<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
[_] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from ________________ to _________________
Commission File Number 0-22439
FISHER COMPANIES INC.
(Exact Name of Registrant as Specified in Its Charter)
WASHINGTON 91-0222175
-------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1525 One Union Square
600 University Street
Seattle, Washington 98101-3185
(Address of Principal Executive Offices) (Zip Code)
(206) 624-2752
(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 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 March 31, 1998: 8,540,982
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following Consolidated Financial Statements are presented for the
Registrant, Fisher Companies Inc. and wholly owned subsidiaries.
1. Consolidated Statement of Income:
Three months ended March 31, 1998 and 1997.
2. Consolidated Balance Sheet:
March 31, 1998 and December 31, 1997.
3. Consolidated Statement of Cash Flows:
Three months ended March 31, 1998 and 1997.
4. Consolidated Statement of Comprehensive Income:
Three months ended March 31, 1998 and 1997.
5. Notes to Consolidated Financial Statements.
2
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three months ended March 31 1998 1997
- --------------------------- ------- -------
<S> <C> <C>
(In thousands except per share amounts)
(Unaudited)
Sales and other revenue:
Broadcasting $27,754 $25,217
Milling 26,467 31,585
Real estate 3,026 2,812
Corporate and other, primarily dividends and interest income 990 896
------- -------
58,237 60,510
------- -------
Costs and expenses:
Cost of products and services sold 37,973 40,076
Selling expenses 4,518 4,331
General, administrative and other expenses 9,479 8,943
------- -------
51,970 53,350
------- -------
Income from operations
Broadcasting 4,809 5,260
Milling 336 824
Real estate 982 822
Corporate and other 140 254
------- -------
6,267 7,160
Interest expense 1,277 1,382
------- -------
Income before provision for income taxes 4,990 5,778
Provision for federal and state income taxes 1,615 1,897
------- -------
Net income $ 3,375 $ 3,881
------- -------
Net income per share $.40 $.45
Net income per share assuming dilution $.39 $.45
Weighted average number of shares outstanding 8,536 8,531
Weighted average number of shares outstanding assuming dilution 8,583 8,567
Dividends declared per share $.25
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
(In thousands except share amounts)
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments $ 2,818 $ 6,337
Receivables 35,931 44,623
Inventories 17,180 14,537
Prepaid expenses 3,839 6,922
Television and radio broadcast rights 4,105 6,912
-------- --------
Total current assets 63,873 79,331
-------- --------
Marketable Securities, at market value 167,842 149,616
-------- --------
Other Assets:
Cash value of life insurance and retirement deposits 12,796 10,052
Television and radio broadcast rights 137 170
Intangible assets, net of amortization 49,206 49,533
Investments in equity investees 6,976 4,478
Other 2,859 3,117
-------- --------
71,974 67,350
-------- --------
Property, Plant and Equipment, net 142,660 142,456
-------- --------
$446,349 $438,753
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 15,711 $ 18,363
Trade accounts payable 5,698 8,117
Accrued payroll and related benefits 3,540 5,274
Television and radio broadcast rights payable 4,201 6,846
Income taxes payable 1,401 617
Other current liabilities 3,178 3,778
-------- --------
Total current liabilities 33,729 42,995
-------- --------
Long-term Debt, net of current maturities 52,286 55,615
-------- --------
Other Liabilities:
Accrued retirement benefits 12,421 12,059
Deferred income taxes 66,977 60,495
Television and radio broadcast rights payable, long-term portion 16 24
Deposits and retainage payable 693 681
-------- --------
80,107 73,259
-------- --------
Minority Interests 33 33
-------- --------
Stockholders' Equity:
Common stock, shares authorized 12,000,000, $1.25 par value;
issued 8,540,982 in 1998 and 8,535,432 in 1997 10,676 10,669
Capital in excess of par 554 277
Accumulated other comprehensive income - unrealized gain
on marketable securities, net of deferred
income taxes of $58,356 in 1998 and $51,977 in 1997 108,375 96,529
Retained earnings 160,589 159,376
-------- --------
280,194 266,851
-------- --------
$446,349 $438,753
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31 1998 1997
- --------------------------- -------- --------
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,375 $ 3,881
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,289 2,959
Increase in noncurrent deferred income taxes 102 (114)
Issuance of stock pursuant to vested stock rights
and related tax benefit 284 146
Change in operating assets and liabilities:
Receivables 8,692 6,012
Inventories (2,643) (3,462)
Prepaid expenses 3,083 1,090
Cash value of life insurance and retirement deposits (2,744) (38)
Income taxes payable 784 837
Trade accounts payable, accrued payroll and related
benefits and other current liabilities (4,753) (5,276)
Other assets 258 (368)
Accrued retirement benefits 362 (161)
Deposits and retainage payable 12 24
Amortization of television and radio broadcast rights 2,840 2,247
Payments for television and radio broadcast rights (2,653) (1,894)
------- -------
Net cash provided by operating activities 10,288 5,883
------- -------
Cash flows from investing activities:
Investments in equity investees (2,498) (1)
Purchase assets of radio stations (3,949)
Purchase of property, plant and equipment (3,166) (5,840)
------- -------
Net cash used in investing activities (5,664) (9,790)
------- -------
Cash flows from financing activities:
Net borrowings under notes payable 2,104 5,085
Payments on borrowing agreements and mortgage loans (8,085) (271)
Proceeds from exercise of stock options 28
Cash dividends paid (2,162) (2,115)
------- -------
Net cash (used in) provided by financing activities (8,143) 2,727
------- -------
Net increase (decrease) in cash and short-term cash investments (3,519) (1,180)
Cash and short-term cash investments, beginning of period 6,337 5,116
------- -------
Cash and short-term cash investments, end of period $ 2,818 $ 3,936
------- -------
</TABLE>
See accompanying notes to consolidated financial statements
FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three months ended March 31 1998 1997
- --------------------------- ------- -------
(In thousands)
(Unaudited)
<S> <C> <C>
Net income $ 3,375 $3,881
Other comprehensive income unrealized gain on securities net of
deferred income taxes of $6,379 in 1998 and $527 in 1997 11,846 979
------- ------
Comprehensive income $15,221 $4,860
------- ------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
FISHER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein, in the opinion of
management, reflects all adjustments which are necessary to state fairly
the consolidated financial position, results of operations, and cash flows
of Fisher Companies Inc. (the "Company") as of and for the periods
indicated. The Company presumes that users of the interim financial
information herein have read or have access to the Company's audited
consolidated financial statements and that the adequacy of additional
disclosure needed for a fair presentation, except in regard to material
contingencies or recent subsequent events, may be determined in that
context. Accordingly, footnote and other disclosures which would
substantially duplicate the disclosures contained in Form 10-K for the year
ended December 31, 1997 filed on March 27, 1998 by the Company have been
omitted. The financial information herein is not necessarily representative
of a full year's operations.
2. In the fourth quarter of 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (FAS 128) which changed
the Company's presentation and calculation of earnings per share. Net
income per share represents net income divided by the weighted average
number of shares outstanding during the year. Net income per share assuming
dilution represents net income divided by the weighted average number of
shares outstanding including the potentially dilutive impact of the stock
options and restricted stock rights issued under the Fisher Companies
Incentive Plan of 1995. Common stock options and restricted stock rights
are converted using the treasury stock method. Per share amounts for the
three months ended March 31, 1997 have been retroactively adjusted to this
new presentation. The adoption of FAS 128 did not have a material impact on
the Company's earnings per share.
3. Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
---- ----
<S> <C> <C>
Finished products $ 4,786 $ 5,114
Raw materials 12,246 9,258
Spare parts and supplies 148 165
------- -------
$17,180 $14,537
======= =======
</TABLE>
4. In December 1996 an annual dividend in the amount of $.98 per share was
declared, payable quarterly during 1997 at the rate of $.245 per share. In
December 1997 and March 1998 a quarterly dividend in the amount of $.25 per
share was declared, payable in March and June 1998, respectively.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS
This discussion is intended to provide an analysis of significant trends and
material changes in the Company's financial position and operating results
during the three month period ended March 31, 1998 compared with the similar
period in 1997.
CONSOLIDATED RESULTS OF OPERATIONS
Sales and other revenue
- -----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$58,237,000 -3.8% $60,510,000
</TABLE>
Sales and other revenue increased 10.1% and 7.6% for broadcasting and real
estate operations, respectively, in the three months ended March 31, 1998, while
milling operations experienced a decline of 16.2%. Revenue of the corporate
segment increased 10.5% as a result of increases in dividends from marketable
securities.
Cost of products and services sold
- ----------------------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$37,973,000 -5.2% $40,076,000
Percentage of revenue 65.2% 66.2%
</TABLE>
The decrease in cost of products and services sold in 1998 is attributable to
lower cost of wheat used to produce flour and lower volume of flour sold by the
milling segment, offset by increased costs to acquire and produce broadcast
programming. Constant gross margin percentages at milling operations and
improved margins from real estate operations contributed to a reduction in cost
of products and services sold as a percentage of revenue.
Selling expenses
- ----------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$4,518,000 4.3% $4,331,000
Percentage of revenue 7.8% 7.2%
</TABLE>
Selling expenses increased as a result of increased commissions and related
expenses resulting from increased broadcasting revenue, partially offset by a
decrease in selling expenses at the milling segment due to lower sales.
7
<PAGE>
General and administrative expenses
- -----------------------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$9,479,000 6.0% $8,943,000
Percentage of revenue 16.3% 14.8%
</TABLE>
The increase in general and administrative expenses incurred in 1998 is largely
attributable to provision for anticipated losses recorded in the broadcasting
segment. General and administrative expenses declined at the milling segment as
a result of emphasis on expense control. The corporate segment experienced an
increase due to increased personnel and other administrative expense.
Interest expense
- ----------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$1,277,000 -7.6% $1,382,000
</TABLE>
Interest expense declined in 1998 compared with 1997 due to lower average
borrowing outstanding during 1998. The average interest rate was 7.2% in 1998
and 7.0% in 1997.
Provision for federal and state income taxes
- --------------------------------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$1,615,000 -14.9% $1,897,000
Effective tax rate 32.4% 32.8%
</TABLE>
The provision for federal and state income taxes varies directly with pre-tax
income. The effective tax rate is less than the statutory rate for both periods
primarily due to a deduction for dividends received, offset by the impact of
state income taxes, net of the federal income tax benefit.
BROADCASTING OPERATIONS
Sales and other revenue
- -----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$27,754,000 10.1% $25,217,000
</TABLE>
Revenue from KOMO Television in Seattle increased approximately $1,500,000
during the three months ended March 31, 1998 while revenue from KATU Television
in Portland increased approximately $700,000. Both stations experienced
increases in local and national advertising. Revenue from radio operations
increased approximately $310,000, including $140,000 from the Company's Seattle
radio stations (KOMO AM, KVI AM and KPLZ-FM) and $170,000 from the nineteen
small market stations in Montana and Eastern Washington. Revenue from Portland
radio operations (KWJJ-FM and KOTK) was essentially unchanged from 1997.
8
<PAGE>
Income from operations
- ----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$4,809,000 -8.6% $5,260,000
Percentage of revenue 17.3% 20.9%
</TABLE>
The decline in operating income is principally due to provision for anticipated
losses incurred from (i) the sale of former Portland Radio studios, as part of
obtaining new facilities for KWJJ-FM and KOTK, and (ii) an interest in Affiliate
Enterprises, Inc. Operating expenses at the broadcasting segment increased
13.2% in 1998 largely the result of increased costs to acquire and produce
broadcast programming.
MILLING OPERATIONS
Sales and other revenue
- -----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$26,467,000 -16.2% $31,585,000
</TABLE>
Flour prices are largely dependent on the cost of wheat purchased to produce
flour. During 1998 average wheat prices were lower than in 1997, with the
result that average flour prices in 1998 were 6% lower than in 1997. Flour
sales volume also declined 5% during the first quarter of 1998. In addition,
revenue from the food distribution division declined $1,590,000 or 13%. The
decline is due largely to lower sales volume in the Southern California market
served by the Rancho Cucamonga Food Distribution Center where reorganization of
sales territories and changes in sales personnel during the latter part of 1997,
combined with strong competition, continued to negatively impact volume.
Income from operations
- ----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$336,000 -59.3% $824,000
Percentage of revenue 1.3% 2.6%
</TABLE>
Income from operations is determined by deducting operating expenses from gross
margin on sales. Gross margin declined at both the milling and food
distribution divisions in 1998. Operating expenses were 6% lower than in 1997,
however that decline did not offset the impact of lower sales volume.
REAL ESTATE OPERATIONS
Sales and other revenue
- -----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$3,026,000 7.6% $2,812,000
</TABLE>
Real estate revenue increased in 1998 due to higher occupancy levels. Average
occupancy during the three months ended March 31, 1998 and 1997 was 98.4% and
95.7%, respectively.
9
<PAGE>
Income from operations
- ----------------------
<TABLE>
<CAPTION>
Three months ended March 31 1998 % Change 1997
<S> <C> <C> <C>
$982,000 19.4% $822,000
Percentage of revenue 32.4% 29.2%
</TABLE>
The improvement in operating income is attributable to increased revenue offset
by additional depreciation expense. Operating expenses declined modestly from
1997.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had working capital of $30,144,000 and cash
and short-term cash investments totaling $2,818,000. The Company intends to
finance working capital, debt service, capital expenditures, and dividend
requirements primarily through operating activities. However, the Company will
consider using available lines of credit to fund acquisition activities and
significant real estate project development activities. In this regard, the
Company has obtained a commitment letter from a bank for a five-year unsecured
revolving line of credit in a maximum amount of $100,000,000 to finance
construction of the KOMO Block Project, a new broadcast center for KOMO
Television. The revolving line of credit will be governed by a credit
agreement, the terms of which have not yet been negotiated.
Net cash provided by operating activities during the three months ended March
31, 1998 was $10,288,000. Net cash provided by operating activities consists of
the Company's net income, increased by non-cash expenses such as depreciation
and amortization, and adjusted by changes in operating assets and liabilities.
Net cash used in investing activities during the period was $5,664,000,
consisting of $3,166,000 for purchase property, plant and equipment used in
operations and $2,498,000 for additional investment in a limited liability
company formed to construct and operate a compact flour mill in Blackfoot, Idaho
in which the milling subsidiary is a 50% member. Net cash used in financing
activities was $8,143,000, including payment of $8,085,000 due on borrowing
agreements and mortgage loans, and cash dividends paid to stockholders totaling
$2,162,000 or $.25 per share. $2,104,000 was borrowed under lines of credit and
notes from shareholders and directors.
YEAR 2000
The Company is actively assessing the impact of the upcoming change in the
century on its computer software and hardware, and on the Company's products,
services and competitive conditions. Certain software applications have been
identified for replacement prior to the year 2000. Based on its analysis to
date, the Company believes that the impact of year 2000 issues will not be
material to the Company's business, operations or financial condition, and that
the cost of remediating such matters will not be material. However, the impact
of the failure of computer systems of customers, vendors and others with whom
the Company does business is uncertain and has not been assessed by the Company.
10
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The discussion above under "Year 2000" includes certain "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "PSLRA"). This statement is included for the express purpose of
availing the Company of the protections of the safe harbor provisions of the
PSLRA. Management's ability to predict results or the effect of future plans is
inherently uncertain, and is subject to factors that may cause actual results to
differ materially from those projected. Factors that could affect the actual
results include the possibility that remediation programs will not operate as
intended, the Company's failure to timely or completely identify all software or
hardware applications requiring remediation, unexpected costs, and the
uncertainty associated with the impact of year 2000 issues on the Company's
customers, vendors and others with whom it does business.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION
In March, 1998 Terry Barrans, President and CEO of the Company's milling
subsidiary, entered a hospital for exploratory surgery. Colon cancer was
diagnosed, and Mr. Barrans was operated upon immediately. Mr. Barrans is
currently undergoing chemotherapy treatment. The prognosis for Mr. Barrans and
the impact of his illness on the Company or the milling subsidiary is uncertain.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit 11, Statement re Computation of Per Share Earnings
Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K: None
12
<PAGE>
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 COMPANIES INC.
(Registrant)
Dated May 12, 1998 /s/ William W. Krippaehne, Jr.
---------------- ------------------------------
William W. Krippaehne, Jr.
President and Chief Executive Officer
Dated May 12, 1998 /s/ David D. Hillard
---------------- --------------------
David D. Hillard
Senior Vice President and Chief Financial
Officer
13
<PAGE>
EXHIBIT INDEX
Exhibit 11, Statement re Computation of Per Share Earnings
Exhibit 27, Financial Data Schedule
<PAGE>
EXHIBIT 11
FISHER COMPANIES INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31
1998 1997
---- ----
<S> <C> <C>
Weighted average of common shares outstanding
during the period 8,536,357 8,530,995
Dilutive effect of:
Restricted stock rights 24,990 22,029
Stock options 21,799 14,113
---------- ----------
Weighted average shares outstanding
assuming dilution 8,583,146 8,567,137
========== ==========
Net income $3,375,000 $3,881,000
========== ==========
Net income per common share $.40 $.45
==== ====
Net income per common share assuming dilution $.39 $.45
==== ====
</TABLE>
Share amounts have been adjusted to reflect the two-for-one stock split that was
effective March 6, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,818
<SECURITIES> 167,842
<RECEIVABLES> 37,212
<ALLOWANCES> 1,281
<INVENTORY> 17,180
<CURRENT-ASSETS> 63,873
<PP&E> 246,035
<DEPRECIATION> 103,375
<TOTAL-ASSETS> 446,349
<CURRENT-LIABILITIES> 33,729
<BONDS> 52,286
0
0
<COMMON> 10,676
<OTHER-SE> 269,518
<TOTAL-LIABILITY-AND-EQUITY> 446,349
<SALES> 57,247
<TOTAL-REVENUES> 58,237
<CGS> 37,973
<TOTAL-COSTS> 37,973
<OTHER-EXPENSES> 13,792
<LOSS-PROVISION> 205
<INTEREST-EXPENSE> 1,277
<INCOME-PRETAX> 4,990
<INCOME-TAX> 1,615
<INCOME-CONTINUING> 3,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,375
<EPS-PRIMARY> .40
<EPS-DILUTED> .39
</TABLE>
