U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



FORM 10-Q



|x |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- |  | ---------------------------------------------------------------------------------------



| |  | For the quarterly period ended June 30, 2003
| |  | --------------------------------------------



| ̈ |  | 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.

(Exact Name of Registrant as Specified in Its Charter)



|WASHINGTON                                                     |  | 91-0222175                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)



100 Fourth Ave. N

Suite 440

Seattle, Washington 98109

(Address of Principal Executive Offices) (Zip Code)



(206) 404-7000

(Registrants Telephone Number, Including Area Code)



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  x    No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:



Common Stock, $1.25 par value, outstanding as of June 30, 2003: 8,595,288



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PART I



FINANCIAL INFORMATION



Item 1. Financial Statements



The following Condensed Consolidated Financial Statements (unaudited) are presented for the Registrant, Fisher Communications, Inc., and its subsidiaries.



|1. |  | Condensed Consolidated Statement of Operations:  Three and six months ended June 30, 2003 and 2002.
|-- |  | ---------------------------------------------------------------------------------------------------



|2. |  | Condensed Consolidated Balance Sheet:  June 30, 2003 and December 31, 2002.
|-- |  | ---------------------------------------------------------------------------



|3. |  | Condensed Consolidated Statement of Cash Flows:  Six months ended June 30, 2003 and 2002.
|-- |  | -----------------------------------------------------------------------------------------



|4 |  | Condensed Consolidated Statement of Comprehensive Income:  Three and six months ended June 30, 2003 and 2002.
|- |  | -------------------------------------------------------------------------------------------------------------



|5. |  | Notes to Condensed Consolidated Financial Statements.
|-- |  | -----------------------------------------------------



2



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ITEM 1  FINANCIAL STATEMENTS



FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS



|                                                                                                                                           |  | Six months ended June 30 |         |   | Three months endedJune 30 |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------- | - | ------------------------- | -
|                                                                                                                                           |  | 2003                     |         |   | 2002                      |  
|                                                                                                                                           |  |                          |         |   | Restated                  |  
|(in thousands, except per share amounts)                                                                                                   |  |                          |         |   |                           |  
|(Unaudited)                                                                                                                                |  |                          |         |   |                           |  
|Revenue                                                                                                                                    |  | $                        | 71,152  |   |                           | $
|Costs and expenses                                                                                                                         |  |                          |         |   |                           |  
|Cost of services sold (exclusive of depreciation reported separately below, amounting to $8,317, $7,622, $4,073, and $3,813,
respectively) |  |                          | 35,818  |   |                           |  
|Selling expenses                                                                                                                           |  |                          | 12,166  |   |                           |  
|General and administrative expenses                                                                                                        |  |                          | 21,963  |   |                           |  
|Depreciation                                                                                                                               |  |                          | 9,194   |   |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|                                                                                                                                           |  |                          | 79,141  |   |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) from operations                                                                                                              |  |                          | (7,989  | ) |                           |  
|Net gain on derivative instruments                                                                                                         |  |                          | 411     |   |                           |  
|Loss from extinguishment of long-term debt                                                                                                 |  |                          |         |   |                           |  
|Other income, net                                                                                                                          |  |                          | 5,601   |   |                           |  
|Equity in operations of equity investees                                                                                                   |  |                          | 2       |   |                           |  
|Interest expense                                                                                                                           |  |                          | (10,149 | ) |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) from continuing operations before income taxes                                                                               |  |                          | (12,124 | ) |                           |  
|Provision for federal and state income taxes (benefit)                                                                                     |  |                          | (4,729  | ) |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) from continuing operations                                                                                                   |  |                          | (7,395  | ) |                           |  
|Income (loss) from discontinued operations, net of income tax:                                                                             |  |                          |         |   |                           |  
|Real estate operations sold                                                                                                                |  |                          |         |   |                           |  
|Georgia television stations held for sale                                                                                                  |  |                          | 884     |   |                           |  
|Portland radio stations held for sale                                                                                                      |  |                          | (18     | ) |                           |  
|Media Services operations closed                                                                                                           |  |                          | (1,381  | ) |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) before cumulative effect of change in accounting principle                                                                   |  |                          | (7,910  | ) |                           |  
|Cumulative effect of change in accounting principle, net of income tax benefit of $34,662                                                  |  |                          |         |   |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Net income (loss)                                                                                                                          |  | $                        | (7,910  | ) |                           | $
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) per share:                                                                                                                   |  |                          |         |   |                           |  
|From continuing operations                                                                                                                 |  | $                        | (0.86   | ) |                           | $
|From discontinued operations                                                                                                               |  |                          | (0.06   | ) |                           |  
|Cumulative effect of change in accounting principle                                                                                        |  |                          |         |   |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Net income (loss) per share                                                                                                                |  | $                        | (0.92   | ) |                           | $
|                                                                                                                                           |  |                          |         |   |                           |  
|Income (loss) per share assuming dilution:                                                                                                 |  |                          |         |   |                           |  
|From continuing operations                                                                                                                 |  | $                        | (0.86   | ) |                           | $
|From discontinued operations                                                                                                               |  |                          | (0.06   | ) |                           |  
|Cumulative effect of change in accounting principle                                                                                        |  |                          |         |   |                           |  
|                                                                                                                                           |  |                          |         |   |                           |  
|Net income (loss) per share assuming dilution                                                                                              |  | $                        | (0.92   | ) |                           | $
|                                                                                                                                           |  |                          |         |   |                           |  
|Weighted average shares outstanding                                                                                                        |  |                          | 8,594   |   |                           |  
|Weighted average shares outstanding assuming dilution                                                                                      |  |                          | 8,594   |   |                           |  



See accompanying notes to condensed
consolidated financial statements.



3



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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET



|                                                                                                            |  | June 30 2003 |         |   | December 31 2002 |  
|----------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | -
|                                                                                                            |  |              |         |   | Restated         |  
|(in thousands, except share and per share amounts)                                                          |  |              |         |   |                  |  
|(Unaudited)                                                                                                 |  |              |         |   |                  |  
|ASSETS                                                                                                      |  |              |         |   |                  |  
|Current Assets                                                                                              |  |              |         |   |                  |  
|Cash and short-term cash investments                                                                        |  | $            | 9,854   |   |                  | $
|Restricted cash                                                                                             |  |              |         |   |                  |  
|Receivables                                                                                                 |  |              | 29,062  |   |                  |  
|Prepaid income taxes                                                                                        |  |              |         |   |                  |  
|Prepaid expenses                                                                                            |  |              | 7,523   |   |                  |  
|Television and radio broadcast rights                                                                       |  |              | 6,816   |   |                  |  
|Assets held for sale                                                                                        |  |              | 2,503   |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Total current assets                                                                                        |  |              | 55,758  |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Marketable Securities, at market value                                                                      |  |              | 105,954 |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Other Assets                                                                                                |  |              |         |   |                  |  
|Cash value of life insurance and retirement deposits                                                        |  |              | 13,965  |   |                  |  
|Television and radio broadcast rights                                                                       |  |              | 4,582   |   |                  |  
|Goodwill, net                                                                                               |  |              | 38,354  |   |                  |  
|Intangible assets                                                                                           |  |              | 1,232   |   |                  |  
|Investments in equity investees                                                                             |  |              | 2,925   |   |                  |  
|Other                                                                                                       |  |              | 11,957  |   |                  |  
|Assets held for sale                                                                                        |  |              | 62,039  |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|                                                                                                            |  |              | 135,054 |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Property, Plant and Equipment, net                                                                          |  |              | 205,970 |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|                                                                                                            |  | $            | 502,736 |   |                  | $
|                                                                                                            |  |              |         |   |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                        |  |              |         |   |                  |  
|Current Liabilities                                                                                         |  |              |         |   |                  |  
|Notes payable                                                                                               |  | $            | 8,274   |   |                  | $
|Trade accounts payable                                                                                      |  |              | 3,659   |   |                  |  
|Accrued payroll and related benefits                                                                        |  |              | 9,653   |   |                  |  
|Television and radio broadcast rights payable                                                               |  |              | 5,191   |   |                  |  
|Other current liabilities                                                                                   |  |              | 1,328   |   |                  |  
|Liabilities held for sale                                                                                   |  |              | 1,187   |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Total current liabilities                                                                                   |  |              | 29,292  |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Long-term Debt, net of current maturities                                                                   |  |              | 258,848 |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Other Liabilities                                                                                           |  |              |         |   |                  |  
|Accrued retirement benefits                                                                                 |  |              | 17,361  |   |                  |  
|Deferred income taxes                                                                                       |  |              | 27,177  |   |                  |  
|Television and radio broadcast rights payable, long-term portion                                            |  |              | 142     |   |                  |  
|Other liabilities                                                                                           |  |              | 5,086   |   |                  |  
|Liabilities held for sale                                                                                   |  |              | 398     |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|                                                                                                            |  |              | 50,164  |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|Commitments and Contingencies                                                                               |  |              |         |   |                  |  
|Stockholders Equity                                                                                        |  |              |         |   |                  |  
|Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,595,288 in 2003 and 8,594,060 in 2002 |  |              | 10,744  |   |                  |  
|Capital in excess of par                                                                                    |  |              | 3,490   |   |                  |  
|Deferred compensation                                                                                       |  |              | (5      | ) |                  |  
|Accumulated other comprehensive incomenet of income taxes:                                                 |  |              |         |   |                  |  
|Unrealized gain on marketable securities                                                                    |  |              | 68,208  |   |                  |  
|Minimum pension liability                                                                                   |  |              | (1,773  | ) |                  |  
|Retained earnings                                                                                           |  |              | 83,768  |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|                                                                                                            |  |              | 164,432 |   |                  |  
|                                                                                                            |  |              |         |   |                  |  
|                                                                                                            |  | $            | 502,736 |   |                  | $
|                                                                                                            |  |              |         |   |                  |  



See accompanying notes to condensed
consolidated financial statements.



4



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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                                                           |  | Six months ended June 30 |        
|------------------------------------------------------------------------------------------ |  | ------------------------ | -------
|                                                                                           |  | 2003                     |        
|                                                                                           |  |                          |        
|(in thousands)                                                                             |  |                          |        
|(Unaudited)                                                                                |  |                          |        
|Cash flows from operating activities                                                       |  |                          |        
|Net loss                                                                                   |  | $                        | (7,910 
|Adjustments to reconcile net loss to net cash provided by operating activities             |  |                          |        
|Depreciation                                                                               |  |                          | 9,452  
|Noncurrent deferred income taxes                                                           |  |                          | (5,502 
|Cumulative effect of change in accounting principle                                        |  |                          |        
|Equity in operations of equity investees                                                   |  |                          | (2     
|Gain on sale of marketable securities                                                      |  |                          | (3,675 
|Gain on collection of installment note receivable                                          |  |                          | (362   
|Amortization of deferred loan costs                                                        |  |                          | 569    
|Increase in fair value of derivative instruments                                           |  |                          | (411   
|Loss from extinguishment of debt                                                           |  |                          |        
|Amortization of television and radio broadcast rights                                      |  |                          | 10,156 
|Payments for television and radio broadcast rights                                         |  |                          | (10,047
|Other                                                                                      |  |                          | 288    
|Change in operating assets and liabilities                                                 |  |                          |        
|Receivables                                                                                |  |                          | 2,046  
|Prepaid income taxes                                                                       |  |                          | 4,424  
|Prepaid expenses                                                                           |  |                          | (1,276 
|Cash value of life insurance and retirement deposits                                       |  |                          | (89    
|Other assets                                                                               |  |                          | 1,377  
|Trade accounts payable, accrued payroll and related benefits and other current liabilities |  |                          | 1,029  
|Accrued retirement benefits                                                                |  |                          | (1,732 
|Other liabilities                                                                          |  |                          | 1,833  
|                                                                                           |  |                          |        
|Net cash provided by operating activities                                                  |  |                          | 168    
|                                                                                           |  |                          |        
|Cash flows from investing activities                                                       |  |                          |        
|Proceeds from sale of real estate and property, plant and equipment                        |  |                          | 141    
|Proceeds from sale of marketable securities                                                |  |                          | 5,169  
|Proceeds from collection of installment note receivable                                    |  |                          | 3,185  
|Restricted cash                                                                            |  |                          | 12,778 
|Purchase of radio station license                                                          |  |                          | (467   
|Purchase of property, plant and equipment                                                  |  |                          | (5,794 
|                                                                                           |  |                          |        
|Net cash provided by (used in) investing activities                                        |  |                          | 15,012 
|                                                                                           |  |                          |        
|Cash flows from financing activities                                                       |  |                          |        
|Net payments under notes payable                                                           |  |                          | (122   
|Borrowings under borrowing agreements and mortgage loans                                   |  |                          |        
|Payments on borrowing agreements and mortgage loans                                        |  |                          | (28,258
|Payment of deferred loan costs                                                             |  |                          | (465   
|Proceeds from exercise of stock options                                                    |  |                          | 4      
|Cash dividends paid                                                                        |  |                          |        
|                                                                                           |  |                          |        
|Net cash provided by (used in) financing activities                                        |  |                          | (28,841
|                                                                                           |  |                          |        
|Net increase (decrease) in cash and short-term cash investments                            |  |                          | (13,661
|Cash and short-term cash investments, beginning of period                                  |  |                          | 23,515 
|                                                                                           |  |                          |        
|Cash and short-term cash investments, end of period                                        |  | $                        | 9,854  
|                                                                                           |  |                          |        



See accompanying notes to condensed
consolidated financial statements.



5



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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



|                                                                    |  | Six months ended June 30 |        |   | Three months ended June 30 |  
|------------------------------------------------------------------- |  | ------------------------ | ------ | - | -------------------------- | -
|                                                                    |  | 2003                     |        |   | 2002                       |  
|                                                                    |  |                          |        |   | Restated                   |  
|(in thousands)                                                      |  |                          |        |   |                            |  
|(Unaudited)                                                         |  |                          |        |   |                            |  
|Net income (loss)                                                   |  | $                        | (7,910 | ) |                            | $
|Other comprehensive income (loss):                                  |  |                          |        |   |                            |  
|Unrealized gain on marketable securities                            |  |                          | 1,865  |   |                            |  
|Effect of income taxes                                              |  |                          | (653   | ) |                            |  
|Net gain on interest rate swap                                      |  |                          |        |   |                            |  
|Effect of income taxes                                              |  |                          |        |   |                            |  
|Loss on settlement of interest rate swap reclassified to operations |  |                          |        |   |                            |  
|Effect of income taxes                                              |  |                          |        |   |                            |  
|Unrealized gain on marketable securities reclassified to operations |  |                          | (3,114 | ) |                            |  
|Effect of income taxes                                              |  |                          | 1,090  |   |                            |  
|Adjustment to minimum pension liability,                            |  |                          | 630    |   |                            |  
|Effect of income taxes                                              |  |                          | (220   | ) |                            |  
|                                                                    |  |                          |        |   |                            |  
|Comprehensive income (loss)                                         |  | $                        | (8,312 | ) |                            | $
|                                                                    |  |                          |        |   |                            |  



See accompanying notes to condensed
consolidated financial statements.



6



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FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. The unaudited financial information furnished herein, in the opinion of management, reflects all adjustments which are necessary to state fairly the consolidated financial position, results of operations, and cash flows of Fisher
Communications, Inc. and subsidiaries (the Company) as of and for the periods indicated. Fisher Communications, Inc.s principal wholly-owned subsidiaries include Fisher Broadcasting Company, Fisher Media Services Company, and
Fisher Properties Inc. The Company presumes that users of the interim financial information herein have read or have access to the Companys audited consolidated financial statements and that the adequacy of additional disclosure needed for a
fair presentation, except in regard to material contingencies or recent subsequent events, may be determined in that context. Accordingly, footnote and other disclosures which would substantially duplicate the disclosures contained in Form 10-K for
the year ended December 31, 2002 filed by the Company have been omitted. The financial information herein is not necessarily representative of a full years operations.



2. Restatement



Goodwill ImpairmentEffective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible
Assets (FAS 142). FAS 142 requires the Company to test goodwill and intangible assets for impairment upon adoption and to test goodwill at least annually, or whenever events indicate that an impairment may exist. Upon the adoption of FAS 142,
the Company, with the concurrence of its independent auditors, concluded there was no impairment of goodwill. Subsequent to the issuance of the Companys consolidated financial statements as of and for the year ended December 31, 2002, the
Company and the independent auditors determined that in performing the Companys initial impairment test, the level (reporting unit) at which the Company should assess goodwill for impairment had been incorrectly identified. The Company has
determined that the impairment test should have been conducted at the operating segment level, which consists and requires separate assessment, with respect to the broadcast operations, of each of the Companys ten television and radio station
groups. As a result of the reassessment of the reporting unit, the Company reperformed the first step of the transitional impairment test, which indicated that impairment existed. Completion of the second step of the transitional impairment test
resulted in a pre-tax goodwill impairment charge of $99,035,000 related to five television reporting units and a related tax benefit of $34,662,000 (as the aforementioned goodwill was deductible for tax purposes). The required annual impairment test
was also reperformed based on the new determination of reporting units, resulting in no further impairment.



As required by the transition provisions of FAS 142, the net loss of $64,373,000 resulting from the reperformed transitional test is recorded as the cumulative effect of a change in accounting principle in the
accompanying condensed consolidated financial statements for the six months ended June 30, 2002. This restatement has no effect on the Companys previously reported revenues and cash flows; nor does it affect results from operations for the six
months ended June 30, 2003.



Retention BonusSubsequent to the
issuance of the Companys consolidated financial statements as of and for the year ended December 31, 2002 and the unaudited condensed consolidated financial statements as of March 31, 2003 and for the three months then ended, the Company
concluded that certain obligations for retention bonuses described in Note 10 to these unaudited condensed consolidated financial statements should have been accrued over the service period specified in the related retention agreements. Accordingly,
the Company revised its financial statements for the year ended December 31, 2002 to record an obligation of $389,000 and related tax effects in the fourth quarter of 2002. Net loss for the year ended December 31, 2002 was increased by $248,000. The
Company also revised its financial statements for the three months ended March 31, 2003 to record an additional liability of $886,000 and related tax effects. Net loss for the quarter ended March 31, 2003 was increased by $564,000. This adjustment
does not impact the six months ended June 30, 2002.



Pension
PlanIn addition, subsequent to the issuance of the consolidated financial statements as of and for the year ended December 31, 2002 and the unaudited condensed consolidated financial statements as of March 31, 2003 and for the three months
then ended, the Company concluded that certain pension-related expenses should have been recorded in the first quarter of 2003 and in prior periods.



The Company had a defined-benefit plan for all non-broadcasting employees. Benefit accruals under this plan ceased in July 2001 and plan assets were distributed to
participants between 2001 and the first half of 2003. Certain settlement losses relating to the distribution of plan assets should have been recognized in 2002 and in the first quarter of 2003. In addition, the Company determined that additional
pension benefits paid in 2003 to certain retired participants who worked beyond their normal retirement age (Late Retirees) had not been recognized over periods



7



---

in which those employees provided services. Accordingly, the Company revised its financial statements to record the settlement losses and the additional
obligation to Late Retirees (cumulatively, the Pension Adjustments). The impact of recording the Pension Adjustments also had the effect of reducing Retained Earnings by $433,000 as of December 31, 2002, increasing Accrued Retirement
Benefits by $681,000, and reducing Deferred Income Tax Liabilities by $248,000, to reflect the pension liability that should have been recorded as of that date. Pension adjustments to record the additional expense that should have been recognized
from January 1, 2000 through December 31, 2002 were recorded in the fourth quarter of 2002 and amounted to $134,000 after taxes. Amounts related to 2000, 2001, and the first three quarters of 2002, totaling $6,000, net of taxes, were not significant
in relation to the fourth quarter of 2002 or to the prior periods. The impact of recording the Pension Adjustments for the first quarter of 2003 was an increase in net loss for the quarter by $282,000.



Segment ReportingAs further discussed in Note 9 to the accompanying condensed
consolidated financial statements, the Company revised its reportable segments to present the previously reported broadcasting segment as two reportable segments: television and radio. In addition, the previously reported media services segment is
presented as the Fisher Plaza segment with the remaining operations in an all other category. The segmental disclosures for comparable periods have been restated to conform to this presentation.



A summary of the significant effects of the restatements on the Companys condensed
consolidated statement of operations for the six months ended June 30, 2002 is as follows (in thousands, except per share amounts):



|                                                                                          |  | Six months ended June 30, 2002 |       
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------
|                                                                                          |  | As originallyreported          |       
|Loss before cumulative effect of change in accounting principle                           |  | $                              | (4,238
|Cumulative effect of change in accounting principle, net of income tax benefit of $34,662 |  |                                |       
|                                                                                          |  |                                |       
|Net loss                                                                                  |  | $                              | (4,238
|                                                                                          |  |                                |       
|Loss per share (basic and assuming dilution)                                              |  |                                |       
|Loss before cumulative effect of change in accounting principle                           |  | $                              | (0.49 
|Cumulative effect of change in accounting principle                                       |  |                                |       
|                                                                                          |  |                                |       
|Net loss                                                                                  |  | $                              | (0.49 
|                                                                                          |  |                                |       



A summary of the significant effects
of the restatements on the Companys consolidated balance sheet as of December 31, 2002 is as follows (in thousands):



8



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|                                   |  | December 31, 2002    
|---------------------------------- |  | ---------------------
|                                   |  | As originallyreported
|Assets                             |  |                      
|Goodwill, net                      |  | $                    
|Total assets                       |  | $                    
|Liabilities                        |  |                      
|Accrued payroll and other benefits |  | $                    
|Accrued retirement benefits        |  | $                    
|Deferred income taxes              |  | $                    
|Stockholders equity               |  |                      
|Retained earnings                  |  | $                    
|Total stockholders equity         |  | $                    



In addition to the restatements
discussed above, December 31, 2002 balance sheet amounts reported in the accompanying condensed consolidated financial statements have been revised to reclassify the assets and liabilities of the Georgia television stations and the Portland radio
stations as Assets and Liabilities held for sale as required by Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets.



3.    New Accounting Pronouncements



In May 2002, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 145
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (FAS 145). FAS 145, which updates, clarifies, and simplifies existing accounting pronouncements, became effective for the
Companys 2003 financial statements. Accordingly, a loss from extinguishment of long-term debt reported by the Company as an extraordinary item in the 2002 financial statements has been reclassified to continuing operations.



In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based CompensationTransition and Disclosure(FAS 148). FAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that voluntarily changes to
the fair value based method of accounting for stock-based compensation. It also amends the disclosure provisions of that statement to require prominent disclosures in both annual and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported results. The disclosure provisions of FAS 148 are effective for financial statements issued for fiscal periods beginning after December 15, 2002 and became effective for the
Company commencing with the first quarter of the 2003 fiscal year. Disclosures required by FAS 148 are provided in Note 8 to these condensed financial statements. The Company does not currently have plans to change to the fair value method of
accounting for its stock-based compensation plans.



On January 1, 2003, the
Company adopted FASB Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). This statement requires entities to record the fair value of future liabilities for asset retirement obligations as an increase in the
carrying amount of the related long-lived asset if a reasonable estimate of fair value can be made. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. The
Company has certain legal obligations, principally related to leases on locations used for broadcast system assets, which fall within the scope of FAS 143. These legal obligations include a responsibility to remediate the leased sites on which these
assets are located. The Company has concluded that the adoption of FAS 143 does not have a material impact on the Companys financial statements.



In February 2003, the Company adopted FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires a variable interest
entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or both. FIN 46 also
requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46



9



---

apply immediately to variable interest entities created after January 31, 2003. Adoption of this portion of the interpretation did not have a material impact
on the Companys financial statements. The consolidation requirements apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements
issued after January 31, 2003, regardless of when the variable interest entity was established. The impact of adoption of this portion of the interpretation is not expected to have a material impact on the Companys financial statements.



4. Discontinued operations



The Companys real estate subsidiary concluded the sale of one industrial property in
October 2002 and three industrial properties in December 2002.



On January 29,
2003, the broadcasting subsidiary signed an asset purchase agreement for the sale of its two Georgia television stations, WFXG-TV, Augusta and WXTX-TV, Columbus, for a purchase price of $40 million plus working capital. Completion of the sale is
subject to FCC approval, receipt of consents to assignment of certain material agreements, and satisfaction of other customary closing conditions. The sale is expected to be completed in 2003.



On May 29, 2003, the broadcasting subsidiary signed an asset purchase agreement for the sale
of its two Portland, Oregon radio stations, KWJJ-FM AND KOTK-AM, for a purchase price of $44 million. Completion of the sale is subject to FCC approval, receipt of consents to assignment of certain material agreements, and satisfaction of other
customary closing conditions. The sale is expected to be completed in 2003.



In
connection with the Companys restructuring, two of the businesses operated by Media Services subsidiary, Fisher Entertainment LLC (Fisher Entertainment) and Civia, Inc. (Civia), ceased operations during the second
quarter, and those businesses were closed.



The real estate properties that
were sold in October and December 2002, the Georgia and Portland stations, as well as Fisher Entertainment and Civia, meet the criteria of a component of an entity as defined in FASB Statement No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets (FAS 144). The operations and cash flow of those components have been or will be eliminated from the ongoing operations of the Company as a result of the disposal and the Company does not have or will not have
any significant involvement in the operations of those components after the disposal transaction. Accordingly, in accordance with the provisions of FAS 144, the results of operations of the properties sold through the date of completion of sale are
reported as discontinued operations in the condensed consolidation statement of operations for the six and three months ended June 30, 2003. The results of operations of the Portland and Georgia stations as well as the results of operations of
Fisher Entertainment and Civia through the date of closing have also been reported as discontinued operations in the accompanying financial statements. The prior year results of operations of the Portland and Georgia stations, Fisher Entertainment
and Civia have been reclassified to conform to the 2003 presentation.



The
income (loss) from discontinued operations of the real estate sold for the six and three-month periods ended June 30, 2002 is summarized as follows (in thousands):



|                                            |  | Periods ended June 30, 2002 |   
|------------------------------------------- |  | --------------------------- | --
|                                            |  | Six months                  |   
|                                            |  | (Unaudited)                 |   
|Income (loss) from discontinued operations: |  |                             |   
|Before income taxes                         |  | $                           | 6 
|Income tax effect                           |  |                             | (2
|                                            |  |                             |   
|                                            |  | $                           | 4 
|                                            |  |                             |   



Revenue of the real estate sold
amounted to $1,914,000 and $956,000 in the six and three-month periods ended June 30, 2002, respectively. Gain on sale of the real estate sold in October and December 2002 amounted to $7,203,000 after income taxes, and was reported in the fourth
quarter of 2002.



10



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The income from discontinued operations of the Georgia television stations to be sold is summarized as follows (in
thousands):



|                                                                                                                                                                                                                                             |  | Six months endedJune 30 |        |   | Three months ended June 30 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | -------------------------- | -
|                                                                                                                                                                                                                                             |  | 2003                    |        |   | 2002                       |  
|                                                                                                                                                                                                                                             |  | (Unaudited)             |       
|Income from discontinued operations:                                                                                                                                                                                                         |  |                         |        |   |                            |  
|Before income taxes                                                                                                                                                                                                                          |  | $                       | 1,360  |   |                            | $
|Income tax effect                                                                                                                                                                                                                            |  |                         | (476   | ) |                            |  
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  
|                                                                                                                                                                                                                                             |  | $                       | 884    |   |                            | $
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  
|                                                                                                                                                                                                                                            
|Revenue of the Georgia stations to be sold amounted to $4,285,000 and $4,051,000 in the six months ended June 30, 2003 and 2002, respectively, and $2,225,000 and
$2,183,000 in the three months ended June 30, 2003 and 2002, respectively.
|                                                                                                                                                                                                                                            
|The income (loss) from discontinued operations of the Portland radio stations to be sold is summarized as follows (in thousands):                                                                                                           
|                                                                                                                                                                                                                                             |  |                        
|                                                                                                                                                                                                                                             |  | Six months endedJune 30 |        |   | Three months ended June 30 |  
|                                                                                                                                                                                                                                             |  | 2003                    |        |   | 2002                       |  
|                                                                                                                                                                                                                                             |  | (Unaudited)             |       
|Income (loss) from discontinued operations:                                                                                                                                                                                                  |  |                         |        |   |                            |  
|Before income taxes                                                                                                                                                                                                                          |  | $                       | (29    | ) |                            | $
|Income tax effect                                                                                                                                                                                                                            |  |                         | 11     |   |                            |  
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  
|                                                                                                                                                                                                                                             |  | $                       | (18    | ) |                            | $
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  
|                                                                                                                                                                                                                                            
|Revenue of the Portland radio stations amounted to $2,444,000 and $3,254,000 in the six months ended June 30, 2003 and 2002, respectively, and $1,059,000 and $1,782,000
in the three months ended June 30, 2003 and 2002, respectively.    
|                                                                                                                                                                                                                                            
|The loss from discontinued operations of the media businesses closed is summarized as follows (in thousands):                                                                                                                               
|                                                                                                                                                                                                                                             |  |                        
|                                                                                                                                                                                                                                             |  | Six months endedJune 30 |        |   | Three months ended June 30 |  
|                                                                                                                                                                                                                                             |  | 2003                    |        |   | 2002                       |  
|                                                                                                                                                                                                                                             |  | (Unaudited)             |       
|Loss from discontinued operations:                                                                                                                                                                                                           |  |                         |        |   |                            |  
|Before income taxes                                                                                                                                                                                                                          |  | $                       | (1,930 | ) |                            | $
|Income tax effect                                                                                                                                                                                                                            |  |                         | 549    |   |                            |  
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  
|                                                                                                                                                                                                                                             |  | $                       | (1,381 | ) |                            | $
|                                                                                                                                                                                                                                             |  |                         |        |   |                            |  



Revenue of the media businesses sold
amounted to $1,556,000 and $680,000 in the six months ended June 30, 2003 and 2002, respectively, and $260,000 and $252,000 in the three months ended June 30, 2003 and 2002, respectively.



5. Derivative instruments



The Company is a party to a variable forward sales transaction (Forward Transaction) with a financial institution. The Companys obligations under the
Forward Transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by the Company. A portion of the Forward Transaction is considered a derivative and, as such, the Company periodically measures its fair value and
recognizes the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. The Company may in the future designate the Forward Transaction as a hedge and, accordingly, the change in fair
value will be recorded in the income statement or in other comprehensive income depending on its effectiveness. The Company may borrow up to $70,000,000 under the Forward Transaction. The Forward Transaction will mature in five separate six-month
intervals beginning March 15, 2005 through March 15, 2007. The amount due at each maturity date will be



11



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determined based on the market value of SAFECO common stock on such maturity date. Although the Company will have the
option of settling the amount due in cash, or by delivery of shares of SAFECO common stock, the Company currently intends to settle in cash rather than by delivery of shares. The Company may prepay amounts due in connection with the Forward
Transaction. During the term of the Forward Transaction, the Company will continue to receive dividends paid by SAFECO; however, any increase in the dividend amount above the present rate must be paid to the financial institution that is a party to
the Forward Transaction. At June 30, 2003 the derivative portion of the Forward Transaction had a fair market value of $4,131,000, which is included in other assets in the accompanying Condensed Consolidated Balance Sheet. At June 30, 2003,
$52,148,000 was outstanding under the Forward Transaction including accrued interest amounting to $5,229,000.



In March 2002, the broadcasting subsidiary entered into an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiarys ratio of consolidated funded debt to
consolidated EBITDA, on a portion of the floating rate debt outstanding under the broadcast facility. The notional amount of the swap is $65,000,000, which reduces as payments are made on principal outstanding under the broadcast facility, until
termination of the contract in March 2004. At June 30, 2003 the fair market value of the swap agreement was a liability of $2,787,000, which is included in other liabilities in the accompanying Condensed Consolidated Balance Sheet.



Changes in the fair market value of the Forward Transaction and the interest rate swap
agreement are reported in Net gain on derivative instruments in the accompanying Condensed Consolidated Statement of Operations.



6. Television and radio broadcast rights and other broadcast commitments:



The broadcasting subsidiary acquires television and radio broadcast rights, and at June 30, 2003 has commitments under license agreements amounting to $69,360,000 for
future rights to broadcast television and radio programs through 2008, and $10,658,000 in related fees. As these programs will not be available for broadcast until after June 30, 2003, they have been excluded from the financial statements in
accordance with provision of Statement of Financial Accounting Standards No. 63, Financial Reporting by Broadcasters. In 2002, the broadcasting subsidiary acquired exclusive rights to sell available advertising time for a radio station
in Seattle (Joint Sales Agreement). Under the Joint Sales Agreement, the broadcasting subsidiary has commitments for monthly payments totaling $12,400,000 through 2007.



7. Income (loss) per share:



Net income (loss) per share represents net income (loss) divided by the weighted average number of shares outstanding during the period. Net income (loss) per share
assuming dilution represents net income (loss) divided by the weighted average number of shares outstanding, including the potentially dilutive impact of the stock options and restricted stock rights issued under the Companys incentive plans.
Common stock options and restricted stock rights are converted using the treasury stock method.



The weighted average number of shares outstanding for the six months ended June 30, 2003 was 8,594,479. The dilutive effect of 460 restricted stock rights and options to purchase 494,163 shares are excluded for the
six month and three-month periods ended June 30, 2003 because such rights and options were anti-dilutive.



The weighted average number of shares outstanding for the six months ended June 30, 2002 was 8,592,183. The dilutive effect of 1,474 restricted stock rights and options to purchase 442,933 shares are excluded for the
six months ended June 30, 2002 because such rights and options were anti-dilutive.



12



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8. Stock-based compensation:



The Company accounts for common stock options and restricted common stock rights in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. No stock-based compensation is reflected in net loss, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table
illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands, except
per share amounts):



|                                                                                                                                                     |  | Six months endedJune 30 |        |   | Three months endedJune 30 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ------------------------- | -
|                                                                                                                                                     |  | 2003                    |        |   | 2002                      |  
|                                                                                                                                                     |  | (Unaudited)             |        |   | (Unaudited)               |  
|Net income (loss), as reported                                                                                                                       |  | $                       | (7,910 | ) |                           | $
|Deduct total stock-based employee compensation expense determined under the fair value based method for all awards, net of related
income tax effect |  |                         | (388   | ) |                           |  
|                                                                                                                                                     |  |                         |        |   |                           |  
|Adjusted net income (loss)                                                                                                                           |  | $                       | (8,298 | ) |                           | $
|                                                                                                                                                     |  |                         |        |   |                           |  
|Income (loss) per share:                                                                                                                             |  |                         |        |   |                           |  
|As reported                                                                                                                                          |  | $                       | (0.92  | ) |                           | $
|Adjusted                                                                                                                                             |  | $                       | (0.97  | ) |                           | $
|Income (loss) per share assuming dilution:                                                                                                           |  |                         |        |   |                           |  
|As reported                                                                                                                                          |  | $                       | (0.92  | ) |                           | $
|Adjusted                                                                                                                                             |  | $                       | (0.97  | ) |                           | $



9. Segment information:



The Company operates its continuing operations as three principal business units:
broadcasting, media services, and real estate. The Company has previously reported its television and radio operations as one reportable segment called Broadcasting. The Company also previously reported Fisher Plaza and the all
other category as one reportable segment called Media Services. The information reported for the six and three-month periods ended June 30, 2002 has been restated to reflect the appropriate reportable segments pursuant to Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (FAS 131) and to reflect reclassification of discontinued operations.



Under the provisions of FAS 131 the Company reports financial data for four reportable
segments: television, radio (included in the broadcasting business unit), Fisher Plaza (included in the media services business unit), real estate, and a remaining all other category. The television reportable segment includes the
operations of the Companys nine network-affiliated television stations (excluding the Georgia television stations, which are included in discontinued operations), and a 50% interest in a company that owns a tenth television station. The radio
reportable segment includes the operations of the Companys 27 radio stations (excluding the Portland radio stations, which are included in discontinued operations). Corporate expenses of the broadcasting business unit are allocated to the
television and radio reportable segments based on a ratio that approximates historic revenue and operating expenses of the segments. The Fisher Plaza reportable segment includes the operations of a communications center located in Seattle that
serves as home of the Companys Seattle television and radio operations, the Companys corporate offices, and third-parties. The real estate reportable segment includes the Companys proprietary commercial real estate and property
management operations. The operations of Fisher Pathways, Inc., a provider of satellite transmission services, which is also included in the media services business unit, as well as the expenses of Fisher Media Services Companys corporate
group are included in an all other category. The results of operations of Fisher Entertainment LLC and Civia, Inc. are reported as discontinued operations as discussed in Note 4 to the Condensed Consolidated Financial Statements.



13



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Revenue for each reportable segment is as follows:



|                           |  | Six months endedJune 30 |        |   | Three months endedJune 30 |  
|-------------------------- |  | ----------------------- | ------ | - | ------------------------- | -
|                           |  | 2003                    |        |   | 2002                      |  
|Television                 |  | $                       | 42,648 |   |                           | $
|Radio                      |  |                         | 20,962 |   |                           |  
|Fisher Plaza               |  |                         | 3,437  |   |                           |  
|Real estate                |  |                         | 3,811  |   |                           |  
|All other                  |  |                         | 612    |   |                           |  
|Corporate and eliminations |  |                         | (318   | ) |                           |  
|                           |  |                         |        |   |                           |  
|                           |  | $                       | 71,152 |   |                           | $
|                           |  |                         |        |   |                           |  



Income (loss) from continuing
operations before interest and income taxes for each reportable segment is as follows (in thousands):



|                                                                           |  | Six months ended June 30 |         |   | Three months endedJune 30 |  
|-------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ------------------------- | -
|                                                                           |  | 2003                     |         |   | 2002Restated              |  
|Television                                                                 |  | $                        | 1,702   |   |                           | $
|Radio                                                                      |  |                          | (1,648  | ) |                           |  
|Fisher Plaza                                                               |  |                          | 1,644   |   |                           |  
|Real estate                                                                |  |                          | 1,131   |   |                           |  
|All other                                                                  |  |                          | (1,022  | ) |                           |  
|Corporate and eliminations                                                 |  |                          | (3,782  | ) |                           |  
|                                                                           |  |                          |         |   |                           |  
|Total segment income (loss) from continuing operations before income taxes |  |                          | (1,975  | ) |                           |  
|Interest expense                                                           |  |                          | (10,149 | ) |                           |  
|                                                                           |  |                          |         |   |                           |  
|Consolidated income (loss) from continuing operations before income taxes  |  | $                        | (12,124 | ) |                           | $
|                                                                           |  |                          |         |   |                           |  



14



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Identifiable assets for each reportable segment are as follows (in thousands):



|                            |  | June 302003 |         | December31 2002
|--------------------------- |  | ----------- | ------- | ---------------
|                            |  |             |         | Restated       
|Television                  |  | $           | 84,908  |                
|Radio                       |  |             | 51,899  |                
|Fisher Plaza                |  |             | 122,124 |                
|Real estate                 |  |             | 46,383  |                
|All other                   |  |             | 3,720   |                
|Corporate and eliminations  |  |             | 129,160 |                
|                            |  |             |         |                
|Continuing operations       |  |             | 438,194 |                
|Discontinued operationsnet |  |             | 64,542  |                
|                            |  |             |         |                
|                            |  | $           | 502,736 |                
|                            |  |             |         |                



Identifiable assets by reportable
segment are those assets used in the operations of each segment. Corporate assets are principally marketable securities.



10. Other commitments:



In connection with a review of strategic alternatives conducted during the fall of 2002 and winter of 2003, the Company entered into agreement with certain officers and employees, which require payments of $3,844,000
in January 2004 if the officers and employees continue their employment until that date. The Company is recognizing the cost of this obligation over the period covered by the agreements and, as of June 30, 2003, $1,978,000 was accrued. General and
administrative expenses in the six months ended June 30, 2003 include $1,600,000 related to these agreements. The agreements also provide that if a change in control should occur, certain officers will receive severance payments totaling
approximately $2,100,000 as well as health and welfare benefits. The Company will recognize this obligation when it is probable the executives are entitled to the benefits.



11. Subsequent events:



On July 30, 2003, the Companys real estate subsidiary entered into an asset purchase agreement for the sale of West Lake Union Center and Fisher Business Center,
the real estate subsidiarys two remaining commercial properties. The aggregate purchase price for the sale of the properties is approximately $64 million. Completion of the sale is subject to the satisfaction of customary due diligence and
closing conditions. Closing of the transaction is expected to occur in September of 2003. The sale is expected to result in a gain of approximately $20 million, net of income tax effects, producing net proceeds after income taxes and closing costs
of approximately $51 million. The Company expects to use the majority of the net proceeds of the sale to reduce outstanding debt.



On August 21, 2003 the Company received a letter from the Nasdaq National Market informing the Company that it is in violation of Nasdaq Rule 4310(c)(14), which requires
the Company to file required reports with the Securities and Exchange Commission. Nasdaq has determined that the Company is in violation of this rule as a result of the Companys delay in filing its Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2003. The Nasdaq letter notes that the Companys securities could be delisted if it does not request a hearing on the delisting by August 28, 2003. The Company has requested a hearing on the delisting matter, which
resulted in an automatic stay of the delisting process. Pending the hearing the Companys Common Stock is trading on the Nasdaq National Market under the symbol FSCIE. After this Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003 is filed, the Company will seek Nasdaq approval to again trade under the symbol FSCI.



12. Reclassifications:



Certain prior-period balances have been reclassified to conform to the current-period presentation. Such reclassifications had no effect on operating results.



15



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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 Additional Factors That May Affect Our Business, Financial Condition And
Future Results, and those discussed in our annual report on Form 10-K for the year ended December 31, 2002. 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.



This discussion is intended to provide an analysis of significant trends and material changes in our financial position and operating
results of our business units during the three- and six-month periods ended June 30, 2003 compared with the corresponding periods in 2002.



On July 30, 2003, the Companys real estate subsidiary entered into an asset purchase agreement for the sale of West Lake Union Center and Fisher Business Center,
the real estate subsidiarys two remaining commercial properties. The aggregate purchase price for the sale of the properties is approximately $64 million. Completion of the sale is subject to the satisfaction of customary due diligence and
closing conditions. Closing of the transaction is expected to occur in September. The sale is expected to result in a gain of approximately $20 million net of income tax effects, producing net proceeds after income taxes and closing costs of
approximately $51 million. The Company expects to use the majority of the net proceeds of the sale to reduce outstanding debt.



Percentage comparisons have been omitted within the following tables where they are not considered meaningful.



CRITICAL ACCOUNTING POLICIES



The SEC has defined a companys critical accounting policies as the ones that are most
important to the portrayal of the companys financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition, we have identified our critical accounting policies below. We also have other accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding
our results. For a detailed discussion on the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements contained in our annual report on Form 10-K/A for the year ended December 31, 2002.



Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Allowance for doubtful accounts. We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware
of a specific customers inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debts based on
historical experience of bad debts as a percent of accounts receivable for each business unit, adjusted for relative improvements or deteriorations in the aging and changes in current economic conditions. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make payments, additional charges may be required.



16



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Television and radio broadcast rights. Television and radio broadcast rights are recorded as assets when the
license period begins and the programs are available for broadcasting, at the gross amount of the related obligations. Costs incurred in connection with the purchase of programs to be broadcast within one year are classified as current assets, while
costs of those programs to be broadcast after one year are considered noncurrent. The costs are charged to operations over their estimated broadcast periods using the straight-line method. Program obligations are classified as current or noncurrent
in accordance with the payment terms of the license agreement. Costs of programs which are not available for broadcast are not recorded as assets and are disclosed as commitments.



The cost of television and radio broadcasting rights is reported in the Condensed Consolidated Balance Sheet at the lower of unamortized
cost or estimated net realizable value, and is periodically reviewed for impairment. We estimate the net realizable value of our broadcasting rights based on techniques that rely on significant assumptions. If managements expectations of
programming usefulness are revised downward, it may be necessary to write down unamortized cost to estimated net realizable value.



Accounting for derivative instruments. We utilize an interest rate swap in the management of our variable rate exposure. The interest rate swap is held at fair
value with the change in fair value being recorded in the statement of income.



We entered into a variable forward sales transaction with a financial institution. Our obligations under the Forward Transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by us. A portion of the Forward
Transaction will be considered a derivative and, as such, we will periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. We may
in the future designate the Forward Transaction as a hedge and, accordingly, the change in fair value will be recorded in the income statement or in other comprehensive income depending on its effectiveness.



Goodwill and long-lived assets. Goodwill represents the excess of purchase price of
certain broadcast properties over the fair value of tangible and identifiable intangible net assets acquired and is accounted for under the provisions of Statement of Financial Accounting Standards No. 142 (FAS 142), which we adopted as of January
1, 2002. Under FAS 142, goodwill and intangible assets with indefinite useful lives are no longer amortized but are tested for impairment at least on an annual basis.



The goodwill impairment test involves a comparison of the fair value of each of our reporting units, with the carrying amounts of net
assets, including goodwill, related to each reporting unit. If the carrying amount exceeds a reporting units fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The impairment loss
is measured based on the amount by which the carrying value of goodwill exceeds the implied fair value of goodwill in the reporting unit being tested. Fair values are determined based on valuations prepared by third party valuation consultants that
rely primarily on the discounted cash flow method. This method uses future projections of cash flows from each of our reporting units and includes, among other estimates, projections of future advertising revenue and operating expenses, market
supply and demand, projected capital spending and an assumption of our weighted average cost of capital. To the extent they have been separately identified, our indefinite-lived assets (broadcast licenses) are tested for impairment on an annual
basis by applying a fair-value-based test as required by FAS 142. Our evaluations of fair values include analyses based on the future cash flows generated by the underlying assets, estimated trends and other relevant determinants of fair value for
these assets. If the fair value of the asset determined is less than its carrying amount, a loss is recognized for the difference between the fair value and its carrying value. Changes in any of these estimates, projections and assumptions could
have a material effect on the fair value of these assets in future measurement periods and result in an impairment of goodwill or indefinite-lived intangibles which could materially effect our results of operations.



We evaluate the recoverability of the carrying amount of long-lived tangible assets whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable as required by Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (FAS 144). We use our judgment when applying the impairment rules to determine when an impairment test is necessary. Factors we consider which could trigger an impairment review include significant underperformance relative to
historical or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, and significant negative cash flows or industry trends.



17



---

Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value,
which is based on future discounted cash flows. In estimating these future cash flows we use future projections of cash flows directly associated with and that were expected to arise as a direct result of the use and eventual disposition of the
assets. These projections rely on significant assumptions. If it is determined that a long-lived asset is not recoverable, an impairment loss would be calculated based on the excess of the carrying amount of the long-lived asset over its fair value,
primarily determined based on discounted cash flows. Changes in any of our estimates could have a material effect on the estimated future cash flows expected to be generated by the asset and result in a future impairment of the involved assets with
a material effect on our future results of operations.



Pension
benefits. We maintain a noncontributory supplemental retirement program for key management. We also maintained a qualified defined benefit plan covering our non-broadcasting employees, which ceased accruing benefit in 2001 with plan assets
distributed to participants between 2001 and the first half of 2003. The cost of these plans is reported and accounted for in accordance with Financial Accounting Standards Board Statements 87, 88 and 132. These Statements require significant
assumptions regarding discount rates, salary increases and asset returns. We believe that our estimates are reasonable for these key actuarial assumptions; however future actual results will likely differ from our estimates, and these differences
could materially affect our future results of operation either unfavorably or favorably.



RESTATEMENT



Goodwill
ImpairmentEffective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (FAS 142). FAS 142 requires the Company to test goodwill and intangible assets
for impairment upon adoption and to test goodwill at least annually, or whenever events indicate that an impairment may exist. Upon the adoption of FAS 142, the Company, with the concurrence of its independent auditors, concluded there was no
impairment of goodwill. Subsequent to the issuance of the Companys consolidated financial statements as of and for the year ended December 31, 2002, the Company and the independent auditors determined that in performing the Companys
initial impairment test, the level (reporting unit) at which the company should assess the goodwill for impairment had been incorrectly identified. The Company has determined that the impairment test should have been conducted at the operating
segment level, which consists, with respect to the broadcast operations, of the Companys ten television and radio station groups. As a result of the reassessment of the reporting unit, the Company reperformed the first step of the transitional
impairment test, which indicated that impairment existed. Completion of the second step of the transitional impairment test resulted in a pre-tax goodwill impairment charge of $99,035,000 related to five television reporting units and a related tax
benefit of $34,662,000 (as the aforementioned goodwill was deductible for tax purposes). The required annual impairment test was also reperformed based on the new determination of reporting units, resulting in no further impairment.



As required by the transition provisions of FAS 142, the net loss of $64,373,000 resulting
from the reperformed transitional test is recorded as the cumulative effect of a change in accounting principle in the accompanying condensed consolidated financial statements for the six months ended June 30, 2002. This restatement has no effect on
the Companys previously reported revenues and cash flows; nor does it affect results from operations for the six months ended June 30, 2003.



Retention BonusSubsequent to the issuance of the Companys consolidated financial statements as of and for the year ended December 31, 2002 and the
unaudited condensed consolidated financial statements as of March 31, 2003 and for the three months then ended, the Company concluded that certain obligations for retention bonuses described in Note 10 to these unaudited condensed consolidated
financial statements should have been accrued over the service period specified in the related retention agreements. Accordingly, the Company revised its financial statements for the year ended December 31, 2002 to record an obligation of $389,000
and related tax effects in the fourth quarter of 2002. Net loss for the year ended December 31, 2002 was increased by $248,000. The Company also revised its financial statements for the three months ended March 31, 2003 to record an additional
liability of $886,000 and related tax effects. Net loss for the quarter ended March 31, 2003 was increased by $564,000. This adjustment does not impact the six months ended June 30, 2002.



Pension PlanIn addition, subsequent to the issuance of the consolidated financial statements as of and for the year ended
December 31, 2002 and the unaudited condensed consolidated financial statements as of March 31, 2003 and for the three months then ended, the Company concluded that certain pension related expenses should have been recorded in the first quarter of
2003 and in prior periods.



The Company had a defined-benefit plan for all
non-broadcasting employees. Benefit accruals under this plan ceased in July 2001 and plan assets were distributed to participants between 2001 and the first half of 2003. Certain settlement losses relating to the distribution of plan assets should
have been recognized in 2002 and in the first



18



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quarter of 2003. In addition, the Company determined that additional pension benefits paid in 2003 to certain retired
participants who worked beyond their normal retirement age (Late Retirees) had not been recognized over periods in which those employees provided services. Accordingly, the Company revised its financial statements to record the
settlement losses and the additional obligation to Late Retirees (cumulatively, the Pension Adjustments). The impact of recording the Pension Adjustments also had the effect of reducing Retained Earnings by $433,000 as of December 31,
2002, increasing Accrued Retirement Benefits by $681,000, and reducing Deferred Income Tax Liabilities by $248,000, to reflect the pension liability that should have been recorded as of that date. Pension adjustments to record the additional expense
that should have been recognized from January 1, 2000 through December 31, 2002 were recorded in the fourth quarter of 2002 and amounted to $134,000 after taxes. Amounts related to 2000, 2001, and the first three quarters of 2002, totaling $6,000,
net of taxes, were not significant in relation to the fourth quarter of 2002 or to the prior periods. The impact of recording the Pension Adjustments for the first quarter of 2003 was an increase in net loss for the quarter by $282,000.



See Note 2 to the condensed consolidated financial statements for a summary of the
significant effects of the restatement on the Companys condensed consolidated statement of operations for the six months ended June 30, 2002 and the condensed consolidated balance sheet as of December 31, 2002.



CONSOLIDATED RESULTS OF OPERATIONS



Operating results for the six months ended June 30, 2003 showed a consolidated loss of
$7,910,000 including loss from discontinued operations amounting to $515,000. Operating results for the six months ended June 30, 2002 showed a consolidated loss of $68,611,000 including loss from discontinued operations amounting to $669,000 and
loss amounting to $64,373,000, net of income taxes, from the cumulative effect of a change in accounting principle.



Operating results for the three months ended June 30, 2003 showed consolidated net loss of $4,287,000. Second quarter 2003 results include net loss from discontinued
operations of $564,000. Operating results for the three months ended June 30, 2002 showed consolidated net income of $3,520,000 including a net gain on derivative instruments amounting to $6,828,000, before income tax effects. Excluding net
after-tax gains on derivative instruments, second quarter results would have been a loss of $785,000.



Revenue

---



|                         |  | Six months ended June 30 |            |   | Three months ended June 30 |      
|------------------------ |  | ------------------------ | ---------- | - | -------------------------- | -----
|                         |  | 2003                     |            |   | %Change                    |      
|Television               |  | $                        | 42,648,000 |   |                            | 1.0  
|Radio                    |  |                          | 20,962,000 |   |                            | 36.2 
|Fisher Plaza             |  |                          | 3,437,000  |   |                            | 67.3 
|Real estate              |  |                          | 3,811,000  |   |                            | -21.2
|All other                |  |                          | 612,000    |   |                            | 56.1 
|Corporate & eliminations |  |                          | (318,000   | ) |                            | 23.0 
|                         |  |                          |            |   |                            |      
|Consolidated             |  | $                        | 71,152,000 |   |                            | 10.1 



During the six-month period ended June
30, 2003, net revenue for our Seattle television station increased 1.4% while our Portland television station experienced an increase of 1.8%. Our smaller market television operations experienced mixed revenue results with the Oregon and Boise,
Idaho smaller market stations reporting decreased revenue of 7.0% and 8.2%, respectively and the Washington and Idaho Falls, Idaho smaller market stations each reporting increased revenues of approximately 15%.



Net revenue at our Seattle television station increased 1% during the second quarter, while
our Portland station reported a decrease of 1.3%. Our smaller market television operations experienced mixed revenue results with the Oregon and Boise, Idaho smaller market stations reporting decreased net revenue of 13.4% and 13.8%, respectively
and the Washington and Idaho Falls, Idaho smaller market stations reporting increased revenues of 12.2% and 5.3%, respectively.



Compared with the similar periods last year, our television stations generally experienced increased revenue from local advertising and decreased revenue from national
and political advertising and paid programming. The comparisons for our Oregon stations are impacted by significant revenue from political advertising reported during 2002. Television revenues are also impacted by the popularity of the programs
presented by our network affiliates.



19



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Based on information published by Miller, Kaplan, Arase & Co. (Miller Kaplan), local and national revenue for the
overall Seattle spot television market increased 2.9% and overall Portland spot revenue declined 2.7% for the six months ended June 30, 2003. In comparison, our Seattle television station spot revenue was relatively flat while our Portland
television station spot revenue decreased 2.2% during the same six-month period.



During the six-month period ended June 30, 2003, our Seattle radio operation experienced a 50.2% increase in net revenue, primarily due to revenue from broadcast of the Seattle Mariners baseball games, under a six-year contract that began
with the 2003 baseball season. Miller Kaplan data, which excludes sports revenue, indicates that local and national radio revenues for the Seattle radio market increased 4.5% during the first half of 2003. Excluding sports revenue, local and
national revenue for our Seattle radio operations decreased 1.1% for the same period. As a result of increased local and national sales, net revenue increased 9.1% at our small market radio stations in Eastern Washington and Montana.



The revenue increase for Fisher Plaza for the six months ended June 30, 2003 is primarily due
to a significant penalty paid by a tenant during the first quarter for early termination of premises agreements. The decline in revenue in the second quarter compared to last years second quarter is due in part to the temporary vacancy of the
aforementioned tenant until the vacated space was fully occupied in July.



The
comparison of real estate revenue is impacted by rents for the Lake Union properties that are included in results for the first six months of 2002, but are not included in 2003 as the property was sold in September 2002. Our real estate subsidiary
has agreements to provide certain management and other services to the purchaser of the property. Based on this continuing involvement, the revenue and results of operations from Lake Union through the date the sale closed are reported as continuing
operations. The subsidiary also provides management services to other third party clients. Real estate revenue includes management service fees from third party clients amounting to $129,000 and $67,000 in the six and three months ended June 30,
2003, respectively.



Revenue in the all other category is attributable to
Fisher Pathways. The increases in revenue during the three- and six-month periods ended June 30, 2003 as compared to the comparable prior year periods are due to increased demand for live news broadcasts over Fisher Pathways transmission
facilities.



Corporate & eliminations includes the elimination of
management fees recognized as revenue by the real estate segment, which are reported as operating expenses by the Fisher Plaza segment. There is no impact on net income as such amounts are eliminated in the Consolidated Financial Statements.



Cost of services sold

---



|                           |  | Six months ended June 30 |            |   | Three months ended June 30 |       
|-------------------------- |  | ------------------------ | ---------- | - | -------------------------- | ------
|                           |  | 2003                     |            |   | % Change                   |       
|Television                 |  | $                        | 21,856,000 |   |                            | -3.0  
|Radio                      |  |                          | 11,708,000 |   |                            | 109.9 
|Fisher Plaza               |  |                          | 1,363,000  |   |                            | 111.3 
|Real estate                |  |                          | 722,000    |   |                            | -13.5 
|All other                  |  |                          | 283,000    |   |                            | 36.0  
|Corporate and eliminations |  |                          | (114,000   | ) |                            | -124.4
|                           |  |                          |            |   |                            |       
|Consolidated               |  | $                        | 35,818,000 |   |                            | 18.3  
|Percentage of revenue      |  |                          | 50.3       | % |                            |       



The cost of services sold consists
primarily of costs to acquire, produce, promote, and broadcast television and radio programming, operating costs of Fisher Plaza, and costs to operate the properties held by the real estate segment. These costs are relatively fixed in nature, and do
not necessarily vary on a proportional basis with revenue.



The decrease in the
cost of services sold in the television segment during the three- and six-month periods ended June 30, 2003 as compared to the comparable prior year periods is primarily due to a reduction in the cost of syndicated programming as a result of
replacing The Rosie ODonnell show, which was cancelled in September 2002, with less costly programs. That decline was partially offset by increased engineering and news expenses.



20



---

The increase in the cost of services sold in the radio segment during the three- and six-month periods ended June 30,
2003 as compared to the comparable prior year periods is primarily related to increased costs at our Seattle radio operations associated with the broadcast of Seattle Mariners baseball and the 24 hour news format adopted by KOMO AM in the fall of
2002.



The increase in the cost of services sold at Fisher Plaza is due to
increased operating costs at that facility, including increases in insurance expense and property taxes, and to lower reimbursement from tenants as a result of a vacancy.



The decline in real estate operating expenses relates primarily to costs of operating the Lake Union properties during the first six months
of 2002. Those properties were sold in the fall of 2002 and, therefore, are excluded from 2003 results.



The all other category includes the cost of operations of Fisher Pathways. The operating expense increase is attributable to costs directly associated with increased revenue.



Selling expenses

---



|                      |  | Six months ended June 30 |            |   | Three months ended June 30 |      
|--------------------- |  | ------------------------ | ---------- | - | -------------------------- | -----
|                      |  | 2003                     |            |   | % Change                   |      
|Television            |  | $                        | 5,347,000  |   |                            | 18.8 
|Radio                 |  |                          | 6,498,000  |   |                            | 54.2 
|All other             |  |                          | 321,000    |   |                            | 196.2
|                      |  |                          |            |   |                            |      
|Consolidated          |  | $                        | 12,166,000 |   |                            | 37.9 
|Percentage of revenue |  |                          | 17.1       | % |                            |      



Each of our television stations
experienced an increase in selling expenses during the three- and six-month periods ended June 30, 2003 as compared to the comparable prior year periods. The largest increase occurred at KATU TV in Portland, which experienced increased costs for
salaries, commissions, advertising, and rating services.



For the radio
segment, selling expenses increased significantly at our Seattle Radio operations in connection with a joint sales agreement that became effective in March 2002, and additional sales personnel and other costs related to the rights agreement to
broadcast Seattle Mariners baseball games on KOMO AM.



The increase in selling
expenses in the all other category is due to increased marketing efforts for Fisher Plaza by the Media Services corporate group.



General and administrative expenses

---



|                           |  | Six months ended June 30 |            |   | Three months ended June 30 |      
|-------------------------- |  | ------------------------ | ---------- | - | -------------------------- | -----
|                           |  | 2003                     |            |   | % Change                   |      
|Television                 |  | $                        | 9,048,000  |   |                            | 0.7  
|Radio                      |  |                          | 4,176,000  |   |                            | 12.2 
|Real estate                |  |                          | 923,000    |   |                            | -22.9
|All other                  |  |                          | 452,000    |   |                            | -38.6
|Corporate and eliminations |  |                          | 7,364,000  |   |                            | 110.3
|                           |  |                          |            |   |                            |      
|Consolidated               |  | $                        | 21,963,000 |   |                            | 21.1 
|Percentage of revenue      |  |                          | 30.9       | % |                            |      



The increase in general and
administrative expenses at the television segment during the six-month period ended June 30, 2003 as compared to the corresponding prior year period is primarily due to higher medical benefits and other employee-related costs. The segment
experienced reductions during the second quarter in a number of expense categories due to emphasis on expense control.



The increase in general and administrative expenses at the radio segment during the three- and six-month periods ended June 30, 2003 as compared to the corresponding
prior year periods is primarily attributable to increased payroll taxes and employee benefits at our Seattle radio operations as a result of additional personnel required for the all-news format and broadcast of Seattle Mariners baseball.



21



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The decrease in general and administrative expenses in the real estate segment during the three- and six-month periods
ended June 30, 2003 as compared to the corresponding prior year periods is primarily attributable to a decrease in salaries and related costs as a result of staff reductions as the Company continues to reduce its real estate portfolio.



General and administrative expenses in the all other category include the expenses of
Fisher Pathways and the Media Services corporate group. The increase during the six-months ended June 30, 2003 as compared to the corresponding prior year periods is primarily attributable to costs incurred to explore and evaluate restructuring
alternatives for Fisher Pathways, Fisher Entertainment, and Civia during the first quarter of 2003.



The increase in corporate general and administrative expenses during the three- and six-month periods ended June 30, 2003 as compared to the corresponding prior year periods is primarily related to legal and
consulting fees incurred in connection with a review of strategic alternatives that concluded in February 2003, pension plan termination amounting to $700,000, and severance as the result of restructuring amounting to $700,000. Corporate general and
administrative expenses in 2003 include $1,600,000 related to agreements with certain officers and employees which are payable in January 2004, including the following amounts relating to other segments: $650,000 television, $350,000 radio, $30,000
real estate, and $70,000 all other.



Depreciation

---



|                           |  | Six months ended June 30 |           |   | Three months ended June 30 |      
|-------------------------- |  | ------------------------ | --------- | - | -------------------------- | -----
|                           |  | 2003                     |           |   | % Change                   |      
|Television                 |  | $                        | 5,805,000 |   |                            | -0.5 
|Radio                      |  |                          | 723,000   |   |                            | 76.1 
|Fisher Plaza               |  |                          | 795,000   |   |                            | 1.3  
|Real estate                |  |                          | 1,266,000 |   |                            | -13.3
|All other                  |  |                          | 509,000   |   |                            | 321.5
|Corporate and eliminations |  |                          | 96,000    |   |                            | -19.3
|                           |  |                          |           |   |                            |      
|Consolidated               |  | $                        | 9,194,000 |   |                            | 5.4  
|Percentage of revenue      |  |                          | 12.9      | % |                            |      



The increase in depreciation at the
radio segment during the three- and six-month periods ended June 30, 2003 as compared to the corresponding prior year periods is primarily attributable to capital expenditures made in connection with the relocation of Seattle radio operations to
Fisher Plaza in fall of 2002.



The decrease in depreciation at our real estate
segment during the three- and six-month periods ended June 30, 2003 as compared to the corresponding prior year periods relates primarily to depreciation of the Lake Union properties during the first half of 2002. Those properties were sold in the
fall of 2002 and, therefore, are excluded from 2003 results.



The increase in
depreciation in the all other category is attributable to depreciation of web publishing software placed in service late in 2002 by the Media Services corporate group.



Income (Loss) from operations

---



|                           |  | Six months ended June 30 |            |   | Three months ended June 30 |       
|-------------------------- |  | ------------------------ | ---------- | - | -------------------------- | ------
|                           |  | 2003                     |            |   | % Change                   |       
|Television                 |  | $                        | 592,000    |   |                            | 61.2  
|Radio                      |  |                          | (2,144,000 | ) |                            | -246.5
|Fisher Plaza               |  |                          | 1,280,000  |   |                            | 104.4 
|Real estate                |  |                          | 900,000    |   |                            | -33.0 
|All other                  |  |                          | (953,000   | ) |                            | 21.9  
|Corporate and eliminations |  |                          | (7,664,000 | ) |                            | 76.4  
|                           |  |                          |            |   |                            |       
|Consolidated               |  | $                        | (7,989,000 | ) |                            |       



22



---

Income (loss) from operations by segment consists of revenue less operating expenses. In computing income from operations
by segment, other income net, net gain on derivative instruments, and equity in operations of equity investees have not been included, and loss from extinguishment of long-term debt, interest expense, and income taxes have not been deducted.



Net gain on derivative instruments

---



| |  | Six months ended June 30 |  | Three months ended June 30
| |  | ------------------------ |  | --------------------------
| |  | 2003                     |  | 2002                      
| |  | $411,000                 |  | $6,103,000                



We record derivative instruments as
assets and liabilities in our consolidated balance sheet and recognize changes in fair values in our consolidated statement of operations. As described in Note 5 to our unaudited Condensed Consolidated Financial Statements we have two derivative
instruments: (i) an interest rate swap, which is included in Other liabilities and (ii) the derivative portion of a variable forward transaction, which is included in Other assets. The fair value of our derivatives is based on quotations from third
parties.



During the first six months of 2003, net gain on derivative
instruments includes unrealized gain from an increase in the fair value of an interest rate swap agreement amounting to $1,509,000, partially offset by unrealized loss resulting from a decrease in fair value of a variable forward sales transaction
amounting to $1,096,000. The second quarter of 2003 includes unrealized gain from an increase in the fair value of an interest rate swap agreement amounting to $857,000, partially offset by unrealized loss resulting from a decrease in fair value of
a variable forward sales transaction amounting to $204,000.



The amounts for
2002 include unrealized gain resulting from an increase in fair value of a variable forward sales transaction amounting to $9,677,000 in the first six months of 2002 and $7,637,000 in the second quarter of 2002, and unrealized loss from a decline in
fair value of an interest rate swap agreement amounting to $938,000 in the first six months and $809,000 in the second quarter of 2002.



Loss from extinguishment of long-term debt

---



| |  | Six months ended June 30 |  | Three months ended June 30
| |  | ------------------------ |  | --------------------------
| |  | 2003                     |  | 2002                      
| |  | $           -0-          |  | $(3,264,000)              



We repaid certain loans in March 2002
and, as a result, expensed deferred loan costs amounting to $3,264,000.



Other income, net

---



| |  | Six months ended June 30 |  | Three months ended June 30
| |  | ------------------------ |  | --------------------------
| |  | 2003                     |  | % Change                  
| |  | $  5,601,000             |  | 307.6%                    



Other income, net includes dividends
received on marketable securities and, to a lesser extent, interest and miscellaneous income. The increase in the first six months of 2003 as compared to the corresponding prior year period is primarily due to gains on sale of marketable securities
amounting to $3,675,000 and interest income from prepayment of an installment note receivable.



Interest expense

---



| |  | Six months ended June 30 |  | Three months ended June 30
| |  | ------------------------ |  | --------------------------
| |  | 2003                     |  | % Change                  
| |  | $10,149,000              |  | 6.5%                      



The increase in interest expense for
the six months ended June 30, 2003 as compared to the corresponding prior year period resulted from several factors, including: higher interest rates on some borrowings; higher interest paid under an interest rate swap agreement; and a premium paid
in February 2003 in connection with prepayment of certain long-term debt. Interest capitalized in connection with the Fisher Plaza project amounted to $1,546,000 and $1,027,000 during the six months ended June 30, 2003 and 2002, respectively.
Interest capitalized for the three months ended June 30, 2003 and 2002 was $877,000 and $628,000, respectively.



23



---

Provision for federal and state income taxes (benefit)

---



|                   |  | Six months ended June 30 |             | Three months ended June 30
|------------------ |  | ------------------------ | ----------- | --------------------------
|                   |  | 2003                     |             | 2002                      
|                   |  | $                        | (4,729,000) |                           
|Effective tax rate |  |                          | 39.0%       |                           



The provision for federal and state
income taxes varies directly with pre-tax income. The effective tax rate varies from the statutory rate primarily due to a deduction for dividends received, offset by the impact of state income taxes.



Other comprehensive income (loss)

---



| |  | Six months ended June 30 |  | Three months ended June 30
| |  | ------------------------ |  | --------------------------
| |  | 2003                     |  | 2002                      
| |  | $(402,000)               |  | $2,169,000                



Other comprehensive income (loss) is
net of income taxes, and primarily includes unrealized gain or loss on our marketable securities. The 2003 amount also includes an adjustment to a minimum pension liability relating to a defined benefit pension plan that was terminated in 2003.
During a portion of 2002, the effective portion of the change in fair value of an interest rate swap agreement is also included. Other comprehensive income or losses are reported as accumulated other comprehensive income, a separate component of
stockholders equity.



During the six months ended June 30, 2003, the
value of our marketable securities increased $1,212,000, net of tax. Also during the period, we realized gain amounting to $2,024,000, net of tax, from sale of our investment in Weyerhaeuser Company common stock.



At June 30, 2003, our marketable securities consisted of 3,002,376 shares of SAFECO
Corporation. The per share market price of SAFECO Corporation common stock was as follows



|December 31, 2002 |  | $ | 34.67 |  |  |  | December 31, 2001 |  | $ | 31.15
|----------------- |  | - | ----- |  |  |  | ----------------- |  | - | -----
|March 31, 2003    |  | $ | 34.97 |  |  |  | March 31, 2002    |  | $ | 32.04
|June 30, 2003     |  | $ | 35.29 |  |  |  | June 30, 2002     |  | $ | 30.89



During the period from January 1, 2002
through March 21, 2002, we used an interest rate swap, designated as a cash flow hedge, to manage exposure to interest rate risks. During this period the fair value of the swap increased $543,000, net of tax, which is recorded in other comprehensive
income. In connection with the refinancing of our long-term debt in March of 2002, the swap agreement was terminated and the remaining negative fair market value of $2,636,000 ($1,713,000 net of tax benefit) was reclassified to operations.



During the six months ended June 30, 2003 we also recorded changes in our
additional minimum pension liability amounting to $410,000, net of income taxes, in connection with one of our defined benefit pension plans that was finally settled in 2003.



Liquidity and Capital Resources



As of June 30, 2003, we had working capital of $26,466,000 and cash and short-term cash investments totaling $9,854,000. We intend to finance working capital, debt
service, capital expenditures, and dividend requirements primarily through operating activities. As of June 30, 2003, approximately $36,000,000 is available under existing credit facilities.



Net cash provided by operating activities during the six months ended June 30, 2003 was
$168,000. Net cash provided by or used in operating activities consists of our net income or loss, increased by non-cash expenses such as depreciation and amortization, and adjusted by changes in operating assets and liabilities. Net cash provided
by investing activities during the period was $15,012,000, including restricted cash of $12,778,000 that became available for general corporate purposes during the first quarter, proceeds from sale of marketable securities of $5,169,000 and proceeds
from collection of an installment note receivable of $3,185,000, all reduced by $5,794,000 invested for purchase of property, plant and equipment (including the Fisher Plaza project) and purchase of a radio station license. Net cash used in
financing activities was $28,841,000, primarily for payments on borrowing agreements and mortgage loans.



24



---

As of June 30, 2003, future maturities of notes payable and long-term debt, and obligations for television and radio
broadcast rights are as follows (in thousands):



|           |  | Notes PayableandLong-TermDebt |         | BroadcastRights
|---------- |  | ----------------------------- | ------- | ---------------
|2003       |  | $                             | 4,161   |                
|2004       |  |                               | 8,784   |                
|2005       |  |                               | 85,770  |                
|2006       |  |                               | 45,252  |                
|2007       |  |                               | 26,117  |                
|Thereafter |  |                               | 97,038  |                
|           |  |                               |         |                
|           |  | $                             | 267,122 |                
|           |  |                               |         |                



Our broadcasting subsidiary acquires
television and radio broadcast rights, and at June 30, 2003 has commitments under license agreements amounting to $69,360,000 for future rights to broadcast television and radio programs through 2008, and $10,658,000 in related fees. As these
programs will not be available for broadcast until after June 30, 2003, they have been excluded from the financial statements in accordance with provision of Statement of Financial Accounting Standards No. 63. Financial Reporting by
Broadcasters. In addition, our broadcasting subsidiary has commitments under a Joint Sales Agreement totaling $12,400,000 through 2007.



ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FUTURE RESULTS



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.



A continuing economic downturn in the Seattle, Washington or Portland, Oregon areas or in the national economy could adversely affect our operations, revenue, cash flow and earnings.



Our operations are concentrated primarily in the Pacific Northwest. The Seattle, Washington
and Portland, Oregon markets are particularly important for our financial well being. Operating results during 2002 and 2003 were adversely impacted by a soft economy, and a continuing economic downturn in these markets could have a material adverse
effect on our operations and financial condition. Because our costs of services are relatively fixed, we may be unable to significantly reduce costs if our revenues continue to decline. If our revenues do not increase or if they continue to decline,
we could continue to suffer net losses or such net losses could increase. In addition, a continued downturn in the national economy has resulted and may continue to result in decreased national advertising sales. This could have an adverse affect on
our results of operations because national advertising sales represent approximately one-third of our television advertising net revenue.



Our restructuring may cause disruption of operations and distraction of management, and may not achieve the desired results.



We continue to implement a restructuring of our corporate enterprise. This restructuring may
disrupt operations and distract management, which could have a material adverse effect on our operating results. We cannot predict whether this restructuring will achieve the desired benefits, or whether our Company will be able to fully integrate
our broadcast communications and other operations. Because we do not control all aspects of the proposed sales or shut down activities we cannot assure you that all such activities will occur. We cannot assure you that the restructuring will be
completed in a timely manner or that any benefits of the restructuring will justify its costs. We may incur costs in connection with the restructuring in a number of areas, including professional fees, marketing expenses, employment expenses, and
administrative expenses. In addition, we may incur additional costs, which we are unable to predict at this time. Our proposed restructuring involves the upstream merger of Fisher Broadcasting Company into Fisher Communications. We may determine
that there are regulatory or contractual restrictions that may cause us to choose not to consummate this merger.



25



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Our proposed sale of the Georgia television stations, the Portland radio stations, and the commercial property assets
and property management operations of Fisher Properties may not take place.



In January 2003, we announced that we executed agreements to sell our Georgia television stations to a third party. We subsequently announced that we executed an agreement to sell our Portland radio station to a different third party. We
may be unable to close the sale of the Georgia stations or the Portland stations or the sales may not take place on the same terms that were previously announced, if we do not obtain FCC approval or other necessary consents. Informal objections to
the applications seeking consent to the assignment of licenses for the Georgia and Portland stations were filed with the FCC, which may delay or prevent us from closing the sale of the stations. Also, if changes in the FCCs multiple ownership
rules, which were adopted by the FCC on June 2, 2003, but stayed by the Courts on September 3, 2003, are implemented, it may be necessary for the proposed buyer of the Portland stations to take steps to sell one of its existing radio holdings in the
Portland radio market in order to obtain FCC consent to the transaction. While the buyer submitted an application in August 2003 to dispose of one of its existing radio stations, there is no assurance that this will be approved by the FCC or
actually consummated on a timely basis, if at all. In August 2003 we announced that we entered into an agreement to sell the remaining commercial real estate properties held by our real estate subsidiary. The sale of the two commercial properties is
subject to closing conditions, including customary due diligence, and may not occur, or may not occur on the terms (including aggregate purchase price) previously described by us, if those closing conditions are not satisfied.



Our debt service consumes a substantial portion of the cash we generate, but our ability
to generate cash depends on many factors beyond our control.



We currently
use a significant portion of our operating cash flow to service our debt. Our leverage makes us vulnerable to an increase in interest rates or a downturn in the operating performance of our businesses or a decline in general economic conditions. It
further limits our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, and may limit our ability to pay dividends in the future. Finally, it inhibits our
ability to compete with competitors who are less leveraged than we are, and it constrains our ability to react to changing market conditions, changes in our industry and economic downturns.



Prevailing economic conditions and financial, business and other factors, many of which are
beyond our control, may affect our ability to satisfy our debt obligations and our goals to reduce our debt. If in the future we cannot generate sufficient cash flow from operations to meet our obligations, we may need to refinance our debt, obtain
additional financing, forego capital expenditures, or sell assets. Any of these actions could adversely affect the value of our common stock. We cannot assure you that we will generate sufficient cash flow or be able to obtain sufficient funding or
take other actions to satisfy our debt service requirements.



In addition, our
debt instruments contain covenants that require us to maintain certain financial ratios. If we are unable to generate sufficient revenue and are unable to reduce expenses we may be deemed in breach these covenants, which could result in an
acceleration of our debt.



Foreign hostilities and further terrorist attacks
may affect our revenues and results of operations.



Our broadcasting
operations experienced a loss of advertising revenue and incurred additional operating expenses during the recent war with Iraq. In the future, we may experience a loss of advertising revenue and incur additional broadcasting expenses in the event
the United States engages in foreign hostilities or in the event there is a terrorist attack against the United States. A significant news event like a war or terrorist attack will likely result in the preemption of regularly scheduled programming
by network news coverage of the event. As a result, advertising may not be aired and the revenue for such advertising may be lost unless the broadcasting station is able to run the advertising at agreed-upon times in the future. There can be no
assurance that advertisers will agree to run such advertising in future time periods or that space will be available for such advertising. We cannot predict the duration of such preemption of local programming if it occurs. In addition, our
broadcasting stations may incur additional expenses as a result of expanded local news coverage of the local impact of a war or terrorist attack. The loss of revenue and increased expenses could negatively affect our results of operations.



26



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The performance of the television networks could harm our operating results.



The operating results of our broadcasting operations are primarily dependent on advertising
revenues. Our Seattle and Portland television stations are affiliated with the ABC Television Network. Popularity of programming on ABC lagged behind other networks during 2002 and 2003, and contributed to a decline in audience ratings, which
negatively impacted revenues for our Seattle and Portland television stations. Continued weak performance by ABC, a decline in performance by CBS or FOX, or an adverse change in performance by other networks or network program suppliers, could harm
our business and results of operations.



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.



We cannot assure you that any of our stations will maintain or increase its current audience ratings or advertising revenues. Fisher Broadcastings television and
radio stations face intense competition from local network affiliates and independent stations, as well as from cable and alternative methods of broadcasting brought about by technological advances and innovations. The stations compete for audiences
on the basis of programming popularity, which has a direct effect on advertising rates. Additional significant factors affecting a stations competitive position include assigned frequency and signal strength. The possible rise in popularity of
competing entertainment and communications media could also have a materially adverse effect on Fisher Broadcastings audience share and advertising revenues. In addition, our principal marketing representative for the sale of national
advertising for our Seattle and Portland television and radio stations is owned by a competitor, and the success of their efforts in selling national advertising is beyond our control. We cannot predict either the extent to which such competition
will materialize or, if such competition materializes, the extent of its effect on our business.



Syndication agreements are subject to cancellation, and such cancellations may affect a stations programming schedule. The syndicator for several of our talk radio programs recently acquired radio stations in
the Seattle market, and competes with our Seattle radio stations. We can give no assurance that we will be able to retain the rights to such programs once our current contracts for these programs expire. We were recently notified by this syndicator
that it was canceling the agreement for one of the most popular programs broadcast by one of our stations. We cannot predict the effect of this cancellation on our revenues, cash flows, or results of operations.



The FCC recently adopted modifications to its national and local television ownership
limitations, its prohibition on common ownership of newspapers and broadcast stations in the same market, as well as its local radio ownership limitations. If the rules are implemented as adopted, large broadcast groups would be allowed to expand
further their ownership on a national basis, a single entity would be permitted to own more than one television station in markets with fewer independently owned stations, and the rules would allow consolidated newspaper and broadcast ownership and
operation in several of our markets. As a result of the rules change, our existing operations could face increased competition from entities with significantly greater resources, and greater economies of scale, than Fisher Broadcasting. The new
radio multiple ownership rules could limit our ability to acquire additional radio stations in existing markets which we serve. There are several proposals pending in Congress to modify or repeal the new FCC rules, several parties have filed
petitions seeking FCC reconsideration of the new rules, and a number of Notices of Appeal have been filed seeking court review of the rules, On September 3, 2003, the United States Court of Appeals for the Third Circuit issued an Order staying the
effectiveness of the new media ownership rules pending review on appeal. On September 5, 2003, the FCC issued an order placing a freeze until further notice on the filing of all applications on certain FCC forms used to obtain consent to the
construction or modification of radio and television stations or the assignment or transfer of control of such stations. We cannot predict when the freeze will be lifted or whether or when the new rules will be implemented as adopted, modified,
reversed by the Courts or repealed in their entirety.



Our operating results
are dependent on the success of programming aired by our television and radio stations.



We make significant commitments to acquire rights to television and radio programs under multi-year agreements. The success of such programs is dependent partly upon unpredictable and volatile factors beyond our
control such as audience preferences, competing programming, and the availability of other entertainment activities. Audience preferences could cause our programming not to gain popularity or decline in popularity, which could cause our advertising
revenues to decline. In some instances, we may have to replace programs before their costs have been fully-amortized, resulting in write-offs that increase operating costs.



In April 2002 we acquired the radio broadcast rights for the Seattle Mariners baseball team for a term of six years. The success of this
programming is dependent on some factors beyond our control, such as the continued competitiveness of the Seattle Mariners and the successful marketing of the team by the teams owners. If the Seattle Mariners fail to maintain their current fan
base, the number of listeners to our radio broadcasts will likely decrease, which would harm our ability to generate anticipated advertising dollars.



27



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We converted one of our Seattle radio stations, KOMO AM, to an all news format which has higher costs than
the previous format. If we are unable to successfully increase the number of listeners, our margins could be adversely affected. In March 2002, we entered into a joint sales agreement with KING FM, which is owned and operated by a third-party. Our
success in selling advertising under this agreement is closely tied to the stations programming performance, which is not under our control. If the stations ratings performance does not improve consistently, it will harm our ability to
recoup our costs and generate a profit from this agreement.



The FCCs
extensive regulation of the broadcasting industry limits our ability to own and operate television and radio stations and other media outlets.



The broadcasting industry is subject to extensive regulation by the FCC under the Communications Act of 1934, as amended. Compliance with and the effects of existing and
future regulations could have a material adverse impact on us. Issuance, renewal or transfer of broadcast station operating licenses requires FCC approval, and we cannot operate our stations without FCC licenses. Failure to observe FCC rules and
policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full eight years) license renewals or, for particularly egregious violations, the denial of a license renewal
application or revocation of a license. While the majority of such licenses are renewed by the FCC, there can be no assurance that Fisher Broadcastings licenses will be renewed at their expiration dates, or, if renewed, that the renewal terms
will be for eight years. If the FCC decides to include conditions or qualifications in any of our licenses, we may be limited in the manner in which we may operate the affected stations.



The Communications Act and FCC rules impose specific limits on the number of stations and other media outlets an entity can own in a single
market. The FCC attributes interests held by, among others, an entitys officers, directors, certain stockholders, and in some circumstances, lenders, to that entity for purposes of applying these ownership limitations. The new ownership rules
may prevent us from acquiring additional stations in a particular market. We may also be prevented from engaging in a swap transaction if the swap would cause the other company to violate these rules.



We may lose audience share and advertising revenue if we are unable to reach agreement
with cable companies regarding the retransmission of signals of our television stations.



Many viewers of our television stations receive their signals via retransmissions by cable television systems. All television stations are generally entitled to be carried on cable television systems in their local
markets without compensation from the cable system (must-carry). Alternatively, commercial television stations may choose to require cable television systems to obtain their permission (retransmission consent) to carry the
signal of their station. In such cases, the terms of carriage, including compensation, are subject to negotiation between the station and the cable system. The decision as to whether a television stations relationship with each local cable
system will be governed by must-carry or by retransmission consent arrangements is binding for a three-year period.



On October 1, 2002, each of Fisher Broadcastings television stations sent notices to cable systems in their market electing must-carry or retransmission consent
status for the period from January 1, 2003 through December 31, 2005. We elected retransmission consent status with respect to a number of key cable systems. We have granted temporary permission for such cable systems to continue to retransmit the
signal of the station involved while a retransmission consent agreement is under negotiation. We have executed retransmission consent agreements with several major systems in the Seattle and Portland television markets granting major cable systems
permission to carry our local analog television stations on those cable systems, but we are in continuing negotiations with other systems in the Seattle and Portland markets, as well as with cable systems in markets served by our other television
stations. There is no assurance, however, that retransmission consent agreements can be negotiated successfully with any cable system. If we cannot reach agreement regarding the terms under which a station will be retransmitted by a cable system,
the cable system will be prohibited by law from continuing to carry the signal of that station. This could have an adverse effect on the ability of the public to receive the signal of the affected station, ultimately resulting in reduced audience
share and advertising revenue.



A write-down of goodwill to comply with new
accounting standards would harm our operating results.



Approximately $38
million (excluding amounts classified as held for sale), or 8% of our total assets as of June 30, 2003, consists of unamortized goodwill. On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (FAS 142). FAS 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. As a result of our adoption of FAS 142 we recorded a charge for impairment of goodwill amounting to $99
million before income tax benefit or $64 million after income taxes. Goodwill is to be tested at the reporting unit level annually or whenever events or circumstances occur indicating that goodwill might be impaired. If impairment is indicated as a
result of future annual testing, we will be required to record an additional impairment charge when such impairment occurs.



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Dependence on key personnel may expose us to additional risks.



Our business is dependent on the performance of certain key employees, including our chief
executive officer and other executive officers. We also employ several on-air personalities who have significant loyal audiences in their respective markets. We can give no assurance that all such key personnel will remain with us. The loss of any
key personnel could harm our operations and financial results.



The
non-renewal or modification of affiliation agreements with major television networks could harm our operating results.



Our television stations affiliation with one of the four major television networks (ABC, CBS, NBC and FOX) has a significant impact on the composition of the
stations programming, revenues, expenses and operations. We cannot give any assurance that we will be able to renew our affiliation agreements with the networks at all, or on satisfactory terms. In recent years, the networks have been
attempting to change affiliation arrangements in manners that would disadvantage affiliates. The non-renewal or modification of any of the network affiliation agreements could harm our operating results.



A network might acquire a television station in one of our markets, which could harm our
business and operating results.



If a network acquires a television
station in a market in which we own a station affiliated with that network, the network will likely decline to renew the affiliation agreement for our station in that market, which could harm our business and results of operations.



Our operations may be adversely affected by power outages, severe weather, increased
energy costs or earthquakes in the Pacific Northwest.



Our corporate
headquarters and a significant portion of our operations are located in the Pacific Northwest. The Pacific Northwest has from time-to-time experienced earthquakes and experienced a significant earthquake on February 28, 2001. We do not know the
ultimate impact on our operations of being located near major earthquake faults, but an earthquake could harm our operating results. Severe weather, such as high winds, can also damage our television and radio transmission towers, which could result
in loss of transmission, and a corresponding loss of advertising revenue, for a significant period of time. In addition, the Pacific Northwest may experience power shortages or outages and increased energy costs. Power shortages or outages could
cause disruptions to our operations, which in turn may result in a material decrease in our revenues and earnings and have a material adverse effect on our operating results. Power shortages or increased energy costs in the Northwest could harm the
regions economy, which could reduce our advertising revenues. Our insurance coverage may not be adequate to cover the losses and interruptions caused by earthquakes, severe weather and power outages.



Our computer systems are vulnerable to viruses and unauthorized tampering.



Despite our implementation of network security measures, our servers and computer systems
are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. Any of these events could cause system interruption, delays and loss of critical data. Our recovery planning may not be
sufficient for all eventualities.



Our efforts to develop new business
opportunities are subject to technological risk and may not be successful, or results may take longer than expected to realize.



We are developing new opportunities for creating, aggregating and distributing content through non-broadcast media channels, such as the Internet, cell phones, and
web-enabled personal digital assistants. The success of our efforts is subject to technological innovations and risks beyond our control, so that the anticipated benefits may take longer than expected to realize. In addition, we have limited
experience in non-broadcast media, which may result in errors in the conception, design or implementation of a strategy to take advantage of the opportunities available in that area. We therefore cannot give any assurance that our efforts will
result in successful products or services.



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Our ownership and operation of real property, including 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.



Revenue and operating income from our properties and the value of our properties may be
adversely affected by the general economic climate, the local economic climate and local real estate conditions, including prospective tenants perceptions of attractiveness of the properties and the availability of space in other competing
properties. We have developed the second building at Fisher Plaza, which entailed a significant investment. The softened economy in the Seattle area could adversely affect our ability to lease the space of our properties on attractive terms or at
all, which could harm our operating results. In addition, a continuing of the severe downturn in the telecom and high-tech sectors may significantly affect our ability to attract tenants to Fisher Plaza, since space at Fisher Plaza is marketed in
significant part to organizations from these sectors. Other risks relating to our real estate operations include the potential inability to provide adequate management, maintenance and insurance, and the potential inability to collect rent due to
bankruptcy or insolvency of tenants or otherwise. One of our properties is leased to a tenant that occupies a substantial portion of the property and the departure of this tenant or its inability to pay their rents or other fees could have a
significant adverse effect on our real estate revenues. Real estate income and values may also be adversely affected by such factors as applicable laws and regulations, including tax and environmental laws, interest rate levels and the availability
of financing. We carry comprehensive liability, fire, extended coverage and rent loss insurance with respect to our properties. There are, however, certain losses that may be either uninsurable, not economically insurable or in excess of our current
insurance coverage limits. If an uninsured loss occurs with respect to a property, it could harm our operating results.



A reduction on the periodic dividend on the common stock of SAFECO may adversely affect our revenue, cash flow and earnings.



We are a 2.2% stockholder of the common stock of SAFECO Corporation. If SAFECO reduces its
periodic dividends, it will negatively affect our cash flow and earnings. In February 2001, SAFECO reduced its quarterly dividend from $0.37 to $0.185 per share.



Antitrust law and other regulatory considerations could prevent or delay our business activity or adversely affect our revenues.



The completion of any future transactions we may consider may be subject
to the notification filing requirements, applicable waiting periods and possible review by the Department of Justice or the Federal Trade Commission under the Hart-Scott-Rodino Act. Any television or radio station acquisitions or dispositions will
be subject to the license transfer approval process of the FCC. Review by the Department of Justice or the Federal Trade Commission may cause delays in completing transactions and, in some cases, result in attempts by these agencies to prevent
completion of transactions or to negotiate modifications to the proposed terms. Review by the FCC, particularly review of concentration of market share, may also cause delays in completing transactions. Any delay, prohibition or modification could
adversely affect the terms of a proposed transaction or could require us to abandon a transaction opportunity. In addition, campaign finance reform laws or regulations could result in a reduction in funds being spent on advertising in certain
political races, which would adversely affect our revenues and results of operations in election years.



We may be required to make additional unanticipated investments in HDTV technology, which could harm our ability to fund other operations or lower our outstanding debt.



Although our Seattle, Portland, Eugene and Boise television stations currently comply with
FCC rules requiring stations to broadcast in high definition television (HDTV), our stations in smaller markets do not because they are operating pursuant to Special Temporary Authority to utilize low power digital facilities. These Special
Temporary Authorizations must be renewed every six months, and there is no assurance that the FCC will continue to extend those authorizations. If the FCC does not extend the authorizations for Fishers smaller stations, then we may be required
to make substantial additional investments in digital broadcasting to maintain the licenses of our smaller market stations. This could result in less cash being available to fund other aspects of our business or decrease our debt load.



30



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Health concerns relating to Severe Acute Respiratory Syndrome (SARS) could disrupt or depress economic activity, which
could harm our results of operations.



Health concerns related to the
spread of SARS could disrupt or depress economic activity, harm trade and result in a decrease in national and local advertising sales. Any decrease in television or radio advertising may harm our results of operations.



ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS



The market risk in our financial instruments represents the potential loss arising from
adverse changes in financial rates. We are exposed to market risk in the areas of interest rates and securities prices. These exposures are directly related to our normal funding and investing activities.



Interest Rate Exposure



Our strategy in managing exposure to interest rate changes is to maintain a balance of fixed- and variable-rate instruments. We will also
consider entering into interest rate swap agreements at such times as we deems appropriate. At June 30, 2003, the fair value of our fixed-rate debt is estimated to be approximately $1,000,000 greater than the carrying amount of $90,511,000. Market
risk is estimated as the potential change in fair value resulting from a hypothetical 10 percent change in interest rates and, at June 30, 2003, amounted to $1,589,000 on our fixed rate debt.



We also had $176,411,000 in variable-rate debt outstanding at June 30, 2003. A hypothetical
10 percent change in interest rates underlying these borrowings would result in a $996,000 annual change in our pre-tax earnings and cash flows.



We are a party to an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiarys ratio of consolidated
funded debt to consolidated EBITDA, on a portion of our floating rate debt outstanding under an eight-year credit facility (Broadcast Facility). The notional amount of the swap reduces as payments are made on principal outstanding under
the broadcast facility until termination of the contract on March 22, 2004. At June 30, 2003, the notional amount of the swap was $65,000,000 and the fair value of the swap agreement was a liability of $2,787,000. A hypothetical 10 percent change in
interest rates would change the fair value of our swap agreement by approximately $33,000 at June 30, 2003. We have not designated the swap as a cash flow hedge; accordingly changes in the fair value of the swap are included in Net gain on
derivative instruments in the accompanying Condensed Consolidated Statement of Operations.



Marketable Securities Exposure



The
fair value of our investments in marketable securities at June 30, 2003 was $105,954,000. Marketable securities consist of 3,002,376 shares of SAFECO Corporation, which is reported on the NASDAQ securities market. As of June 30, 2003, these shares
represented 2.2% of the outstanding common stock of SAFECO Corporation. While we currently do not intend to dispose of our investments in marketable securities, we have classified the investments as available-for-sale under applicable accounting
standards. Mr. William W. Krippaehne, Jr., President, CEO, and a Director of the Company, is a Director of SAFECO Corporation. A hypothetical 10 percent change in market prices underlying these securities would result in a $10,595,000 change in the
fair value of the marketable securities portfolio. Although changes in securities prices would affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the
investments are sold.



As of June 30, 2003, 3,000,000 shares of SAFECO
Corporation stock owned by the Company were pledged as collateral under a variable forward sales transaction with a financial institution. A portion of the Forward Transaction is considered a derivative and, as such, we periodically measure its fair
value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. As of June 30, 2003 the derivative portion of the Forward Transaction had a fair market value of
$4,131,000, which is included in Other assets in the accompanying Condensed Consolidated Balance Sheet. A hypothetical 10 percent change in the market price of SAFECO Corporation stock would change the market value of the Forward Transaction by
approximately $7,700,000. A hypothetical 10 percent change in volatility would change the market value of the Forward Transaction by approximately $250,000. A hypothetical 10 percent change in interest rates would change the market value of the
Forward Transaction by approximately $410,000.



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ITEM 4CONTROLS AND PROCEDURES



The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of its disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that,
as of the end of the fiscal quarter covered by this report, these disclosure controls and procedures are effective in ensuring that the information that the Company is required to disclose in the reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms, and that the disclosure controls and procedures are effective in ensuring that the information required to be reported is
accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.



We have made no significant changes in internal controls over financial reporting during the last fiscal quarter that materially affected or
are reasonably likely to materially affect our internal controls over financial reporting. We intend to continue to refine our internal controls on an ongoing basis as we deem appropriate with a view towards continuous improvements.



Management and PricewaterhouseCoopers LLP, our independent accountants, have reported to our
Audit Committee certain matters involving internal controls that PricewaterhouseCoopers LLP considers to be reportable conditions under standards established by the American Institute of Certified Public Accountants. These matters relate to internal
controls with respect to the identification of pension liability, the timing and recording of settlement losses and the classification of cash flows.



These matters have been discussed among management, PricewaterhouseCoopers LLP and our Audit Committee. We have assigned the highest priority to the correction of these
reportable conditions and are committed to addressing them as soon as possible. We have recently hired additional corporate accounting staff and we intend to respond to the reportable conditions by hiring additional accounting staff.



32



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PART II



OTHER INFORMATION



Item 1. Legal Proceedings



The Company and its subsidiaries are parties to various claims, legal actions and complaints in the ordinary course of their businesses. In the Companys opinion,
all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the consolidated financial position or results of
operations of the Company.



Item 2. Changes in Securities and Use of
Proceeds



None



Item 3. Defaults Upon Senior Securities



None



Item 4. Submission of Matters to a Vote of Security Holders



The Annual Meeting of Stockholders was held April 24, 2003.



The four nominees elected to the Board of Directors for three-year terms expiring in 2006 are listed below. There were no broker non-votes
with respect to any of the nominees.



|                    |  | VotesFor  |  | VotesWithheld
|------------------- |  | --------- |  | -------------
|James W. Cannon     |  | 6,815,529 |  | 234,786      
|Phelps K. Fisher    |  | 5,795,797 |  | 1,254,518    
|Jacklyn F. Meurk    |  | 6,748,758 |  | 301,557      
|Jerry A. St. Dennis |  | 6,895,463 |  | 154,852      



Continuing as Directors are Carol H.
Fratt, Donald G. Graham, Jr., Donald G. Graham, III, and William W. Krippaehne, Jr., whose terms expire in 2004, and Jean F. McTavish, George F Warren, and William W. Warren, Jr., whose terms expire in 2005. In August 2003, Ms. Meurk and Ms.
McTavish announced their retirement from the Companys Board of Directors.



Item 5. Other Information



None



Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits:



|     | 
|---- | 
|2.1  | 
|     | 
|10.1 | 
|     | 
|31.1 | 
|     | 
|31.2 | 
|     | 
|32.1 | 
|     | 
|32.2 | 



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(b) Reports on Form 8-K:



A report on Form 8-K dated April 23, 2003 was filed with the Commission announcing first quarter operating results.



A report on Form 8-K dated April 25, 2003 was filed with the Commission announcing the
results of its 2003 Annual Meeting of Shareholders, the retirement of Donald G. Graham, Jr., as Chairman of the Board of Directors and the elimination of certain executive officer positions as part of Fisher Communications ongoing
restructuring process.



A report on Form 8-K dated May 29, 2003 was filed with
the Commission announcing the signing of an agreement for the sale of the broadcasting subsidiarys two Portland, Oregon radio stations.



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|                            |  |  |  | FISHER COMMUNICATIONS, INC.
(Registrant)
|--------------------------- |  |  |  | ----------------------------------------
|                            |  |  | 
|Dated    September 12, 2003 |  |  |  |                                         
|                            |  |  |  |                                         



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EXHIBIT INDEX



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            | 
|2.1         |  | Asset Purchase Agreement dated as of May 29, 2003 Among Fisher Broadcasting Company, Fisher BroadcastingPortland Radio,
L.L.C., Entercom Portland, LLC, and Entercom Portland License, LLC.                                                                                                                                                                                                                                                                          
|            | 
|10.1        |  | Second Amendment To Credit Agreement, dated as of June 27, 2003, by and among Fisher Broadcasting Company, certain subsidiaries
of Fisher Broadcasting Company, Wachovia Bank, National Association (successor to First Union National Bank), in its capacity as Administrative Agent, Bank Of America, N.A. and The Bank Of New York, as co-syndication agents, National City Bank, as
documentation agent and certain lenders located on the signature page thereto.
|            | 
|31.1        |  | Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|31.2        |  | Certification of Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|32.1        |  | Certification of CEO 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 CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                        



36