D S Fisher Communications, Inc. > $ sa in w ga lo d lo w Th th fa > re co Fisher Annual a st w ic do Report 02 try p an p le an na pe sp N W I a co CORP: DOCUMENT: YEAR: sp of Fisher fo Communications, Annual Report / 10-K 2002 b Inc. an ac DOC Fi Dear Shareholders Hopes for a profitable 2002 did not the cornerstones of our restructuring program: > materialize. Consolidated net loss was concentrating on our core businesses; increasing $.23 a share in 2002. This includes gains on the revenue base; streamlining operations and sale of real estate and net gain on derivative controlling expenses; and selling selected assets to instruments. If, for purposes of comparison pay down debt. with 2001 results, the real estate and derivative gains, as well as a charge for expensing deferred Concentrating on Core Businesses In Fisher’s loan costs in connection with refinancing of 1999 annual report I stated that “Fisher is focusing debt, were excluded from 2002 results, the net its efforts and resources on becoming a fully loss per share would have been $1.35, compared integrated communications and media company.” with a $.96 per share loss reported in 2001. So began a series of actions involving the acquisition of 11 television stations in 1999, sale of Fisher’s The broad context for Fisher’s performance and legacy flour milling businesses in 2001, construction that of many other Northwest companies is a of Fisher Plaza, and the sale of commercial real faltering national economy and an even weaker estate and other selected assets in 2002 and 2003. regional economy. Nationally, consumer confidence continued to wane, and in late February 2003 hit During this same period, we began restructuring the a nine-year low due to lack of job creation, a wary corporation to increase efficiency and effectiveness. stock market, fear of terrorism, and a possible war The name change from Fisher Companies Inc. to with Iraq. These pressures are reflected in signif- Fisher Communications, Inc. signaled the move from icantly reduced advertising and one of the worst a holding company structure to a single corporate downturns in the history of the broadcasting indus- entity with operating subsidiaries. Eliminated in this try. Here in the Puget Sound region, employment is process were the boards of directors of the three predicted to move sideways for the rest of the year, operating companies: Fisher Properties, Fisher Mills, and regional employment is not expected to reach its and Fisher Broadcasting. At the same time, as we pre-recession level until 2005. State unemployment look to eliminate unnecessary processes and levels at the end of January 2003 showed Oregon reduce overhead, we also must focus on our busi- and Washington ranking second and third in the ness operations where sustained profitability can nation. Given that Fisher Communications’ financial be created. performance is largely dependent on advertising spending driven by the national and Pacific Increasing the Revenue Base Revenue is the Northwest economies, our recovery will take time. lifeblood of all commercial enterprises, but especially critical to those with high fixed costs. With these external conditions as a backdrop, Unlike businesses that are able to reduce pro- I am convinced the best course of action is to duction when confronted with declining sales, continue implementing our restructuring plan with our broadcasting services must be maintained speed and determination. Following is an overview continuously, without curtailment, regardless of the of the company’s changing focus over the last level of our advertising revenue. It takes a lot of four years, the progress to date on managing the people, capital, and equipment to run broadcasting business drivers that we believe we can influence, stations effectively. Station management is working and a look forward to what we will attempt to hard to recruit and train salespeople who under- accomplish in 2003. In particular, we will address stand that commitment, and who can thrive in our DOCUMENT: SECTION: PAGE: Fisher ar02 Letter to shareholders I. Letter to Letter to Shareholders Shareholde (cont.) (cont.) competitive markets. In addition, for stations to and support our broadcasting businesses, or spend Center and F be financially successful, they must be seen as roughly twice that amount and create expanded The property valued members of their local communities. Fisher digital facilities and a flexible digital hub, plus seek shut down b is committed to producing quality local program- to produce a return on the total investment by media servic ming that includes talent and features not available offering office and technology space to companies Entertainme on competing stations, as well as developing formats with similar technological requirements. sold, absorb that help create strong and enduring market to-day mana positions. With the second phase complete except for tenant from Media improvements, we believe that both these object- So, in April 2002, Fisher Communications decided ives can be met. KOMO TV and our three Seattle Selling Sele to enter into a six-year agreement with the Baseball radio stations now reside in the East Building and we announc Club of Seattle for play-by-play broadcasts of work closely together. The 200,000-square-foot mercial real Seattle Mariners baseball on KOMO AM. An East Building is now near full occupancy by Fisher it became ev important aspect of this decision was that Fisher’s operations and third-party tenants. We are currently assets were local and regional radio and television interests in discussion with numerous prospects to occupy priate, we be parallel the fan base of Seattle Mariners baseball. much of the 100,000 square feet of available properties. T To gain the most from broadcasting Mariners space in the recently completed West Building. group of pro baseball, we simultaneously conducted research to Fisher Indus determine the optimal format for creating additional Streamlining Operations and Controlling Center in Ke value in terms of rating, share, and cume from this Expenses Making operations more efficient and Technology exclusive programming. An all-news radio format controlling costs are two sides of the same coin. these sales emerged as the clear winner, which we believe is Rest assured that the company is constantly our original e capable of producing substantial additional revenue seeking to reduce all expenses. But it is in the modi- Fisher Busin over the coming years through audience “recycling” fication of structure that we expect to see the most and West La into adjacent time periods on KOMO AM and to immediate and long-term benefits to the company. complementary assets such as our other Seattle In January 20 stations, KOMO TV, KVI AM, and KPLZ FM. The Since broadcasting is our central business, it’s agreement to goal of these program and format changes is to vitally important that the supporting processes television sta propel KOMO AM from a ranking of 18th among all and management are as efficient as possible. in Columbus radio stations in the Seattle market to a leadership Accordingly, we are in the process of initiating an Fisher’s broa position among the market’s top ten, where it upstream merger of Fisher Broadcasting Company Washington would join the company of its sister AM station, KVI. into Fisher Communications. This consolidation will entail the transfer of some personnel and functions Some of the statem passages containing Fisher Plaza represents another major investment to corporate, and others into the various operating also include any oth Report include, with in our broadcasting operations and an important units. In addition, Fisher’s corporate functions will news format of KOM other company-owne source of additional revenue for the company. move from downtown Seattle to Fisher Plaza. of initiating an upstr return on total inves Several years ago, Fisher was faced with the need statement that Fishe Fisher’s broadcastin for updated broadcasting facilities in Seattle to We expect to discontinue operations of Fisher’s in our forward-lookin due to the weak ec accommodate digital broadcasting requirements. other two subsidiaries — Fisher Properties and attract the advertisin determine there are The options were to spend approximately $60 Fisher Media Services — and to sell the remaining the Company may b property in Seattle, t million on a new studio building that would upgrade two commercial properties, West Lake Union we may be unable t obtain FCC approva located in Washingt reports filed with the DOCUMENT: SECTION: PAGE: DOCUMENT: Fisher ar02 Letter to shareholders II. Fisher ar0 Letter to F Shareholders w (cont.) Center and Fisher Business Center, during 2003. February 2003, we sold our common stock hold- O The property management operation will be sold or ings of the Weyerhaeuser Company and Terabeam W shut down by the end of the year. The remaining Corporation. P media services businesses, including Fisher W Entertainment, Fisher Pathways, and Civia, will be With these transactions and additional sales of E sold, absorbed, or shut down. Ownership and day- selected assets, our goal is to reduce Fisher’s long- C to-day management of Fisher Plaza will be moved term debt by approximately one half during 2003. D from Media Services to Fisher Communications. As of this writing, we have reduced borrowings by S C more than $20 million since year-end 2002. A Selling Selected Assets In November of 2001, S we announced the intended sale of Fisher’s com- I trust that this discussion of the challenges under- S mercial real estate properties. When, early in 2002, gone and the outline of changes implemented in C it became evident that offers for the portfolio of 2002 and early 2003 have provided some detail M assets were below the value we believed appro- and insight into the restructuring plan announced S priate, we began considering offers for individual earlier, on February 12, 2003.