<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, 1999
[_] 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, 1999: 8,542,384
<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, 1999 and 1998.
2. Consolidated Balance Sheet:
March 31, 1999 and December 31, 1998.
3. Consolidated Statement of Cash Flows:
Three months ended March 31, 1999 and 1998.
4. Consolidated Statement of Comprehensive Income:
Three months ended March 31, 1999 and 1998.
5. Notes to Consolidated Financial Statements.
2
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ITEM 1 - FINANCIAL STATEMENTS
FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three months ended March 31 1999 1998
- ----------------------------------------------------------------- ------------------
(In thousands except per share amounts) (Unaudited)
<S> <C> <C>
Sales and other revenue:
Broadcasting $28,122 $27,754
Milling 26,999 26,467
Real estate 3,179 3,026
Corporate and other, primarily dividends and interest income 1,098 990
- ----------------------------------------------------------------- ------- -------
59,398 58,237
------- -------
Costs and expenses:
Cost of products and services sold 39,720 37,973
Selling expenses 4,964 4,518
General, administrative and other expenses 10,872 9,479
- ----------------------------------------------------------------- ------- -------
55,556 51,970
------- -------
Income from operations
Broadcasting 3,790 4,809
Milling (590) 336
Real estate 1,033 982
Corporate and other (391) 140
- ----------------------------------------------------------------- ------- -------
3,842 6,267
Interest expense 1,049 1,277
- ----------------------------------------------------------------- ------- -------
Income before provision for income taxes 2,793 4,990
Provision for federal and state income taxes 803 1,615
- ----------------------------------------------------------------- ------- -------
Net income $ 1,990 $ 3,375
- ----------------------------------------------------------------- ------- -------
Net income per share $.23 $.40
Net income per share assuming dilution $.23 $.39
Weighted average number of shares outstanding 8,542 8,536
Weighted average number of shares outstanding assuming dilution 8,573 8,583
Dividends declared per share $.26 $.25
</TABLE>
See accompanying notes to consolidated financial statements.
3
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FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
----------- ------------
(In thousands except share amounts) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments $ 3,926 $ 3,968
Receivables 38,620 44,481
Inventories 9,534 11,009
Prepaid expenses 6,328 6,993
Television and radio broadcast rights 4,843 8,190
- -------------------------------------------------------------- -------- --------
Total current assets 63,251 74,641
- -------------------------------------------------------------- -------- --------
Marketable Securities, at market value 125,085 132,281
- -------------------------------------------------------------- -------- --------
Other Assets:
Cash value of life insurance and retirement deposits 11,152 10,900
Television and radio broadcast rights 49 49
Intangible assets, net of amortization 48,321 48,650
Investments in equity investees 15,923 15,126
Other 3,874 3,285
- -------------------------------------------------------------- -------- --------
79,319 78,010
-------- --------
Property, Plant and Equipment, net 157,129 154,590
- -------------------------------------------------------------- -------- --------
$424,784 $439,522
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 8,757 $ 13,479
Trade accounts payable 7,987 8,454
Accrued payroll and related benefits 4,085 5,071
Television and radio broadcast rights payable 4,795 7,675
Income taxes payable 805 457
Dividends payable 2,221 2,221
Other current liabilities 1,857 3,030
- -------------------------------------------------------------- -------- --------
Total current liabilities 30,507 40,387
- -------------------------------------------------------------- -------- --------
Long-term Debt, net of current maturities 65,890 63,257
- -------------------------------------------------------------- -------- --------
Other Liabilities:
Accrued retirement benefits 12,980 13,298
Deferred income taxes 52,623 55,048
Deposits and retainage payable 1,050 951
- -------------------------------------------------------------- -------- --------
66,653 69,297
-------- --------
Minority Interests 33 33
- -------------------------------------------------------------- -------- --------
Stockholders' Equity:
Common stock, shares authorized 12,000,000, $1.25 par value;
issued 8,542,384 10,678 10,678
Capital in excess of par 2,013 1,792
Deferred compensation (863) (733)
Accumulated other comprehensive income - unrealized gain
on marketable securities, net of deferred
income taxes of $43,378 in 1999 and $45,935 in 1998 80,559 85,236
Retained earnings 169,314 169,575
- -------------------------------------------------------------- -------- --------
261,701 266,548
-------- --------
$424,784 $439,522
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
4
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FISHER COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31 1999 1998
- -------------------------------------------------------------- -------- -----------
(In thousands) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,990 $ 3,375
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,389 3,289
Increase in noncurrent deferred income taxes 94 102
Issuance of stock pursuant to vested stock rights
and related tax benefit 284
Amortization of deferred compensation 91
Loss in equity investee 385
Change in operating assets and liabilities:
Receivables 5,861 8,692
Inventories 1,475 (2,643)
Prepaid expenses 665 3,083
Cash value of life insurance and retirement deposits (252) (2,744)
Income taxes payable 348 784
Trade accounts payable, accrued payroll and related
benefits and other current liabilities (2,626) (4,753)
Other assets (589) 258
Accrued retirement benefits (318) 362
Deposits and retainage payable 99 12
Amortization of television and radio broadcast rights 3,347 2,840
Payments for television and radio broadcast rights (2,880) (2,653)
- -------------------------------------------------------------- ------- -------
Net cash provided by operating activities 11,079 10,288
- -------------------------------------------------------------- ------- -------
Cash flows from investing activities:
Investments in equity investees (1,182) (2,498)
Purchase of property, plant and equipment (5,599) (3,166)
- -------------------------------------------------------------- ------- -------
Net cash used in investing activities (6,781) (5,664)
- -------------------------------------------------------------- ------- -------
Cash flows from financing activities:
Net borrowings under notes payable 3,190 2,104
Payments on borrowing agreements and mortgage loans (5,279) (8,085)
Cash dividends paid (2,251) (2,162)
- -------------------------------------------------------------- ------- -------
Net cash used in financing activities (4,340) (8,143)
- -------------------------------------------------------------- ------- -------
Net decrease in cash and short-term cash investments (42) (3,519)
Cash and short-term cash investments, beginning of period 3,968 6,337
- -------------------------------------------------------------- ------- -------
Cash and short-term cash investments, end of period $ 3,926 $ 2,818
- -------------------------------------------------------------- ------- -------
</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 1999 1998
- --------------------------------------------------------------------------- -------- -----------
(In thousands) (Unaudited)
<S> <C> <C>
Net income $ 1,990 $ 3,375
Other comprehensive income unrealized gain on securities net of deferred
income taxes of $(2,519) in 1999 and $6,379 in 1998 (4,677) 11,846
- --------------------------------------------------------------------------- ------- -------
Comprehensive income $(2,687) $15,221
- --------------------------------------------------------------------------- ------- -------
</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, 1998 filed on March
25, 1999 by the Company have been omitted. The financial information herein
is not necessarily representative of a full year's operations.
2. Inventories are summarized as follows (in thousands):
March 31 December 31
1999 1998
-------- -----------
Finished products $ 4,084 $ 3,906
Raw materials 5,364 6,983
Spare parts and supplies 86 120
--------- -----------
9,534 $11,009
========= ===========
3. In June 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (FAS 133), was
issued. This pronouncement standardizes the accounting for derivative
instruments by requiring that an entity recognize those items as assets or
liabilities in the financial statements and measure them at fair value. FAS
133 is required to be adopted by the Company for the year ended December 31,
2000. Early adoption is permitted. The Company is currently reviewing the
requirements of FAS 133 and assessing its impact on the Company's financial
statements. The Company has not made a decision regarding the period of
adoption.
6
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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, 1999 compared with the similar
period in 1998.
Consolidated Results of Operations
- ----------------------------------
Sales and other revenue
- -------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$59,398,000 2.0% $58,237,000
Increases in sales and other revenue during the three months ended March 31,
1999, compared with the similar period of 1998, were 1.3% for broadcasting
operations, 2.0% for milling operations, 5.0% for real estate operations, and
10.9% for the corporate segment. The increase in corporate segment revenue is
principally attributable to increases in dividends from marketable securities.
Cost of products and services sold
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$39,720,000 4.6% $37,973,000
Percentage of revenue 66.9% 65.2%
The increase in cost of products and services sold in 1999 is attributable to
increased costs to acquire and produce broadcast programming, increased volume
of flour and bakery products sold by the milling segment, and higher costs to
operate and maintain real estate properties.
Selling expenses
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$4,964,000 9.9% $4,518,000
Percentage of revenue 8.4% 7.8%
Selling expenses increased as a result of increased commissions and related
expenses resulting from increased broadcasting and milling revenue.
General and administrative expenses
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$10,872,000 14.7% $9,479,000
Percentage of revenue 18.3% 16.3%
General and administrative expenses increased in the broadcasting, milling and
corporate segments, while the real estate segment reported a modest decline.
The increase in general and administrative expenses at the broadcasting segment
is largely attributable to personnel and employee benefits. The milling segment
incurred a loss from the 50%-owned Blackfoot milling facility during the start-
up phase of the new conventional flour mill, which began operations in December
1998. The corporate segment incurred increased costs in connection with a new
corporate marque and brand identity program in February, and new strategic
initiatives.
7
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Interest expense
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$1,049,000 -17.8% $1,277,000
Interest expense declined in 1999 compared with 1998. Average borrowing was
greater in 1999; however, interest in the amount of $188,000 relating to
borrowings for construction for the Fisher Plaza project was capitalized as a
cost of the project. The average interest rate was 6.9% in 1999 and 7.2% in
1998.
Provision for federal and state income taxes
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$803,000 -50.3% $1,615,000
Effective tax rate 28.7% 32.4%
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
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$28,122,000 1.3% $27,754,000
Revenue from KOMO Television in Seattle declined approximately $700,000 during
the three months ended March 31, 1999. Declines in all advertising categories
were partially offset by revenue from paid programming. Revenue from KATU
Television in Portland increased approximately $100,000. Declines in local and
political advertising were offset by increases in national advertising sales and
revenue from paid programming. Revenue from radio operations increased
approximately $900,000, including $640,000 from the Company's Seattle radio
stations (KOMO AM, KVI AM and KPLZ-FM), $70,000 from Portland radio operations
(KWJJ-FM and KOTK), and $175,000 from the nineteen small market stations in
Montana and Eastern Washington.
Income from operations
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$3,790,000 -21.2% $4,809,000
Percentage of revenue 13.5% 17.3%
The decline in operating income is due to the decline in revenue at KOMO
Television, and to higher operating expenses, in particular costs to acquire and
produce broadcast programming, and general and administrative expenses.
8
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Milling Operations
Sales and other revenue
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$26,999,000 2.0% $26,467,000
Flour prices are largely dependent on the cost of wheat purchased to produce
flour. During 1999 average wheat prices were lower than in 1998, with the
result that average flour prices in 1999 were 9% lower than in 1998. Revenue of
the milling division declined $820,000, notwithstanding that flour sales volume
increased 9% during the first quarter of 1999. Revenue from the food
distribution division increased $1,350,000 or 14%, as each of the Company's
three distribution facilities reported increased sales.
Income from operations
- -------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$(590,000) N/M $336,000
Percentage of revenue N/M 1.3%
Income from operations is determined by deducting operating expenses from gross
margin on sales. During the first quarter of 1999 the milling division
experienced low flour and millfeed margins, largely offset by improved margins
at all three distribution facilities. Operating expenses increased more than
30% compared with 1998, due in large measure to continued start-up costs
associated with the new conventional mill in Blackfoot, Idaho. That mill, which
is owned by the Koch Fisher Mills L.L.C. in which Fisher Mills has a 50%
ownership interest, began operations in December 1998.
Real Estate Operations
Sales and other revenue
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$3,179,000 5.0% $3,026,000
Real estate revenue increased in 1999 due to rental rate adjustments associated
with lease renewal activity, and contracted rent escalations. Average occupancy
during the three months ended March 31, 1999 and 1998 was 97.5% and 98.4%,
respectively.
Income from operations
- --------------------------------------------------------------------------------
Three months ended March 31 1999 % Change 1998
$1,033,000 5.2% $982,000
Percentage of revenue 32.5% 32.4%
The improvement in operating income is attributable to increased revenue,
partially offset by higher costs to operate and maintain the Company's real
estate developments. Depreciation expense declined modestly from 1998.
Liquidity and Capital Resources
As of March 31, 1999, the Company had working capital of $32,744,000 and cash
and short-term cash investments totaling $3,926,000. The Company intends to
finance working capital, debt
9
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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 five-year
unsecured revolving line of credit from a bank in a maximum amount of
$100,000,000 to finance construction of a new digital broadcasting facility for
KOMO Television (to be called Fisher Plaza), and for general corporate purposes.
The revolving line of credit is governed by a credit agreement which provides
that borrowings under the line will bear interest at a variable rate not to
exceed the bank's publicly announced reference rate. The agreement also places
limitations on the disposition or encumbrance of certain assets and requires the
Company to maintain certain financial ratios. The Company has a commitment from
a bank for eight-year senior secured credit facilities in the amount of
$230,000,000 to finance the Retlaw acquisition and for general corporate
purposes. See Note 12 to the Company's 1998 consolidated financial statements
for information concerning the acquisition. The senior credit facilities will be
secured by a first priority perfected security interest in the voting capital
stock of the broadcasting subsidiary. The facilities will also place limitations
on the disposition or encumbrance of certain assets and require the Company to
maintain certain financial ratios. In addition to an amortization schedule which
will require repayment of all borrowings under the facilities by June 2007, the
amount available under the facilities will reduce each year beginning in 2002.
Amounts borrowed under the facilities will bear interest at variable rates based
on the Company's ratio of funded debt to operating cash flow, but will not
exceed the bank's prime rate plus 75 basis points.
Net cash provided by operating activities during the three months ended March
31, 1999 was $11,079,000. 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 $6,781,000,
principally $5,599,000 for purchase of property, plant and equipment used in
operations (including the Fisher Plaza project). Net cash used in financing
activities was $4,340,000, including payment of $5,279,000 due on borrowing
agreements and mortgage loans, and cash dividends paid to stockholders totaling
$2,251,000 or $.26 per share. $3,190,000 was borrowed under lines of credit and
notes from shareholders and directors.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The market risk in the Company's financial instruments represents the potential
loss arising from adverse changes in financial and commodity market prices and
rates. The Company is exposed to market risk in the areas of interest rates,
securities prices and grain prices. These exposures are directly related to its
normal funding and investing activities and to its use of agricultural
commodities in its operations.
Interest Rate Exposure
The Company's strategy in managing exposure to interest rate changes is to
maintain a balance of fixed- and variable-rate instruments. See Note 5 to the
Company's 1998 consolidated financial statements for information regarding the
contractual interest rates of the Company's debt. The Company will also
consider entering into interest rate swap agreements at such times as it deems
appropriate. At March 31, 1999, the fair value of the Company's debt is
estimated to approximate the carrying amount. Market risk is estimated as the
potential change in fair value
10
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resulting from a hypothetical 10 percent change in interest rates, and on the
Company's fixed rate debt, amounts to $2,062,000 at March 31, 1999.
The Company also has $22,371,000 in variable-rate debt outstanding at March 31,
1999. A hypothetical 10 percent change in interest rates underlying these
borrowings would result in a $118,000 annual change in the Company's pre-tax
earnings and cash flows.
Marketable Securities Exposure
The fair value of the Company's investments in marketable securities at March
31, 1999 is $125,085,000. Marketable securities consist of equity securities
traded on a national securities exchange or reported on the NASDAQ securities
market. A significant portion of the marketable securities consists of
3,002,376 shares of SAFECO Corporation. As of March 31, 1999, these shares
represented 2.2% of the outstanding common stock of SAFECO Corporation. While
the Company has no intention to dispose of its investments in marketable
securities, it has classified its 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 $12,509,000 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.
Commodity Price Exposure
The Company has exposure to adverse price fluctuations associated with its grain
and flour inventories, product gross margins, and certain anticipated
transactions in its milling operations. Commodities such as wheat are purchased
at market prices that are subject to volatility. As an element of its strategy
to manage the risk of market price fluctuations, the Company enters into various
exchange-traded futures contracts. The Company closely monitors and manages its
exposure to market risk on a daily basis in accordance with formal policies
established for this activity. These policies limit the level of exposure to be
hedged. All transactions involving derivative financial instruments are
required to have a direct relationship to the price risk associated with
existing inventories or future purchase and sales of its products.
The Company enters into both forward purchase and sales commitments for wheat
and flour. At the same time, the Company enters into generally matched
transactions using offsetting forward commitments and/or exchange-traded futures
contracts to hedge against price fluctuations in the market price of wheat.
The Company determines the fair value of its exchange-traded contracts based on
the settlement prices for open contracts, which are established by the exchange
on which the instruments are traded. The margin accounts for open commodity
futures contracts, which reflect daily settlements as market values change,
represent the Company's basis in those contracts. As of March 31, 1999, the
carrying value of the Company's investment in commodities futures contracts and
the total net deferred gains and losses on open contracts were immaterial. At
March 31, 1999, the actual open positions of these instruments and the potential
near-term losses in earnings, fair value, and/or cash flows from changes in
market rates or prices were not material.
11
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Year 2000
The Year 2000 or Y2K problem is somewhat predictable in its timing, but
unpredictable in its effects. In order to conserve limited computer memory,
many computer systems, software programs, and other microprocessor dependent
devices were created using only two digit dates, such that 1998 was represented
as 98. These systems may not recognize certain 1999 dates, and the year 2000
and beyond, with the result that processors and programs may fail to complete
the processing of information or revert back to the year 1900. As we approach
the year 2000, we expect computer systems and software used by many companies in
a wide variety of applications to experience operating difficulties unless they
are modified or upgraded to process information involving, related to, or
dependent upon the century change. Failures could incapacitate systems
essential to the functioning of commerce, building systems, consumer products,
utilities, and government services locally as well as worldwide. Significant
uncertainty exists concerning the scope and magnitude of problems associated
with Y2K.
State of Readiness
The Company recognized the need to reduce the risks of Year 2000 related
failures, and in August 1998 established a Y2K Task Force to address these
risks. The Y2K Task Force, comprised of senior management from each of the
Company's business segments and third party consultants, is leading the Year
2000 risk management efforts. The Y2K Task Force is coordinating the
identification and testing of computer hardware and software applications, with
a goal to ensure availability and integrity of the information systems and the
reliability of the operational systems and manufacturing processes utilized by
the Company and its subsidiaries.
The Company has adopted a five-step process toward Year 2000 readiness:
<TABLE>
<CAPTION>
Projected Completion Date
-------------------------
<S> <C>
Internal Systems Inventory 2nd Quarter 1999
Systems Testing and Repairs 2nd Quarter 1999
External Risk Assessment 2nd Quarter 1999
Contingency Planning 4th Quarter 1999
Financial Risk Transfer On-going
</TABLE>
The Company has approached the first two items in its five-step process
(Internal systems Inventory and Systems Testing and Repair) as a single task,
and has divided this task into four major categories:
. Building Systems
. Information Systems
. Broadcast Equipment
. Milling Equipment
The Company has conducted a comprehensive evaluation of a majority of its
building systems, related computer equipment and components that could be
potentially impacted. Building computer system testing is also underway. To
date, problems discovered in our building systems are minor and usually relate
to building security systems. These problems are being addressed.
12
<PAGE>
Information systems are being tested with a licensed software program; a
diagnostic tool designed for personal computers and servers that will identify
Y2K issues related to computer hardware, software and data. To date, this
testing appears to have been successful and has yielded no significant problems.
With the constant introduction of new computer equipment and software,
information systems testing will continue throughout the year.
The Company has arranged with a systems integration company to provide a
comprehensive Y2K assessment program for television and radio broadcast
equipment. The systems integration company has considerable experience in the
design and integration of conventional and digital communications, computer and
broadcast facilities, as well as in large system integration. The systems
integration company also has extensive experience working with major television
networks and broadcasting companies in systems assessment.
The Company is nearing completion of a comprehensive inventory of potential Y2K
effected equipment at each of the milling locations. Compliance letters have
been received from key vendors and testing of equipment will begin early in the
second quarter, and will continue throughout the year as we increase our
knowledge base.
Risks
The Company also faces risk to the extent suppliers of products, services, and
systems relied upon by the Company and others with whom the Company or its
subsidiaries transact business do not comply with Year 2000 requirements. In
the event such third parties cannot provide the Company or its subsidiaries with
products, services, or systems that meet the Year 2000 requirements on a timely
basis, or in the event Year 2000 issues prevent such third parties from timely
delivery of products or services required by the Company or its subsidiaries,
the Company's results of operations could be materially adversely affected. To
the extent Year 2000 issues cause significant delays in, or cancellation of,
decisions to purchase the Company's products or services, the Company's
business, results of operations, and financial position would be materially
adversely affected. The Company is assessing these risks and in some cases has
initiated formal communications with significant suppliers and customers to
determine the extent to which the Company is vulnerable to these third parties'
failure to remediate their own Year 2000 issues. There can be no assurance the
Company will identify and remediate all significant Year 2000 risks, or that
such risks will not have a material adverse effect on the Company's business,
results of operations, or financial position. Accordingly, the Company will
continue to develop contingency plans in anticipation of unexpected Year 2000
events. Based on its assessment of year 2000 risks to date, the Company does
not believe any material exposure to significant business interruption exists as
a result of Year 2000 compliance issues.
Contingency Plans
Since the Year 2000 problem is pervasive, few, if any, companies can make
absolute assurances that they will identify and remediate all Y2K risks.
Accordingly, the Company expects the risk assessment and contingency planning to
remain an ongoing process leading up to and beyond the year 2000. In addition,
the potential Year 2000 problem is being addressed as part of the Company's
overall emergency preparedness program that includes contingency planning for
other potential major catastrophes like earthquakes, fires and floods.
The Companies approach to Financial Risk Transfer has two main areas of focus.
13
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. Secure the broadest insurance coverage available at a reasonable cost
and avoid exclusions or restrictions of coverage.
. Explore other Financial Risk Transfer products and/or Y2K specific
insurance coverage to the extent that it becomes available at economically
feasible levels.
Estimated Costs
The Company is continuing to assess the potential impact of the century change
on its business, results of operations, and financial position. The total cost
of these Year 2000 compliance activities is not anticipated to be material to
the Company's financial position or its results of operations. The cost of
internal resources dedicated to the Year 2000 has not been estimated at this
time. The Company currently estimates that the cost of assessment and testing
of broadcast equipment will approximate $300,000.
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.
14
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information
None
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
15
<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 13, 1999 /s/ William W. Krippaehne, Jr.
---------------- ---------------------------------------
William W. Krippaehne, Jr.
President and Chief Executive Officer
Dated May 13, 1999 /s/ David D. Hillard
---------------- ---------------------------------------
David D. Hillard
Senior Vice President and Chief Financial
Officer
16
<PAGE>
EXHIBIT 11
FISHER COMPANIES INC.
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended March 31
1999 1998
------------- ------------
<S> <C> <C>
Weighted average of common shares outstanding
during the period 8,542,384 8,536,357
Dilutive effect of:
Restricted stock rights 16,117 24,990
Stock options 14,481 21,799
---------- ----------
Weighted average shares outstanding
assuming dilution 8,572,982 8,583,146
========== ==========
Net income $1,990,000 $3,375,000
========== ==========
Net income per common share $ .23 $ .40
========== ==========
Net income per common share assuming dilution $ .23 $ .39
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,926
<SECURITIES> 125,085
<RECEIVABLES> 39,982
<ALLOWANCES> 1,362
<INVENTORY> 9,534
<CURRENT-ASSETS> 63,251
<PP&E> 267,851
<DEPRECIATION> 110,722
<TOTAL-ASSETS> 424,784
<CURRENT-LIABILITIES> 30,507
<BONDS> 0
0
0
<COMMON> 10,678
<OTHER-SE> 251,023
<TOTAL-LIABILITY-AND-EQUITY> 424,784
<SALES> 58,300
<TOTAL-REVENUES> 59,398
<CGS> 39,720
<TOTAL-COSTS> 39,720
<OTHER-EXPENSES> 15,601
<LOSS-PROVISION> 235
<INTEREST-EXPENSE> 1,049
<INCOME-PRETAX> 2,793
<INCOME-TAX> 803
<INCOME-CONTINUING> 1,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,990
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
