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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-Q



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



For the quarterly period ended September 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



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FISHER COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)



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|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 October 31, 2003: 8,608,288



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##### Table of Contents

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 Statements of Operations:Three and nine months ended September 30, 2003 and 2002                 
|-- |  | ------------------------------------------------------------------------------------------------------------------------
|   | 
|2. |  | Condensed Consolidated Balance Sheets:September 30, 2003 and December 31, 2002                                          
|   | 
|3. |  | Condensed Consolidated Statements of Cash Flows:Nine months ended September 30, 2003 and 2002                           
|   | 
|4. |  | Condensed Consolidated Statements of Comprehensive Income (Loss):Three and nine months ended September 30, 2003 and 2002
|   | 
|5. |  | Notes to Condensed Consolidated Financial Statements                                                                    



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##### Table of Contents

ITEM 1  FINANCIAL STATEMENTS



FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



|(in thousands, except per share amounts) (Unaudited)                                                                                        |      | Nine months endedSeptember 30 |         |      | Three months endedSeptember 30 |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ----------------------------- | ------- | ---- | ------------------------------ | -
|                                                                                                                                            | 2003 |                               |         | 2002 |                                |  
|Revenue                                                                                                                                     |      | $                             | 103,858 |      |                                | $
|                                                                                                                                            |      |                               |         |     
|Costs and expenses                                                                                                                          |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Cost of services sold (exclusive of depreciation reported separately below, amounting to $10,691, $10,269, $3,561, and $3,973,
respectively |      |                               | 54,108  |      |                                |  
|Selling expenses                                                                                                                            |      |                               | 19,082  |      |                                |  
|General and administrative expenses                                                                                                         |      |                               | 30,666  |      |                                |  
|Depreciation                                                                                                                                |      |                               | 11,787  |      |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               | 115,643 |      |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Loss from operations                                                                                                                        |      |                               | (11,785 | )    |                                |  
|                                                                                                                                            |      |                               |         |     
|Net gain on derivative instruments                                                                                                          |      |                               | 460     |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Loss from extinguishment of long-term debt                                                                                                  |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Other income, net                                                                                                                           |      |                               | 5,737   |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Equity in operations of equity investee                                                                                                     |      |                               | 9       |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Interest expense, net                                                                                                                       |      |                               | (9,023  | )    |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|Income (loss) from continuing operations before income taxes                                                                                |      |                               | (14,602 | )    |                                |  
|                                                                                                                                            |      |                               |         |     
|Provision (benefit) for federal and state income taxes                                                                                      |      |                               | (5,829  | )    |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|Income (loss) from continuing operations                                                                                                    |      |                               | (8,773  | )    |                                |  
|                                                                                                                                            |      |                               |         |     
|Income (loss) from discontinued operations, net of income tax:                                                                              |      |                               |         |      |                                |  
|Real estate operations sold and held for sale                                                                                               |      |                               | (336    | )    |                                |  
|Property management business held for sale                                                                                                  |      |                               | (234    | )    |                                |  
|Milling business                                                                                                                            |      |                               |         |      |                                |  
|Georgia television stations held for sale                                                                                                   |      |                               | 281     |      |                                |  
|Portland radio stations held for sale                                                                                                       |      |                               | (897    | )    |                                |  
|Media Services operations closed                                                                                                            |      |                               | (1,572  | )    |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Loss before cumulative effect of change in accounting principle                                                                             |      |                               | (11,531 | )    |                                |  
|                                                                                                                                            |      |                               |         |     
|Cumulative effect of change in accounting principle, net of income tax benefit of $34,662                                                   |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|Net loss                                                                                                                                    |      | $                             | (11,531 | )    |                                | $
|                                                                                                                                            |      |                               |         |      |                                |  
|Income (loss) per share:                                                                                                                    |      |                               |         |      |                                |  
|From continuing operations                                                                                                                  |      | $                             | (1.02   | )    |                                | $
|From discontinued operations                                                                                                                |      |                               | (0.32   | )    |                                |  
|Cumulative effect of change in accounting principle                                                                                         |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|Net loss per share                                                                                                                          |      | $                             | (1.34   | )    |                                | $
|                                                                                                                                            |      |                               |         |      |                                |  
|Income (loss) per share assuming dilution:                                                                                                  |      |                               |         |      |                                |  
|From continuing operations                                                                                                                  |      | $                             | (1.02   | )    |                                | $
|From discontinued operations                                                                                                                |      |                               | (0.32   | )    |                                |  
|Cumulative effect of change in accounting principle                                                                                         |      |                               |         |      |                                |  
|                                                                                                                                            |      |                               |         |      |                                |  
|Net income (loss) per share assuming dilution                                                                                               |      | $                             | (1.34   | )    |                                | $
|                                                                                                                                            |      |                               |         |      |                                |  
|Weighted average shares outstanding                                                                                                         |      |                               | 8,595   |      |                                |  
|                                                                                                                                            |      |                               |         |     
|Weighted average shares outstanding assuming dilution                                                                                       |      |                               | 8,595   |      |                                |  



See
accompanying notes to condensed consolidated financial statements.



3



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##### Table of Contents

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|(in thousands, except share and per share amounts)(Unaudited)                                               |  | September 302003 |         |   | December 312002 |  
|----------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | --------------- | -
|ASSETS                                                                                                      |  |                  |         |   |                 |  
|                                                                                                            |  |                 
|Current Assets                                                                                              |  |                  |         |   |                 |  
|Cash and short-term cash investments                                                                        |  | $                | 10,182  |   |                 | $
|Restricted cash                                                                                             |  |                  |         |   |                 |  
|Receivables                                                                                                 |  |                  | 28,468  |   |                 |  
|Deferred income taxes                                                                                       |  |                  | 7,956   |   |                 |  
|Prepaid expenses                                                                                            |  |                  | 4,888   |   |                 |  
|Television and radio broadcast rights                                                                       |  |                  | 8,601   |   |                 |  
|Assets held for sale                                                                                        |  |                  | 2,645   |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Total current assets                                                                                        |  |                  | 62,740  |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Marketable Securities, at market value                                                                      |  |                  | 106,133 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Other Assets                                                                                                |  |                  |         |   |                 |  
|Cash value of life insurance and retirement deposits                                                        |  |                  | 13,978  |   |                 |  
|Television and radio broadcast rights                                                                       |  |                  | 4,566   |   |                 |  
|Goodwill, net                                                                                               |  |                  | 38,354  |   |                 |  
|Intangible assets                                                                                           |  |                  | 1,232   |   |                 |  
|Investments in equity investee                                                                              |  |                  | 2,807   |   |                 |  
|Other                                                                                                       |  |                  | 10,262  |   |                 |  
|Assets held for sale                                                                                        |  |                  | 109,153 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|                                                                                                            |  |                  | 180,352 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Property, Plant and Equipment, net                                                                          |  |                  | 161,258 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|                                                                                                            |  | $                | 510,483 |   |                 | $
|                                                                                                            |  |                  |         |   |                 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                        |  |                  |         |   |                 |  
|                                                                                                            |  |                 
|Current Liabilities                                                                                         |  |                  |         |   |                 |  
|Notes payable                                                                                               |  | $                | 7,151   |   |                 | $
|Trade accounts payable                                                                                      |  |                  | 4,654   |   |                 |  
|Accrued payroll and related benefits                                                                        |  |                  | 10,241  |   |                 |  
|Television and radio broadcast rights payable                                                               |  |                  | 8,234   |   |                 |  
|Other current liabilities                                                                                   |  |                  | 1,275   |   |                 |  
|Liabilities of businesses held for sale                                                                     |  |                  | 3,372   |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Total current liabilities                                                                                   |  |                  | 34,927  |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Long-term Debt, net of current maturities                                                                   |  |                  | 224,651 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Other Liabilities                                                                                           |  |                  |         |   |                 |  
|Accrued retirement benefits                                                                                 |  |                  | 17,656  |   |                 |  
|Deferred income taxes                                                                                       |  |                  | 31,450  |   |                 |  
|Television and radio broadcast rights payable, long-term portion                                            |  |                  | 110     |   |                 |  
|Other liabilities                                                                                           |  |                  | 2,661   |   |                 |  
|Liabilities of businesses held for sale                                                                     |  |                  | 37,541  |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|                                                                                                            |  |                  | 89,418  |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|Commitments and Contingencies                                                                               |  |                  |         |   |                 |  
|                                                                                                            |  |                 
|Stockholders Equity                                                                                        |  |                  |         |   |                 |  
|Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,608,288 in 2003 and 8,594,060 in 2002 |  |                  | 10,760  |   |                 |  
|Capital in excess of par                                                                                    |  |                  | 4,030   |   |                 |  
|Deferred compensation                                                                                       |  |                  | (2      | ) |                 |  
|Accumulated other comprehensive income - net of income taxes:                                               |  |                  |         |   |                 |  
|Unrealized gain on marketable securities                                                                    |  |                  | 68,325  |   |                 |  
|Minimum pension liability                                                                                   |  |                  | (1,773  | ) |                 |  
|Retained earnings                                                                                           |  |                  | 80,147  |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|                                                                                                            |  |                  | 161,487 |   |                 |  
|                                                                                                            |  |                  |         |   |                 |  
|                                                                                                            |  | $                | 510,483 |   |                 | $
|                                                                                                            |  |                  |         |   |                 |  



See
accompanying notes to condensed consolidated financial statements.



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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



|(in thousands)(Unaudited)                                                                  |      | Nine months ended September 30 |        
|------------------------------------------------------------------------------------------ | ---- | ------------------------------ | -------
|                                                                                           | 2003 |                                |        
|Cash flows from operating activities                                                       |      |                                |        
|Net loss                                                                                   |      | $                              | (11,531
|Adjustments to reconcile net loss to net cash provided by operating activities             |      |                                |        
|Depreciation                                                                               |      |                                | 14,055 
|Deferred income taxes                                                                      |      |                                | (3,214 
|Cumulative effect of change in accounting principle                                        |      |                                |        
|Gain on sales of real estate                                                               |      |                                | (1,555 
|Equity in operations of equity investee                                                    |      |                                | (9     
|Increase in fair value of derivative instruments                                           |      |                                | (460   
|Gain on sale of marketable securities                                                      |      |                                | (3,675 
|Amortization of deferred loan costs                                                        |      |                                | 861    
|Loss from extinguishment of debt                                                           |      |                                |        
|Amortization of television and radio broadcast rights                                      |      |                                | 17,009 
|Payments for television and radio broadcast rights                                         |      |                                | (15,670
|Other                                                                                      |      |                                | 519    
|                                                                                           |      |                               
|Change in operating assets and liabilities                                                 |      |                                |        
|Receivables                                                                                |      |                                | 2,832  
|Prepaid expenses                                                                           |      |                                | (674   
|Cash value of life insurance and retirement deposits                                       |      |                                | (102   
|Other assets                                                                               |      |                                | 1,223  
|Trade accounts payable, accrued payroll and related benefits and other current liabilities |      |                                | 3,146  
|Accrued retirement benefits                                                                |      |                                | (1,437 
|Other liabilities                                                                          |      |                                | 1,940  
|                                                                                           |      |                                |        
|Net cash provided by operating activities                                                  |      |                                | 3,258  
|                                                                                           |      |                                |        
|Cash flows from investing activities                                                       |      |                                |        
|Proceeds from sale of discontinued milling business assets                                 |      |                                |        
|Proceeds from sale of real estate and property, plant and equipment                        |      |                                | 136    
|Proceeds from sale of marketable securities                                                |      |                                | 5,169  
|Proceeds from collection of note receivable                                                |      |                                | 3,185  
|Dividends from equity investee                                                             |      |                                | 125    
|Restricted cash                                                                            |      |                                | 12,778 
|Purchase of radio station license                                                          |      |                                | (467   
|Purchase of property, plant and equipment                                                  |      |                                | (10,771
|                                                                                           |      |                                |        
|Net cash provided by (used in) investing activities                                        |      |                                | 10,155 
|                                                                                           |      |                                |        
|Cash flows from financing activities                                                       |      |                                |        
|Net payments under notes payable                                                           |      |                                | (828   
|Borrowings under borrowing agreements and mortgage loans                                   |      |                                |        
|Net payments on borrowing agreements and mortgage loans                                    |      |                                | (25,794
|Payment of deferred loan costs                                                             |      |                                | (614   
|Proceeds from exercise of stock options                                                    |      |                                | 490    
|Cash dividends paid                                                                        |      |                                |        
|                                                                                           |      |                                |        
|Net cash provided by (used in) financing activities                                        |      |                                | (26,746
|                                                                                           |      |                                |        
|Net increase (decrease) in cash and short-term cash investments                            |      |                                | (13,333
|                                                                                           |      |                               
|Cash and short-term cash investments, beginning of period                                  |      |                                | 23,515 
|                                                                                           |      |                                |        
|Cash and short-term cash investments, end of period                                        |      | $                              | 10,182 
|                                                                                           |      |                                |        



See
accompanying notes to condensed consolidated financial statements.



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FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



|(in thousands)(Unaudited)                                           |      | Nine months ended September 30 |         |      | Three months ended Setpember 30 |  
|------------------------------------------------------------------- | ---- | ------------------------------ | ------- | ---- | ------------------------------- | -
|                                                                    | 2003 |                                |         | 2002 |                                 |  
|Net loss                                                            |      | $                              | (11,531 | )    |                                 | $
|                                                                    |      |                                |         |     
|Other comprehensive income (loss):                                  |      |                                |         |      |                                 |  
|Unrealized gain on marketable securities                            |      |                                | 2,045   |      |                                 |  
|Effect of income taxes                                              |      |                                | (716    | )    |                                 |  
|                                                                    |      |                                |         |     
|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    | )    |                                 |  
|                                                                    |      |                                |         |      |                                 |  
|                                                                    |      |                                | (285    | )    |                                 |  
|                                                                    |      |                                |         |      |                                 |  
|Comprehensive loss                                                  |      | $                              | (11,816 | )    |                                 | $
|                                                                    |      |                                |         |      |                                 |  



See
accompanying notes to condensed consolidated financial statements.



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FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Basis of Presentation



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. Any
adjustments are of a normal recurring nature. 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 the Companys Annual Report on Form 10-K/A 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. New Accounting Pronouncements



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



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation
- Transition and Disclosure. SFAS 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 SFAS 123 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 SFAS 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 SFAS 148 are provided in Note 7 to these condensed consolidated 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 SFAS No. 143, Accounting
for Asset Retirement Obligations. SFAS 143 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 SFAS 143. These legal obligations include a responsibility to remediate the leased sites on which these assets are located. The adoption of SFAS 143 did not have a material impact on
the Companys financial statements.



In April 2003, the FASB issued SFAS
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 did not have a material impact on the Companys financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150
establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. For public entities, SFAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments
created before the issuance date of the statement and still existing at the beginning of the interim period of adoption. The adoption of SFAS 150 did not have a material impact on the Companys financial statements.



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3. Discontinued Operations



The Companys real estate subsidiary concluded the sale of one industrial property in
October 2002, three industrial properties in December 2002, certain remaining real estate holdings in May 2003, and its final two commercial office properties in October 2003. The Company intends to discontinue the property management operations
conducted by the real estate subsidiary through sale or other transfer of the remaining property management contracts to a third party.



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 finality of the Federal Communications Commission (FCC) approval dated October 3, 2003 and satisfaction of other customary closing
conditions. The sale is expected to be completed in the fourth quarter of 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
satisfaction of customary closing conditions. The sale is expected to be completed in the fourth quarter of 2003.



In connection with the Companys restructuring, two of the businesses operated by the Companys Media Services subsidiary, Fisher Entertainment LLC
(Fisher Entertainment) and Civia, Inc. (Civia), ceased operations during the second quarter of 2003, and those businesses were closed.



The aforementioned real estate properties that were sold in 2002 and October 2003, the pending sale or closure of property management operations, the pending sale of
the Companys Georgia and Portland stations, as well as the closure of Fisher Entertainment and Civia, meet the criteria of a component of an entity as defined in SFAS No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets. 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 SFAS 144, the results of operations of these components are reported as discontinued operations in the Condensed
Consolidated Statements of Operations for the three and nine months ended September 30, 2003. The prior-year results of operations for these components have been reclassified to conform to the 2003 presentation.



In accordance with Emerging Issues Task Force Issue No. 87-24, Allocation of Interest
to Discontinued Operations, the income (loss) from discontinued operations of certain of these components includes an allocation of interest expense relating to corporate debt that is required to be repaid from the net proceeds from sales, in
addition to interest expense relating to mortgage loans on the properties held for sale. This corporate debt has not been reclassified in the accompanying Condensed Consolidated Balance Sheets; however, mortgage obligations that relate to properties
held for sale have been reclassified to Liabilities of businesses held for sale.



Operational data for discontinued real estate properties is summarized as follows (in thousands):



|                                                   |  | Nine months ended September 30 |       |   | Three months ended September 30 |  
|-------------------------------------------------- |  | ------------------------------ | ----- | - | ------------------------------- | -
|                                                   |  | 2003                           |       |   | 2002                            |  
|                                                   |  | (Unaudited)                    |      
|Revenue                                            |  | $                              | 4,821 |   |                                 | $
|                                                   |  |                                |       |  
|Income (loss) from discontinued operations:        |  |                                |       |   |                                 |  
|Before income taxes                                |  | $                              | 14    |   |                                 | $
|Income tax effect                                  |  |                                | (5    | ) |                                 |  
|                                                   |  |                                |       |   |                                 |  
|                                                   |  |                                | 9     |   |                                 |  
|Corporate interest allocation, net of income taxes |  |                                | (345  | ) |                                 |  
|                                                   |  |                                |       |   |                                 |  
|                                                   |  | $                              | (336  | ) |                                 | $
|                                                   |  |                                |       |   |                                 |  



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The corporate interest allocation is based on an estimated $14 million in net proceeds (after estimated income taxes,
closing costs, reimbursement from the buyer of certain other items, and retirement of mortgage obligations) that will be used to pay down corporate debt as a result of the October 2003 sale of real estate properties. The corporate interest
allocation calculation for the 2002 periods also includes $6.2 million used to pay down corporate debt resulting from the fourth-quarter 2002 sales of real estate properties.



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.



Operational data for the property management operations is
summarized as follows (in thousands):



|                                            |  | Nine months ended September 30 |      |   | Three months ended September 30 |  
|------------------------------------------- |  | ------------------------------ | ---- | - | ------------------------------- | -
|                                            |  | 2003                           |      |   | 2002                            |  
|                                            |  | (Unaudited)                    |     
|Revenue                                     |  | $                              | 272  |   |                                 | $
|                                            |  |                                |      |  
|Income (loss) from discontinued operations: |  |                                |      |   |                                 |  
|Before income taxes                         |  | $                              | (122 | ) |                                 | $
|Income tax effect                           |  |                                | (112 | ) |                                 |  
|                                            |  |                                |      |   |                                 |  
|                                            |  | $                              | (234 | ) |                                 | $
|                                            |  |                                |      |   |                                 |  



Operational data for the Georgia
television stations to be sold is summarized as follows (in thousands):



|                                                   |  | Nine months ended September 30 |        |   | Three months ended September 30 |  
|-------------------------------------------------- |  | ------------------------------ | ------ | - | ------------------------------- | -
|                                                   |  | 2003                           |        |   | 2002                            |  
|                                                   |  | (Unaudited)                    |       
|Revenue                                            |  | $                              | 6,346  |   |                                 | $
|                                                   |  |                                |        |  
|Income (loss) from discontinued operations:        |  |                                |        |   |                                 |  
|Before income taxes                                |  | $                              | 2,161  |   |                                 | $
|Income tax effect                                  |  |                                | (756   | ) |                                 |  
|                                                   |  |                                |        |   |                                 |  
|                                                   |  |                                | 1,405  |   |                                 |  
|Corporate interest allocation, net of income taxes |  |                                | (1,124 | ) |                                 |  
|                                                   |  |                                |        |   |                                 |  
|                                                   |  | $                              | 281    |   |                                 | $
|                                                   |  |                                |        |   |                                 |  



The corporate interest allocation is
based on an estimated $41 million in net proceeds (including estimated working capital at closing, net of estimated closing costs) that will be used to pay down corporate debt as a result of the pending sale.



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Operational data for the Portland radio stations to be sold is summarized as follows (in thousands):



|                                                   |  | Nine months ended September 30 |       |   | Three months ended September 30 |  
|-------------------------------------------------- |  | ------------------------------ | ----- | - | ------------------------------- | -
|                                                   |  | 2003                           |       |   | 2002                            |  
|                                                   |  | (Unaudited)                    |      
|Revenue                                            |  | $                              | 2,460 |   |                                 | $
|                                                   |  |                                |       |  
|Income (loss) from discontinued operations:        |  |                                |       |   |                                 |  
|Before income taxes                                |  | $                              | 84    |   |                                 | $
|Income tax effect                                  |  |                                | (31   | ) |                                 |  
|                                                   |  |                                |       |   |                                 |  
|                                                   |  |                                | 53    |   |                                 |  
|Corporate interest allocation, net of income taxes |  |                                | (950  | ) |                                 |  
|                                                   |  |                                |       |   |                                 |  
|                                                   |  | $                              | (897  | ) |                                 | $
|                                                   |  |                                |       |   |                                 |  



Upon signing the agreement to sell the
Portland radio stations, the Company entered into an agreement whereby the buyer operates the radio stations under a separate agreement prior to closing the transaction and remits monthly amounts specified in the contract. Such payments commenced in
June 2003 and totaled $467,000 and $567,000, respectively, in the three- and nine-month periods ended September 2003; these amounts are included within Income from discontinued operations but are not reported as revenue in the table shown above.



The corporate interest allocation is based on an estimated $35 million in net
proceeds (after estimated income taxes and closing costs) that will be used to pay down corporate debt as a result of the pending sale.



Operational data for the media businesses closed is summarized as follows (in thousands):



|                                   |  | Nine months ended September 30 |        |   | Three months ended September 30 |  
|---------------------------------- |  | ------------------------------ | ------ | - | ------------------------------- | -
|                                   |  | 2003                           |        |   | 2002                            |  
|                                   |  | (Unaudited)                    |       
|Revenue                            |  | $                              | 1,556  |   |                                 | $
|                                   |  |                                |        |  
|Loss from discontinued operations: |  |                                |        |   |                                 |  
|Before income taxes                |  | $                              | (2,234 | ) |                                 | $
|Income tax effect                  |  |                                | 662    |   |                                 |  
|                                   |  |                                |        |   |                                 |  
|                                   |  | $                              | (1,572 | ) |                                 | $
|                                   |  |                                |        |   |                                 |  



As required by SFAS 144, assets and
liabilities relating to the two real estate properties sold in October 2003, the pending sale or closure of property management operations, the Georgia television stations, and the Portland radio stations are classified as held for sale in the
accompanying condensed consolidated financial statements.



During 2001
substantially all of the assets and working capital used in the Companys flour milling and food distributions operations were sold. In September 2002, land and a building in Portland, Oregon used in the Companys food distributions
operations were sold. Net proceeds from the sale were $2,800,000. During the quarter ended September 30, 2002, estimates of the net realizable value of property, plant and equipment not included in the sales described above and certain liabilities
relating to the wind-up of discontinued milling operations were revised, resulting in a loss from discontinued operations amounting to $500,000, net of $269,000 in income taxes.



4. 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



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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 would 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 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 September 30, 2003 the derivative portion of the Forward Transaction had a fair
market value of $3,223,000, which is included in other assets in the accompanying Condensed Consolidated Balance Sheet. At September 30, 2003, $58,187,000 was outstanding under the Forward Transaction including accrued interest amounting to
$6,596,000.



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 $63,675,000, which reduces as payments are made on principal outstanding under the broadcast facility, until termination of the contract in March 2004. At September 30, 2003 the fair market
value of the swap agreement was a liability of $1,831,000, 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 Statements of Operations.



5. Television and Radio Broadcast Rights and Other Broadcast Commitments



The broadcasting subsidiary acquires television and radio broadcast rights, and may make commitments for program rights where the cost exceeds the projected direct revenue from the program. The impact of such contracts on the Companys
overall financial results is dependent on a number of factors, including popularity of the program, increased audience for other programming, and strength of the advertising market. Estimates of future revenues can change significantly and,
accordingly, are reviewed periodically to determine whether losses are expected over the life of the contract.



At September 30, 2003 the broadcasting subsidiary has commitments under license agreements amounting to $71,967,000 for future rights to broadcast television and radio programs through 2008, and $10,334,000 in related
fees. As these programs will not be available for broadcast until after September 30, 2003, they have been excluded from the financial statements in accordance with provisions of SFAS 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 $11,768,000 through 2007.



6. 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 stock options and restricted stock rights issued under the Companys incentive plans. Stock options and restricted stock rights are converted using the treasury stock method.



The weighted average number of shares outstanding for the nine- and three-month periods ended
September 30, 2003 was 8,595,190 and 8,596,596, respectively. The dilutive effect of 460 restricted stock rights and options to purchase 456,623 shares are excluded for the nine-month and three-month periods ended September 30, 2003 because such
rights and options were anti-dilutive; therefore, there is no difference in the calculation between basic and diluted per-share amounts.



The weighted average number of shares outstanding for the nine- and three-month periods ended September 30, 2002 was 8,592,818 and 8,594,060, respectively. The dilutive
effect of 1,474 restricted stock rights and options to purchase 442,933 shares are excluded for the nine months ended September 30, 2002 because such rights and



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##### Table of Contents

options were anti-dilutive. For the three months ended September 30, 2002, weighted average shares outstanding assuming dilution includes 21,053 weighted
average shares for the dilutive effect of stock options and restricted stock rights.



7. 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 generally 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.
During the third quarter of 2003, the Company recognized stock-based compensation expense of $77,000, net of tax, relating to the acceleration of certain stock options specified in the severance agreement of a former Company executive.



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 SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands, except per share amounts):



|                                                                                                                                                     |  | Nine months ended September 30 |         |   | Three months endedSeptember 30 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------ | -
|                                                                                                                                                     |  | 2003                           |         |   | 2002                           |  
|                                                                                                                                                     |  | (Unaudited)                    |         |   | (Unaudited)                    |  
|Net loss, as reported                                                                                                                                |  | $                              | (11,531 | ) |                                | $
|Deduct total stock-based employee compensation expense determined under the fair value based method for all awards, net of related
income tax effect |  |                                | (641    | ) |                                |  
|                                                                                                                                                     |  |                                |         |   |                                |  
|Adjusted net income (loss)                                                                                                                           |  | $                              | (12,172 | ) |                                | $
|                                                                                                                                                     |  |                                |         |   |                                |  
|Loss per share:                                                                                                                                      |  |                                |         |   |                                |  
|As reported                                                                                                                                          |  | $                              | (1.34   | ) |                                | $
|Adjusted                                                                                                                                             |  | $                              | (1.41   | ) |                                | $
|                                                                                                                                                     |  |                                |         |  
|Loss per share, assuming dilution:                                                                                                                   |  |                                |         |   |                                |  
|As reported                                                                                                                                          |  | $                              | (1.34   | ) |                                | $
|Adjusted                                                                                                                                             |  | $                              | (1.41   | ) |                                | $



8.
Segment Information



The Company operates its continuing operations as two
principal business units: broadcasting and media services. Under the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company reports financial data for three reportable segments:
television, radio (included in the broadcasting business unit), Fisher Plaza (included in the media services business unit), 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-party tenants. 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 the Companys commercial real estate and property
management operations, as well as Fisher Entertainment and Civia, are reported as discontinued operations as discussed in Note 3 to the condensed consolidated financial statements.



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Revenue for each reportable segment is as follows (in thousands):



|                           |  | Nine months ended September 30 |         |   | Three months ended September 30 |  
|-------------------------- |  | ------------------------------ | ------- | - | ------------------------------- | -
|                           |  | 2003                           |         |   | 2002                            |  
|Television                 |  | $                              | 63,227  |   |                                 | $
|Radio                      |  |                                | 35,273  |   |                                 |  
|Fisher Plaza               |  |                                | 4,496   |   |                                 |  
|All other                  |  |                                | 901     |   |                                 |  
|Corporate and eliminations |  |                                | (39     | ) |                                 |  
|                           |  |                                |         |   |                                 |  
|                           |  | $                              | 103,858 |   |                                 | $
|                           |  |                                |         |   |                                 |  



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



|                                                                           |  | Nine months endedSeptember 30 |         |   | Three months endedSeptember 30 |  
|-------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ------------------------------ | -
|                                                                           |  | 2003                          |         |   | 2002                           |  
|Television                                                                 |  | $                             | 2,712   |   |                                | $
|Radio                                                                      |  |                               | (1,337  | ) |                                |  
|Fisher Plaza                                                               |  |                               | 2,009   |   |                                |  
|All other                                                                  |  |                               | (1,764  | ) |                                |  
|Corporate and eliminations                                                 |  |                               | (7,199  | ) |                                |  
|                                                                           |  |                               |         |   |                                |  
|Total segment income (loss) from continuing operations before income taxes |  |                               | (5,579  | ) |                                |  
|Interest expense                                                           |  |                               | (9,023  | ) |                                |  
|                                                                           |  |                               |         |   |                                |  
|Consolidated income (loss) from continuing operations before income taxes  |  | $                             | (14,602 | ) |                                | $
|                                                                           |  |                               |         |   |                                |  



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



|                              |  | September 30 2003 |         | December 31 2002
|----------------------------- |  | ----------------- | ------- | ----------------
|                              |  |                  
|Television                    |  | $                 | 95,398  |                 
|Radio                         |  |                   | 47,707  |                 
|Fisher Plaza                  |  |                   | 124,225 |                 
|All other                     |  |                   | 3,692   |                 
|Corporate and eliminations    |  |                   | 127,663 |                 
|                              |  |                   |         |                 
|Continuing operations         |  |                   | 398,685 |                 
|                              |  |                  
|Discontinued operations - net |  |                   | 111,798 |                 
|                              |  |                   |         |                 
|                              |  | $                 | 510,483 |                 
|                              |  |                   |         |                 



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



9. 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
September 30, 2003, $2,839,000 was accrued. General and administrative expenses in the nine months ended September 30, 2003 include $2,450,000



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related to these agreements. The agreements also provide that if a change in control should occur, certain officers will receive additional severance
payments totaling approximately $2,100,000 as well as health and welfare benefits. The Company would recognize this obligation when it is probable the executives are entitled to such benefits.



10. Subsequent and Other 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 sale closed in October 2003. The aggregate purchase price for the sale of the properties was $62
million, and the sale produced proceeds, after income taxes, closing costs and reimbursement from the buyer of certain other items, of approximately $52 million. The Company used the proceeds of the sale to retire the mortgages on the properties
sold and to reduce other corporate debt.



On August 21, 2003 the Company
received a letter from The Nasdaq National Market informing the Company that it was in violation of Nasdaq Rule 4310(c)(14), which requires the Company to file required reports with the Securities and Exchange Commission. Nasdaq had determined that
the Company was 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. On September 15, 2003, the Company filed its Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2003. On September 16, 2003, the Company received notification from Nasdaq that the Company had evidenced compliance with the filing requirements and all other requirements necessary for its continued listing on The
Nasdaq National Market.



11. Reclassifications



Certain prior-period balances have been reclassified to conform to the
current-period presentation. Such reclassifications had no effect on net loss or stockholders equity.



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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/A 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, if any, and material changes in our financial position and
operating results of our business units during the three- and nine-month periods ended September 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 sale closed in October 2003. The aggregate purchase price for the sale of the properties was $62 million, and the sale produced proceeds, after income taxes, closing costs
and reimbursement from the buyer of certain other items, of approximately $52 million. The Company used the proceeds of the sale to retire the mortgages on the properties sold and to reduce other corporate debt. The Company intends to discontinue
the property management operations conducted by the real estate subsidiary through sale or other transfer of the remaining property management contracts to a third party; therefore, all real estate operations are presented as discontinued operations
in the Companys condensed consolidated financial statements.



CRITICAL
ACCOUNTING POLICIES



The SEC has defined a companys critical
accounting policies as those 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. Our critical accounting policies are presented below. We also have other accounting policies which involve the use of estimates, judgments and assumptions that are significant to
understanding our financial 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.



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Television and radio broadcast rights. Television and radio broadcast rights are recorded as assets at the gross
amount of the related obligations when the license period begins and the programs are available for broadcasting. 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 on corporate debt. The interest rate swap
is held at fair value, with the change in fair value being recorded in our results of operations.



We have entered into a variable forward sales transaction with a financial institution. Our obligations under this Forward Transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by
us. 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 our
results of operations. We may in the future designate the Forward Transaction as a hedge and, accordingly, the change in fair value would be recorded in the operating results 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 (SFAS) No. 142, which we adopted
as of January 1, 2002. Under SFAS 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 SFAS 142. Our evaluations of fair values include analyses based on the future cash flows to be 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 affect 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 SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. 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.



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Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value,
which is based primarily on future discounted cash flows. In estimating these future cash flows we use 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 we determine 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 which
could have 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 benefits 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.



CONSOLIDATED RESULTS OF OPERATIONS



Revenue



|                           |  | Nine Months Ended September 30 |         |   | Three Months Ended September 30 |     
|-------------------------- |  | ------------------------------ | ------- | - | ------------------------------- | ----
|($ in thousands)           |  | 2003                           |         |   | % Change                        |     
|Television                 |  | $                              | 63,227  |   |                                 | 0.8 
|Radio                      |  |                                | 35,273  |   |                                 | 48.2
|Fisher Plaza               |  |                                | 4,496   |   |                                 | 46.9
|All other                  |  |                                | 901     |   |                                 | 40.6
|Corporate and eliminations |  |                                | (39     | ) |                                 | 50.0
|                           |  |                                |         |   |                                 |     
|Consolidated               |  | $                              | 103,858 |   |                                 | 15.1



Television and radio revenues
fluctuate based on various factors, including the popularity of our programming, overall economic trends nationally and in the specific economies in which we operate, the success of our sales and promotional efforts, the actions of our competitors,
as well as the level of national and local political advertising during any period.



Television revenues for the nine months ended September 30, 2003 increased modestly in comparison to the same period in 2002 due primarily to overall increased local advertising at our Seattle, Portland, Washington (smaller-market), and
Idaho Falls television stations, offset somewhat by lower local advertising revenues from other stations and overall lower political advertising revenues at all television stations. We also experienced overall lower revenue from national advertising
and paid-programming in comparison to the nine months ended September 30, 2002.



During the nine-month period ended September 30, 2003, net revenue for our Seattle television station increased 1.4%, while our Portland television station experienced an increase of 0.9%. Our smaller-market television operations
experienced mixed revenue results with the Oregon and Boise, Idaho smaller-market stations reporting decreased revenue of 7.2% and 8.3%, respectively and the Washington and Idaho Falls smaller-market stations each reporting increased revenues of
15.2% and 13.1%, respectively.



Net revenue at our Seattle television station
increased 1.4% during the third quarter of 2003, while our Portland station reported a decrease of 1.1%, both in comparison to the third quarter of 2002. Our smaller-market television operations experienced mixed revenue results with the Oregon and
Boise, Idaho smaller-market stations reporting decreased net revenue of 7.7% and 8.6%, respectively, and the Washington and Idaho Falls smaller-market stations reporting increased revenues of 14.4% and 9.2%, respectively, in comparison to the three
months ended September 30, 2002.



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##### Table of Contents

Based on information published by Miller, Kaplan, Arase & Co. LLP (Miller Kaplan), local and national revenue for the
overall Seattle spot television market increased 4.2% and overall Portland spot revenue increased 0.6% for the nine months ended September 30, 2003, in comparison to the nine months ended September 30, 2002. In comparison, our Seattle television
station spot revenue increased 1.2% while our Portland television station spot revenue decreased 3.4% during the same nine-month periods.



During the nine-month period ended September 30, 2003, our Seattle radio operation experienced a 67.8% increase in net revenue, as compared to the same period in 2002,
due primarily 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 2.9% during the first nine months of 2003. Excluding sports revenue, local and national revenue for our Seattle radio operations decreased 2.6% for the same period. As a result of increased local and national
sales, net revenue increased 8.8% at our smaller-market radio stations in Eastern Washington and Montana in the first nine months of 2003, as compared to the same period in 2002.



The increase in Radio revenues for the three months ended September 30, 2003, as compared to the three months ended September 30, 2002, is
due primarily to the contract to broadcast Seattle Mariners baseball games.



The revenue increase for Fisher Plaza for the nine months ended September 30, 2003 is primarily due to a significant penalty paid by a tenant during the first quarter of 2003 for early termination of premises agreements.



Revenue in the all other category is attributable to Fisher Pathways. The increases in
revenue during the three- and nine-month periods ended September 30, 2003, as compared to the same periods in 2002, are due primarily to increased demand for Fisher Pathways transmission and studio facilities.



Cost of services sold



|                           |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |      
|-------------------------- |  | ------------------------------ | ------ | - | ------------------------------- | -----
|($ in thousands)           |  | 2003                           |        |   | % Change                        |      
|Television                 |  | $                              | 32,525 |   |                                 | -4.7 
|Radio                      |  |                                | 19,545 |   |                                 | 133.5
|Fisher Plaza               |  |                                | 1,277  |   |                                 | 70.0 
|All other                  |  |                                | 389    |   |                                 | 25.9 
|Corporate and eliminations |  |                                | 372    |   |                                 | -39.6
|                           |  |                                |        |   |                                 |      
|Consolidated               |  | $                              | 54,108 |   |                                 | 22.5 
|                           |  |                                |        |   |                                 |      
|Percentage of revenue      |  |                                | 52.1   | % |                                 |      



The cost of services sold consists
primarily of costs to acquire, produce, promote, and broadcast television and radio programming, and operating costs of Fisher Plaza. 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 nine-month periods ended September 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 with less costly
programs and lower costs for other syndicated programs. That decline was partially offset by increased engineering and news expenses.



The increase in the cost of services sold in the radio segment during the three- and nine-month periods ended September 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 year-to-date 2003 cost of services sold at Fisher Plaza, as compared to
the 2002 year-to-date amount, is due primarily 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 all other category includes the cost of operations of Fisher Pathways. These expenses
increased primarily due to costs associated with increased revenue.



18



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##### Table of Contents

Selling expenses



|                      |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |      
|--------------------- |  | ------------------------------ | ------ | - | ------------------------------- | -----
|($ in thousands)      |  | 2003                           |        |   | % Change                        |      
|Television            |  | $                              | 8,218  |   |                                 | 19.6 
|Radio                 |  |                                | 10,428 |   |                                 | 49.9 
|All other             |  |                                | 436    |   |                                 | 188.7
|                      |  |                                |        |   |                                 |      
|Consolidated          |  | $                              | 19,082 |   |                                 | 36.5 
|                      |  |                                |        |   |                                 |      
|Percentage of revenue |  |                                | 18.4   | % |                                 |      



Nearly all of our television stations
experienced an increase in selling expenses during the three- and nine-month periods ended September 30, 2003, as compared to the comparable prior-year periods. The largest increase occurred at our Portland station, which experienced increased costs
for salaries, commissions, advertising, and rating services. Our Seattle television station also experienced increases in consulting and salaries in comparison to the 2002 periods.



For the radio segment, selling expenses increased significantly at our Seattle radio operations for the three- and nine-month periods ended
September 30, 2003, in comparison to the same period in 2002, due primarily to additional sales personnel and other costs related to the rights agreement to broadcast Seattle Mariners baseball games on KOMO AM and a joint sales agreement that became
effective in March 2002.



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



|                           |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |     
|-------------------------- |  | ------------------------------ | ------ | - | ------------------------------- | ----
|($ in thousands)           |  | 2003                           |        |   | % Change                        |     
|Television                 |  | $                              | 13,031 |   |                                 | -5.8
|Radio                      |  |                                | 6,286  |   |                                 | -3.4
|All other                  |  |                                | 1,109  |   |                                 | 0.6 
|Corporate and eliminations |  |                                | 10,240 |   |                                 | 85.5
|                           |  |                                |        |   |                                 |     
|Consolidated               |  | $                              | 30,666 |   |                                 | 13.7
|                           |  |                                |        |   |                                 |     
|Percentage of revenue      |  |                                | 29.5   | % |                                 |     



The decline in general and
administrative expenses at the television segment during the three- and nine-month periods ended September 30, 2003, as compared to the corresponding prior-year periods, is primarily due to the Companys focus on expense control.



The decline in general and administrative expenses at the radio segment during the three- and
nine-month periods ended September 30, 2003, as compared to the corresponding prior-year periods, is also primarily attributable to the corporate-wide focus on controlling costs. The overall decreases were offset somewhat by 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.



The increase in corporate general and administrative expenses during the nine-month period ended September 30, 2003, as compared to the
corresponding prior-year period, 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 expenses incurred in the first half of 2003,
severance as the result of restructuring, and fees and expenses relating to the restatement of our financial statements during the summer of 2003. Corporate general and administrative expenses in the first nine months of 2003 also include $2,450,000
related to agreements with certain officers and employees which are payable in January 2004, including the following amounts relating to other segments: $825,000 television, $480,000 radio, and $120,000 all other. The increase in corporate general
and administrative expenses during the three months ended September 30, 2003, in comparison to the corresponding period in 2002, is primarily attributable to the aforementioned agreements with certain officers and employees, for which third-quarter
2003 expense was $861,000, and fees and expenses relating to the restatement of our financial statements during the summer of 2003, partially offset by lower costs for salaries.





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##### Table of Contents

Depreciation



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Nine Months Ended September 30 |         |   | Three Months Ended September 30 |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ------------------------------- | ------
|($ in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2003                           |         |   | % Change                        |       
|Television                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $                              | 8,537   |   |                                 | -1.6  
|Radio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                | 1,152   |   |                                 | -12.6 
|Fisher Plaza                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                | 1,210   |   |                                 | 1.3   
|All other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                | 744     |   |                                 | 83.3  
|Corporate and eliminations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                | 144     |   |                                 | -20.9 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                |         |   |                                 |       
|Consolidated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | $                              | 11,787  |   |                                 | 0.1   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                |         |   |                                 |       
|Percentage of revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                | 11.3    | % |                                 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The decrease in depreciation at the radio segment during the three- and nine-month periods ended September 30, 2003, as
compared to the corresponding prior-year periods, is primarily attributable to the relocation of Seattle radio operations to Fisher Plaza in the fall of 2002 and a corresponding acceleration of depreciation on certain capitalized items at the prior
facility.  Income (loss) from operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Nine Months Ended September 30 |         |   | Three Months Ended September 30 |       
|($ in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2003                           |         |   | % Change                        |       
|Television                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $                              | 916     |   |                                 | -220.8
|Radio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                | (2,138  | ) |                                 | -431.0
|Fisher Plaza                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                | 2,009   |   |                                 | 80.0  
|All other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                | (1,777  | ) |                                 | 33.9  
|Corporate and eliminations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                | (10,795 | ) |                                 | 70.2  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                |         |   |                                 |       
|Consolidated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | $                              | (11,785 | ) |                                 | 76.8  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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 investee 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Nine Months Ended September 30 |         |   | Three Months Ended September 30 |       
|(in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 2003                           |         |   |                                 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $                              | 460     |   |                                 |       
|We record derivative instruments as assets and
liabilities in our Condensed Consolidated Balance Sheets and recognize changes in fair values in our Condensed Consolidated Statements of Operations. As described in Note 4 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 nine 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 $2,464,000, partially offset by unrealized loss resulting from a decrease in fair value of a variable forward sales
transaction amounting to $2,004,000. The third quarter of 2003 includes unrealized gain from an increase in the fair value of an interest rate swap agreement amounting to $957,000, partially offset by unrealized loss resulting from a decrease in
fair value of a variable forward sales transaction amounting to $908,000.  The
amounts for 2002 include unrealized gain resulting from an increase in fair value of a variable forward sales transaction amounting to $11,682,000 in the first nine months of 2002 and $2,005,000 in the third quarter of 2002,



20



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##### Table of Contents

and unrealized loss from a decline in fair value of an interest rate swap agreement amounting to $1,454,000 in the first nine months and $516,000 in the
third quarter of 2002. The net gain for the nine months ended September 30, 2002 also is net of a realized loss amounting to $2,636,000 from termination, in March 2002, of an interest rate swap agreement.



Loss from extinguishment of long-term debt



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |   |        |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ------------------------------- | - | ------ | ----
|(in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2003                           |        |   | 2002                            |   |        | 2003
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                |        |   |                                 | $ | 3,264  |     
|We repaid certain loans in March 2002 and, as a result,
expensed deferred loan costs amounting to $3,264,000.  Other income,
net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |   |        |     
|(in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2003                           |        |   | 2002                            |   |        | 2003
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                              | 5,737  |   |                                 | $ | 7,536  |     
|Other income, net includes dividends received on marketable
securities, gains on the sale of marketable securities, gains on the sale of properties and, to a lesser extent, interest and miscellaneous income. The decreases in the three- and nine-month periods ended September 30, 2003, as compared to the same
periods in 2002, are primarily the result of a September 2002 sale of real estate properties resulting in a gain of $5,511,000. The year-to-date 2003 period includes a gain on sale of marketable securities amounting to $3,675,000.  Interest expense, net                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |   |        |     
|(in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2003                           |        |   | 2002                            |   |        | 2003
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                              | (9,023 | ) |                                 | $ | (8,101 | )   
|Interest expense is shown net of certain allocations of
interest expense to discontinued operations relating to corporate debt and mortgage loans that are required to be repaid with the net proceeds from sales.  The increase in interest expense for the nine months ended September 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 $2,231,000 and $1,701,000 during the nine months ended September 30, 2003 and 2002, respectively. Interest capitalized for the three months ended September 30, 2003 and 2002 was $685,000 and $674,000,
respectively.  Provision (benefit) for federal and state income
taxes
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Nine Months Ended September 30 |        |   | Three Months Ended September 30 |   |        |     
|(in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2003                           |        |   | 2002                            |   |        | 2003
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                              | (5,829 | ) |                                 | $ | (1,317 | )   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                |        |   |                                
|Effective tax rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                | 39.9   | % |                                 |   | 46.1   | %   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The provision (benefit) 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         







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Other comprehensive income (loss)



|               |  | Nine Months Ended September 30 |  | Three Months Ended September 30 |       |     
|-------------- |  | ------------------------------ |  | ------------------------------- | ----- | ----
|(in thousands) |  | 2003                           |  | 2002                            |       | 2003
|               |  | $    (285)                     |  | $                               | 3,042 |     



Other comprehensive income (loss) is
net of income taxes and consists primarily of unrealized gain 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 nine months ended September 30, 2003,
the value of our marketable securities increased $1,329,000, 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 September 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
|September 30, 2003 |  | $35.35 |  | September 30, 2002 |  | $31.78



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 nine months ended September 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 settled in 2003.



Liquidity and Capital Resources



As of September 30, 2003, we had working capital of $27,813,000, including cash and short-term cash investments totaling $10,182,000. As of September 30, 2003,
approximately $32,000,000 is available under existing credit facilities. We intend to finance working capital, debt service, capital expenditures, and dividend requirements (if so declared) primarily through operating activities.



Net cash provided by operating activities during the nine months ended September 30, 2003 was
$3,258,000, compared to $17,395,000 in the nine months ended September 30, 2002. The decline in cash provided by operating activities was due primarily to lower net operating performance in the 2003 period. Net cash provided by operating activities
consists of our net loss, increased by non-cash expenses such as depreciation and the 2002 cumulative change in accounting principle, increased by certain gains that are not considered operating activities (and for which the cash flows pertaining to
such items are from investing activities) and adjusted by changes in operating assets and liabilities.



Net cash provided by investing activities during the year-to-date period ended September 30, 2003 was $10,155,000, compared to a usage of cash for investing activities of $30,028,000 in the same period in 2002. The
2003 nine-month period includes restricted cash of $12,778,000 that became available for general corporate purposes during the first quarter of 2003, 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 $10,771,000 invested for purchase of property, plant and equipment (including the Fisher Plaza project) and purchase of a radio station license. The 2002 nine-month period includes proceeds
from the sale of certain discontinued operations and real estate properties and equipment totaling $16,010,000, offset by $15,146,000 reclassified to restricted cash and $30,892,000 invested for purchase of property, plant and equipment (including
the Fisher Plaza project).



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Net cash used in financing activities in the nine-months ended September 30, 2003, was $26,746,000, primarily resulting
from payments on borrowing agreements and mortgage loans. During the period ended September 30, 2002, $17,081,000 was provided from financial activities due primarily to net borrowings during the period in excess of repayments, offset in part by
dividend payments of $4,468,000, or $0.52 per share, during the period. At a meeting held on July 3, 2002, the Companys board of directors voted to suspend payment of the quarterly dividend.



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 sale closed in October 2003. The aggregate purchase price for the sale of the properties was $62
million, and the sale produced proceeds, after income taxes, closing costs and reimbursement from the buyer of certain other items, of approximately $52 million. The Company used the proceeds of the sale to retire the mortgages on the properties
sold and to reduce other corporate debt.



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 finality of the
FCC approval dated October 3, 2003 and satisfaction of other customary closing conditions. The sale is expected to be completed in the fourth quarter of 2003, and the Company plans to use the net proceeds to pay down corporate debt.



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 satisfaction of customary closing conditions. The sale is expected to be completed in the fourth quarter of
2003, and the Company plans to use the net proceeds to pay down corporate debt



As of September 30, 2003, future maturities of notes payable and long-term debt, and obligations for television and radio broadcast rights are as follows, including amounts that have been reclassified as held for sale in the accompanying
Condensed Consolidated Balance Sheets (in thousands):



|           |  | Notes Payableand Long-Term Debt |         | BroadcastRights
|---------- |  | ------------------------------- | ------- | ---------------
|2003       |  | $                               | 2,418   |                
|2004       |  |                                 | 8,784   |                
|2005       |  |                                 | 86,489  |                
|2006       |  |                                 | 50,292  |                
|2007       |  |                                 | 24,897  |                
|Thereafter |  |                                 | 97,038  |                
|           |  |                                 |         |                
|           |  | $                               | 269,918 |                
|           |  |                                 |         |                



The broadcasting subsidiary acquires
television and radio broadcast rights, and may make commitments for program rights where the cost exceeds the projected direct revenue from the program. The impact of such contracts on the Companys overall financial results is dependent on a
number of factors, including popularity of the program, increased audience for other programming, and strength of the advertising market. Estimates of future revenues can change significantly and, accordingly, are reviewed periodically to determine
whether losses are expected over the life of the contract.



At September 30,
2003 the broadcasting subsidiary has commitments under license agreements amounting to $71,967,000 for future rights to broadcast television and radio programs through 2008, and $10,334,000 in related fees. As these programs will not be available
for broadcast until after September 30, 2003, they have been excluded from the financial statements in accordance with provisions of SFAS 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 $11,768,000 through
2007.



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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 to our financial well being. Operating results during 2002 and 2003 have been 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 we could continue to suffer net losses or such net losses could increase. In addition, a continued downturn in the national economy may result in overall decreased national advertising sales. This could have an adverse affect on our
results of operations because national advertising sales represent a significant portion 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.



Our proposed sale of the Georgia television stations and the Portland radio stations 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. Completion of the sale of the Georgia stations is currently subject to finality of the FCC approval
dated October 3, 2003 and satisfaction of other customary closing conditions. Completion of the sale of the Portland stations is subject to satisfaction of customary closing conditions. 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.



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.





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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 of 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.



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, an increase in performance by CBS or FOX, or a positive 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 talk radio programs aired
by our Seattle radio stations 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. The syndication agreement for one of the most popular programs broadcast by one of our radio stations was recently cancelled. 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



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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.



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, and the inability to enter into a swap transaction could inhibit our ability to implement our business strategies.



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



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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 September 30, 2003, consists of unamortized goodwill. On
January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. As a
result of our adoption of SFAS 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.



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



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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.



Our ownership and
operation of Fisher Plaza is subject to risks, including those relating to the economic climate, local real estate conditions, potential inability to provide adequate management, maintenance and insurance, potential collection problems, reliance on
significant tenants, and regulatory risks.



Revenue and operating income
from Fisher Plaza and the value of that property 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
property 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 Fisher Plaza 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 Fisher Plaza 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. 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



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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.



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 deem
appropriate. At September 30, 2003, the fair value of our fixed-rate debt is estimated to be approximately $928,000 greater than the carrying amount of $96,157,000. Market risk is estimated as the potential change in fair value resulting from a
hypothetical 10 percent change in interest rates and, at September 30, 2003, amounted to $1,513,000 on our fixed rate debt.



We also had $173,586,000 in variable-rate debt outstanding at September 30, 2003. A hypothetical 10 percent change in interest rates underlying these borrowings would
result in a $989,000 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
September 30, 2003, the notional amount of the swap was $63,675,000 and the fair value of the swap agreement was a liability of $1,831,000. A hypothetical 10 percent change in interest rates would change the fair value of our swap agreement by
approximately $17,000 at September 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
Statements of Operations.



Marketable Securities Exposure



The fair value of our investments in marketable securities at September 30, 2003 was
$106,133,000. Marketable securities consist of 3,002,376 shares of SAFECO Corporation, which is reported on the NASDAQ securities market. As of September 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 $10,613,000 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.





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As of September 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 September 30, 2003 the derivative portion of the Forward Transaction had a fair market value of $3,223,000, 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 $7,500,000. A hypothetical 10 percent
change in volatility would change the market value of the Forward Transaction by approximately $200,000. A hypothetical 10 percent change in interest rates would change the market value of the Forward Transaction by approximately $400,000.



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.



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##### Table of Contents

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



None



Item 5. Other Information



None



Item 6. Exhibits and Reports on Form 8-K



|(a) | Exhibits:
|--- | ---------

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



|(b) | Reports on Form 8-K:
|--- | --------------------



A report on Form 8-K dated July 18, 2003 was filed with the Commission announcing that the Company had revised its accounting for the impairment of goodwill and accordingly would restate its financial results for 2002
and the first quarter of 2003. The report responded to Items 5, 7, and 9 of Form 8-K.



A report on Form 8-K dated August 4, 2003 was filed with the Commission announcing the retirement of board members Jean F. McTavish and Jacklyn F. Meurk and the appointment of two new board members, Deborah L. Bevier and Richard L. Hawley,
to fill the vacancies. The Company also announced its financial results for the fiscal quarter ended June 30, 2003, as well as the sale of two of its commercial real estate properties. The report responded to Items 5, 7, 9, and 12 of Form 8-K. Other
than the information provided in response to Item 5, the information contained in this report shall be deemed furnished to and not filed with the Commission.



A report on Form 8-K dated August 25, 2003 was filed with the Commission announcing that it has received a notice of potential delisting from the Nasdaq National Market.
The report responded to Item 5 and 7 of Form 8-K.



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##### Table of Contents

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.
|----------------------- |  | ---------------------------
|                        |  |                            
|                        |  |                            
|Dated November 14, 2003 |  |                            
|                        |  |                            
|                        |  |                            



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##### Table of Contents

EXHIBIT INDEX



|Exhibit No. |  | Description                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|10.1        |  | Agreement dated September 2, 2003 between Robert Bateman and Fisher Communications, Inc.                                      
|            | 
|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.



33