<PAGE> 1
EXHIBIT 99.2
ON PAPER ONLINE
2
Interim Report
6 Months Ended June 30, 2000
Hollinger Inc.
<PAGE> 2
ON PAPER ONLINE [Logo]
2
Interim Report
6 Months Ended June 30, 2000
Hollinger Inc. [Logo]
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED JUNE 30 2000 1999
(millions of dollars)
--------- -----------
<S> <C> <C>
Total revenue.......................................... 1675.5 1635.9
Net earnings........................................... 12.7 156.1
Cash flow provided by operations (note)................ 172.6 162.9
(dollars)
Net earnings per retractable common share.............. 0.34 4.75
Cash flow provided by operations per
retractable common share (note)........................ 4.64 4.95
</TABLE>
NOTE
Cash flow provided by operations is before any change in non-cash operating
working capital, the cash used for discontinued operations and other costs.
Throughout this report, Hollinger Inc. is referred to as "Hollinger" or the
"Company", Hollinger International Inc. is referred to as "Hollinger
International Inc." or "Hollinger International", Hollinger Canadian Publishing
Holdings Inc. is referred to as "HCPH", and Hollinger Canadian Newspapers,
Limited Partnership is referred to as "Hollinger L.P." The word "company" refers
to one or other of Hollinger Inc.'s subsidiary companies, depending on the
context.
Reference to "dollars" and "$" are to Canadian dollars, "U.S. $" are to United
States dollars and "pounds sterling" and "(pound)" are to lawful currency of the
United Kingdom.
"EBITDA" means earnings before interest, taxes, depreciation and amortization.
<PAGE> 4
T O T H E S H A R E H O L D E R S
================================================================================
SECOND QUARTER RESULTS
Earnings before unusual items, income taxes and minority interest were $47.9
million for the three months ended June 30, 2000 compared to $52.0 million for
1999. The net loss for the three months ended June 30, 2000 amounted to $0.2
million or a loss of $0.01 per share compared with net earnings of $46.7 million
or $1.42 per share in 1999. Excluding the net effect of unusual items, a net
loss of $0.9 million or a loss of $0.02 per share was incurred in the second
quarter of 2000 compared with a net loss of $0.4 million or a loss of $0.01 per
share in 1999.
Reported earnings for the quarter compared to last year have been affected by
several major items.
The National Post EBITDA loss for the second quarter of 2000 was $10.6
million, a $6.9 million improvement over the EBITDA loss of $17.5 million
in the second quarter of 1999, reflecting a 39% increase in revenue
year-over-year.
Unusual items in the second quarter 2000 include gains on asset sales,
additional start-up costs related to the new printing facility in Chicago,
severance costs in Canada and equity loss at Interactive Investor. Unusual
items in the second quarter of 1999 consisted primarily of a gain on sales
of community newspapers by Hollinger International Inc. and an accounting
gain on the issue of limited partnership units offset by the write off of
finance costs related to the early retirement of debt and acquisition
costs.
Interest expense for the quarter rose over 1999 as a result of increased
interest rates and increased debt levels.
Second quarter revenue from internet operations grew from $1.6 million in
1999 to $6.1 million in 2000 and internet related EBITDA losses grew from
$2.8 million to $13.5 million over the same time frame, reflecting the
expanding success of these operations.
RESTRUCTURING PROCESS
In April 2000, Hollinger International announced that its board of directors had
approved a process whereby certain of the company's newspaper assets would be
made available for sale, merger or affiliation on terms consistent with the full
enterprise value of such assets. Morgan Stanley Dean Witter was retained to act
as the company's professional adviser and in that role is co-ordinating the
<PAGE> 5
================================================================================
process. As has been stated, management considers the company's shares
undervalued and the most effective means of narrowing the gap between the
enterprise value and imputable market value of its assets is to sell some of
them and apply the proceeds to debt reduction and share cancellation.
At the end of July, Hollinger International Inc. announced that an agreement had
been entered into to sell to CanWest Global Communications Corp. ("CanWest") for
approximately $3.5 billion, subject to adjustments, the following assets:
-- a 50% interest in the National Post, while continuing as managing
partner;
-- 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 reflects the full enterprise value of the assets with
newspapers being valued at approximately 10 times EBITDA, and will be payable as
to approximately $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. Hollinger International will nominate two directors to the CanWest Board,
commensurate with its opening equity interest of 15%. Conrad Black 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. The
sale is expected to be completed on October 2. Hollinger will use the cash
proceeds to eliminate bank debt and possibly to cancel debentures and shares and
create a substantial reserve of liquid assets. The UniMedia group in Quebec and
many community newspapers in Ontario and British Columbia are not included in
this sale.
<PAGE> 6
================================================================================
At the beginning of August, Hollinger International announced the sale of its
remaining U.S. community newspaper properties (excluding those in the Chicago
Group) to four buyers for approximately U.S. $215 million, which represents a
trailing twelve month EBITDA multiple of over 12 times. The sale represented the
best opportunity for Hollinger International to realize the maximum value for
the newspapers and to show an excellent return on its original investment and
the work it had put into the properties over the years. This sale will also
allow Hollinger International to pay down debt and is consistent with the
strategy announced in April. The sales are expected to be completed during the
fourth quarter.
HOLLINGER INTERNATIONAL INC.
Hollinger International's continuing operations, assuming completion of the
transactions announced to date and in contemplation, will be composed of the
Chicago Group including the Chicago Sun-Times, The Jerusalem Post, the U.K.
Newspaper Group, consisting of the Telegraph Group Limited, a 50% interest in
the National Post in Canada, and Hollinger Ventures (Hollinger's new media
investment subsidiary).
TELEGRAPH GROUP LIMITED
Second quarter locally reported operating revenue was (pound sterling) 94.0
million in 2000 compared with (pound sterling) 85.2 million in 1999, an increase
of 10%.
Advertising revenue in local currency for the second quarter was up over 16%
year-on-year. Classified sections continue to perform well with an increase of
17% over the same period last year. In particular, Recruitment (Careers)
revenues continued to strengthen with an increase of more than 20% over the same
period last year. Revenue from the Travel, Motors and Property sections
increased year-on-year by 14%, 21% and 38% respectively. Display advertising
also performed strongly during the second quarter with an increase of 19% over
the same period last year.
Locally reported EBITDA for the six months ended June 30, 2000 was (pound
sterling) 37.0 million, compared to (pound sterling) 27.5 million during the
corresponding period in 1999, an increase of 35%. The increase in EBITDA is
primarily a result of the growth in advertising revenue partly offset by higher
compensation and other costs related to increased internet activity. The EBITDA
loss from internet activity was (pound sterling) 0.9 million in the second
quarter of 2000 compared with (pound sterling) 0.1 million in 1999.
<PAGE> 7
================================================================================
The ABC net circulation figure for The Daily Telegraph for the period January
2000 to June 2000 was 1,033,680, some 311,000 ahead of its nearest competitor
The Times. The ABC net circulation figure for The Sunday Telegraph for the
period January 2000 to June 2000 was 811,408. The ABC weekly circulation figure
for The Spectator for the period July to December 1999 was 58,459 compared to
57,247 for the same period in 1999.
A new supplement entitled dotcom.telegraph was added to the Thursday edition of
The Daily Telegraph in May 2000. This weekly supplement focusses on e-commerce
developments.
Newsprint costs have decreased year-on-year despite the addition of the separate
Travel supplement to The Sunday Telegraph introduced in January 2000, the new
dotcom.telegraph section and increases in paginations driven by increased
advertising revenues.
Hollinger Telegraph New Media Limited oversees Hollinger's investments in U.K.
and European online activities. handbag.com, a joint venture with Boots plc, now
achieves 4 million page impressions per month while UKMax's page traffic has
increased to 7 million page impressions per month. newsplayer.com, in which
Hollinger took a 5% stake in April, was launched during May. Electronic
Telegraph (ET) revenues are up by 102% year-on-year. Page impressions on ET have
now reached 20 million pages per month. Work continues on the development of the
new technical infrastructure which will allow the launch of new channels around
the ET hub later in the year.
THE CHICAGO GROUP
Revenue for the Chicago Group was U.S. $101.2 million for the second quarter of
2000 compared with U.S. $101.7 million in 1999. Advertising revenue for the
second quarter increased marginally to U.S. $77.2 million in 2000 from U.S.
$77.1 million in 1999. Retail advertising was slightly down versus last year as
a result of store closings and bankruptcies which have impacted the entire
Chicago market. Classified advertising was also down slightly; however general
advertising had a strong quarter. Circulation revenue in the second quarter of
2000 was U.S. $19.8 million, down U.S. $0.9 million or 4% from 1999. Although
circulation revenue for the second quarter declined versus 1999, average daily
ABC circulation was up as of the end of June 2000 compared to June 1999.
Reported EBITDA for the second quarter of 2000 was U.S. $18.9 million compared
with U.S. $19.2 million in 1999, a decrease of U.S. $0.3 million or 2%. EBITDA
for the second quarter
<PAGE> 8
================================================================================
included a loss from internet operations of U.S. $0.6 million in 2000 and U.S.
$0.2 million in 1999. The decrease in EBITDA in the second quarter 2000 compared
with 1999 primarily results from virtually flat operating revenue and increased
losses from internet operations.
The Ashland production facility is now operational with four of the six presses
being used in daily production. Press five is planned to be in operation by the
end of August and Press six should be operational before the end of the year.
NATIONAL POST COMPANY
National Post revenue grew to $34.0 million in the second quarter of 2000 from
$24.4 million in 1999, a 39% improvement. This growth was primarily driven by
increased advertising revenue, but circulation revenues also improved over 1999.
National Post EBITDA loss for second quarter 2000 was $10.6 million, a $6.9
million improvement over the $17.5 million EBITDA loss in 1999.
INTERNET INVESTMENTS
Since the beginning of the year, Hollinger has added to its portfolio of
minority positions in Internet companies, including investments in
FreeSamples.com, Mediant Technology Partners, DealTime.com, SUMmedia.com and
Offroad Capital. Also, Hollinger has increased its investment in Bidhit.com.
HCPH SPECIAL SHARES
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 U.S. $8.88
cash resulting in a payment in July to Special shareholders of U.S. $95 million.
The Canadian dollar equivalent of the obligation at June 30, 2000 was $140.6
million.
<PAGE> 9
================================================================================
RETRACTION PRICE OF RETRACTABLE COMMON SHARES
The retraction price of the outstanding retractable common shares of the Company
as of July 6, 2000 was $13.25 per share.
SHARE CAPITAL INFORMATION
As at August 21, 2000, the issued shares and options to purchase retractable
common shares of the Company were as follows:
Preference shares Retractable common shares Options
10,694,490 Series II 37,132,105 928,000
10,147,225, Series III
DIVIDENDS
A regular quarterly dividend of 15(cent) per retractable common share has been
declared payable on September 10, 2000 to shareholders of record on August 25,
2000.
August 21, 2000 Conrad M. Black
-------------------------
Conrad M. Black
Chairman of the Board and
Chief Executive Officer
<PAGE> 10
MARKET VALUE INFORMATION
BALANCE SHEET
--------------------------------------------------------------------------------
(in thousands of dollars except where noted)
<TABLE>
<CAPTION>
JUNE 30 December 31
2000 1999
------------ ------------
(not audited)
<S> <C> <C>
ASSETS
Investment in Hollinger International .......... $ 942,825 $ 903,753
Other investments .............................. 12,827 12,004
Other assets ................................... 41,514 26,775
------------ ------------
$ 997,166 $ 942,532
------------ ------------
LIABILITIES
Exchangeable shares ............................ $ 260,658 $ 285,211
Other liabilities .............................. 310,785 310,583
------------ ------------
571,443 595,794
------------ ------------
NET ASSETS REPRESENTING SHAREHOLDERS' EQUITY
Capital stock .................................. 314,683 315,229
Net unrealized appreciation of investments ..... 251,855 181,798
Net unrealized increase in liabilities ......... 1,695 15,429
Deficit ........................................ (142,510) (165,718)
------------ ------------
425,723 346,738
------------ ------------
$ 997,166 $ 942,532
------------ ------------
RETRACTABLE COMMON SHARES OUTSTANDING .......... 37,132,105 37,196,415
------------ ------------
NET ASSET VALUE PER RETRACTABLE COMMON SHARE ... $ 11.46 $ 9.32
============ ============
</TABLE>
STATEMENT OF INCOME AND EXPENSES
(not audited)
--------------------------------------------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
2000 1999
-------- --------
<S> <C> <C>
INCOME
Dividends ...................................... $ 22,842 $ 25,043
Interest and other ............................. 2,342 4,003
Net management fees ............................ 10,812 3,820
-------- --------
35,996 32,866
-------- --------
EXPENSES
Administrative and other expenses .............. 6,939 9,147
Interest expense ............................... 15,150 26,749
-------- --------
22,089 35,896
-------- --------
Income (loss) before the undernoted ............ 13,907 (3,030)
Unusual items .................................. 486 20,954
Income tax expense ............................. (538) (1,297)
-------- --------
Net income for the period ...................... $ 13,855 $ 16,627
-------- --------
EARNINGS PER RETRACTABLE COMMON SHARE .......... $ 0.37 $ 0.51
======== ========
</TABLE>
<PAGE> 11
SCHEDULE OF SEGMENTED EARNINGS
(not audited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) U.K. CANADIAN CORPORATE
CHICAGO COMMUNITY NEWSPAPER NEWSPAPER AND CONSOLIDATED
GROUP GROUP GROUP GROUP OTHER TOTAL
------- --------- --------- --------- --------- ------------
THREE MONTHS ENDED JUNE 30, 2000
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales revenue ....................... $149,916 $ 32,192 $224,255 $454,466 $ -- $860,829
Cost of sales
and expenses ....................... 123,409 27,040 169,935 369,481 1,160 691,025
-------- -------- -------- -------- -------- --------
Income before interest, taxes,
depreciation and amortization ...... 26,507 5,152 54,320 84,985 (1,160) 169,804
Depreciation and amortization ....... 7,461 2,296 14,634 29,583 2,302 56,276
-------- -------- -------- -------- -------- --------
Operating income (loss) ............. $ 19,046 $ 2,856 $ 39,686 $ 55,402 $ (3,462) $113,528
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales revenue ...................... $149,921 $ 32,215 $212,922 $423,284 $ 643 $818,985
Cost of sales and expenses ......... 119,179 24,488 163,566 343,284 8,751 659,268
-------- -------- -------- -------- -------- --------
Income before interest, taxes,
depreciation and amortization ..... 30,742 7,727 49,356 80,000 (8,108) 159,717
Depreciation and amortization ...... 8,307 2,517 15,103 28,684 1,978 56,589
-------- -------- -------- -------- -------- --------
Operating income (loss) ............ $ 22,435 $ 5,210 $ 34,253 $ 51,316 $(10,086) $103,128
======== ======== ======== ======== ======== ========
</TABLE>
NOTE
1. Corporate and Other revenue includes revenues of miscellaneous newspaper
operations.
<PAGE> 12
SCHEDULE OF SEGMENTED EARNINGS
(not audited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) U.K. CANADIAN CORPORATE
CHICAGO COMMUNITY NEWSPAPER NEWSPAPER AND CONSOLIDATED
GROUP GROUP GROUP GROUP OTHER TOTAL
------- --------- --------- --------- --------- ------------
SIX MONTHS ENDED JUNE 30, 2000
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales revenue ................... $ 285,301 $ 61,115 $ 462,825 $ 861,094 $ -- $1,670,335
Cost of sales
and expenses ................... 238,986 51,184 342,087 713,817 2,810 1,348,884
---------- ---------- ---------- ---------- ---------- ----------
Income before interest, taxes,
depreciation and amortization ... 46,315 9,931 120,738 147,277 (2,810) 321,451
Depreciation and amortization .... 14,710 4,597 29,783 59,062 3,927 112,079
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) .......... $ 31,605 $ 5,334 $ 90,955 $ 88,215 $ (6,737) $ 209,372
---------- ---------- ---------- ---------- ---------- ----------
Total assets ..................... $ 785,327 $ 223,090 $1,202,025 $3,136,037 $ 373,141 $5,719,620
---------- ---------- ---------- ---------- ---------- ----------
Expenditures on capital assets ... $ 24,758 $ 2,444 $ 26,376 $ 24,695 $ 317 $ 78,590
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales revenue .................... $ 287,378 $ 82,301 $ 440,928 $ 810,442 $ 1,943 $1,622,992
Cost of sales and expenses ....... 235,090 65,497 331,750 676,361 14,903 1,323,601
---------- ---------- ---------- ---------- ---------- ----------
Income before interest, taxes,
depreciation and amortization ... 52,288 16,804 109,178 134,081 (12,960) 299,391
Depreciation and amortization .... 16,952 6,892 30,799 56,813 3,792 115,248
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) .......... $ 35,336 $ 9,912 $ 78,379 $ 77,268 $ (16,752) $ 184,143
---------- ---------- ---------- ---------- ---------- ----------
Total assets ..................... $ 691,150 $ 373,231 $1,277,039 $3,090,279 $ 336,328 $5,768,027
---------- ---------- ---------- ---------- ---------- ----------
Expenditures on capital
assets .......................... $ 43,138 $ 5,691 $ 23,470 $ 67,657 $ 1,834 $ 141,790
========== ========== ========== ========== ========== ==========
</TABLE>
NOTE
1. Corporate and Other revenue includes revenues of miscellaneous newspaper
operations.
<PAGE> 13
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
----------- --------------
(not audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash .............................................. $ 118,043 $ 74,441
Accounts receivable ............................... 556,790 528,072
Inventory ......................................... 74,663 50,089
----------- -----------
749,496 652,602
INVESTMENTS ....................................... 211,849 159,744
CAPITAL ASSETS .................................... 3,867,154 3,915,168
GOODWILL AND OTHER ASSETS ......................... 891,121 922,920
----------- -----------
$ 5,719,620 $ 5,650,434
----------- -----------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness ................................. $ 320,727 $ 307,961
Accounts payable and accrued expenses ............. 595,000 603,441
Income taxes payable .............................. 86,414 73,863
Current portion of long-term debt ................. 13,850 71,437
Exchangeable shares ............................... 140,581 51,421
----------- -----------
1,156,572 1,108,123
LONG-TERM DEBT .................................... 2,600,062 2,393,979
EXCHANGEABLE SHARES ............................... 206,176 233,790
Deferred unrealized gain .......................... 7,673 21,139
Future income taxes ............................... 915,414 401,294
----------- -----------
4,885,897 4,158,325
----------- -----------
MINORITY INTEREST AND DEFERRED CREDITS ............ 1,039,084 1,353,221
----------- -----------
SHAREHOLDERS' EQUITY
Capital stock ..................................... 314,683 315,229
Deficit (note 1) .................................. (470,187) (180,732)
----------- -----------
(155,504) 134,497
Equity adjustment from foreign currency translation (49,857) 4,391
----------- -----------
(205,361) 138,888
----------- -----------
$ 5,719,620 $ 5,650,434
=========== ===========
</TABLE>
NOTE
1. The Company has adopted effective January 1, 2000, on a retroactive basis,
the new standard issued by The Canadian Institute of Chartered Accountants with
respect to accounting for income taxes. The cumulative effect of adopting the
new standard was to increase the deficit at the beginning of the year by
approximately $291 million. Prior years' financial statements have not been
restated for this change in accounting policy.
<PAGE> 14
CONSOLIDATED STATEMENT OF EARNINGS
(not audited)
--------------------------------------------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Sales ............................................................... $ 860,829 $ 818,985 $ 1,670,335 $ 1,622,992
Investment and other income ......................................... 2,781 5,222 5,166 12,936
----------- ----------- ----------- -----------
863,610 824,207 1,675,501 1,635,928
----------- ----------- ----------- -----------
EXPENSES
Cost of sales and expenses .......................................... 691,025 659,268 1,348,884 1,323,601
Depreciation and amortization ....................................... 56,276 56,589 112,079 115,248
Interest expense .................................................... 69,745 62,566 135,846 124,885
----------- ----------- ----------- -----------
817,046 778,423 1,596,809 1,563,734
----------- ----------- ----------- -----------
NET EARNINGS IN EQUITY ACCOUNTED COMPANIES .......................... 582 1,128 1,221 905
NET FOREIGN CURRENCY GAINS .......................................... 762 5,111 1,252 3,872
----------- ----------- ----------- -----------
EARNINGS BEFORE THE UNDERNOTED ...................................... 47,908 52,023 81,165 76,971
Unusual items ....................................................... 2,903 124,334 40,097 447,496
Income taxes ........................................................ (27,515) (71,495) (55,636) (207,264)
Minority interest ................................................... (23,538) (58,196) (52,904) (161,128)
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) ................................................. $ (242) $ 46,666 $ 12,722 $ 156,075
=========== =========== =========== ===========
(dollars) (dollars)
NET EARNINGS (LOSS) PER RETRACTABLE COMMON SHARE (note 2)
Basic ............................................................... $ (0.01) $ 1.42 $ 0.34 $ 4.75
----------- ----------- ----------- -----------
Fully diluted ....................................................... $ (0.03) $ 1.20 $ 0.27 $ 4.07
----------- ----------- ----------- -----------
CASH FLOW PROVIDED BY OPERATIONS PER RETRACTABLE COMMON SHARE (note 1)
Basic ............................................................... $ 2.56 $ 2.08 $ 4.64 $ 4.95
----------- ----------- ----------- -----------
Fully diluted ....................................................... $ 2.56 $ 1.96 $ 4.64 $ 4.66
----------- ----------- ----------- -----------
</TABLE>
NOTES TO THE CONSOLIDATED STATEMENT OF EARNINGS
1. Cash flow provided by operations per retractable common share is based on
cash flow provided by operations which is before any increase or decrease in
non-cash operating working capital, the cash used by discontinued operations,
other costs and foreign currency translation adjustment.
<PAGE> 15
CONSOLIDATED STATEMENT
OF CASH FLOW
(not audited)
--------------------------------------------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net earnings ........................ $ 12,722 $ 156,075
Unusual items ....................... (40,097) (447,496)
Current income taxes related
to unusual items ................... 9,640 156,159
Items not involving cash:
Depreciation and amortization ....... 112,079 115,248
Deferred income taxes ............... 18,362 19,556
Net earnings in equity accounted
companies, net of dividends
received .......................... (895) (537)
Minority interest ................... 52,904 161,128
Other ............................... 7,859 2,778
--------- ---------
CASH FLOW PROVIDED BY OPERATIONS .... 172,574 162,911
Change in non-cash operating
working capital .................... (89,314) 87,448
Cash used for discontinued
operations ......................... (918) (1,065)
Other costs ......................... (7,197) (41,812)
--------- ---------
75,145 207,482
--------- ---------
FINANCING
Redemption and cancellation of
capital stock ...................... (132) (821)
Redemption and cancellation of
exchangeable shares ................ (3,349) (131,208)
Capital stock of subsidiary purchased
for cancellation by subsidiary ..... -- (100,272)
Issue of partnership units and
common shares of subsidiaries ...... -- 197,593
Increase in long-term debt
and deferred liabilities ........... 101,232 53,707
Retirement of convertible debt ...... -- (122)
Decrease in capital lease
obligations ........................ (994) (1,533)
Dividends ........................... (11,149) (9,867)
Dividends and distributions paid by
subsidiary operations to
minority interests ................. (33,795) (27,320)
--------- ---------
51,813 (19,843)
========= =========
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
2000 1999
--------- ---------
<S> <C> <C>
INVESTMENT
Proceeds on disposal of
fixed assets ...................... 4,612 11,402
Additions to fixed assets
and assets under capital leases ... (54,152) (117,148)
Additions to investments ........... (57,672) (11,605)
Proceeds on disposal
of investments and marketable
securities ....................... 57,667 2,999
Additions to circulation ........... (24,438) (24,642)
Additions to goodwill and
other assets ...................... (2,466) (59,638)
Investment in newspaper
operations ........................ (6,009) (607,442)
Proceeds on disposal of newspaper
operations ........................ -- 620,866
-------- --------
(82,458) (185,208)
-------- --------
Effect of exchange rate
changes on cash ................... (898) (9,513)
-------- --------
INCREASE (DECREASE) IN CASH POSITION 43,602 (7,082)
CASH AT BEGINNING OF PERIOD ........ 74,441 128,061
-------- --------
CASH AT END OF PERIOD .............. $ 118,043 $ 120,979
--------- ---------
Supplemental disclosure of investing
and financing activities
Interest paid ...................... $ 114,307 $ 106,318
Income taxes paid .................. $ 30,644 $ 104,063
</TABLE>
<PAGE> 16
RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
(not audited)
--------------------------------------------------------------------------------
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET EARNINGS ....................................................... (note 5) (note 5)
NET EARNINGS FOR THE PERIOD BASED ON CANADIAN GAAP ................. $ (242) $ 46,666 $ 12,722 $ 156,075
Capitalization of betterments,
net of related amortization ....................................... (2,926) (1,697) (4,154) (4,931)
Acquired tax losses (note 6) ....................................... -- 165 -- 338
Business combinations (note 4) ..................................... 233 233 466 466
Foreign exchange (note 2) .......................................... (2,018) -- (3,021) --
Compensation to employees .......................................... -- (444) -- (547)
Adjustment to tax provision (note 6) ............................... -- 4,000 -- --
Financial instruments (note 3) ..................................... (6,515) 7,804 (2,828) 17,206
Other .............................................................. 40 43 59 81
--------- --------- --------- ---------
NET EARNINGS FOR THE PERIOD BASED ON U.S. GAAP ..................... $ (11,428) $ 56,770 $ 3,244 $ 168,688
========= ========= ========= =========
(dollars) (dollars)
BASIC EARNINGS PER RETRACTABLE COMMON SHARE:
Earnings before extraordinary items (note 3) ....................... $ (1.06) $ 1.75 $ (0.29) $ 4.89
--------- --------- --------- ---------
Net earnings ....................................................... $ (1.06) $ 1.52 $ (0.29) $ 4.66
--------- --------- --------- ---------
DILUTED EARNINGS PER RETRACTABLE COMMON SHARE:
Earnings before extraordinary items ................................ $ (1.08) $ 1.59 $ (0.36) $ 4.43
--------- --------- --------- ---------
Net earnings ....................................................... $ (1.08) $ 1.36 $ (0.36) $ 4.20
--------- --------- --------- ---------
</TABLE>
NOTES TO THE RECONCILIATION TO UNITED STATES GAAP.
1. The above represents additional information to the Consolidated Statement of
Earnings of the Company which was prepared in accordance with Canadian GAAP. Set
out above are the material adjustments (net of deferred income taxes, minority
interest and foreign exchange rate adjustments where applicable) to net earnings
for the six months ended June 30, 2000 and June 30, 1999 and the three months
ended June 30, 2000 and June 30, 1999 in order to conform to accounting
principles generally accepted in the United States.
2. Under Canadian GAAP, the unrealized foreign exchange gain or loss arising on
the translation of long-term debt denominated in a foreign currency is deferred
and amortized over the life of the related debt. Under U.S. GAAP this exchange
gain or loss is expensed immediately.
3. Canadian GAAP requires the value ascribed to certain subsidiary Special
shares be increased over the life of the shares to the Company's optional cash
settlement amount through a periodic charge to earnings. Under U.S. GAAP the
shares are recorded at their fair value on the date of issue and such a charge
to increase their carrying amount is not required. During the period ended June
30, 2000, the Company announced the cash settlement of all of the subsidiary
special shares. Under U.S. GAAP, the accrued loss on settlement is higher by
$8,633,000 as a result of not accreting the value of these shares to their cash
settlement amount in prior years.
Under Canadian GAAP, the dividends on mandatory redeemable preferred stock
must be recorded as interest expense. Under U.S. GAAP, such dividends are
charged against retained earnings.
Under U.S. GAAP, the movement in the unrealized mark to market adjustment
on the Series II preference shares of $24,995,000 as at June 30, 2000 (1999,
nil) must be treated as an adjustment to dividends paid for purposes of
calculating earnings per share. Such adjustment is not required under Canadian
GAAP.
4. U.S. GAAP requires that the transfer of the Canadian Newspaper Group be
accounted for at historical values using "as-if pooling of interests"
accounting, resulting in no gain on the sale of properties and no additional
amount being ascribed to circulation.
5. U.S GAAP earnings for the six months and three months ended June 30, 1999
have been increased by $15,396,000 and $6,902,000, respectively as a result of a
restatement to include the effects of dividends accrued on the Series I, II, and
III preference shares which are treated as interest expense under Canadian GAAP,
but as dividends paid under U.S. GAAP. This adjustment had no impact on U.S.
GAAP earnings per share.
6. Effective January 1, 2000, the Company adopted on a retroactive basis new
Canadian accounting standards for income taxes which are comparable to the
related US accounting standards. As a result of this change, the Company will
not have any significant differences between Canadian and U.S. GAAP in respect
of income taxes for periods subsequent to January 1, 2000.
Under Canadian accounting standards, the Company is not required to restate
its comparative figures for prior years and the cumulative effect of this change
in accounting policy of $291,000,000 (net of related minority interest) has been
charged directly to retained earnings. Substantially all of this adjustment is
attributable to future income tax liabilities established in respect of amounts
ascribed to circulation on business acquisitions which are largely not
deductible for income tax purposes.
Under U.S. GAAP, the establishment of such future tax liabilities on
business acquisitions, would have resulted in additional goodwill being recorded
for an equivalent amount. The new Canadian accounting standard for income taxes
does not require the restatement of prior years' business acquisitions and
permits the adjustment otherwise made to goodwill under U.S. GAAP, to be made
directly to retained earnings (net of the related minority interest). As a
result of not restating comparative figures, differences between Canadian and
U.S. GAAP for income taxes still existed for the period prior to January 1,
2000.
<PAGE> 17
<TABLE>
<CAPTION>
TRANSFER AGENTS AND REGISTRARS MAJOR ELECTRONIC WEB SITES
<S> <C> <C>
Retractable Common Shares and Series II and Hollinger International http://www.hollinger.com
III Preference Shares: Telegraph http://www.telegraph.co.uk
Computershare Investor Services, Inc., Toronto http://www.UKMax.com
STOCK EXCHANGE LISTINGS http://www.thebestofbritish.com
The Retractable Common Shares are listed on The Chicago Sun-Times http://www.suntimes.com
Toronto Stock Exchange (stock symbol HLG.C) Chicago Network http://www.chicago-news.com
The Series II and III Preference Shares are listed on Jerusalem Post http://jpost.co.il
The Toronto Stock Exchange (trading symbols
HLG.PR.B and HLG.PR.C, respectively). Southam http://www.canada.com
INVESTOR INFORMATION UniMedia http://www.unimedia.ca
Holders of the Company's securities and other National Post http://www.nationalpost.com
interested parties seeking information about National Post Site http://www.canada.com
the Company should communicate with the
Executive Vice-President and Chief Financial
Officer, at 10 Toronto Street, Toronto,
Ontario M5C 2B7, Tel (416) 363-8721,
Fax (416) 364-0832.
SHARE INFORMATION
For information relating to Retractable Common
Shares and Series II and III Preference Shares
holdings, dividends, lost share certificates,
etc., please communicate with: Computershare
Investor Services, Inc. Tel: (416) 981-9633 or
1-800-663-9097 (toll free in Canada and U.S.)
Fax: (416) 981-9800
e-mail: [email protected]
</TABLE>
HOLLINGER INC. [Logo]
10 Toronto Street, Toronto, Ontario, M5C 2B7
General Enquiries: Telephone (416) 363-8721
Fax: (416) 364-2088
