HLR Hollinger Intl CL A

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, +1-212-521-4826, , or Jeremy Fielding, +1-212-521-4825, Web site: http://www.hollingerinternational.com/

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