Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FSCI > SEC Filings for FSCI > Form 10-Q on 7-Nov-2012All Recent SEC Filings

Show all filings for FISHER COMMUNICATIONS INC

Form 10-Q for FISHER COMMUNICATIONS INC


7-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. Some of the statements in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as "aims", "anticipates", "believes", "estimates", "expects", "hopes", "intends", "plans", "predicts", "projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. There are many risks and uncertainties that could cause actual results to differ materially from those predicted in our forward-looking statements, including, without limitation, those factors discussed under the caption "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the Securities and Exchange Commission on March 9, 2012. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. As used herein, unless the context requires otherwise, when we say "we", "us", "our", or the "Company", we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.

This discussion is intended to provide an analysis of significant trends and material changes in our financial condition and operating results during the three and nine months ended September 30, 2012 compared with the corresponding periods in 2011.

Overview

We are an integrated media company. We own or operate 13 full power (including a 50%-owned television station) and seven low power television stations and three owned radio stations (in addition to one managed radio station). Our television stations are located in Washington, Oregon, Idaho and California, and our radio stations are located in Washington.

Our operations receive revenue from the sale of local, regional and national advertising and, to a much lesser extent, from retransmission consent fees, tower rental and commercial production activities. Our operating results are, therefore sensitive to broad economic trends that affect the broadcasting industry in general, as well as local and regional trends, particularly those affecting the Pacific Northwest economy. The advertising revenue of our stations is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring, and retail advertising in the period leading up to and including the holiday season. In addition, advertising revenue is generally higher during election years due to spending by political candidates and advocacy groups. This political spending typically is heaviest during the fourth quarter.

Our television revenue is significantly affected by network affiliation and the success of programming offered by those networks. Our two largest television stations, KOMO TV and KATU TV, accounted for approximately 60% percent of our television revenue for the nine months ended September 30, 2012 and are affiliated with the ABC Television Network. We have thirteen television stations which are affiliated with one of the four major networks. Six of our television stations are affiliated with Univision. Our remaining television stations are independent or subscribe to various programming services. Our two affiliation agreements with the ABC Television Network with current terms expiring in August 2014. Our affiliation agreements with the CBS Television Network generally expire in February 2016. Our affiliation agreements with FOX Television Network expire in September 2014 and September 2015. Our affiliation agreement with Univision expires in December 2014. Our broadcasting operations are subject to competitive pressures from traditional broadcasting sources, as well as from alternative methods of delivering information and entertainment, and these pressures may cause fluctuations in operating results.

Management focuses on key metrics from operational data within our operations. Information on significant trends is provided in the section entitled "Consolidated Results of Operations."

Significant Developments

The following significant developments impacted our financial statements for the three and nine months ended September 30, 2012 and 2011.

Special and Quarterly Cash Dividend. In the third quarter of 2012, our Board of Directors declared a special cash dividend of $10.00 per common share, or approximately $88.8 million, which was paid on October 19, 2012 to holders of record on September 28, 2012. Additionally, in October 2012, our Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on December 17, 2012 to holders of record on November 30, 2012.


Table of Contents

Local Marketing Agreement. In June 2012, we amended our Local Marketing Agreement ("LMA") with South Sound Broadcasting LLC ("South Sound") to manage South Sound's FM radio station licensed in Oakville, Washington for another five years. The station broadcasts our KOMO News Radio AM programming to FM listeners in the Seattle - Tacoma radio market. This LMA and related option agreement supersedes and terminates a previous LMA and option agreement between us and South Sound. Under the terms of the previous option agreement, we were obligated to pay South Sound up to approximately $1.4 million if we did not exercise the option prior to its expiration. Pursuant to the amended LMA, the $1.4 million fee was eliminated and instead we paid South Sound $750,000 for a 7.5% ownership interest in South Sound and $615,000 for a new option agreement, pursuant to which we have the right to acquire the station until January 2017. The option agreement is non-refundable, but will be applied to the purchase price if we choose to exercise the option. The consideration for the option agreement is presented as other assets on our unaudited condensed consolidated balance sheet as of September 30, 2012. Advertising revenue earned under this LMA is recorded as operating revenue and LMA fees and programming expenses are recorded as operating costs.

Redemption of Senior Notes. In January 2012, we redeemed the remaining $61.8 million aggregate principal amount of our 8.625% Senior Notes due in 2014 ("Senior Notes") for a total consideration of $62.7 million in cash plus accrued interest of $1.8 million. We recorded a loss on extinguishment of debt of $1.5 million, including a charge for related unamortized debt issuance costs, of approximately $594,000. As a result of the redemption of the remaining outstanding Senior Notes, we are no longer subject to provisions contained in the indenture, including various debt covenants and other restrictions.

Sale and Leaseback of Fisher Plaza. In December 2011, we completed the sale of Fisher Plaza to Hines Global REIT ("Hines") for $160.0 million in cash. In connection with the sale of Fisher Plaza we entered into a lease (the "Lease") with Hines pursuant to which we leased 121,000 rentable square feet of Fisher Plaza. The Lease has an initial term that expires on December 31, 2023 and we have the right to extend the term for three successive five-year periods. Our corporate headquarters and Seattle television, radio and developing media operations continue to be located at Fisher Plaza. Given our sale of Fisher Plaza in December 2011, our consolidated results in 2012 and in future years will not include any revenue, operating expense or depreciation from Fisher Plaza, and will include rent expense, related to the Lease with Hines.

Expiration of KING FM Agreement. In May 2011, our Joint Sales Agreement with the classical music station KING FM expired and was not renewed. As a result we no longer record advertising revenue and operating expenses related to KING FM subsequent to the expiration of the agreement.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, but not limited to, those affecting revenues, goodwill and intangibles impairment, the useful lives of tangible and intangible assets, valuation allowances for receivables and broadcast rights, stock-based compensation expense, valuation allowances for deferred income taxes and liabilities and contingencies. The brief discussion below is intended to highlight some of the judgments and uncertainties that can impact the application of these policies and the specific dollar amounts reported on our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed in our Annual Report on Form 10-K for the year ended December 31, 2011 and elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise required by law, we do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.

For a detailed discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2011.

There have been no material changes in the application of our critical accounting policies and estimates subsequent to that report except for those discussed below.

In the third quarter of 2012, our Board of Directors declared a special cash dividend of $10.00 per common share, or approximately $88.8 million, which was paid on October 19, 2012 to holders of record on September 28, 2012. At September 30, 2012, the special cash dividend was reported as dividends payable in our unaudited condensed consolidated balance sheet.


Table of Contents

Consolidated Results of Operations

We report financial data for two reportable segments: television and radio. The television segment includes the operations of our 20 owned and/or operated television stations (including a 50%-owned television station) and our developing media business. The radio segment includes the operations of our three owned radio stations and one managed radio station. Prior to 2012, we also included Fisher Plaza as a reportable segment which consisted of the operations of a communications center located near downtown Seattle that serves as the home of our Seattle-based television, radio and developing media operations, our corporate offices and third-party tenants. Our corporate headquarters and Seattle-based television, radio and developing media operations continue to be located at Fisher Plaza.

We disclose information about our reportable segments based on the measures we use in assessing the performance of those reportable segments. We use "segment income from continuing operations" to measure the operating performance of our segments which represents income from continuing operations before depreciation and amortization, gain on sale of real estate, net, and Plaza fire reimbursements, net. Additionally, the performance metric for segment income from continuing operations excludes the allocation of corporate costs and Fisher Plaza rent expense. Prior period financial information has been restated to conform to current period presentation.


Table of Contents

The following table sets forth our results of operations for the three and nine months ended September 30, 2012 and 2011, including the dollar and percentage variances between these periods. Percentage variances have been omitted where they are not considered meaningful.

                                         Three months ended                                       Nine months ended
                                            September 30,                 Variance                  September 30,                  Variance
(in thousands)                           2012           2011           $            %            2012           2011             $            %
Revenue
Television                             $  34,663      $ 30,522      $  4,141          14 %     $ 100,600      $  90,557      $  10,043          11 %
Radio                                      5,225         5,344          (119 )        (2 %)       15,524         15,876           (352 )        (2 %)
Fisher Plaza                                  -          3,853        (3,853 )      (100 %)           -          11,361        (11,361 )      (100 %)

Total segment revenue                     39,888        39,719           169           0 %       116,124        117,794         (1,670 )        (1 %)
Intercompany and other                         7           (19 )          26         137 %           (27 )         (192 )          165          86 %

Consolidated revenue                      39,895        39,700           195           0 %       116,097        117,602         (1,505 )        (1 %)
Direct operating costs
Television                                13,878        13,720          (158 )        (1 %)       41,509         40,900           (609 )        (1 %)
Radio                                      2,359         2,352            (7 )        (0 %)        6,880          7,166            286           4 %
Fisher Plaza                                  -          1,488         1,488         100 %            -           4,112          4,112         100 %

Total segment direct operating costs      16,237        17,560         1,323           8 %        48,389         52,178          3,789           7 %
Corporate and other                          149           144            (5 )        (3 %)          585            417           (168 )       (40 %)

Consolidated direct operating costs       16,386        17,704         1,318           7 %        48,974         52,595          3,621           7 %
Selling, general and administrative
expenses
Television                                 8,128         7,570          (558 )        (7 %)       24,089         23,120           (969 )        (4 %)
Radio                                      1,479         1,516            37           2 %         4,624          5,352            728          14 %
Fisher Plaza                                  -             79            79         100 %            -             311            311         100 %

Total segment selling, general and
administrative expenses                    9,607         9,165          (442 )        (5 %)       28,713         28,783             70           0 %
Corporate and other                        4,923         3,477        (1,446 )       (42 %)       12,928         12,026           (902 )        (8 %)
Fisher Plaza rent                          1,409            -         (1,409 )        na           3,933             -          (3,933 )        na

Consolidated selling, general and
administrative expenses                   15,939        12,642        (3,297 )       (26 %)       45,574         40,809         (4,765 )       (12 %)
Amortization of broadcast rights
Television                                 2,479         2,449           (30 )        (1 %)        7,372          8,324            952          11 %
Segment income from continuing
operations
Television                                10,178         6,783         3,395          50 %        27,630         18,213          9,417          52 %
Radio                                      1,387         1,476           (89 )        (6 %)        4,020          3,358            662          20 %
Fisher Plaza                                  -          2,286        (2,286 )      (100 %)           -           6,938         (6,938 )      (100 %)

Total segment income from continuing
operations                                11,565        10,545         1,020          10 %        31,650         28,509          3,141          11 %
Corporate and other                       (5,065 )      (3,640 )      (1,425 )       (39 %)      (13,540 )      (12,635 )         (905 )        (7 %)
Fisher Plaza rent                         (1,409 )          -         (1,409 )        na          (3,933 )           -          (3,933 )        na

Subtotal                                   5,091         6,905        (1,814 )       (26 %)       14,177         15,874         (1,697 )       (11 %)
Depreciation and amortization
Television                                 1,486         1,200          (286 )       (24 %)        4,463          3,526           (937 )       (27 %)
Radio                                         29            23            (6 )       (26 %)           88             70            (18 )       (26 %)
Fisher Plaza                                  -          1,200         1,200         100 %            -           3,608          3,608         100 %

Total segment depreciation and
amortization                               1,515         2,423           908          37 %         4,551          7,204          2,653          37 %
Corporate and other                          221           274            53          19 %           690            823            133          16 %

Consolidated depreciation and
amortization                               1,736         2,697           961          36 %         5,241          8,027          2,786          35 %
Gain on sale of real estate, net              -             -             -           na            (164 )       (4,089 )       (3,925 )       (96 %)
Plaza fire reimbursements, net                -            (40 )         (40 )      (100 %)           -            (223 )         (223 )      (100 %)

Income from continuing operations          3,355         4,248          (893 )       (21 %)        9,100         12,159         (3,059 )       (25 %)
Loss on extinguishment of senior
notes, net                                    -           (298 )         298         100 %        (1,482 )       (1,356 )         (126 )        (9 %)
Other income, net                             49            34            15          44 %           143            214            (71 )       (33 %)
Interest expense                             (16 )      (1,572 )       1,556          99 %          (292 )       (5,697 )        5,405          95 %

Income from continuing operations
before income taxes                        3,388         2,412           976          40 %         7,469          5,320          2,149          40 %
Provision for income taxes                 1,188           893          (295 )       (33 %)        2,851          1,978           (873 )       (44 %)

Income from continuing operations,
net of income taxes                        2,200         1,519           681          45 %         4,618          3,342          1,276          38 %

Income from discontinued operations,
net of income taxes                           -            (75 )          75         100 %            -              (9 )            9         100 %

Net income                             $   2,200      $  1,444      $    756          52 %     $   4,618      $   3,333      $   1,285          39 %

Comparison of three and nine months ended September 30, 2012 and 2011

No comparisons for the three and nine months ended September 30, 2012 compared to the same periods in 2011 are included for the Fisher Plaza segment in the discussion below because, effective on the sale of Fisher Plaza, it is no longer a reportable segment and is not included in results of operations for 2012.


Table of Contents

Revenue

The following table sets forth our main types of revenue by segment for the
three and nine months ended September 30, 2012 and 2011:



                                                        Three months ended September 30,                                        Nine months ended September 30,
                                                        %          % total                      % total                         %          % total                       % total
(in thousands)                            2012       change        revenue         2011         revenue         2012         change        revenue         2011          revenue
Core advertising (local and national)   $ 21,760          -4 %           55 %    $ 22,775             57 %    $  69,917            0 %           60 %    $  69,578             59 %
Political                                  3,648         285 %            9 %         947              2 %        5,110          293 %            4 %        1,301              1 %
Internet                                   1,220         -13 %            3 %       1,408              4 %        3,800           -4 %            3 %        3,958              3 %
Retransmission                             6,271          83 %           16 %       3,420              9 %       16,117           61 %           14 %       10,037              9 %
Trade, barter and other                    1,764         -11 %            4 %       1,972              5 %        5,656            0 %            5 %        5,683              5 %

Television                                34,663          14 %           87 %      30,522             77 %      100,600           11 %           87 %       90,557             77 %
Core advertising (local and national)      4,849          -4 %           12 %       5,059             13 %       14,591           -2 %           13 %       14,951             13 %
Political                                    122         455 %            0 %          22              0 %          180           21 %            0 %          149              0 %
Trade, barter and other                      254          -3 %            1 %         263              1 %          753           -3 %            1 %          776              1 %

Radio                                      5,225          -2 %           13 %       5,344             13 %       15,524           -2 %           13 %       15,876             13 %
Fisher Plaza                                  -         -100 %            0 %       3,853             10 %           -          -100 %            0 %       11,361             10 %
Intercompany and other                         7        -137 %            0 %         (19 )            0 %          (27 )        -86 %            0 %         (192 )            0 %

Total Revenue                           $ 39,895           0 %          100 %    $ 39,700            100 %    $ 116,097           -1 %          100 %    $ 117,602            100 %

Television. Television revenue increased $4.1 million and $10.0 million in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. This increase was primarily due to increases in retransmission revenue and political advertising, offset partially by decreases in core advertising.

The increase of $2.9 million and $6.1 million in retransmission revenue for the three and nine months ended September 30, 2012 compared to the same periods in 2011 was primarily a result of finalizing the renewal of substantially all of our retransmission consent contracts for the 2012-2014 cycle in the second quarter of 2012.

Automotive-related advertising, one of our largest advertising categories, increased 9% and 11%, respectively, for the three and nine months ended September 30, 2012, compared to the same periods in 2011. Results of other advertising categories for the three and nine months ended September 30, 2012, compared to the same periods in 2011 include retail (increased 5% and 8%, respectively) and professional services (decreased 12% and increased 1%, respectively).

Political revenue increased 285% and 293%, respectively, for the three and nine months ended September 30, 2012, compared to the same periods in 2011.

Revenue from our ABC-affiliated stations increased 17% and 12% in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011, primarily due to increases in retransmission revenue and political revenue, partially offset by a decrease in national advertising revenue. Revenue from our CBS-affiliated stations increased 11% and 14% in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011, as a result of increases in retransmission revenue and local and political advertising.

Radio. Radio revenue decreased by 2% in both the three and nine months ended September 30, 2012, compared to the same periods in 2011. The decrease for the nine months ended September 30, 2012 compared to the same period in 2011 is primarily a result of the non-renewal of our ten year Joint Sales Agreement with KING FM, which expired in the second quarter of 2011.

Direct operating costs

Direct operating costs consist primarily of costs to produce and promote programming for the television and radio segments. Many of these costs are relatively fixed in nature and do not necessarily vary on a proportional basis with revenue.

Television. Direct operating costs for the television segment increased $158,000 and $609,000 in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. The increase in the three and nine months ended September 30, 2012 compared to the same periods in 2011 primarily reflects an increase in costs related to network fees.

Radio. Direct operating costs for the radio segment increased $7,000 in the three months ended September 30, 2012 and decreased $286,000 in the nine months ended September 30, 2012, compared to the same periods in 2011. The decrease in the nine months ended September 30, 2012, compared to the same period in 2011 was primarily due to a reduction in advertising costs for our radio stations and a decrease in music rights as the result of an industry-wide legal settlement.

Other. Other non-segment direct operating costs consist primarily of the centralized network operating center and corporate engineering department. In the three and nine months ended September 30, 2012, non-segment direct operating costs increased $5,000 and $168,000 compared to the same periods in 2011, respectively.

Selling, general and administrative expenses

Television. Selling, general and administrative expenses in our television segment increased $558,000 and $969,000 in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. Prior year's expenses were reduced by vacation accrual savings related to our revised . . .

  Add FSCI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FSCI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.