Hollinger International Announces 2006 First Quarter Financial Results

NEW YORK, May 10  /PRNewswire-FirstCall/ -- Hollinger International Inc. (NYSE:HLR) today reported results for the first quarter, ended March 31, 2006.

The Company reported a total operating loss of $24.3 million compared with an operating loss of $15.8 million for the 2005 first quarter. The Company reported a net loss per share of $0.13 and a loss per share from continuing operations of $0.29 compared with a loss per share of $0.20 and a loss per share from continuing operations of $0.23 in the year-ago first quarter. Net earnings for the quarter include a $14.7 million gain from the sale of the Company's remaining Canadian operations.

The change in consolidated operating income was driven by a $15.0 million decline in operating income at the Company's Sun-Times New Group operating segment ("STNG"). This includes $9.3 million of separation costs recognized in the first quarter of 2006, primarily related to the previously announced 10% reduction of headcount associated with the reorganization of STNG.  The remainder of the decline in STNG's operating income resulted from lower advertising and circulation revenues, partially offset by lower newsprint, labor and other expenses.  Operating expenses of the Investment and Corporate Group segment were $17.3 million in the first quarter, down $5.6 million from last year, driven by a $4.0 million decrease in spending related to the Special Committee investigation to $8.0 million this year, as well as lower wages and director and officer liability insurance premiums.

Gordon A. Paris, Chairman and Chief Executive Officer, said, "Our disappointing results in the first quarter reflect the challenging advertising environment that our industry and, more specifically, our Chicago market are facing. The effects of these industry and regional economic trends were compounded by the disruption to our advertising sales force from an internal investigation, as well as our strategic reorganization. This strategic reorganization, which rationalizes and refocuses our operations, positions STNG for profitable growth by leveraging the full power of our media properties across the greater Chicago area, and by exploiting the range of new media alternatives available to us. The reorganization continues on track, and we expect to see benefits beginning in the second half of the year."

Total operating revenues for the quarter were $102.4 million compared with $109.4 million in the year-ago period. All of the Company's revenues are generated by its STNG operating segment.

Advertising revenues in the first quarter were $78.9 million, down $5.1 million, or 6% compared with the prior year period. The decline in advertising revenue reflects weak industry advertising trends in the retail and national categories, particularly auto and entertainment.  In addition, the Chicago advertising market was weaker than the rest of the country in retail, real estate and recruitment categories. STNG's total advertising revenue fell more than the market largely due to category mix, temporary impacts of an internal sales investigation previously disclosed, and temporary disruption from the strategic reorganization of the STNG sales force.

Circulation revenues in the first quarter were down 7.5% compared with the similar period a year ago. The $1.7 million decline reflects lower single-copy sales, intensified competitive discounting of home subscription rates, and the elimination of unprofitable bartered bulk programs.

Newsprint expense in the first quarter was $16.2, down $0.3 million from the comparable period in 2005.  Total newsprint consumption decreased approximately 14%, more than offsetting the approximately 14% increase in average cost per ton.  Consumption was down due to cut-downs in the size of newspapers including the Chicago Sun Times, as well as lower circulation.

STNG segment compensation expense increased $8.7 million to $53.9 million in the first quarter due to the recognition of $9.3 million of severance costs.  Severance costs are primarily related to the voluntary and involuntary separations required to achieve the previously announced plan to reduce the STNG workforce by 10%, or 260 full-time employees, anticipated to be complete by the end of 2006.  As of March 31, 2006, 160 employees had accepted voluntary separation and approximately 65 positions have been identified for involuntary separation to occur through December 31, 2006.  The Company expects to achieve most of the remaining targeted workforce reduction through attrition.  Compensation expense before severance declined due to lower benefits expense and lower headcount due to attrition, more than offsetting wage increases.

Other operating expenses declined by $1.1 million in the first quarter from the comparable period a year ago due to lower distribution and circulation costs.

STNG's segment operating loss for the quarter was $6.8 million, compared with operating income of $8.1 million in the first quarter of 2005. The first quarter loss resulted from the recognition of severance noted above.  The remaining shortfall to prior year's operating income reflects the drop in advertising and circulation revenues, partially offset by lower newsprint, compensation and other operating expenses.

As of March 31, 2006, the Company held $348.3 million in cash and cash equivalents ($270.3 million), short-term investments ($47.0 million), and escrow deposits and restricted cash ($31.0 million.  The Company recently completed its previously announced $50 million common stock repurchase program, purchasing a total of 6.18 million shares. As of May 5, 2006, adjusting for completion of purchases under the program which began in April, the Company's cash and cash equivalents, short-term investments and escrow deposits and restricted cash totaled approximately $296 million.

As previously announced, the reorganization of STNG is expected to be complete by the end of 2006. A comprehensive reorganization of STNG's advertising sales group and redesign of its processes is anticipated to be substantially completed during the second quarter of 2006. It is expected that when fully implemented, the reorganization will provide the Company with a significantly enhanced advertising sales capability and results.

CONFERENCE CALL AND WEBCAST:  The Company will hold a conference call at 10:00 am ET today to discuss its first quarter performance. The call will be accessible via a live Webcast, available through a link from http://www.hollingerinternational.com/ or can be accessed at 800-638-5439 (or 617-614-3945 for international callers) with the passcode 89986943.  A replay of the call will be available beginning at approximately 12:00 pm ET today through Wednesday, May 17th.  To listen to the replay, call 888-286-8010 (or 617-801-6888 for international callers) and use the passcode 14436196.  The replay will also be accessible via webcast on the Company's website.

Hollinger International Inc. (http://www.hollingerinternational.com/ ) is a newspaper publisher whose assets include The Chicago Sun-Times and a large number of community newspapers in the Chicago area.

Cautionary Statement on Forward-Looking Statements. Certain statements made in this release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result" or similar words or phrases. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by Hollinger International with the Securities and Exchange Commission, including in its Forms 10-K and 10-Q. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward- looking statements as a prediction of actual results.

   Contacts: Molly Morse / Jeremy Fielding
             Kekst and Company
             212-521-4826/4825
             
             



              HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            For the Three Months Ended March 31, 2006 and 2005
              (Amounts in thousands, except per share data)
                               (Unaudited)


                                                      Three Months Ended
                                                           March 31
                                                     2006           2005
  Operating revenue:
    Advertising                                    $78,889        $83,962
    Circulation                                     20,979         22,688
    Job printing                                     2,088          2,011
    Other                                              468            722
  Total operating revenue                          102,424        109,383

  Operating costs and expenses:
    Newsprint                                       16,156         16,459
    Compensation                                    56,602         49,379
    Other operating costs                           45,999         51,982
    Depreciation                                     5,256          4,750
    Amortization                                     2,681          2,652
    Total operating costs and expenses             126,694        125,222
  Operating loss                                   (24,270)       (15,839)

  Other income (expense):
    Interest expense                                  (132)          (248)
    Amortization of deferred financing costs            (7)            (7)
    Interest and dividend income                     4,216          4,399
    Other income (expense), net                        530         (1,169)
  Total other income (expense)                       4,607          2,975
  Loss from continuing operations before
   income taxes                                    (19,663)       (12,864)
  Income tax expense                                 6,930          7,679
  Loss from continuing operations                  (26,593)       (20,543)
  Discontinued operations (net of income taxes):
    Earnings from operations of business
     segment disposed of                               199          2,034
    Gain from disposal of business segment          14,712              -
    Earnings from discontinued operations           14,911          2,034
  Net loss                                        $(11,682)      $(18,509)
  Basic and diluted loss per share:
    Weighted average shares outstanding             90,946         90,857
    Loss from continuing operations                 $(0.29)        $(0.23)
    Discontinued operations                           0.16           0.03
  Net loss                                          $(0.13)        $(0.20)



              HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                   March 31, 2006 and December 31, 2005
                (Amounts in thousands, except share data)

                                                   March 31,    December 31,
                                                     2006          2005
                                                 (Unaudited)
                            ASSETS

  Current assets:
  Cash and cash equivalents                       $270,307       $198,388
  Short-term investments                            46,950         57,650
  Accounts receivable, net of allowance
   for doubtful accounts of $10,865 in 2006
   and $11,756 in 2005                              90,586         90,951
  Inventories                                       14,889         12,600
  Escrow deposits and restricted cash               30,957         13,350
  Assets of operations to be disposed of                 -         21,418
  Other current assets                               3,288          6,785
  Total current assets                             456,977        401,142
                                                        40
  Loan to affiliates                                30,327         29,284
  Investments                                       14,947         23,037
  Property, plant and equipment, net of
   accumulated depreciation of $122,612
   in 2006 and $117,360 in 2005                    191,306        194,354
  Intangible assets, net of accumulated
   amortization of $40,026 in 2006 and
   $38,933 in 2005                                  95,903         96,981
  Goodwill                                         124,104        124,104
  Prepaid pension benefit                           96,723         95,346
  Non-current assets of operations to
   be disposed of                                        -         73,391
  Other assets                                      28,192         27,689
  Total assets                                  $1,038,479     $1,065,328


                     LIABILITIES AND STOCKHOLDERS' DEFICIT

  Current liabilities:
  Current installments of long-term debt            $7,077         $7,148
  Accounts payable and accrued expenses            108,332        125,007
  Dividends payable                                  4,534          4,534
  Amounts due to related parties                     7,982          7,987
  Income taxes payable and other tax liabilities   588,848        586,734
  Liabilities of operations to be disposed of            -         12,531
  Deferred revenue                                  11,199         11,684
  Total current liabilities                        727,972        755,625
  Long-term debt, less current installments            885            919
  Deferred income taxes and other tax liabilities  397,986        360,524
  Non-current liabilities of operations to
   be disposed of                                        -         15,141
  Other liabilities                                109,373        102,970
  Total liabilities                              1,236,216      1,235,179
  Stockholders' deficit:
  Class A common stock, $0.01 par value.
   Authorized 250,000,000 shares;
   88,008,022 shares issued and
   75,687,055 shares outstanding at
   March 31, 2006 and December 31, 2005                880            880
  Class B common stock, $0.01 par value.
   Authorized 50,000,000 shares;
   14,990,000 shares issued and
   outstanding at March 31, 2006 and
   December 31, 2005                                   150            150
  Additional paid-in capital                       493,969        493,385
  Accumulated other comprehensive income:
  Cumulative foreign currency translation
   adjustment                                        7,892         20,095
  Unrealized gain (loss) on marketable securities     (877)          (820)
  Minimum pension liability adjustment             (18,771)       (18,777)
  Accumulated deficit                             (532,171)      (515,955)
                                                   (48,928)       (21,042)

  Class A common stock in treasury, at
   cost - 12,320,967 shares at March 31, 2006
   and December 31, 2005                          (148,809)      (148,809)
  Total stockholders' deficit                     (197,737)      (169,851)
  Total liabilities and stockholders' deficit   $1,038,479     $1,065,328


DATASOURCE: Hollinger International Inc



CONTACT: Molly Morse, [phone], , or Jeremy

Fielding, [phone], 



Web site: http://www.hollingerinternational.com/ 

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