##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2006
 o
    
    Transition Report Under Section 13 or 15(d) of the Exchange Act
 For the transition period from  to
 Commission File Number 0-22439
 FISHER COMMUNICATIONS, INC.
  WASHINGTON
    
    91-0222175(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer
Identification Number)
 100 Fourth Ave. N., Suite 510
Seattle, Washington 98109
 (206) 404-7000
 þ o
  o þ o
 o þ




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##### 



PART IFINANCIAL INFORMATIONItem 1. Financial StatementsThe following Condensed Consolidated Financial Statements (unaudited) are presented for
the Registrant, Fisher Communications, Inc., and its subsidiaries.1.
    
    Condensed Consolidated Statements of Operations:Three months ended March 31, 2006 and 20052.
    
    Condensed Consolidated Balance Sheets:March 31, 2006 and December 31, 20053.
    
    Condensed Consolidated Statements of Cash Flows:Three months ended March 31, 2006 and 20054.
    
    Condensed Consolidated Statements of Comprehensive Income:Three months ended March 31, 2006 and 20055.
    
    Notes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Position and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RisksItem 4. Controls and ProceduresPART IIOTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEXHIBIT INDEXEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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ITEM 1
 FINANCIAL STATEMENTS
 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months endedMarch 312006
    
    2005(in thousands, except per-share amounts)(Unaudited)Revenue
    
    $
    33,828
    
    
    $
    30,957Costs and expensesCost of services sold (exclusive of depreciation
reported separately below, amounting to
$2,133 and $3,486, respectively)
    
    
    15,740
    
    
    
    16,623Selling expenses
    
    
    6,638
    
    
    
    5,878General and administrative expenses
    
    
    8,623
    
    
    
    9,875Depreciation and amortization
    
    
    2,582
    
    
    
    4,12933,583
    
    
    
    36,505Income (loss) from operations
    
    
    245
    
    
    
    (5,548
    )Other income, net
    
    
    898
    
    
    
    850Interest expense
    
    
    (3,454
    )
    
    
    (3,371
    )Loss before income taxes
    
    
    (2,311
    )
    
    
    (8,069
    )Benefit for federal and state income taxes
    
    
    (610
    )
    
    
    (3,001
    )Net loss
    
    $
    (1,701
    )
    
    $
    (5,068
    )Basic and diluted net loss per share
    
    $
    (0.20
    )
    
    $
    (0.59
    )Shares used in computation of basic and diluted
net loss per share
    
    
    8,706
    
    
    
    8,625
  3




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##### Table of Contents



FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31
    
    December 312006
    
    2005(in thousands, except share and per-share amounts)(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    15,457
    
    
    $
    19,622Receivables, net
    
    
    24,440
    
    
    
    28,166Income taxes receivable
    
    
    986
    
    
    
    986Deferred income taxes
    
    
    923
    
    
    
    665Prepaid expenses
    
    
    5,347
    
    
    
    4,295Television and radio broadcast rights
    
    
    5,587
    
    
    
    6,519Total current assets
    
    
    52,740
    
    
    
    60,253Marketable securities, at market value
    
    
    151,201
    
    
    
    170,053Cash value of life insurance and retirement deposits
    
    
    15,563
    
    
    
    15,303Television and radio broadcast rights
    
    
    2,046
    
    
    
    2,075Goodwill, net
    
    
    38,354
    
    
    
    38,354Intangible assets
    
    
    1,244
    
    
    
    1,244Investment in equity investee
    
    
    2,748
    
    
    
    2,759Prepaid financing fees and other assets
    
    
    6,070
    
    
    
    6,040Property, plant and equipment, net
    
    
    143,667
    
    
    
    144,312Total Assets
    
    $
    413,633
    
    
    $
    440,393LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesTrade accounts payable
    
    $
    2,645
    
    
    $
    3,483Accrued payroll and related benefits
    
    
    6,826
    
    
    
    7,355Interest payable
    
    
    539
    
    
    
    3,809Television and radio broadcast rights payable
    
    
    3,372
    
    
    
    5,524Other current liabilities
    
    
    5,270
    
    
    
    4,520Total current liabilities
    
    
    18,652
    
    
    
    24,691Long-term debt
    
    
    150,000
    
    
    
    150,000Accrued retirement benefits
    
    
    19,682
    
    
    
    19,644Deferred income taxes
    
    
    24,419
    
    
    
    31,381Other liabilities
    
    
    4,883
    
    
    
    5,056Commitments and ContingenciesStockholders EquityCommon stock, shares authorized 12,000,000, $1.25 par value; issued and outstanding
8,709,841 as of March 31, 2006 and 8,705,041 as of December 31, 2005
    
    
    10,887
    
    
    
    10,881Capital in excess of par
    
    
    8,756
    
    
    
    8,590Deferred compensation
    
    
    
    
    
    
    (159
    )Accumulated other comprehensive income, net of income taxes:Unrealized gain on marketable securities
    
    
    97,346
    
    
    
    109,600Minimum pension liability
    
    
    (2,172
    )
    
    
    (2,172
    )Retained earnings
    
    
    81,180
    
    
    
    82,881Total Stockholders Equity
    
    
    195,997
    
    
    
    209,621Total Liabilities and Stockholders Equity
    
    $
    413,633
    
    
    $
    440,393
  4




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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Threee months endedMarch 312006
    
    2005(in thousands)(Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (1,701
    )
    
    $
    (5,068
    )Adjustments to reconcile net loss to net cash used in
operating activitiesDepreciation and amortization
    
    
    2,582
    
    
    
    4,129Deferred income taxes
    
    
    (621
    )
    
    
    (2,855
    )Equity in operations of equity investees
    
    
    11
    
    
    
    3Amortization of deferred loan costs
    
    
    158
    
    
    
    164Amortization of television and radio broadcast rights
    
    
    2,271
    
    
    
    2,956Payments for television and radio broadcast rights
    
    
    (3,463
    )
    
    
    (4,096
    )Other
    
    
    164
    
    
    
    512Change in operating assets and liabilitiesReceivables
    
    
    3,726
    
    
    
    3,908Prepaid expenses
    
    
    (1,052
    )
    
    
    (1,037
    )Cash value of life insurance and retirement deposits
    
    
    (260
    )
    
    
    490Other assets
    
    
    (188
    )
    
    
    (58
    )Trade accounts payable, accrued payroll and related benefits, interest
payable, and other current liabilities
    
    
    (3,887
    )
    
    
    (4,358
    )Income taxes receivable and payable
    
    
    
    
    
    
    (306
    )Accrued retirement benefits
    
    
    38
    
    
    
    204Other liabilities
    
    
    (170
    )
    
    
    126Net cash used in operating activities
    
    
    (2,392
    )
    
    
    (5,286
    )Cash flows from investing activitiesProceeds from collection of notes receivable
    
    
    
    
    
    
    1,000Purchase of property, plant and equipment
    
    
    (1,960
    )
    
    
    (2,238
    )Net cash used in investing activities
    
    
    (1,960
    )
    
    
    (1,238
    )Cash flows from financing activitiesPayments under notes payable
    
    
    
    
    
    
    (9
    )Payment of deferred loan costs
    
    
    
    
    
    
    (85
    )Proceeds from exercise of stock options
    
    
    177
    
    
    
    2,420Excess tax benefit from exercise of stock options
    
    
    10Net cash provided by financing activities
    
    
    187
    
    
    
    2,326Net decrease in cash and cash equivalents
    
    
    (4,165
    )
    
    
    (4,198
    )Cash and cash equivalents, beginning of period
    
    
    19,622
    
    
    
    16,025Cash and cash equivalents, end of period
    
    $
    15,457
    
    
    $
    11,827
  5




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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three months endedMarch 312006
    
    2005(in thousands)(Unaudited)Net loss
    
    $
    (1,701
    )
    
    $
    (5,068
    )Other comprehensive loss:Unrealized loss on marketable securities
    
    
    (18,852
    )
    
    
    (10,596
    )Effect of income taxes
    
    
    6,598
    
    
    
    3,708Other comprehensive loss
    
    
    (12,254
    )
    
    
    (6,888
    )Comprehensive loss
    
    $
    (13,955
    )
    
    $
    (11,956
    )
  6




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Stock-based Compensation
     7




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, Accounting
for Certain Hybrid Instruments,
       8




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Three months endedMarch 312006
    
    
    2005Service cost
    
    $
    
    
    
    $
    40Interest cost
    
    
    260
    
    
    
    267Amortization of loss
    
    
    38
    
    
    
    87Net periodic pension cost
    
    $
    298
    
    
    $
    394
  2006
    
    
    2005Discount Rate
    
    
    5.48
    %
    
    
    5.74
    %Rate of Compensation increase
    
    
    
    
    
    
    3.00
    %
        9




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Stock options
 Restricted stock rights
 Determining Fair Value Under SFAS 123(R)
 Valuation and Amortization Method.
 Expected Life
 Expected Volatility
 Risk-Free Interest Rate.
 Expected Dividend Yield.
 Expected Forfeitures.
 10




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Three months ended March 312006
    
    
    2005Assumptions:Weighted average risk-free interest rate
    
    
    4.8
    %
    
    
    4.1
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    33
    %
    
    
    31
    %Expected life of options
    
    6 years
    
    
    6 yearsWeighted average fair value at date of grant
    
    $
    17.57
    
    
    $
    19.74
 Stock-based Compensation Under SFAS 123(R)
    Condensed consolidated statement of operations:Decrease in income from operations
    
    $
    (121
    )Increase in loss before income taxes
    
    
    (121
    )Increase in net loss
    
    
    (79
    )Increase in basic and diluted net loss per share
    
    
    (0.01
    )Condensed consolidated statement of cash flows:Increase in net cash used in operating activities
    
    
    (10
    )Increase in net cash provided by financing activities
    
    
    10
 11




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Stock Award Activity
  Stock Options
    
    
    Restricted Stock RightsWeighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    WeightedExercise
    
    
    Remaining
    
    
    Aggregate
    
    
    
    
    
    
    AverageNumber
    
    
    Price Per
    
    
    Contractual
    
    
    Intrinsic
    
    
    Number
    
    
    Grant-Dateof Shares
    
    
    Share
    
    
    Life
    
    
    Value
    
    
    of Shares
    
    
    Fair ValueOutstanding at December 31, 2005
    
    
    275,430
    
    
    $
    52.88
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    $
    46.89Options and stock rights granted
    
    
    39,100
    
    
    
    42.70
    
    
    
    
    
    
    
    
    
    
    
    6,400
    
    
    
    42.70Options
exercised/stock rights vested
    
    
    (4,800
    )
    
    
    36.86Options expired
    
    
    (4,000
    )
    
    
    37.25Options and stock rights forfeited
    
    
    (37,905
    )
    
    
    53.23Outstanding at March 31, 2006
    
    
    267,825
    
    
    $
    51.92
    
    
    6.2 years
    
    $
    262,000
    
    
    
    10,400
    
    
    $
    44.31Exercisable at March 31, 2006
    
    
    158,775
    
    
    $
    55.74
    
    
    4.4 years
    
    $
    145,000
   12




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Pro Forma Information Under SFAS 123 and APB 25
  Three monthsended March 31,2005Net loss, as reported
    
    $
    (5,068
    )Add: stock-based compensation included in net loss, net of tax
    
    
    197Deduct: total stock-based compensation determined under fair
value based method for all awards, net of tax
    
    
    (22
    )Pro forma net loss
    
    $
    (4,893
    )Basic and diluted net loss per share:As reported
    
    $
    (0.59
    )Pro forma
    
    $
    (0.57
    )
   13




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Three MonthsEnded March 312006
    
    
    2005Television
    
    $
    22,859
    
    
    $
    20,826Radio
    
    
    8,838
    
    
    
    8,265Fisher Plaza
    
    
    2,164
    
    
    
    1,918Corporate and eliminations
    
    
    (33
    )
    
    
    (52
    )$
    33,828
    
    
    $
    30,957
  Three monthsended March 312006
    
    
    2005Television
    
    $
    2,599
    
    
    $
    (1,051
    )Radio
    
    
    (256
    )
    
    
    (917
    )Fisher Plaza
    
    
    510
    
    
    
    (76
    )Corporate and eliminations
    
    
    (1,710
    )
    
    
    (2,654
    )$
    1,143
    
    
    $
    (4,698
    )
  Three monthsended March 312006
    
    
    2005Total segment income (loss) before
interest and income taxes
    
    $
    1,143
    
    
    $
    (4,698
    )Interest expense
    
    
    (3,454
    )
    
    
    (3,371
    )$
    (2,311
    )
    
    $
    (8,069
    )
 14




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March 31,
    
    
    December 31,2006
    
    
    2005Total assetsTelevision
    
    $
    84,365
    
    
    $
    92,543Radio
    
    
    42,285
    
    
    
    41,487Fisher Plaza
    
    
    117,757
    
    
    
    118,611Corporate and eliminations
    
    
    169,226
    
    
    
    187,752$
    413,633
    
    
    $
    440,393
       15




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Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the three months ended March 31, 2006
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)Revenue
    
    $
    
    
    
    $
    33,880
    
    
    $
    (52
    )
    
    $
    33,828Costs and expensesCost of services sold
    
    
    
    
    
    
    15,329
    
    
    
    411
    
    
    
    15,740Selling expenses
    
    
    
    
    
    
    6,638
    
    
    
    
    
    
    
    6,638General and administrative expenses
    
    
    2,441
    
    
    
    6,645
    
    
    
    (463
    )
    
    
    8,623Depreciation and amortization
    
    
    62
    
    
    
    2,520
    
    
    
    
    
    
    
    2,5822,503
    
    
    
    31,132
    
    
    
    (52
    )
    
    
    33,583Income (loss) from operations
    
    
    (2,503
    )
    
    
    2,748
    
    
    
    
    
    
    
    245Other income, net
    
    
    787
    
    
    
    111
    
    
    
    
    
    
    
    898Equity in income of subsidiaries
    
    
    1,818
    
    
    
    
    
    
    
    (1,818
    )
    
    
    Interest expense
    
    
    (3,451
    )
    
    
    (3
    )
    
    
    
    
    
    
    (3,454
    )Income (loss) before income taxes
    
    
    (3,349
    )
    
    
    2,856
    
    
    
    (1,818
    )
    
    
    (2,311
    )Provision (benefit) for federal and state income taxes
    
    
    (1,648
    )
    
    
    1,038
    
    
    
    
    
    
    
    (610
    )Net income (loss)
    
    $
    (1,701
    )
    
    $
    1,818
    
    
    $
    (1,818
    )
    
    $
    (1,701
    )
 16




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##### Table of Contents



Financial Information for Guarantors
Condensed Consolidated Statement of Operations
for the three months ended March 31, 2005
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)Revenue
    
    $
    
    
    
    $
    31,015
    
    
    $
    (58
    )
    
    $
    30,957Costs and expensesCost of services sold
    
    
    
    
    
    
    16,230
    
    
    
    393
    
    
    
    16,623Selling expenses
    
    
    
    
    
    
    5,878
    
    
    
    
    
    
    
    5,878General and administrative expenses
    
    
    3,438
    
    
    
    6,888
    
    
    
    (451
    )
    
    
    9,875Depreciation and amortization
    
    
    69
    
    
    
    4,060
    
    
    
    
    
    
    
    4,1293,507
    
    
    
    33,056
    
    
    
    (58
    )
    
    
    36,505Loss from operations
    
    
    (3,507
    )
    
    
    (2,041
    )
    
    
    
    
    
    
    (5,548
    )Other income, net
    
    
    670
    
    
    
    180
    
    
    
    
    
    
    
    850Equity in income of subsidiaries
    
    
    (1,196
    )
    
    
    
    
    
    
    1,196
    
    
    
    Interest expense
    
    
    (3,371
    )
    
    
    
    
    
    
    
    
    
    
    (3,371
    )Loss before income taxes
    
    
    (7,404
    )
    
    
    (1,861
    )
    
    
    1,196
    
    
    
    (8,069
    )Benefit for federal and state income taxes
    
    
    (2,336
    )
    
    
    (665
    )
    
    
    
    
    
    
    (3,001
    )Net loss
    
    $
    (5,068
    )
    
    $
    (1,196
    )
    
    $
    1,196
    
    
    $
    (5,068
    )
 17




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##### Table of Contents



Financial Information for Guarantors
Condensed Consolidated Balance Sheet
as of March 31, 2006
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)ASSETSCurrent AssetsCash and
cash equivalents
    
    $
    3,728
    
    
    $
    11,729
    
    
    $
    
    
    
    $
    15,457Receivables, net
    
    
    141
    
    
    
    24,299
    
    
    
    
    
    
    
    24,440Due from affiliate
    
    
    
    
    
    
    2,014
    
    
    
    (2,014
    )
    
    
    Income taxes receivable
    
    
    1,538
    
    
    
    
    
    
    
    (552
    )
    
    
    986Deferred income taxes
    
    
    73
    
    
    
    850
    
    
    
    
    
    
    
    923Prepaid expenses
    
    
    354
    
    
    
    4,993
    
    
    
    
    
    
    
    5,347Television and radio broadcast rights
    
    
    
    
    
    
    5,587
    
    
    
    
    
    
    
    5,587Total current assets
    
    
    5,834
    
    
    
    49,472
    
    
    
    (2,566
    )
    
    
    52,740Marketable securities, at market value
    
    
    150,749
    
    
    
    452
    
    
    
    
    
    
    
    151,201Investment in consolidated subsidiaries
    
    
    226,896
    
    
    
    
    
    
    
    (226,896
    )
    
    
    Cash value of life insurance and retirement deposits
    
    
    5,191
    
    
    
    10,372
    
    
    
    
    
    
    
    15,563Television and radio broadcast rights
    
    
    
    
    
    
    2,046
    
    
    
    
    
    
    
    2,046Goodwill, net
    
    
    
    
    
    
    38,354
    
    
    
    
    
    
    
    38,354Intangible assets
    
    
    
    
    
    
    1,244
    
    
    
    
    
    
    
    1,244Investments in equity investee
    
    
    
    
    
    
    2,748
    
    
    
    
    
    
    
    2,748Prepaid financing fees and other assets
    
    
    5,012
    
    
    
    1,058
    
    
    
    
    
    
    
    6,070Property, plant and equipment, net
    
    
    1,044
    
    
    
    142,623
    
    
    
    
    
    
    
    143,667Total Assets
    
    $
    394,726
    
    
    $
    248,369
    
    
    $
    (229,462
    )
    
    $
    413,633LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesTrade accounts payable
    
    $
    261
    
    
    $
    2,384
    
    
    $
    
    
    
    $
    2,645Payable to affiliate
    
    
    2,014
    
    
    
    
    
    
    
    (2,014
    )
    
    
    Accrued payroll and related benefits
    
    
    865
    
    
    
    5,961
    
    
    
    
    
    
    
    6,826Interest payable
    
    
    539
    
    
    
    
    
    
    
    
    
    
    
    539Television and radio broadcast rights payable
    
    
    
    
    
    
    3,372
    
    
    
    
    
    
    
    3,372Income taxes payable
    
    
    
    
    
    
    552
    
    
    
    (552
    )
    
    
    Other current liabilities
    
    
    2,175
    
    
    
    3,095
    
    
    
    
    
    
    
    5,270Total current liabilities
    
    
    5,854
    
    
    
    15,364
    
    
    
    (2,566
    )
    
    
    18,652Long-term debt
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    150,000Accrued retirement benefits
    
    
    19,597
    
    
    
    85
    
    
    
    
    
    
    
    19,682Deferred income taxes
    
    
    23,213
    
    
    
    1,206
    
    
    
    
    
    
    
    24,419Other liabilities
    
    
    65
    
    
    
    4,818
    
    
    
    
    
    
    
    4,883Stockholders EquityCommon stock
    
    
    10,887
    
    
    
    1,131
    
    
    
    (1,131
    )
    
    
    10,887Capital in excess of par
    
    
    8,756
    
    
    
    164,234
    
    
    
    (164,234
    )
    
    
    8,756Accumulated other comprehensive income, net of income taxes:Unrealized gain on marketable securities
    
    
    97,346
    
    
    
    21
    
    
    
    (21
    )
    
    
    97,346Minimum pension liability
    
    
    (2,172
    )
    
    
    
    
    
    
    
    
    
    
    (2,172
    )Retained earnings
    
    
    81,180
    
    
    
    61,510
    
    
    
    (61,510
    )
    
    
    81,180Total Stockholders Equity
    
    
    195,997
    
    
    
    226,896
    
    
    
    (226,896
    )
    
    
    195,997Total Liabilities and Stockholders Equity
    
    $
    394,726
    
    
    $
    248,369
    
    
    $
    (229,462
    )
    
    $
    413,633
 18




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##### Table of Contents



Financial Information for Guarantors
Condensed Consolidated Balance Sheet
as of December 31, 2005
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    3,660
    
    
    $
    15,962
    
    
    $
    
    
    
    $
    19,622Receivables, net
    
    
    105
    
    
    
    28,061
    
    
    
    
    
    
    
    28,166Due from affiliate
    
    
    6,184
    
    
    
    
    
    
    
    (6,184
    )
    
    
    Income taxes receivable
    
    
    1,538
    
    
    
    
    
    
    
    (552
    )
    
    
    986Deferred income taxes
    
    
    7
    
    
    
    658
    
    
    
    
    
    
    
    665Prepaid expenses
    
    
    414
    
    
    
    3,881
    
    
    
    
    
    
    
    4,295Television and radio broadcast rights
    
    
    
    
    
    
    6,519
    
    
    
    
    
    
    
    6,519Total current assets
    
    
    11,908
    
    
    
    55,081
    
    
    
    (6,736
    )
    
    
    60,253Marketable securities, at market value
    
    
    169,634
    
    
    
    419
    
    
    
    
    
    
    
    170,053Investment in consolidated subsidiaries
    
    
    225,057
    
    
    
    
    
    
    
    (225,057
    )
    
    
    Cash value of life insurance and retirement deposits
    
    
    5,115
    
    
    
    10,188
    
    
    
    
    
    
    
    15,303Television and radio broadcast rights
    
    
    
    
    
    
    2,075
    
    
    
    
    
    
    
    2,075Goodwill, net
    
    
    
    
    
    
    38,354
    
    
    
    
    
    
    
    38,354Intangible assets
    
    
    
    
    
    
    1,244
    
    
    
    
    
    
    
    1,244Investments in equity investee
    
    
    
    
    
    
    2,759
    
    
    
    
    
    
    
    2,759Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid financing fees and and other assets
    
    
    5,169
    
    
    
    871
    
    
    
    
    
    
    
    6,040Property, plant and equipment, net
    
    
    904
    
    
    
    143,408
    
    
    
    
    
    
    
    144,312Total Assets
    
    $
    417,787
    
    
    $
    254,399
    
    
    $
    (231,793
    )
    
    $
    440,393LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesTrade accounts payable
    
    $
    693
    
    
    $
    2,790
    
    
    $
    
    
    
    $
    3,483Payable to affiliate
    
    
    
    
    
    
    6,184
    
    
    
    (6,184
    )
    
    
    Accrued payroll and related benefits
    
    
    1,113
    
    
    
    6,242
    
    
    
    
    
    
    
    7,355Interest payable
    
    
    3,809
    
    
    
    
    
    
    
    
    
    
    
    3,809Television and radio broadcast rights payable
    
    
    
    
    
    
    5,524
    
    
    
    
    
    
    
    5,524Income taxes payable
    
    
    
    
    
    
    552
    
    
    
    (552
    )
    
    
    Other current liabilities
    
    
    2,058
    
    
    
    2,462
    
    
    
    
    
    
    
    4,520Total current liabilities
    
    
    7,673
    
    
    
    23,754
    
    
    
    (6,736
    )
    
    
    24,691Long-term debt
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    150,000Accrued retirement benefits
    
    
    19,560
    
    
    
    84
    
    
    
    
    
    
    
    19,644Deferred income taxes
    
    
    30,868
    
    
    
    513
    
    
    
    
    
    
    
    31,381Other liabilities
    
    
    65
    
    
    
    4,991
    
    
    
    
    
    
    
    5,056Stockholders Equity
Common stock
    
    
    10,881
    
    
    
    1,131
    
    
    
    (1,131
    )
    
    
    10,881Capital in excess of par
    
    
    8,590
    
    
    
    164,234
    
    
    
    (164,234
    )
    
    
    8,590Deferred compensation
    
    
    (159
    )
    
    
    
    
    
    
    
    
    
    
    (159
    )Accumulated other comprehensive income, net of income taxes:Unrealized gain on marketable securities
    
    
    109,600
    
    
    
    
    
    
    
    
    
    
    
    109,600Minimum pension liability
    
    
    (2,172
    )
    
    
    
    
    
    
    
    
    
    
    (2,172
    )Retained earnings
    
    
    82,881
    
    
    
    59,692
    
    
    
    (59,692
    )
    
    
    82,881Total Stockholders Equity
    
    
    209,621
    
    
    
    225,057
    
    
    
    (225,057
    )
    
    
    209,621Total Liabilities and Stockholders Equity
    
    $
    417,787
    
    
    $
    254,399
    
    
    $
    (231,793
    )
    
    $
    440,393
 19




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##### Table of Contents



Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 2006
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)Net cash provided by (used in) operating activities
    
    $
    83
    
    
    $
    (2,475
    )
    
    $
    
    
    
    $
    (2,392
    )Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (202
    )
    
    
    (1,758
    )
    
    
    
    
    
    
    (1,960
    )Net cash used in investing activities
    
    
    (202
    )
    
    
    (1,758
    )
    
    
    
    
    
    
    (1,960
    )Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    177Excess tax benefit from exercise of stock options
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Net cash provided by financing activities
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    187Net increase (decrease) in cash and cash equivalents
    
    
    68
    
    
    
    (4,233
    )
    
    
    
    
    
    
    (4,165
    )Cash and cash equivalents, beginning of period
    
    
    3,660
    
    
    
    15,962
    
    
    
    
    
    
    
    19,622Cash and cash equivalents, end of period
    
    $
    3,728
    
    
    $
    11,729
    
    
    $
    
    
    
    $
    15,457
 20




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##### Table of Contents



Financial Information for Guarantors
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 2005
 Wholly
    
    
    
    
    
    FisherFisher
    
    Owned
    
    
    
    
    
    Communications,Communications,
    
    Guarantor
    
    
    
    
    
    Inc. andInc.
    
    Subsidiaries
    
    Eliminations
    
    Subsidiaries(in thousands)Net cash provided by (used in) operating activities
    
    $
    103
    
    
    $
    (5,389
    )
    
    
    
    
    
    $
    (5,286
    )Cash flows from investing activitiesProceeds from collection of notes receivable
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Purchase of property, plant and equipment
    
    
    (37
    )
    
    
    (2,201
    )
    
    
    
    
    
    
    (2,238
    )Net cash used in investing activities
    
    
    (37
    )
    
    
    (1,201
    )
    
    
    
    
    
    
    (1,238
    )Cash flows from financing activitiesPayments under notes payable
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Payment of deferred loan costs
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )Proceeds from exercise of stock options
    
    
    2,420
    
    
    
    
    
    
    
    
    
    
    
    2,420Net cash provided by (used in) financing activities
    
    
    2,335
    
    
    
    (9
    )
    
    
    
    
    
    
    2,326Net increase (decrease) in cash and cash equivalents
    
    
    2,401
    
    
    
    (6,599
    )
    
    
    
    
    
    
    (4,198
    )Cash and cash equivalents, beginning of period
    
    
    1,007
    
    
    
    15,018
    
    
    
    
    
    
    
    16,025Cash and cash equivalents, end of period
    
    $
    3,408
    
    
    $
    8,419
    
    
    $
    
    
    
    $
    11,827
 21




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##### Table of Contents



ITEM 2   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with the 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 II. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this report. 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.
      22




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CRITICAL ACCOUNTING POLICIES
   23




---



##### Table of Contents



CONSOLIDATED RESULTS OF OPERATIONS
   24




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##### Table of Contents



Three MonthsEnded March 31,
    
    
    Variance2006
    
    
    2005
    
    
    $
    
    
    %(dollars in thousands)(Unaudited)RevenueTelevision
    
    $
    22,859
    
    
    $
    20,826
    
    
    $
    2,033
    
    
    
    9.8
    %Radio
    
    
    8,838
    
    
    
    8,265
    
    
    
    573
    
    
    
    6.9
    %Fisher Plaza
    
    
    2,164
    
    
    
    1,918
    
    
    
    246
    
    
    
    12.8
    %Corporate and eliminations
    
    
    (33
    )
    
    
    (52
    )
    
    
    19
    
    
    
    -36.5
    %Consolidated
    
    
    33,828
    
    
    
    30,957
    
    
    
    2,871
    
    
    
    9.3
    %Cost of services soldTelevision
    
    
    11,150
    
    
    
    11,870
    
    
    
    (720
    )
    
    
    -6.1
    %Radio
    
    
    3,391
    
    
    
    3,734
    
    
    
    (343
    )
    
    
    -9.2
    %Fisher Plaza
    
    
    788
    
    
    
    622
    
    
    
    166
    
    
    
    26.7
    %Corporate and eliminations
    
    
    411
    
    
    
    397
    
    
    
    14
    
    
    
    3.5
    %Consolidated
    
    
    15,740
    
    
    
    16,623
    
    
    
    (883
    )
    
    
    -5.3
    %Selling expensesTelevision
    
    
    3,217
    
    
    
    2,698
    
    
    
    519
    
    
    
    19.2
    %Radio
    
    
    3,380
    
    
    
    3,089
    
    
    
    291
    
    
    
    9.4
    %Fisher Plaza
    
    
    41
    
    
    
    91
    
    
    
    (50
    )
    
    
    -54.9
    %Consolidated
    
    
    6,638
    
    
    
    5,878
    
    
    
    760
    
    
    
    12.9
    %General and administrative expensesTelevision
    
    
    4,482
    
    
    
    4,691
    
    
    
    (209
    )
    
    
    -4.5
    %Radio
    
    
    2,084
    
    
    
    2,036
    
    
    
    48
    
    
    
    2.4
    %Fisher Plaza
    
    
    65
    
    
    
    269
    
    
    
    (204
    )
    
    
    -75.8
    %Corporate and eliminations
    
    
    1,992
    
    
    
    2,879
    
    
    
    (887
    )
    
    
    -30.8
    %Consolidated
    
    
    8,623
    
    
    
    9,875
    
    
    
    (1,252
    )
    
    
    -12.7
    %Depreciation and amortizationTelevision
    
    
    1,471
    
    
    
    2,678
    
    
    
    (1,207
    )
    
    
    -45.1
    %Radio
    
    
    289
    
    
    
    367
    
    
    
    (78
    )
    
    
    -21.3
    %Fisher Plaza
    
    
    760
    
    
    
    1,014
    
    
    
    (254
    )
    
    
    -25.0
    %Corporate and eliminations
    
    
    62
    
    
    
    70
    
    
    
    (8
    )
    
    
    -11.4
    %Consolidated
    
    
    2,582
    
    
    
    4,129
    
    
    
    (1,547
    )
    
    
    -37.5
    %Income (loss) from operationsTelevision
    
    
    2,539
    
    
    
    (1,111
    )
    
    
    3,650Radio
    
    
    (306
    )
    
    
    (961
    )
    
    
    655Fisher Plaza
    
    
    510
    
    
    
    (78
    )
    
    
    588Corporate and eliminations
    
    
    (2,498
    )
    
    
    (3,398
    )
    
    
    900Consolidated
    
    
    245
    
    
    
    (5,548
    )
    
    
    5,793Other income, net
    
    
    898
    
    
    
    850
    
    
    
    48Interest expense
    
    
    (3,454
    )
    
    
    (3,371
    )
    
    
    (83
    )Loss before income taxes
    
    
    (2,311
    )
    
    
    (8,069
    )
    
    
    5,758Benefit for federal and state income taxes
    
    
    (610
    )
    
    
    (3,001
    )
    
    
    2,391Net loss
    
    $
    (1,701
    )
    
    $
    (5,068
    )
    
    $
    3,367
 25




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##### Table of Contents



Comparison of Fiscal Three-Month Periods Ended March 31, 2006 and March 31, 2005
 Revenue
    Cost of services sold
     26




---



##### Table of Contents



Selling expenses
   General and administrative expenses
    Depreciation
  Other income, net
  Interest expense
  Benefit for federal and state income taxes
  Liquidity and capital resources
  27




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##### Table of Contents



28




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##### Table of Contents



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
  Interest Rate Exposure
  Marketable Securities Exposure
  
 ITEM 4  CONTROLS AND PROCEDURES
   29




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##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
  The following risk factors and other information included in this quarterly report should be
carefully considered. The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial
also may impair our business operations. If any of the following risks occur, our business,
financial condition and future results could be materially adversely affected.
 We depend on advertising revenues, which fluctuate as a result of a number of factors.
  
    
    the health of the national economy, and particularly the economy of the Northwest region
and Seattle, Washington and Portland, Oregon;
    
    the popularity of our programming;
    
    changes in the makeup of the population in the areas where our stations are located;
    
    pricing fluctuations in local and national advertising;
    
    the activities of our competitors, including increased competition from other forms of
advertising-based mediums, particularly network, cable television, direct satellite
television and radio, and the Internet;
    
    the use of new services and devices which allow viewers to minimize commercial
advertisements, such as satellite radio and personal digital video recorders; and
    
    other factors that may be beyond our control.
   We have incurred losses in the past. We cannot assure you that we will be able to achieve
profitability.
  30




---



##### Table of Contents



Our operating results are dependent on the success of programming aired by our television and radio
stations.
   Competition in the broadcasting industry and the rise of alternative entertainment and
communications media may result in loss of audience share and advertising revenue by our stations.
  
    
    local network affiliates and independent stations;
    
    cable, direct broadcast satellite and alternative methods of broadcasting brought about
by technological advances and innovations, such as pay-per-view and home video and
entertainment systems; and
    
    other sources of news, information and entertainment, such as streaming video broadcasts
over the Internet, podcasting, newspapers, movie theaters and live sporting events.
   Because significant portions of our cost of services are relatively fixed, downturns in the economy
harm our operations, revenue, cash flow and earnings.
  31




---



##### Table of Contents



We may experience disruptions in our business if we acquire and integrate new television or radio
stations.
  Radio and television programming revenue may be negatively affected by the cancellation of
syndication agreements.
  Our indebtedness could materially and adversely affect our business and prevent us from fulfilling
our obligations under our 8.625% senior notes due 2014
  
    
    increase our vulnerability to general adverse economic and industry conditions or a
downturn in our business;
    
    reduce the availability of our cash flow to fund working capital, capital expenditures
and other general business purposes;
    
    reduce the funds available to purchase the rights to television and radio programs;
    
    limit our flexibility in planning for, or reacting to, changes in our industries, making
us more vulnerable to economic downturns;
    
    place us at a competitive disadvantage compared to our competitors that have less debt; and
    
    limit our ability to make certain asset dispositions.
  32




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##### Table of Contents



The non-renewal or modification of affiliation agreements with major television networks could harm
our operating results.
   Changes in FCC regulations regarding ownership have increased the uncertainty surrounding the
competitive position of our stations in the markets we serve.
    The FCCs extensive regulation of the broadcasting industry limits our ability to own and operate
television and radio stations and other media outlets.
  33




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##### Table of Contents



We will be required to make additional investments in HDTV technology, which could harm our ability
to fund other operations or repay debt.
  We may lose audience share and advertising revenue if we are unable to reach agreement with cable
and satellite companies regarding the retransmission of signals of our television stations.
   34




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##### Table of Contents



Dependence on key personnel may expose us to additional risks.
  A reduction on the periodic dividend on the common stock of Safeco Corporation may adversely affect
our other income, cash flow and earnings. A reduction in the share price of Safeco Corporation may
adversely affect our total assets and stockholders equity.
  Failure of our information technology systems would disrupt our operations, which could reduce our
customer base and result in lost revenue. Our computer systems are vulnerable to viruses,
unauthorized tampering, system failures and potential obsolescence.
  Our ownership and operation of Fisher Plaza is subject to risks, including those relating to the
economic climate, local real estate conditions, potential inability to provide adequate management,
maintenance and insurance, potential collection problems, reliance on significant tenants, and
regulatory risks.
  35




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##### Table of Contents



We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act
of 2002. Material weaknesses in internal control, if identified in future periods, could indicate
a lack of proper controls to generate accurate financial statements.
  Our operations may be adversely affected by earthquakes and other natural catastrophes in the
Northwest.
  A write-down of goodwill would harm our operating results.
  Foreign hostilities and terrorist attacks may affect our revenue and results of operations.
  36




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 10.1*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Oregon TV LLC (filed as Exhibit 10.13 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.2*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Washington TV LLC (filed as Exhibit 10.14 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.3*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Idaho TV LLC (filed as Exhibit 10.15 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.4*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting S.E. Idaho TV LLC (filed as Exhibit 10.16 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).31.1
    
    Certification of Chief Executive Officer.31.2
    
    Certification of Chief Financial Officer.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference.
    
    Certain information in this exhibit has been omitted and filed separately with the
Commission pursuant to a confidential treatment request under 17 C.F.R. Sections
200.80(b)(4), 200.83 and 230.406. 37
    Table of Contents  SIGNATURES
  FISHER COMMUNICATIONS, INC.
               (Registrant)Dated: May 9, 2006
    /s/ Robert C. BatemanRobert C. BatemanSenior Vice President and Chief Financial Officer 38
    Table of Contents  EXHIBIT INDEX
 Exhibit No.
    
    Description10.1*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Oregon TV LLC (filed as Exhibit 10.13 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.2*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Washington TV LLC (filed as Exhibit 10.14 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.3*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting Idaho TV LLC (filed as Exhibit 10.15 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).10.4*
    
    Renewal Letter Agreement dated January 6, 2006 between CBS Television and Fisher
Broadcasting S.E. Idaho TV LLC (filed as Exhibit 10.16 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 (File No. 000-22439)).31.1
    
    Certification of Chief Executive Officer.31.2
    
    Certification of Chief Financial Officer.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference.
    
    Certain information in this exhibit has been omitted and filed separately with the
Commission pursuant to a confidential treatment request under 17 C.F.R. Sections
200.80(b)(4), 200.83 and 230.406. 39