UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2000

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission File No. 0-24004

HOLLINGER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (312) 321-2299

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes     x         No          

      Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

INDEX

HOLLINGER INTERNATIONAL INC.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Six Months Ended June 30, 2000 and June 30, 1999
(Amounts in Thousands, Except Per Share Data)
(Unaudited)

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2000 and June 30, 1999
(Amounts in Thousands)
(Unaudited)

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2000 and December 31, 1999
(Amounts in Thousands)

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and June 30, 1999
(Amounts in Thousands)
(Unaudited)

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Note 1 — Unaudited Financial Statements

      The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is presumed that the reader has already read the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.

      In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.

Note 2 — Principles of Presentation and Consolidation

      The Company is a subsidiary of Hollinger Inc., a Canadian corporation, which at June 30, 2000 owned approximately 39.1% of the combined equity ownership interest and approximately 74.3% of the combined voting power of the outstanding Common Stock of the Company, without giving effect to the future issuance of Class A Common Stock upon conversion of the Company’s Series C Convertible Preferred Stock (“Series C Preferred Stock”) and the remaining Series E Redeemable Convertible Preferred Stock (“Series E Preferred Stock”).

      All significant intercompany balances and transactions have been eliminated. Certain reclassifications have been made in the 1999 financial statements to conform to the 2000 presentation.

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Note 3 — Earnings per share

      The following table reconciles the numerator and denominator for the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2000 and 1999:

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Note 4 — Segment Information

      The Company operates principally in the business of publishing, printing and distribution of newspapers and magazines and holds investments principally in companies that operate in the same business as the Company. Southam, the Canadian Newspapers and the Hollinger L.P. make up the Canadian Newspaper Group. The following is a summary of the segments of the Company:

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Capital expenditures for the corporate entities were $184,000 and $1,087,000 for the six months ended June 30, 2000 and 1999, respectively.

Reconciliation of segment assets to total assets:

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Note 5 — Bank Credit Facility

In June 2000, Hollinger International Publishing Inc., Hollinger Canadian Publishing Holdings Inc. (“HCPH”), The Telegraph Group Limited, Southam, HIF and a group of financial institutions increased the term loan component of the Fourth Amended and Restated Credit Facility (Restated Credit Facility) by $100,000,000. This additional term loan matures on September 30, 2005 and bears interest at the option of the respective borrowers, at a rate per annum tied to specified floating rates on a reserve adjusted Eurocurrency rate, in each case plus a specified margin determined based on leverage ratios.

The Restated Credit Facility now totals $975,000,000 consisting of a $575,000,000 revolving credit line maturing on September 30, 2004, a $300,000,000 term loan maturing December 31, 2004 and a $100,000,000 term loan maturing September 30, 2005.

Note 6 — Minority Interest

On June 12, 2000, the Company exercised its option to pay cash on the mandatory exchange of HCPH Special shares. Pursuant to the terms of the indenture governing the Special shares, each Special share was exchanged for $8.88 cash resulting in a payment in July to Special shareholders of $58,200,000. This payment was $10,900,000 in excess of the recorded book amount. This excess amount was disclosed as minority interest in the Statement of Operations.

Note 7 — Subsequent Events

a) On July 31, 2000, the Company announced that an agreement had been entered into to sell to CanWest Global Communications Corp. (“CanWest”) for approximately $2.35 billion (Cdn $3.5 billion), subject to adjustments, the following Canadian Newspaper assets:

		—	a 50% interest in the National Post, while continuing as managing partner;
		—	all metropolitan and a large number of community newspapers in Canada (including the Ottawa Citizen, Vancouver Sun, the Province, the Calgary Herald, the Edmonton Journal, the Montreal Gazette, The Windsor Star, The Regina Leader Post, the Star Phoenix and The Victoria Times-Colonist);
		—	the Southam Magazine and Information Group, and
		—	certain operating Canadian Internet properties including canada.com.

The purchase price will be payable as to approximately $470 million (Cdn$700 million) in shares of CanWest and as to the balance, 75% in cash and 25% in subordinated debentures of a senior company in the CanWest group. The Company will nominate two directors to the CanWest Board, commensurate with its opening equity interest of 15%. Conrad Black, the Company’s Chairman and CEO, will be the Chairman of the National Post. With respect to the other newspaper assets being sold to CanWest, Mr. Black and his associates will enter into a management services agreement for at least 17 months in order to ensure operating continuity and to facilitate a smooth transition to the new arrangements.

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The sale is expected to be completed at the end of September. The Company will use the cash proceeds to eliminate bank debt and possibly to cancel debentures and shares and create a substantial reserve of liquid assets.

b) On August 2, 2000, the Company announced the sale of its remaining U.S. Community newspapers for approximately $215 million to four buyers: Bradford Publications Company, Newspaper Holdings, Inc. of Alabama, Paxton Media Group, Inc. and Forum Communications Company. The sales are expected to be completed during the fourth quarter of 2000.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

The Company’s business is concentrated in the publishing, printing and distribution of newspapers and includes the Chicago Group, the Community Group, the U.K. Newspaper Group and the Canadian Newspaper Group. The Chicago Group includes the Chicago Sun-Times, Post Tribune and city and suburban newspapers in the Chicago metropolitan area. The Community Group includes the Company’s U.S. community newspapers, operating in 12 states, and for reporting and administrative purposes, Jerusalem Post. The U.K. Newspaper Group includes the operating results of the Telegraph. The Canadian Newspaper Group includes results of Southam Inc. (“Southam”), the Canadian Newspapers and the Hollinger Canadian Newspapers Limited Partnership (“Hollinger L.P.”).

CONSOLIDATED RESULTS OF OPERATIONS

Second quarter 2000 net earnings were $4.7 million or $0.03 per share compared with $91.0 million or $0.86 per share in 1999. Earnings before extraordinary items for the three months ended June 30, 1999 were $96.2 million or $0.91 per share. There were no extraordinary items in 2000. Net earnings for the six months ended June 30, 2000 were $32.9 million or $0.29 per share compared with $238.2 million or $2.22 per share in 1999. Earnings before extraordinary items for the six months ended June 30, 1999 were $243.4 million or $2.27 per share. The extraordinary item in 1999 represented the write-off of previously deferred financing fees related to the early retirement of a Bank Credit Facility.

There were a number of infrequent and non-recurring items affecting the results of both years. In the second quarter 2000 infrequent or non-recurring items amounted to a net loss of $14.0 million after income tax and minority interest and primarily consisted of duplicative start-up costs related to the new printing facility in Chicago, severance costs in Canada, gains on asset sales, equity loss at Interactive Investor International (III) and the amount paid on mandatory retirement of HCPH Special shares in excess of the recorded book amount. In second quarter 1999, infrequent and non-recurring items amounted to a net gain of $67.7 million after income tax and minority interest and primarily consisted of gains on sale of assets, a gain resulting from the issuance of Partnership units for several Canadian Newspapers and the extraordinary write off of previously deferred financing fees.

In the six months ended June 30, 2000, infrequent and non-recurring items amounted to a net loss of $1.1 million after income tax and minority interest and primarily consisted of duplicative start-up costs related to the new printing facility in Chicago, severance costs in Canada, gains on asset sales, including Trip.com and the partial interest in III and the amount paid on mandatory retirement of HCPH Special shares in excess of the recorded book amount. In the six months ended June 30, 1999, infrequent and non-recurring items amounted to a net gain of $197.0 million and primarily consisted of gains on sales of U.S. community newspapers and a gain resulting from the issuance of Partnership units for several Canadian newspapers.

In addition, Community Group operations sold during 1999, contributed $2.3 million to operating revenue, $0.2 million to operating income and $0.1 million to net earnings in the second quarter

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of 1999 and $18.3 million to operating revenue, $1.5 million to operating income and $0.9 million to net earnings in the six months ended June 30, 1999.

Net earnings from comparable operations, which excludes infrequent and non-recurring items and also excludes net earnings from divested properties and assumes all instruments are dilutive, amounted to $18.8 million in second quarter 2000 or $0.17 per diluted share compared with $23.2 million or $0.20 per diluted share in 1999. Included in these second quarter earnings is a net loss from internet operations of $8.0 million in 2000 or $(0.07)per diluted share compared to a net loss from internet operations of $1.2 million or $(0.01) per diluted share in 1999. Net earnings from comparable operations amounted to $34.0 million in the six months ended June 30, 2000 or $0.30 per diluted share compared with $40.2 million or $0.33 per diluted share in 1999. Included in these six month earnings is a net loss from internet operations of $11.2 million in 2000 or $(0.09) per diluted share compared to a net loss from internet operations of $2.1 million or $(0.02) per diluted share in 1999.

Operating revenue for the second quarter of 2000 was $574.1 compared with $546.4 million in 1999, an increase of 5.1%. Operating revenue from comparable operations for the second quarter of 2000 was $574.1 million compared with $544.1 million in 1999, an increase of 5.5%. Operating revenue for the six months ended June 30, 2000 was $1,123.3 million compared with $1,071.1 million in 1999, an increase of 4.9%. Operating revenue from comparable operations for the six months ended June 30, 2000 was $1,123.3 million compared with $1,052.9 million in 1999, an increase of 6.7%.

Operating income in the second quarter of 2000 was $71.7 million compared with $67.1 million in 1999, an increase of 6.9%. Operating income from comparable operations in the second quarter of 2000 was $73.5 million compared with $67.4 million in 1999, an increase of 9.1%. Operating income for the six months ended June 30, 2000 was $133.0 million compared with $125.3 million in 1999, an increase of 6.1%. Operating income from comparable operations for the six months ended June 30, 2000 was $137.4 million compared with $124.7 million in 1999, an increase of 10.2%.

Interest expense for the second quarter 2000 was $36.8 million compared with $32.9 million in 1999, an increase of $3.9 million. For the six months ended June 30, 2000 interest expense was $71.8 million compared with $64.5 million in 1999, an increase of $7.3 million. These increases result from both increased interest rates and an increase in debt levels and in the second quarter, the impact of expensing rather than capitalizing interest costs related to the new Chicago plant.

Other income (expense) in the second quarter 2000 was a net expense of $4.1 million and included losses from equity accounted companies, foreign currency losses and gains on asset sales. Other income in the second quarter of 1999 amounted to $101.1 million and included a gain on sale of U.S. community newspapers and a gain resulting from the issuance of Partnership units for several Canadian newspapers. Other income for the six months ended June 30, 2000 was $21.0 million and included gains on asset sales, losses from equity accounted companies and foreign currency losses. Other income for the six months ended June 30, 1999 was $329.5 million and included gains on sales of U.S. community newspapers and a gain resulting from the issuance of Partnership units for several Canadian newspapers.

Minority interest in the second quarter 2000 was $14.2 million compared with $1.7 million in 1999. Minority interest in 2000 represents the minority’s share of Hollinger L.P. and also includes $10.9 million related to the amount paid on mandatory retirement of HCPH Special shares in excess of the recorded book amount. Minority interest in 1999 represents the minority’s share of

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Hollinger L.P. for May and June and the minority’s share of net earnings of Southam prior to the Company acquiring the remaining minority shares of Southam in January and February 1999.

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