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Fisher Communications Inc – ‘8-K/A’ for 7/1/99

On:  Tuesday, 9/14/99   ·   For:  7/1/99   ·   Accession #:  1032210-99-1337   ·   File #:  0-22439

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/14/99  Fisher Communications Inc         8-K/A:7     7/01/99    3:58K                                    Donnelley R R & S… Co/FA

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment 1 to Form 8K                                29    117K 
 2: EX-23.1     Consent of Pricewaterhousecoopers LLP                  1      5K 
 3: EX-23.2     Consent of Miller, Kaplan, Arase & Co., LLP            1      5K 


8-K/A   —   Amendment 1 to Form 8K
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 1, 1999 FISHER COMPANIES INC. (Exact name of registrant as specified in its charter) WASHINGTON (State or other jurisdiction of incorporation) 000-22439 91-0222175 -------------------------- ------------------------------- (Commission File Number) IRS Employer Identification No. 1525 One Union Square 600 University Street Seattle, Washington 98101-3185 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (206) 624-2752
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired. The financial information required by Item 7(a) is provided below, pursuant to Item 7(a)(4) (b) Pro Forma Financial Information. The pro forma financial information required by Item 7(b) is provided below, pursuant to Item 7(b)(2). (c) Exhibits 2.1 Asset Purchase and Sale Agreement Among Fisher Companies Inc., and Fisher Broadcasting Inc., as the Purchaser and Retlaw Enterprises, Inc., Retlaw Broadcasting, L.L.C., Retlaw Broadcasting of Boise, L.L.C., Retlaw Broadcasting of Fresno, L.L.C., Retlaw Broadcasting of Idaho Falls, L.L.C., Retlaw Broadcasting of Yakima, L.L.C., Retlaw Broadcasting of Eugene, L.L.C., Retlaw Broadcasting of Columbus, L.L.C., and Retlaw Broadcasting of Augusta, L.L.C., as the Sellers, dated November 18, 1998, as amended November 30, 1998 and December 7, 1998 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10- K for the year December 31, 1998 (Commission File No. 000-22439). 2.2 Amendment No. 3 to Asset Purchase and Sale Agreement dated as of June 30, 1999. (Incorporated by reference to the Form 8-K filed by Fisher Companies Inc. dated July 15, 1999.) 2.3 Amendment No. 4 to Asset Purchase and Sale Agreement dated as of July 1, 1999. (Incorporated by reference to the Form 8-K filed by Fisher Companies Inc. dated July 15, 1999.) 23.1 Consent of PriceWaterhouseCoopers LLP 23.2 Consent of Miller, Kaplan, Arase & Co., LLP 99.1 Press Release issued by the Company on July 2, 1999. (Incorporated by reference to the Form 8-K filed by Fisher Companies Inc. dated July 15, 1999.) 2
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Retlaw Broadcasting, LLC Report and Financial Statements September 30, 1996, 1997 and 1998 3
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Report of Independent Accountants To the Board of Directors of Retlaw Enterprises, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and changes in membership equity and of cash flows present fairly, in all material respects, the financial position of Retlaw Broadcasting, LLC (the "Company," a limited liability company wholly owned by Retlaw Enterprises, Inc.) and its subsidiaries at September 30, 1998 and 1997, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Century City, California December 11, 1998, except as to Note 14, which is as of July 1, 1999 4
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Independent Auditors' Report Retlaw Enterprises, Inc. North Hollywood, California We have audited the accompanying consolidated statements of operations, changes in group equity and cash flows of Retlaw Broadcasting Group (the "Group," which represents the broadcasting divisions of Retlaw Enterprises, Inc.) for the year ended September 30, 1996. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the operations and the cash flows of the Group for the year ended September 30, 1996, in conformity with generally accepted accounting principles. Miller, Kaplan, Arase & Co., LLP North Hollywood, California March 26, 1998 5
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Retlaw Broadcasting Consolidated Balance Sheet ________________________________________________________________________________ [Enlarge/Download Table] September 30, ---------------------------- June 30, 1997 1998 1999 (unaudited) Assets Current assets Cash and cash equivalents $ 995,000 $ 3,137,000 $ 2,235,000 Accounts receivable, less allowance for doubtful accounts of $208,000, $221,000 and $282,000 (unaudited) 5,529,000 7,823,000 8,637,000 Broadcast contract rights 5,408,000 9,596,000 7,864,000 Prepaid expenses and inventory 1,082,000 293,000 265,000 ------------ ------------ ------------ Total current assets 13,014,000 20,849,000 19,001,000 Broadcast contract rights, less current portion 924,000 1,267,000 1,150,000 Investments and other assets Investment in Southwest Oregon Television Broadcasting Corporation 2,344,000 2,245,000 2,027,000 Deferred debt financing costs, net (Note 10) 1,038,000 1,948,000 1,734,000 Other assets 346,000 308,000 502,000 ------------ ------------ ------------ Total other assets 3,728,000 4,501,000 4,263,000 Property and equipment, net (Note 4) 11,730,000 14,868,000 13,572,000 Goodwill and other intangibles, net (Note 2) 41,607,000 80,182,000 75,368,000 ------------ ------------ ------------ Total assets $ 71,003,000 $121,667,000 $113,354,000 ============ ============ ============ Liabilities and Equity Current liabilities Accounts payable $ 337,000 $ 844,000 $ 740,000 Accounts payable, affiliate (Note 5) 387,000 410,000 196,000 Accrued interest expense 121,000 1,200,000 547,000 Accrued payroll and related benefits 1,490,000 1,959,000 624,000 Other accrued liabilities 179,000 161,000 13,000 Broadcast contracts payable (Note 7) 6,140,000 9,340,000 8,303,000 Current debt payable (Note 10) 975,000 650,000 ------------ ------------ ------------ Total current liabilities 8,654,000 14,889,000 11,073,000 Long-term debt (Note 10) 33,000,000 79,025,000 78,700,000 Broadcast contracts payable, less current portion (Note 7) 913,000 1,867,000 975,000 Deferred compensation and retirement plan (Note 8) 1,073,000 1,365,000 1,376,000 ------------ ------------ ------------ Total liabilities 43,640,000 97,146,000 92,124,000 Commitments and contingencies (Notes 13 and 14) Group/member's equity 27,363,000 24,521,000 21,230,000 ------------ ------------ ------------ Total liabilities and equity $ 71,003,000 $121,667,000 $113,354,000 ============ ============ ============ See accompanying notes. 6
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Retlaw Broadcasting, LLC Consolidated Statement of Operations ________________________________________________________________________________ [Enlarge/Download Table] For the year ended For the nine-months ended September 30, June 30, --------------------------------------------- ----------------------------- 1996 1997 1998 1998 1999 (unaudited) Net revenues $ 25,066,000 $ 34,765,000 $ 41,740,000 $ 29,898,000 $ 37,334,000 Operating expenses Programming, production and other operating expenses 13,091,000 17,571,000 19,776,000 13,779,000 17,376,000 Promotion and selling expenses 3,073,000 4,012,000 4,754,000 3,203,000 4,828,000 General and administrative expenses 4,825,000 6,540,000 7,226,000 5,087,000 5,728,000 Depreciation and amortization 3,714,000 6,687,000 8,006,000 4,854,000 7,648,000 ------------- ------------- ------------- ------------- ------------- Operating income (loss) 363,000 (45,000) 1,978,000 2,975,000 1,754,000 Interest expense 710,000 2,900,000 4,730,000 2,788,000 5,252,000 Other income 85,000 142,000 343,000 267,000 207,000 ------------- ------------- ------------- ------------- ------------- Loss before extraordinary item (262,000) (2,803,000) (2,409,000) 454,000 (3,291,000) Extraordinary item Loss on early extinguishment of debt (Note 10) (1,038,000) (1,038,000) ------------- ------------- ------------- ------------- ------------- Net loss $ (262,000) $ (2,803,000) $ (3,447,000) $ (584,000) $ (3,291,000) ============= ============= ============= ============= ============= See accompanying notes. 7
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Retlaw Broadcasting, LLC Consolidated Statement of Cash Flows ________________________________________________________________________________ [Enlarge/Download Table] For the year ended For the nine-months ended September 30, June 30, --------------------------------------------- ---------------------------- 1996 1997 1998 1998 1999 (unaudited) Cash flows from operating activities Net loss $ (262,000) $ (2,803,000) $ (3,447,000) $ (584,000) $ (3,291,000) Adjustments to reconcile net income to net cash provided from operating activities Broadcasting contract payments (1,487,000) (2,226,000) (3,451,000) (2,589,000) (2,249,000) Broadcasting contract amortization 1,711,000 2,415,000 3,074,000 2,300,000 2,169,000 Depreciation and amortization 3,714,000 6,687,000 8,006,000 4,854,000 7,648,000 Earnings from investment accounted for under the equity method (35,000) (161,000) (169,000) (142,000) (142,000) Loss on early extinguishment of debt 1,038,000 1,038,000 Net gain on sale of property and equipment (3,000) Changes in assets and liabilities Accounts receivable (1,852,000) (598,000) (2,294,000) (2,640,000) (814,000) Prepaid expenses and inventory (744,000) (45,000) 789,000 627,000 28,000 Other assets 70,000 38,000 438,000 (194,000) Accounts payable and accrued expenses 2,305,000 (723,000) 2,060,000 3,497,000 (2,840,000) Deferred compensation 93,000 192,000 292,000 42,000 11,000 ------------ ------------ ------------ ----------- ------------ Net cash provided by operating activities 3,440,000 2,808,000 5,936,000 6,841,000 326,000 ============ ============ ============ =========== ============ Cash flows from investing activities Capital expenditures (1,514,000) (1,698,000) (1,409,000) (1,189,000) (938,000) Purchase of television stations and other investments (53,764,000) (104,000) (48,048,000) (48,048,000) Dividends received from investment 75,000 125,000 89,000 360,000 Proceeds from the sale of property and equipment 5,000 ------------ ------------ ------------ ----------- ------------ Net cash used in investing activities (55,273,000) (1,727,000) (49,332,000) (49,148,000) (578,000) ============ ============ ============ =========== ============ Cash flows from financing activities Repayment of credit facilities (1,000,000) (34,000,000) (33,000,000) (650,000) Borrowings under credit facilities 34,000,000 81,000,000 81,000,000 Debt issuance cost (2,067,000) (2,067,000) Net transaction with Retlaw Enterprises, Inc. (Note 6) 18,406,000 (200,000) 605,000 539,000 ------------ ------------ ------------ ----------- ------------ New cash provided by (used in) financing activities 52,406,000 (1,200,000) 45,538,000 46,472,000 (650,000) ------------ ------------ ------------ ----------- ------------ Net increase (decrease) in cash and cash equivalents 573,000 (119,000) 2,142,000 4,165,000 (902,000) Cash and cash equivalents at beginning of period 541,000 1,114,000 995,000 995,000 3,137,000 ------------ ------------ ------------ ----------- ------------ Cash and cash equivalents at end of period $ 1,114,000 $ 995,000 $ 3,137,000 $ 5,160,000 $ 2,235,000 ============ ============ ============ =========== ============ Supplemental cash flow information Interest paid $ 710,000 $ 2,823,000 $ 3,661,000 $ 2,146,000 $ 4,065,000 ============ ============ ============ =========== ============ See accompanying notes. 8
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Retlaw Broadcasting, LLC Consolidated Statement of Changes in Member's Equity ________________________________________________________________________________ [Download Table] Group/ member's equity Balance at September 30, 1995 $ 12,113,000 Net transactions with Retlaw Enterprises, Inc. (Note 6) 18,515,000 Net loss (262,000) ------------ Balance at September 30, 1996 30,366,000 Net transactions with Retlaw Enterprises, Inc. (Note 6) (200,000) Net loss (2,803,000) ------------ Balance at September 30, 1997 27,363,000 Net transactions with Retlaw Enterprises, Inc. (Note 6) 605,000 Net loss (3,447,000) ------------ Balance at September 30, 1998 24,521,000 Net loss (unaudited) (3,291,000) ------------ Balance at June 30, 1999 (unaudited) $ 21,230,000 ============ See accompanying notes. 9
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ 1. Business organization and basis of presentation Retlaw Broadcasting, LLC ("the Company"), formerly known as Retlaw Broadcasting Group (the "Group"), was a business entity "carved out" from Retlaw Enterprises Inc. (the "Parent"). On April 30, 1998, these assets of the Parent were transferred in a tax-free exchange to a wholly owned Limited Liability Company (LLC) of the Parent under the laws of Delaware. The respective group equity amounts as of April 30, 1998 were transferred to membership interest to reflect this tax-free exchange. The LLC has elected to be treated as a partnership for federal and state income tax purposes; therefore, the ultimate tax liability is borne by the Parent (Note 2). The Company's operations include television stations located in California, Washington, Oregon, Idaho, Georgia and a 50% interest in the issued and outstanding shares of the capital stock of the South West Oregon Television Broadcasting Corporation ("South West"). The accompanying financial statements reflect the assets, liabilities, revenues, expenses and cash flows of the Group through April 30, 1998 and of the LLC thereafter. The transfer of Group assets to the LLC was recorded at historical cost as the Group and LLC are under the common control of the Parent. Certain corporate, general and administrative expenses of Retlaw Enterprises, Inc. were allocated to the Company which, in the opinion of management, are reasonable. However, such expenses are not necessarily indicative of, and it is not practicable for management to estimate the level of, expenses which might have been incurred had the Company been operating as a separate business. 2. Summary of significant accounting policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The interest in South West is accounted for under the equity method. All significant intercompany transactions are eliminated in consolidation. Revenue Recognition The Company's primary source of revenue is the sale of television time to advertisers. Revenue is recorded when the advertisements are broadcast. Broadcast Contract Rights and Broadcast Contracts Payable Licensed broadcast rights represent amounts payable to program suppliers for the limited right to broadcast the suppliers' programming. Broadcast rights are recorded as assets when available for use at cost. The cost of broadcasting rights is amortized on a straight line basis over the term of the contract and is reported at the lower of unamortized cost or net realizable value. The portion of broadcast rights that are expected to be amortized and paid within one year are classified as 10
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ current assets and current liabilities respectively. Actual payments are made in installments over a period generally the same as the license period. Barter Arrangements The Company, in the ordinary course of business, provides commercial air time to certain customers in exchange for syndicated film programming, goods and services. Barter transactions are recorded on the basis of the estimated fair market value of the commercial airtime given up. Revenue is recognized as the related advertising is broadcast and expenses are recognized when the related programming is aired or the goods or services are received. Trade and barter revenue was $2,168,000, $4,022,000 and $4,778,000 for the years ended September 30, 1996, 1997 and 1998, respectively. Trade and barter expense was $2,096,000, $4,055,000 and $4,778,000 for the years ended September 30, 1996, 1997 and 1998, respectively. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation on buildings and improvements is computed principally using straight line and accelerated methods over their estimated useful lives of 4 to 40 years. Depreciation on machinery, equipment, automobiles, furniture and fixtures is computed principally using accelerated methods over their estimated useful lives of 3 to 15 years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the terms of the leases or their estimated useful lives. Expenditures for improvements that add to the productive capacity or extend the useful life of an asset are capitalized while expenditures for normal repair and maintenance are expensed as incurred. Goodwill and Other Intangibles The purchase price of the net assets of broadcasting stations acquired in excess of their fair market values and other intangibles are amortized using the straight-line method over 15 years. Amortization expense was $1,744,000, $3,826,000 and $4,977,000 for the years ended September 30, 1996, 1997 and 1998, respectively. Goodwill and other intangibles are stated net of accumulated amortization of $16,835,000 and $22,850,000 at September 30, 1997 and 1998, respectively. Impairment of Long-Lived Assets Periodically, the Company evaluates whether there has been an impairment in the carrying value of the long-lived assets, such as intangibles and property and equipment, in accordance with generally accepted accounting principles. Management believes that the long-lived assets in the accompanying balance sheet are appropriately valued. 11
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ Interest Rate Swap Agreements The Company utilizes interest rate swap agreements to manage its exposure to interest rate risk on its long term debt. The differential paid or received on interest rate swap agreements is recorded as an adjustment to interest expense over the term of the agreement. Income Taxes The Company is a Limited Liability Company that has elected to be treated as a Partnership and is not subject to federal or state income taxes. Accordingly, no recognition has been given to income taxes as the income or loss is included on the tax returns of the Parent. When the company was formed, all the tax responsibilities that arose during Company's existence as part of an S Corporation remained with the Parent. Additionally, certain assets contributed by the Parent and held by the Company are subject to the built in gain provisions applicable to S Corporations. Any tax liability resulting from the disposition of these assets will also be borne by the Parent. Use of 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. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board (FASB) issued FAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (FAS 131). FAS 131 supersedes FAS No. 14, "Financial Reporting for Segments of a Business Enterprise," replacing the "industry segment" approach with the "management approach." The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. FAS 131 also requires disclosures about products and services, geographic areas and major customers. FAS 131 is required to be adopted by the Company during the year end September 30, 1999. The Company does not believe the adoption of FAS 131 will have a significant impact on its financial statements. In June 1998, FAS 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 end September 30, 2001. Early adoption is permitted. The Company is currently 12
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ reviewing the requirements of FAS 133 and assessing its impact on the Company's financial statements. Unaudited Interim Financial Statements The interim financial data as of June 30, 1999 and for the nine months ended June 30, 1998 and 1999 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments necessary to present fairly the Company's financial position as of June 30, 1999 and the results of its operations and cash flows for the nine months ended June 30, 1998 and 1999. Reclassifications Certain amounts in the 1996 financial statements have been reclassified to conform with current year presentation. 3. Concentration of credit risk The Company maintains its cash in bank deposit accounts that, at any time, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of trade accounts receivable. The Company's sales and trade accounts receivable are generated principally from advertising from a large number of national, regional and local customers from many different industries located in its operating locations. Credit is extended based on evaluation of the customer's financial condition. Credit losses are provided for in the financial statements and have consistently been within management's expectations. No single customer represented more than 10% of sales in fiscal 1996, 1997 or 1998. 13
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ 4. Property and equipment Net property and equipment consist of the following: [Download Table] September 30, 1997 1998 Machinery and equipment $ 20,096,000 $ 22,201,000 Buildings and leasehold improvements 5,339,000 6,362,000 Land 2,048,000 2,777,000 Automobiles 848,000 983,000 Furniture and fixtures 446,000 694,000 ------------ ------------ 28,777,000 33,017,000 Less: Accumulated depreciation and amortization (17,047,000) (18,149,000) ------------ ------------ Net property and equipment $ 11,730,000 $ 14,868,000 ------------ ------------ Depreciation expense was $1,971,000, $2,861,000 and $3,029,000 for the years ended September 30, 1996, 1997 and 1998, respectively. 5. Accounts payable, affiliate The Company is a 50% investor in South West and manages the operations of the satellite station owned by South West. As a result of the relationship, certain revenues and expenses are allocated to the satellite station from the Company. As of September 30, 1997 and 1998, the accounts payable due to the affiliate was $387,000 and $410,000, respectively. Additionally, the Company's equity share of net income of $35,000, $161,000 and $169,000 for the years ended September 30, 1996, 1997 and 1998, respectively, have been included in other income. 14
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ 6. Transactions with Retlaw Enterprises, Inc. Intercompany transactions between the Parent and the Company are summarized as follows: [Enlarge/Download Table] For the year ended September 30, ------------------------------------------------------------- 1996 1997 1998 Net cash transfers $ 51,434,000 $ (6,521,000) $ (4,009,000) Net operating expense allocation 371,000 2,421,000 1,925,000 Interest expense allocations 710,000 2,900,000 1,689,000 Net principal payments on debt (34,000,000) 1,000,000 1,000,000 ------------- -------------- -------------- Total $ 18,515,000 $ (200,000) $ 605,000 ============= ============== ============== The Parent allocated costs to the Company relating to corporate services such as salaries and human resources, insurance premium maintenance, and external accounting. Such costs were allocated based on the relative percentage of time and resources spent by the Parent on behalf of the Company. Interest expense incurred and principal payments paid by the Parent relating to the long-term debt were also allocated to the Company. Management believes that the allocation methods were reasonable in the circumstances. 7. Broadcast contracts payable At September 30, 1998, the Company had broadcast contracts payable of $4,865,000 due in cash and $6,342,000 of bartered commercial air time. Aggregate maturities or payments required on these contracts are as follows for the year ending September 30: Year ending, 1999 $ 2,999,000 2000 1,305,000 2001 545,000 2002 16,000 ------------ Total $ 4,865,000 ============ The approximate fair value of broadcast contracts payable classified as non-current as of September 30, 1998 was $1,590,000. The fair value was estimated using a discount rate of 9%. 15
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ 8. Deferred compensation and retirement plans The Company has a qualified profit-sharing plan that covers eligible employees. On January 1, 1993 the company established a 401(k) Plan for its employees. Eligible employees may contribute a percentage of their pre-tax income to the plan up to certain limitations prescribed by the Internal Revenue Code. The Company matches employee contributions up to a maximum of 4% of participating employees' gross wages. The Company contributed $365,000 and $394,000 for the years ended September 30, 1997 and 1998, respectively. The Company has an unfunded key employee deferred compensation and retirement plan providing for Company contributions and employee deferrals. The accrued liabilities related to this plan are as follows: September 30, 1997 1998 Company accruals $ 720,000 $ 935,000 Employee contributions 190,000 190,000 Accrued interest 163,000 230,000 ----------- ----------- $ 1,073,000 $ 1,355,000 =========== =========== Total expense under this Plan was $225,000, $191,000, $282,000 for the years ended September 30, 1996, 1997 and 1998, respectively. 9. Leasing operations The Company leases to various third parties real property, transmitter sites and facilities and office space with initial terms ranging from one to twenty years. A number of the leases include renewal options and call for annual rental increases as provided in the lease agreement or based on changes in the Consumer Price Index. Total rental income included in the financial statements was $45,000, $265,000 and $304,000 for the years ended September 30, 1996, 1997 and 1998, respectively. 16
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ Aggregate future minimum rental payments due to the Company under rental agreements that have initial or remaining non-cancelable terms for the next five years and thereafter as of September 30, 1998 are as follows: Year ending, 1999 $ 244,000 2000 238,000 2001 231,000 2002 124,000 2003 54,000 Thereafter 141,000 ------------ $ 1,032,000 ============ 10. Long-term debt In fiscal year 1996, the Parent, on behalf of the Company, entered into a Credit Agreement with First Union National Bank of North Carolina ("First Union") and CIBC, Inc. The credit facility consisted of revolving and term loans. The maximum borrowings under the facility were $36,000,000 for the revolving loan, subject to certain reductions, and $8,000,000 for the term loan. However, as of April 30, 1998 the term loan and revolving balances were paid in their entirety as a part of a refinancing for the acquisition of the Georgia Stations in Columbus and Augusta (Note 12). Deferred financing costs of $1,038,000, net of accumulated amortization, related to the old agreement were charged to current year operations. The new Credit Agreement with First Union for $85,000,000 includes a $20,000,000 Senior Secured Revolving Credit Facility and $65,000,000 Senior Secured Term Loan Facility. At April 30, 1998, $81,000,000 was provided for payment in full of the former term loan and revolving credit line which totaled $32,028,000 as well as $46,000,000 for the acquisition of the Georgia Stations and $2,067,000 for agent and administrative fees which were capitalized as deferred loan cost and will be amortized over the respective loan period. The remainder of the proceeds was used for working capital. Long -Term Debt consists of the following: September 30, 1997 1998 Aggregate revolving loans $ 25,000,000 $ 15,000,000 Term loan 8,000,000 65,000,000 ------------ ------------ 33,000,000 80,000,000 Less: Current portion -- 975,000 ------------ ------------ $ 33,000,000 $ 79,025,000 ============ ============ 17
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ The Company can choose to have the interest computed under a "Alternate Base Rate" or a "LIBOR Rate" as defined in the Credit Agreement. The Alternate Base Rate is a variable rate of interest based on First Union's prime rate of interest, the Federal Funds Effective Rate and the ratio of funded debt. The Company as of September 30, 1998 had no outstanding debt subject to the Alternate Base Rate. The LIBOR Rate is a variable rate of interest based on the London Interbank Offered Rate, the Eurodollar Reserve Percentage, and the ratio of funded debt. The interest rates in effect at September 30, 1998 for the Revolving Loans were 5.69% plus 3%, or 8.69%. and 5.53% plus 3% or 8.53%. The outstanding Revolving Loans subject to the LIBOR Rate interest computation of 8.69% and 8.53% at September 30, 1998 were $12,000,000 and $3,000,000, respectively. The unused portion of the Revolving Loan subject to the terms of the related Credit Agreement at September 30, 1998 was $5,000,000. The Company is obligated to pay a commitment fee computed at the rate of 0.50% per annum on the average daily unused revolving committed amount. There was no amount outstanding under the commitment fee obligation at September 30, 1998. The Revolving Loan Facility is required to be paid in its entirety on March 31, 2003. Aggregate amounts of reductions and resulting maximum commitments under the Credit Agreement for the Revolving Loan Facility are as follows for the year ending September 30: Maximum revolving Amount of committed Year ending, reduction amount 1999 $ 4,000,000 $ 16,000,000 2000 4,000,000 12,000,000 2001 4,500,000 7,500,000 2002 5,000,000 2,500,000 2003 2,500,000 -- ------------ $ 20,000,000 18
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ Aggregate amounts of Principal payments to be made on the Term Loan Facility for the next five years and thereafter are as follows for year ending September 30: Amount of Year ending, payment 1999 $ 975,000 2000 650,000 2001 650,000 2002 650,000 2003 650,000 Thereafter 61,425,000 ------------ Total $ 65,000,000 ============ The Term Loan Facility consists of an aggregate principal amount of $65,000,000 payable in consecutive quarterly installments beginning December 31, 1998. The interest rate in effect at September 30, 1998 was the LIBOR Rate plus 3.5%, or 9.19%. Obligations under the Credit Agreement are secured by substantially all assets of the Company as defined in the Security and Pledge Agreement dated April 30, 1998. The Company is obligated by various loan covenants that include debt service, funded debt and capital expenditure limitations and interest and fixed charge covenant requirements. On April 30, 1998, the Company entered into an additional interest rate swap agreement with First Union to reduce its exposure to interest rate changes on its floating rate debt. The swap agreements effectively change its floating interest rate exposure to a 6.30% and 5.50% LIBOR fixed rate based upon notional amounts of $18,000,000 and $30,000,000, respectively. The swap agreements mature on November 1, 1999 and may be extended to May 1, 2001 at the option of First Union. For the year ended September 30, 1998, the Company paid $92,000 in additional interest expense, representing the differential of the fixed rate and the counterparty's floating rate. The Company is exposed to credit loss in the event of non-performance by the counterparty to the swap agreement, although the Company does not anticipate non-performance by the counterparty. As of September 30, 1998, the estimated fair market value of the swap agreements are $710,000 and $605,000, respectively in a payable position. 19
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ 11. Fair value of financial instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate that value. Cash and Cash Equivalents Cash and cash equivalents have maturities of three months or less. The carrying amounts approximate fair value. Accounts and Notes Receivable The carrying value of accounts receivable approximates the fair value due to the short-term nature of these instruments. Accounts Payable and Accrued Liabilities The carrying value of accounts payable and accrued expenses approximates the fair value due to the short-term nature of these instruments. Borrowings The carrying amount is a reasonable estimate of fair value as short-term borrowings are advanced at current interest rates and interest rates on long-term borrowings are based on floating interest rates. (See Note 10 regarding interest rate swap agreements.) 12. Acquisitions On June 27, 1996, the Parent, on behalf of the Company, purchased the assets of television stations KVAL-TV, Eugene, Oregon; KCBY-TV, Coos Bay, Oregon; KBCI-TV, Boise, Idaho; and a 50% interest in the stock of South West, which operates television station KPIC-TV, located in Roseburg, Oregon from Northwest Television, Inc. ("Northwest"). The acquisition was accounted for under the purchase method. The interest in South West has been recorded using the equity method. Also included in the purchase were three sign producing companies, which are located on each of the properties of the stations acquired. The total purchase price was $53,764,000. The goodwill associated with the acquisitions is amortized over 15 years in accordance with the Company's policies. On May 1, 1998, the Company purchased the assets of Augusta Family Broadcasting, Inc., and Columbus Family Broadcasting, Inc., which included stations in Augusta and Columbus, Georgia ("Georgia Stations"). The total cost of acquisition was approximately $48,000,000. The acquisition, which was financed through Senior Secured Notes and Revolving Credit Facilities with First Union, has been accounted for as a purchase under the provisions of Accounting 20
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ Principles Board Opinion No. 16, "Business Combinations". The goodwill and other intangibles associated with the acquisition will be amortized over 15 years on a straight-line basis. The results of operations of the acquired stations are included in the consolidated financial statements from the dates of acquisition. Unaudited pro forma results as if the acquired stations had been included in the financial results since the beginning of the year prior to their acquisition are as follows: For the year ended September 30, ------------------------------------------------- 1996 1997 1998 (unaudited) Net revenues $ 36,549,000 $ 45,739,000 $ 45,031,000 Net loss $ (2,408,000) $ (7,912,000) (7,486,000) 13. Commitments and contingencies Broadcast Rights The aggregate amount payable by the Company under contracts for programming not currently available for telecasting, and accordingly, not included in the broadcast contracts payable and the related broadcast contract rights in the accompanying consolidated balance sheet, totaled $2,673,000 at September 30, 1998. Leases At September 30, 1998, the Company was obligated under several non- cancelable leases on property and equipment. Aggregate future minimum rental payments under such leases at September 30, 1998 are as follows: Year ending, 1999 $ 84,000 2000 52,000 2001 41,000 2002 32,000 2003 27,000 Thereafter 133,000 ---------- $ 369,000 ========== Total rental expense was $46,000, $131,000 and $111,000 for the years ended September 30, 1996, 1997 and 1998, respectively. 21
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Retlaw Broadcasting, LLC Notes to Consolidated Financial Statements September 30, 1996, 1997 and 1998 ________________________________________________________________________________ Legal The Company is subject to various lawsuits, claims and assessments that are routine to the nature of the business. While the ultimate outcome of these matters is difficult to predict, management estimates that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows. 14. Subsequent events In November of 1998, the Parent entered into an agreement to sell the assets of Retlaw Broadcasting, LLC for a sum of $216,700,000, which includes $7,600,000 of working capital, to the Fisher Companies Inc. The acquisition was completed on July 1, 1999. 22
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION On July 1, 1999, Fisher Companies Inc., a Washington corporation ("FSCI"), and its subsidiary Fisher Broadcasting Inc. completed the acquisition of the broadcasting assets of Retlaw Enterprises, Inc., a California corporation, and eight wholly-owned limited liability companies ("Retlaw"). The broadcast assets acquired consist of eleven network-affiliated television stations in seven markets located in California, the Pacific Northwest, and Georgia. The acquired television stations will be owned and operated by Fisher Broadcasting Inc. Total consideration for the assets acquired was $216.7 million, which included $7.6 million of working capital. The amount of such purchase price was negotiated between the parties. The acquisition was financed from proceeds of Senior Credit Facilities with Bank of America National Trust and Savings Association as Administrative Agent, Credit Suisse First Boston as Syndication Agent, and other financial institutions party thereto. The unaudited pro forma combined statements of operations set forth below gives effect to the acquisition of Retlaw by FSCI as if it had occurred on January 1, 1998. The unaudited pro forma combined balance sheet set forth below gives effect to the acquisition of Retlaw by FSCI as if it had occurred on June 30, 1999. The historical financial information set forth below has been derived from the financial statements of FSCI and Retlaw, and should be read in conjunction with those financial statements and the notes to such financial statements. The financial statements and notes to the financial statements of Retlaw are included elsewhere herein. The financial statements and notes to the financial statements of FSCI are included in FSCI's Annual Report on Form 10-K filed on March 25, 1999. The acquisition has been accounted for using the purchase method of accounting. These pro forma financial statements have been prepared on the basis of assumptions described herein. The unaudited pro forma combined financial information set forth below combines FSCI's balance sheet as of June 30, 1999, and statements of operations for the year ended December 31, 1998 and for the six months ended June 30, 1999 with the balance sheet and statements of operations of Retlaw as of June 30, 1999 and for the fiscal year ended September 30, 1998 and the six months ended June 30, 1999. The unaudited pro forma combined statements of operations do not include Retlaw financial information for the period from October 1, 1998 through December 31, 1998. Retlaw's net revenues and net income for this period were $14.3 million and $669,000, respectively. These pro forma financial statements reflect certain adjustments, including adjustments to reflect the amortization of goodwill acquired, interest expense related to the acquisition indebtedness and the tax effect of including Retlaw's net loss in FSCI's results of operations. The pro forma adjustments are based on consideration exchanged and the estimated fair value of assets acquired and liabilities assumed. The actual adjustments may differ from the estimates made herein. The unaudited pro forma combined financial information set forth below does not purport to represent what the consolidated results of operations or financial condition of FSCI would actually have been if the Retlaw acquisition and related transactions had in fact occurred on such date or to project the future consolidated results of operations or financial condition of FSCI. 23
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 [Enlarge/Download Table] Fisher Retlaw Pro forma (Historical) (Historical) adjustments Total ------------ ------------ ----------- -------- (in thousands, except share and per share amounts) Sales and other revenue: Broadcasting $127,637 $ 41,740 $ 3,291 (8) $172,668 Milling 108,056 108,056 Real estate 12,265 12,265 Corporate and other, primarily dividends and other interest income 4,224 343 (7) 4,567 -------- -------- --------- -------- 252,182 41,740 3,634 297,556 -------- -------- --------- -------- Costs and expenses: Cost of products and services sold 157,526 19,776 1,290 (4) 179,840 1,248 (8) Selling expenses 20,203 4,754 632 (8) 25,589 General, administrative and other expenses 37,898 7,226 4,895 (3) 50,317 298 (8) Depreciation and amortization 8,006 (5,930)(3) - (3,560)(4) 1,484 (8) -------- -------- --------- -------- 215,627 39,762 357 255,746 -------- -------- --------- -------- Income from operations Broadcasting 33,937 1,978 2,934 38,849 Milling (1,440) (1,440) Real estate 4,117 4,117 Corporate and other (59) 343 284 -------- -------- --------- -------- 36,555 1,978 3,277 41,810 Interest expense 4,451 4,730 (6,187)(5) 21,635 17,184 (6) 1,457 (8) Other income 343 (343)(7) - -------- -------- --------- -------- Income (loss) before provision for income taxes and extraordinary item 32,104 (2,409) (9,520) 20,175 Provision for federal and state income taxes 11,047 (2,427)(9) 8,620 -------- -------- --------- -------- Income (loss) before extraordinary item $ 21,057 $ (2,409) $ (7,093) $ 11,555 ======== ======== ========= ======== Income before extraordinary item per share $ 2.47 $ 1.35 Income before extraordinary item per share assuming dilution $ 2.46 $ 1.35 Weighted average number of shares outstanding 8,541 8,541 Weighted average number of shares outstanding assuming dilution 8,575 8,575 24
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 [Enlarge/Download Table] Fisher Retlaw Pro forma (Historical) (Historical) adjustments Total ------------ ------------ ----------- -------- (in thousands, except share and per share amounts) Sales and other revenue: Broadcasting $ 61,027 $ 23,058 $ 84,085 Milling 53,546 53,546 Real estate 16,221 16,221 Corporate and other, primarily dividends and other interest income 2,285 $ 117 (7) 2,402 -------- -------- --------- -------- 133,079 23,058 117 156,254 -------- -------- --------- -------- Costs and expenses: Cost of products and services sold 78,724 11,412 645 (4) 90,781 Selling expenses 10,502 3,210 13,712 General, administrative and other expenses 22,270 3,848 2,448 (3) 28,566 Depreciation and amortization 5,236 (3,726)(3) - (1,510)(4) -------- -------- --------- -------- 111,496 23,706 (2,143) 133,059 -------- -------- --------- -------- Income from operations Broadcasting 12,671 (648) 2,143 14,166 Milling (1,576) (1,576) Real estate 11,698 11,698 Corporate and other (1,210) 117 (1,093) -------- -------- --------- -------- 21,583 (648) 2,260 23,195 Interest expense 2,256 3,430 (3,430)(5) 10,848 8,592 (6) Other income 117 (117)(7) - -------- -------- --------- -------- Income before provision for income taxes 19,327 (3,961) (3,019) 12,347 Provision for federal and state income taxes 6,497 (2,208)(9) 4,289 -------- -------- --------- -------- Net income (loss) $ 12,830 $ (3,961) $ (811) $ 8,058 ======== ======== ========= ======== Net income per share $ 1.50 $ 0.94 Net income per share assuming dilution $ 1.50 $ 0.94 Weighted average number of shares outstanding 8,546 8,546 Weighted average number of shares outstanding assuming dilution 8,574 8,574 25
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1999 [Enlarge/Download Table] Fisher Retlaw Pro forma (Historical) (Historical) Adjustments Total ------------ ------------ ----------- -------- (in thousands) Assets Current assets: Cash and short-term cash investments $ 224,208 $ 2,235 $ (2,235) (2) $ 7,532 (216,676) (1) Receivables 42,767 8,637 51,404 Inventories 14,444 14,444 Prepaid expenses 6,169 265 (664)(10) 5,770 Television and radio broadcast rights 3,489 7,864 (5,962) (2) 5,391 -------- -------- --------- -------- Total current assets 291,077 19,001 (225,537) 84,541 -------- -------- --------- -------- Marketable securities, at market value 137,034 137,034 -------- -------- --------- -------- Other assets Cash value of life insurance and retirement deposits 11,186 11,186 Television and radio broadcast rights 49 1,150 (6) (2) 1,193 Intangible assets, net of amortization 47,992 75,368 (75,368) (2) 243,789 195,797 (1) Investments in equity investees 15,500 2,027 703 (11) 18,230 Other 12,378 2,236 (2,236) (2) 8,557 (3,821)(10) -------- -------- --------- -------- 87,105 80,781 115,069 282,955 -------- -------- --------- -------- Property, plant and equipment, net 164,922 13,572 2,324 (11) 180,818 -------- -------- --------- -------- Total assets $ 680,138 $ 113,354 $(108,144) $685,348 -------- -------- --------- -------- Liabilities and Stockholders' Equity Current liabilities Notes payable $ 20,046 $ 650 $ (650) (2) $ 20,046 Trade accounts payable 13,960 740 14,700 Accrued payroll and related benefits 3,913 624 (283) (2) 4,254 Television and radio broadcast rights payable 1,856 8,303 (6,033) (2) 4,126 Income taxes payable 262 262 Dividends payable 2,223 2,223 Other current liabilities 2,822 756 (172) (2) 3,706 300 (12) -------- -------- --------- -------- Total current liabilities 45,082 11,073 (6,838) 49,317 -------- -------- --------- -------- Long-term debt, net of current maturities 281,719 78,700 (78,700) (2) 281,719 -------- -------- --------- -------- Television and radio broadcast rights payable, net of current portion 975 975 Other liabilities Accrued retirement benefits 13,020 1,376 (1,376) (2) 13,020 Deferred income taxes 60,534 60,534 Deposits and retainage payable 1,148 1,148 -------- -------- --------- -------- 74,702 1,376 (1,376) 74,702 -------- -------- --------- -------- Minority interests 33 33 -------- -------- --------- -------- Stockholders' equity Common stock 10,688 10,688 Capital in excess of par 2,439 2,439 Deferred compensation (753) (753) Accumulated other comprehensive income 88,326 88,326 Retained earnings 177,902 177,902 Group/member's equity 21,230 (21,230) (2) - -------- -------- --------- -------- Total stockholders' equity 278,602 21,230 (21,230) 278,602 -------- -------- --------- -------- Total liabilities and stockholders' equity $680,138 $113,354 $(108,144) $685,348 ======== ======== ========= ======== 26
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION Pro forma adjustments for the unaudited pro forma combined balance sheet as of June 30, 1999 and statements of operations for the year ended December 31, 1998 and the six months ended June 30, 1999 are as follows: 1. Reflects the payment of $216.7 million in consideration by FSCI at closing of the acquisition and other acquisition costs incurred in connection with the acquisition and the allocation of these amounts to tangible and intangible assets acquired and liabilities assumed. 2. Reflects elimination of assets not acquired, liabilities not assumed and Retlaw's group/member's equity. 3. Reflects the amortization of the goodwill resulting from the acquisition on a straight-line basis over 40 years, net of elimination of the historical amortization of goodwill acquired by Retlaw in prior acquisitions, and the reclassification of amortization to conform to FSCI's presentation of expenses. 4. Reflects the change in depreciation expense for the increase in the value of the property and equipment acquired, and the reclassification of depreciation to conform to FSCI's presentation of expenses. 5. Reflects the elimination of interest expense on Retlaw debt not assumed by FSCI. 6. Reflects the interest expense resulting from borrowings incurred to finance the acquisition. The interest rate on borrowings is assumed to be 7.32%, which is the rate in effect on the date of closing of the acquisition. The Company had entered into an interest rate swap agreement which fixes the interest rate on $90 million notional amount at 8.52%. Including the effect of the swap, the effective interest rate is 7.81%. If interest rates change by a magnitude of 1/8 of 1%, the annual effect on pro forma interest expense would be $163,000. 7. Reflects the reclassification of other income to conform to Fisher's presentation of revenues and other income. 8. Reflects the pro forma effect of Retlaw's acquisition of the assets of Augusta Family Broadcasting, Inc. on May 1, 1998 for $48,000,000 as if the acquisition had been made as of January 1, 1998. The pro forma statement of operations data for Augusta Family Broadcasting from January 1, 1998 through April 30, 1998 are derived as follows (in thousands): [Download Table] Pro Forma Historical Adjustments Pro Forma ---------- ------------ ---------- Net revenues 3,291 3,291 Costs and expenses Cost of products and services sold 1,248 1,248 Selling expenses 632 632 General and administrative expenses 298 298 Depreciation and amortization 146 (146)(a) 1,484 953 (b) 531 (C) ----- ------ ------ Income (loss) from operations 967 (1,338) (371) 27
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION [Download Table] Interest expense 25 (25)(d) 1,457 1,457 (e) Net income (loss) 942 (2,770) (1,828) ----- ------ ------ (a) Reflects elimination of historical depreciation and amortization of Augusta Family Broadcasting. (b) Reflects the amortization of goodwill resulting from the acquistion of Augusta Family Broadcasting on a straight-line basis over 15 years. (c) Reflects depreciation of the new basis of property and equipment acquired from August Family Broadcasting. (d) Reflects elimination of interest expense on Augusta Family Broadcasting debt not assumed by Retlaw. (e) Reflects the interest expense resulting from borrowings incurred to finance the acquisition of Augusta Family Broadcasting, at an assumed weighted average interest rate of 9.08%. 9. Reflects the tax effect of including Retlaw's net loss in FSCI's results of operations after taking into account the above pro forma adjustments. 10. Reflects acquisition costs incurred by FSCI as of June 30, 1999. These costs are reclassified from prepaid expenses and other assets to intangible assets. 11. Reflects step-up in basis to fair value. 12. Reflects $300,000 of estimated additional direct acquisition costs to be incurred. 28
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 14, 1999 FISHER COMPANIES INC. By: /s/ David D. Hillard ------------------------------------- David D. Hillard Senior Vice President, Chief Financial Officer and Secretary 29

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