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Executives

Joe Lovejoy - SVP and CFO

Colleen Brown - President and CEO

Analysts

Bishop Cheen - Wachovia

Barry Lucas - Gabelli & Company

Tom Kerr - Reed Conner & Birdwell, LLC

Robert Berzins - Post Advisory Group

Kevin Seagraves - Fort Washington

Fisher Communications Inc. (FSCI) Q3 2008 Earnings Call November 6, 2008 4:00 PM ET

Operator

Good day ladies and gentlemen, and welcome to the third quarter 2008 Fisher Communications conference call. My name is Chanel and I'll be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Joe Lovejoy, Senior Vice President and Chief Financial Officer. Please proceed

Joe Lovejoy

Thank you. Good afternoon everyone and thank you for joining us. Before we get started let me remind you that this call contains forward-looking statements relating to the development of the company's operations, products and services and anticipated future operating results. These statements are based on information available at the time they are made but are necessarily subject to a number of risks and uncertainties and that actual results may differ materially from expectations.

Factors that could cause actual results to differ materially from those expectations are described in our annual report on Form 10-K and quarterly reports on Form 10-Q as filed periodically with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward looking statements due to new information, events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events.

A webcast of this call is available on the investor relations portion of our web site and will be archived in audio form on the website for a limited period. With that, I will turn the call over to Colleen Brown, our President and Chief Executive Officer.

Colleen Brown

Thanks Joe. Good afternoon and thank you for joining us. And as you may have seen from the press release, our third quarter financial performance was impacted by the economic slowdown and the sharp decline in advertising during the period. This is unquestionably a tough time for our economy and for advertising in general.

Despite improving competitive performance for our stations and strong internet growth, the combination of the credit crisis, weakening consumer confidence and very soft economic conditions have cost many advertisers to curtail their spending. So in what would typically have been a growth year, we have been challenged to drive revenue creatively and rapidly and to appropriately address every cost component and spending decision in order to offset lower than expected revenues.

We had no Olympic programming on our stations and although we benefited from strong political spending, our markets did not see any Presidential candidate advertising in the quarter. The political revenue we did receive was not enough to offset the general reduction in advertising particularly from auto and retail. Given the momentous events in the financial markets that have transpired since our last call, we thought it would be appropriate for us to spend a few moments today talking about how those issues are affecting our performance and the steps we are taking to manage the business in this environment.

As always we will take your questions following our prepared remarks. Despite the progress, we have made in restructuring the company, Fisher is obviously not immune to the challenges that are impacting every single company in the industry. Although 2008 has been unprecedented political advertising year in some markets, total U.S. ad spending is now expected to decline in 2008. Just as past week experts have begun to revise forecast downward estimating a slight decline year-over-year in total advertising for 2008.

Across the industry automotive advertising have declined significantly. At Fisher we experienced a 41% decline in automotive ad revenues from the same period last year. In fact the declines in automotive was so precipitous in the quarter that for the first time in recent memory automotive was not our number one advertising category. Outside the political, professional services, which consist primarily of medical spending became the number one category.

The reduction in advertising spending was not limited to automotive, we like most of our competitors also experienced declines in just about every category including retail, financial, restaurant and packaged goods. We did see increases in entertainment and pharmaceuticals.

At Fisher we are highly cognizant of the environment in which we are trying to grow margins, cash flow and earnings and are clearly not pleased with the quarter’s result. But we also recognize that most of the factors that have impacted our short-term performance result from macroeconomic factors.

I am encouraged by the progress that our stations continue to make in this environment. We want to insure that when the economic tide turns Fisher emerges as a stronger, well positioned competitor. Since we cannot anticipate the duration of the downturn we are intensely committed to reducing overhead costs, making operational improvements and improving key financial metrics.

Our consistent operating strategy has helped us grow revenue, increased market share, diversify revenue streams and improve returns over the last few years. For example, we have achieved an increase in our share of market revenue in the majority of our markets this year, including significant share gains for our Bakersfield duopoly as well as our Seattle radio cluster. These gains are direct results to stronger ratings.

Our stations scored some key victories in the July ratings period. For example in six of our seven markets our station’s rankings are number one or number two in early evening news in the coveted adults (inaudible) demography.

In addition our two stations at Bakersfield became the top two stations in late news within the marketplace. Our strategy to expand Fisher’s demographic each and develop new revenue continues to deliver positive results as our Spanish-language television stations generated strong revenue growth at 22%. And broadcast cash flow at these stations increased at an even more impressive 30% in the quarter as we continue to fully develop these stations.

Similarly our online business experienced substantial revenue growth of approximately 22% during the quarter. Average monthly unique visitor grew 30% from third quarter of 2007. In January we began to take action for what we anticipated would be a difficult year. While Fisher wasn’t experiencing the same slowdown as some of our peers at that time, our concern was the slowdown would eventually impact us. This concern began to play out in the second quarter and was deeply felt in third quarter and we anticipate a very challenging 12 months ahead.

During the quarter, we continue to aggressively control our costs. So far this year, we have identified programming changes and other efficiencies that will result in annualized savings of approximately $3 million. Regarding the Plaza, we are pleased with the level of interest, but clearly the current credit market environment has impacted our review of options. For now we've decided to suspense specific direct marketing efforts for the Fisher Plaza. We are pleased with the improving financial performance of this asset and remain committed to maximizing its value until such time we may decide to reconsider our options.

Although, we face many challenges, our employees understand these issues and are committed to the success of Fisher. We have gained competitive strength and momentum in our marketplaces and through continued focus on our goals. We will be well positioned when better economic times return. And with that I will turn the call back over to Joe.

Joe Lovejoy

Thank you, Colleen. We issued our quarterly release of financial results this morning and we plan to file our Form-10Q on Monday the 10th. Those documents include an in-depth information regarding our financial results. So please refer to those sources for additional information. Consistent with our improved transparency initiative, we will be discussing, certain non-GAAP financial measures, such as broadcast, cash flow and EBITDA. Definitions and reconciliations of both terms can be found in our press release.

Consolidated revenue for the third quarter of 2008 grew 2.8% to $41.9 million from $40.8 million in the third quarter of 2007. Loss from operations was $1 million for the third quarter compared with income from operations of $1.7 million during the same period in 2007. We reported net income of $29.8 million or $3.41 a share for the third quarter, compared to a net loss of $533,000 or $0.06 per share in the third quarter of 2007. Excluding the after tax effects of the gain from the sale of Safeco stock of $31.8 million, we would have recorded a net loss of $2.1 million in the third quarter of 2008 or $0.24 per share.

Consolidated EBITDA totaled $3.1 million through the third quarter of 2008, a decrease of $2.7 million from the third quarter of 2007. The decrease was largely attributable to weakness in key advertising categories in our television segment as Colleen alluded to earlier as well as lower revenue from the broadcast of the Mariners in our radio segment.

Within the TV segment, increased internet expenses also attributed to the decline in EBITDA. The decline was also attributable to be approximately $300,000 in severance expenses recorded in the quarter. We have made certain programming and operational decisions that will result in an 8% reduction in FTEs by the end of the year. We expect going forward, annualized net pre-tax savings of approximately $3 million from those decisions as Colleen mentioned.

Our trailing fourth quarter operating cash flow as defined by our debt agreements was $27.7 million, excluding the effect of our discontinued operations. The details of this calculation can be found on our website. We ended the quarter with current assets of $120 million including cash of $19.3 million and short-term investments of $59.2 million. As of the end of the third quarter 2008, we had our entire $20 million credit facility available to us.

And next I'll review our third quarter performance by operating segment. Our television segment reported revenues of $27.4 million in the third quarter, an increase of 7.3% over the $25.5 million generated in the third quarter of 2007.

TV BCF was $5.6 million compared with $6.2 million in the same period of 2007, a decrease of 9.7%. The company reported TV BCF margin of 21.1% in the third quarter of '08, a decrease from 24.7% in the third quarter 2007. During the third quarter, we recorded $5.4 million of political revenue, compared to $1.2 million during the same period last year.

Fisher also earned $750,000 in retransmission consent revenue in the third quarter which represented an 11.3% increase over the third quarter of 2007. As discussed on prior calls, our current retransmission revenues primarily attributable to our satellite retransmission agreement, several of our major cable retransmission agreements expired at the end of the year and as we renegotiate those contracts, we expect that the source of revenue will become more significant in future years.

On the same-station television basis, Fisher's 2008 third quarter revenue was $25.3 million compared with $25.5 million in the third quarter of 2007, a decrease of 0.9%, same-station TV BCF was $5.3 million, compared with $6.2 million in the same period of 2007, a decrease of 14%. Expenses at our English-language stations were virtually flat on the same-station basis in the third quarter of 2007.

Turning to radio, and our radio segment revenue decreased 9.9% from the third quarter of 2007. For the third quarter of 2008, our radio segment reported revenues of $11.3 million. Broadcast cash flow was negative $275,000 compared with a positive BCF of $1.2 million in the same period of 2007. The decrease was largely attributable to a 21% decline in Mariners related revenue in the third quarter of 2008, our final quarter broadcasting Mariners baseball games.

Despite an 8% decline in the overall Seattle radio market in the third quarter, our radio stations increased market share in the quarter and have done so now for five quarters in a row. Without the impact of Mariners contract we generated a radio BCF margin of 31.9% in the third quarter of 2008 compared to 34.8% in the third quarter of 2007.

For Plaza for the third quarter of 2008 our Plaza segment reported revenues of $3.3 million, a 17% increase over the $2.8 million generated in the third quarter of 2007. EBITDA was $2.2 million in the third quarter of 2008, an increase from the $2 million reported in the third quarter of 2007. Occupancy was 97% at the end of the third quarter, no change from the end of the second quarter.

And now I will turn the call back to Colleen.

Colleen Brown

Thanks, Joe. As I shared with you last quarter we are committed to improving our level of transparency and have increased the amount and relevancy of the information we are providing our investors. That commitment will be there, not only in good quarters but in the challenging quarters as well.

In summary while our third quarter results were impacted by the difficult economic environment, the company continues to make progress towards improving our competitive position, growing market share, growing our key audiences, reducing costs and diversifying sources of revenue. We believe that these efforts will not only help us offset some of the near term challenges posed by the short-term declines in ad spending. But more importantly these initiatives will make us stronger -- stronger positioning Fisher to emerge from the down cycle as a leaner, more competitive company.

With that we will open the call up for your questions. Operator.

Question-and-Answer Session

Operator

(Operator Instruction). And we will pause for a moment to compile a list of questions. And your first question comes from the line of Bishop Cheen of Wachovia.

Bishop Cheen - Wachovia

Hi. Everyone. How are you?

Colleen Brown

Hi, Bishop.

Bishop Cheen - Wachovia

Thanks for taking the question. Okay, so let me go right to the balance sheet here. You guys, you threw out so many numbers, my head is spinning and I am sure I am not going to be able to get my head around it. But didn't I see like a huge chunk of cash still on here at this point? At this point, no that was assets. Tell me how much cash do you have at this point?

Joe Lovejoy

$19 million and $59 million in short-term investments, commercial paper.

Bishop Cheen - Wachovia

And 59 even in commercial paper. We have done the dividend and its 19 in cash.

Joe Lovejoy

19.2 rounded.

Bishop Cheen - Wachovia

Okay.

Joe Lovejoy

And 59.2 in the short-term investment.

Bishop Cheen - Wachovia

Okay. We've taken care of the dividend. We sold all our Safeco shares. You've taken Plaza off the block because of who can blame in the conditions for brick and water and every other kind of asset right now. And you've got plenty of cash, to work your way through this dislocation. You are going to cut costs. But as we go out 10 months the next capital event, that is scheduled and I'm not going into what ever your current dissident shareholders might be demanding. The next capital event is scheduled is the call of your bonds, which is totally your options. Can you just give me some color on what your thinking is because I know you would love to have more flexibility in your balance sheet, then that bonds allow in terms of flexibility. So whatever you can tell us I think would be helpful.

Joe Lovejoy

Well yeah, flexibility is a good thing. As you know, I mean the coupon rate right now is pretty down attractive in today's market. Who knows what 10 months from now will bring, but yes, no decision has been made at this point, in terms of what we will do in terms of the first call date. But right now, we feel pretty good despite some of the limitation that the indenture has in it. We are pretty comfortable having that piece of capital in our structure.

Bishop Cheen - Wachovia

Okay. Yes. I mean, it makes sense to me when you see what's going on. And then, your take on how deeply banged up the commercial real estate market is. That -- that's quite an attractive building you have in a great location. And normally, we would never be having this discussion. But clearly you're not going to sell it into an extremely bid -- low bid market or a no bid market. What's your stance out there on how tough it is for commercial real estate?

Joe Lovejoy

I think it is tough for anybody that is trying to raise capital to acquire any asset these days. And that's kind of whether the -- like you mentioned, I mean, this is not the best environment to be selling any asset that requires. And even if a buyer doesn't require financing, the market place is such that most buyers require financing and the pricing is based on that. For most of the buyers. So, it is an attractive asset which we have some opportunities to maximize value further. And what we consider when markets improve.

Bishop Cheen - Wachovia

Okay and then to the operating side. Can you give me a sense, i.e. two questions, (a), you have identified 3 million of annualized operating cuts. How much of that is headcount, how much of that is other kinds of expenses? And (b), can you give us a sense on where you are on the development of your re-transmission of revenues segment, which is very high margin. And your new media and its not retrans or internet or call it what you want, whatever euphemism you guys call the kind of, not the traditional revenue streams?

Colleen Brown

Sure Bishop, first of all on the 3 million of annualized its no surprise that the broadcast industry is about 70% personnel costs. So the majority of that is personnel driven and head reduction driven. Obviously going forward, we'll realize the full benefit of that since most of it came in the back half of the year as well as offset by severance costs. I do feel that we are able to keep severance costs to a minimum by working our way through the process rather than in a drop decision.

On the retrans itself we are in negotiations. I don’t think it’s appropriate to drop those negotiations in the press or even on a conference call but we are actively in negotiation and so far they are going well. But that does not mean necessarily we will get everything that we are asking for. We have asked for cash and it’s a great deal of money for the company if we are successful. So we will continue to be very, very bullish on pursuing this.

As far as new media goes, our costs ramped up because our sales are ramping up and we've seen great growth in internet revenue even despite the softness in advertising in general. However, again with this kind of effort it’s pretty much based on employees and salaries and its highly variable expense against revenue. So I feel very confident that as revenue grows we can add appropriately AEs or sales folks or we can reduce sales folks as the revenue constricts itself if it follows the same way that we've seen advertising in the television or radio factor goes.

So I am very, very encouraged about our new media sector. We have grown tremendously and I anticipate that to continue. We especially saw the benefit during the elections, what a robust website can provide. And I think that that really is absolutely one of the new revenue streams that is going to be critical for the future of this company particularly.

Bishop Cheen - Wachovia

From a cash flow contributing, a few points at how many years or how long do you think before your new media segment will be positive cash flow?

Colleen Brown

We have been running pretty close to break even although obviously with the softness in general advertising, we don’t anticipate that to continue. We are very aware of not overspending any investment. So we are extremely conscious of cutting our costs as much as we can, where we can without hurting the momentum that we have gained. We have long said that we would be profitable next year. I would like it to be sooner but I think that is realistic. We are working towards that end, but of course with the softness in the advertising we are reassessing right now.

Bishop Cheen - Wachovia

Okay, and last question, I promise to set up and go. Give us a sense if you could if you have this handy, you duplicated and unduplicated TV homes in your footprint, would that clearly be on the table in any negotiation on retrans?

Colleen Brown

Are you talking about duplicate between satellites and cable?

Bishop Cheen - Wachovia

Yeah. Or in your duopoly, in other words if one of your markets has approximately [2,000] homes but you have two facilities in there that’s a million homes.

Colleen Brown

Correct.

Bishop Cheen - Wachovia

Yes.

Colleen Brown

Yes.

Bishop Cheen - Wachovia

So, I am just kind of looking for a how many homes you reach actual homes, not FCC attribution and then how many duplicated homes?

Colleen Brown

And that's a little bit different question then I took it to be, Joe has that answer.

Joe Lovejoy

I may not have a specific answer. But looking at a different way and this might get you the same information for you. Our largest MSO is Comcast which is in primarily three of markets, Seattle, Portland and Eugene and they are close to 3.4 million subs.

Colleen Brown

Unduplicated.

Joe Lovejoy

Unduplicated, that's their subscribers.

Bishop Cheen - Wachovia

Right and so just trying to get a feel for --

Colleen Brown

Bishop, if you are trying to estimate revenue?

Bishop Cheen - Wachovia

Yeah.

Colleen Brown

Yes. What we have said in the past, if you use a modeling of approximately just for example a dime per sub, of what our potential is, it's in the 5 million range.

Bishop Cheen - Wachovia

Okay. That's very helpful. Thank you.

Colleen Brown

You are welcome.

Joe Lovejoy

You are welcome.

Operator

Your next question comes from the line of Barry Lucas of Gabelli & Company.

Barry Lucas - Gabelli & Company

Good afternoon, Colleen, Joe.

Colleen Brown

Hi Barry.

Barry Lucas - Gabelli & Company

A quick mass question if you don't mind. If I pull out political and we don't have that on a same station basis. But it looks like the core business was down 20% in the quarter is that what I am really getting here?

Colleen Brown

I got that right here. Hold on we have got that, I'm trying to find it here. Quite here it is 6.5% in local and core business national is 20% down.

Barry Lucas - Gabelli & Company

Okay. And what are you seeing in terms of variance in as we are through October into November in the fourth quarter?

Colleen Brown

Yes Barry. We don't give forward guidance but I can tell you that since the political is now clearly behind us. That we did see the late breaking in political -- sort of it started late in third quarter. So -- and it hit really hard and we saw that continue through fourth quarter. So we have over achieved our expectations for political. And as far as the rest is, the two months I think is a little bit early but we have seen bookings pick up and we are encouraged by that.

I do see a stronger number of cancellations. I think it kind of falls into two camps. One camp is they book early, wanting to reserve their space and they're optimistic and then they have to cancel. And then we see those folks holding back and placing later as we have a combination of things going on for fourth quarter. I still think that it is going to be a rough fourth quarter.

Barry Lucas - Gabelli & Company

Right. Okay. Thanks very much

Colleen Brown

You're welcome Barry.

Operator

Your next question comes from the line of Tom Kerr of Reed Conner & Birdwell, LLC.

Tom Kerr - Reed Conner & Birdwell, LLC

Hi there.

Colleen Brown

Hi, Tom.

Tom Kerr - Reed Conner & Birdwell, LLC

Two questions, one on the decline in the auto business. Can you differentiate between dealers and manufacturers and which one's the big issue? And number two, on the Plaza, can you tell us if you received any bids or was there a situation where you received bids and didn't like the price you were getting.

Colleen Brown

No, we had a very robust process, a lot of activity and a lot of interest in many what I call very good bids. But in the third round, second round or the third round?

Joe Lovejoy

Second.

Colleen Brown

Second round they announced to verify financing. All of them started slow walking the financing. It became evident to us that it was going to have to be a discount if there was even going to be the ability to do anything and ultimately our Board decided that this is not the environment to pursue this.

Tom Kerr - Reed Conner & Birdwell, LLC

Okay. And then on the auto business?

Colleen Brown

Yeah I can speak from that the dealer business has been better than the manufacturing business. To give you a little context in first quarter for Fisher we were the opposite of the market. In general the industry numbers were down five and in general we were up, we were up five. In second quarter, we are about even with the market. In the third quarter I'm anticipating, I don't think I'm going to wrong but I'm anticipating we are little worse than the market and then I think it just caught up to the northwest a little bit later than the rest of the country. But the dealer market has been hit but not hit as hard as the manufacturing market.

Tom Kerr - Reed Conner & Birdwell, LLC

Okay. Is that pretty much across all your regions?

Colleen Brown

Yeah. Pretty solidly. California has been worse all around.

Tom Kerr - Reed Conner & Birdwell, LLC

Great. Okay. That's it, thank you.

Colleen Brown

Thank you.

Operator

Your next question comes from the line of Robert Berzins of Post Advisory.

Robert Berzins - Post Advisory Group

Good afternoon. As an investor if I was looking at this company a year ago I would have thought of it as being the holder of especially three asset groups, Fisher Plaza, Safeco Stock as well as the Broadcasting business. Now in part because of your voluntary sales of Safeco and the ultimate sale of Safeco as a company you are down two businesses, Fisher Plaza and Broadcasting. You've been more diversified than most people have been in the broadcasting space. Now admittedly your Fisher Plaza sale is on hold for the time being, but at some point in time I'm sure you'll sell it. Then you'll be looking pretty much like a broadcasting pure play.

Where will you be? Are you thinking about possibly eliminating some secular risk by trying to establish a portfolio of assets that again provides diversity over two or three areas or should we expect you to become more of a concentrated broadcasting player? In part I am asking what your thoughts are with respect to the use of the almost $80 million in cash that you have got.

Colleen Brown

Just to provide you a little context, the Safeco really was not voluntary.

Robert Berzins - Post Advisory Group

Well you sold, you sold shares in advance of that announcement, though.

Colleen Brown

Right. Mainly because we didn’t want to pay arbitrage and we saw the market softening and that worried us. Not that we had any inside information that the deal wouldn’t close but we didn’t want to be left holding the bag if you will on a deal that had been broken. So we long ago said, probably now four years ago, although I wasn’t here then, that this company wanted to emphasize and move toward a pure play and that is what we have been doing. The fact that Safeco sold was something that complimented our strategy. As far as the Plaza goes, obviously it is the home to a big number of our assets. And so whatever we do here has to make strategic sense as well as economic sense for the company.

Bottom-line, in diversifying, in your question about diversification I think it makes sense for us to -- if we are looking at increasing shareholder value over the long-term to look at those opportunities that build half of what we currently do. If there is something that makes sense that can build shareholder value we will consider it. And obviously in a diversification sense, that is quite attractive, and I do believe that you are seeing multi-platform media becoming very successful and finding ways to capitalize on that for our shareholders is very attractive. But we are not going to do it if it's not extremely attractive, especially in this environment.

Robert Berzins - Post Advisory Group

Okay. So the bottom line is you think of media seeing your core business and you will probably be expanding in and around the media industries rather than trying to achieve diversity, outside of the media industries, sort of thing.

Colleen Brown

Yes, that's correct.

Robert Berzins - Post Advisory Group

And you currently feel comfortable with respect to the risk, DVR, internet competition you feel comfortable with that.

Colleen Brown

Yes. Obviously we are in the media business and there is great deal of research right now that we can, dive down to discuss further and I'd be happy to discuss offline with you, specifically. But the various technology applications that are available don't always hurt and sometimes help what we are all about. So I do believe that, how we expand has to be built off the core brands and the very strong brands that exist in our current markets and that is our best opportunity to drive value to the shareholder.

Robert Berzins - Post Advisory Group

Okay. And last question really just a follow-up do you have process you can share with respect to the use of the 80 million?

Colleen Brown

Yes. I'm sorry, you did ask that and I did not follow-up. Joe I don't know if you want to add on to what I am going to say. But obviously, I feel very strongly about having a healthy balance sheet, and we are going to be extremely thoughtful and strategic about how we use that. There are number of ways that it can be used. We continue to evaluate that, and it is in the regular course of Board discussion at each Board meeting and we continue to discuss and we will discuss in December.

Robert Berzins - Post Advisory Group

Have you considered open market purchases of your bonds?

Joe Lovejoy

We have considered that, and we continue to consider it. We have some restrictions in terms of our credit agreement. But as Colleen said, I mean in this environment, we really need to be cognizant of cash is king and have a strong balance sheet. Maybe more so than ordinary times. You also look at the rate of return, if you looked at -- if you do the analysis, based on the current pricing of the bonds, it is pretty attractive and you have to weigh that into the analysis. But right now, we're considering it. Let's put it that way. We do have some constraints as it relates to our agreements.

Robert Berzins - Post Advisory Group

Okay. As in absolute prohibition or is it subject to some kind of cash, out of stock by virtue of having sold off so much stake or stock you had pretty open back and were we deploying that in other assets like bonds?

Joe Lovejoy

Not with the revolver. No credit agreement.

Robert Berzins - Post Advisory Group

Okay. Thank you very much.

Colleen Brown

Thank you.

Operator

Your next question comes from the line of Kevin Seagraves of Fort Washington.

Kevin Seagraves - Fort Washington

Hello.

Colleen Brown

Hello.

Kevin Seagraves - Fort Washington

The CP investments that you guys have. Do you guys have full access to that? Do you end up in something with that lost liquidity by any chance?

Joe Lovejoy

Well, I think generally speaking most CPs if not all CP lost liquidity. They're highly -- they are highest rated A1P1. So we are very confident. We keep in touch with the bank on a continual basis and the market valuation is very close to the book value. So, we don't see any issues there.

Kevin Seagraves - Fort Washington

Okay. And then, in terms of Fisher Plaza, when you look at that in the 2009 -- not in terms of selling it, but in terms of the business as it stands today, in terms of leasing and everything else that you have there, do you see anything on the horizon there in terms of either leases coming up or other revenue? I don't fully understand all the revenue sources there. It's just in the environment that we're there now. Do you feel pretty comfortable with that business? And the EBITDA do you generate from that?

Joe Lovejoy

We do. I mean we do see some opportunity as leases roll over as they always do, to renew at attractive rates. Remember this is not as a pretty unique property in terms of its technology and its type of tenancy mix, which is skewed to the data center type of environment. So its not that you can't just compare it to office market so to speak. So there is some installation there. We do see -- on the expense side we see some opportunity to make more efficient the management of the property. So I mean we feel pretty comfortable there are opportunities to improve EBITDA and evaluation.

Colleen Brown

I just want to add on to that we have a great variety of tenants and I think that also insulates us from one giant tenant leaving because we don't have that kind of mix. We have a lot of medium to small sized tenants with solid leases and we do track that by the way.

Kevin Seagraves - Fort Washington

Okay. And then if you guys seen any change in bad debt or either there or in broadcasting side of the business?

Joe Lovejoy

No, and I keep my obviously my finger on the pulse of that and with our collections department. And in terms of DSO we haven't seen any measurable change in either direction actually compared to last year in history in general. So we haven't seen any meaningful change there.

Kevin Seagraves - Fort Washington

Okay. And then with the increase in cost over last year just in total and make sure I had them all, you talked about the internet spending, you talked about Spanish-speaking stations and I assume some of the acquisition was in that. Does that pretty much cover the bulk of the increases year-over-year, any cash expenses, operating expense?

Joe Lovejoy

Yes. I mean there is some with the radio segment as well with increased Mariners in particular with the contractual. Again 2008 being the last year but there was the stepped increase each year of the contract. And then we talked about a little bit of ’07 too.

Kevin Seagraves - Fort Washington

Okay. And then as we go forward, obviously you got the cost savings initiatives. You guys have managed change, is there any other pieces that we should think about, in terms of -- just like the last three quarters from, not from an SG&A perspective. But the other costs have been relatively stable [except] to cost savings. Is there anything we should expect either up or down to move the needle there much?

Joe Lovejoy

I think you pretty much got it on the expense side. Again on the revenue side the retransmission opportunity is a big focus of ours right now.

Kevin Seagraves - Fort Washington

Okay, and what would it end up in net outlay on the dividend. Was that like 30-31?

Joe Lovejoy

30-31. Round it.

Kevin Seagraves - Fort Washington

Okay, okay, that’s all I have. Thanks a lot.

Colleen Brown

Good enough.

Operator

Your next question from the line of Bishop Cheen of Wachovia.

Bishop Cheen - Wachovia

Hi. I am sorry for the follow-up. Just three small questions. One, I know you do have I can’t recite them, typical restrictions in your $20 million credit facility, restricted payments and what you can use to buy back on bonds? Does that also apply to stock?

Joe Lovejoy

I will have to check on the credit agreement. Bishop.

Bishop Cheen - Wachovia

Okay.

Joe Lovejoy

There is restricted payments with the indenture and as you know we have a dividend amount that was pretty close to that limit. So, that’s kind of a governing agreement for our [sakes] and the credit agreement as much as you know, more easy to amend, than an indenture.

Bishop Cheen - Wachovia

Yes. And that’s why I was going to follow-up with you because the dividends now kind of go away which is the biggest difference in the operating cash flow metric versus the EBITDA metric.

Joe Lovejoy

That's correct.

Bishop Cheen - Wachovia

So that going forward, they are going look almost identical.

Joe Lovejoy

[That's true.]

Bishop Cheen - Wachovia

And I was just wondering, if since the dividends go away. If there was any linkage in any other kind of restricted payment going away in terms of buying back stock?

Joe Lovejoy

No.

Bishop Cheen - Wachovia

Okay, two. The long-term debt is 150, which is roughly the face of the bond? Is there total debt? Do you have some drawn on your credit facility now? I think you said you've nothing drawn.

Joe Lovejoy

That's correct, nothing.

Bishop Cheen - Wachovia

Okay, so your total debt is 150.

Joe Lovejoy

Correct.

Bishop Cheen - Wachovia

And three is there any kind of -- forgive me, if anyone asked this. On the commercial paper, with what 59 million in there. Is there any kind of restriction or lock-up meaningful on that commercial paper?

Joe Lovejoy

We lock-up. I don't think so.

Bishop Cheen - Wachovia

If you can't actually access that.

Joe Lovejoy

From an accounting perspective either, I mean, we intend to hold this till maturity. They all mature between now and early April of '09.

Bishop Cheen - Wachovia

Okay. So --

Joe Lovejoy

We have got them short-term on purpose.

Bishop Cheen - Wachovia

It's like a short-term CD. You are not going touch, it's not liquid. That 59 is not liquidity at your finger tips until after April.

Joe Lovejoy

Well, it depends on how you look at it. We don't intend or we don't plan on needing it until April or even after that for that matter. But if we needed it, then we could access it.

Bishop Cheen - Wachovia

You could access it. Okay. Just not your plan to do so.

Joe Lovejoy

No. It's not our plan at all.

Bishop Cheen - Wachovia

Okay, so we should think about you as a company with, seven I think Bob said it close to $80 million of cash in the kitty.

Colleen Brown

Correct.

Bishop Cheen - Wachovia

Thank you. Well that's quite an uptown dilemma.

Colleen Brown

Thanks Bishop.

Bishop Cheen - Wachovia

Thank you.

Colleen Brown

Okay. Thank you.

Operator

That is it for the Q&A session. I would now like to turn the call back over to Ms. Colleen Brown.

Colleen Brown

Well, thank you everybody. These are interesting times and we will continue to persevere and look for ways to improve the operations of the company. We appreciate your time today.

Operator

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.

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Source: Fisher Communications Inc. Q3 2008 Earnings Call Transcript
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