-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SWITQGWxelH6cS7rxtDeTAU8lrlr7t7E6Dfa5jC4h4ydqEY6tcTtGdsoXahIukBG iqZjMuZbVDo46IEcoEpL7w== /in/edgar/work/20000530/0000950135-00-003060/0000950135-00-003060.txt : 20000919 0000950135-00-003060.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950135-00-003060 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000529 FILED AS OF DATE: 20000530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLINGER INC CENTRAL INDEX KEY: 0000911707 STANDARD INDUSTRIAL CLASSIFICATION: [2711 ] IRS NUMBER: 135691211 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 000-22346 FILM NUMBER: 646345 BUSINESS ADDRESS: STREET 1: 1827 WEST 5TH AVE STREET 2: VANCOUVER BRITISH COLUMBIA CITY: CANADA V6J 1P5 STATE: A1 BUSINESS PHONE: 4163638721 MAIL ADDRESS: STREET 1: 10 TORONTO ST STREET 2: TORONTO ONTARIO CITY: TORONTA ONTARIO CANA STATE: A6 6-K 1 0001.txt HOLLINGER, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of May 2000 HOLLINGER INC. (Translation of registrant's name into English) 10 Toronto Street Toronto, Ontario M5C 2B7 CANADA (Address of principal executive offices) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F Form 40-F x (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes No x 2 EXHIBIT LIST
Sequential Exhibit Description Page Number 99.1 Press Release dated May 29, 2000 of Hollinger Inc. 99.2 Interim Report of Hollinger Inc. for the three months ended March 31, 2000.
2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 30, 2000 HOLLINGER INC. by: /s/ Charles G. Cowan, Q.C. -------------------------- Name: Charles G. Cowan, Q.C. Title: Vice-President and Secretary 3 EX-99.1 2 0002.txt PRESS RELEASE DATED MAY 29, 2000 OF HOLLINGER, INC 1 Exhibit 99.1 PRESS RELEASE HOLLINGER INC. HOLLINGER 2000 FIRST QUARTER RESULTS TORONTO, May 29, 2000 -- Hollinger Inc., (TSE: HLG.C) today announced its CONSOLIDATED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 with comparison to the three months ended March 31, 1999.
PER RETRACTABLE COMMON SHARE THREE MONTHS ENDED MARCH 31 THREE MONTHS ENDED MARCH 31 --------------------------- ---------------------------- 2000 1999 2000 1999 ----- ------ ------ ------ (MILLIONS OF CDN. DOLLARS) (CDN. DOLLARS) Total revenue 811.9 811.7 n/a n/a EBITDA 151.6 139.7 n/a n/a Net earnings before the effects of unusual items 2.0 (0.5) $ 0.05 $ (0.01)
HOLLINGER INC. CONSOLIDATED STATEMENT OF EARNINGS ($000'S)
THREE MONTHS ENDED MARCH 31 --------------------------------- 2000 1999 -------- --------- REVENUE Sales $809,506 $ 804,007 Investment and other income 2,385 7,714 -------- --------- 811,891 811,721 -------- --------- EXPENSES Cost of sales and expenses 657,859 664,333 Depreciation and amortization 55,803 58,659 Interest expense 66,101 62,319 -------- --------- 779,763 785,311 -------- --------- NET EARNINGS (LOSS) IN EQUITY ACCOUNTED COMPANIES 639 (223) NET FOREIGN CURRENCY GAINS (LOSSES) 490 (1,239) -------- --------- EARNINGS BEFORE THE UNDERNOTED 33,257 24,948 Unusual items 37,194 323,162 Income taxes (28,121) (135,769) Minority interest (29,366) (102,932) -------- --------- NET EARNINGS $ 12,964 $ 109,409 ======== ========= NET EARNINGS PER RETRACTABLE COMMON SHARE $ 0.35 $ 3.33 ======== =========
- more - 2 Earnings before unusual items, income taxes and minority interest were $33.3 million for the three months ended March 31, 2000 as compared to $24.9 million for 1999. Reported earnings for the quarter compared to last year have been affected by several major items. The National Post EBITDA loss for the first quarter 2000 was $11.1 million, a $6.4 million improvement over the EBITDA loss of $17.5 million in the first quarter of 1999, reflecting a 44% increase in revenue year-over-year. Unusual items in 1999 include the gain on sale of community newspapers by Hollinger International Inc. In 2000, unusual items include gains on the disposition of the Company's interest in Trip.com and a partial disposition of its interest in Interactive Investor International (III). The Company retains a 29% interest in III. Interest expense for the quarter rose over 1999 as a result of increased interest rates and increased debt levels. First quarter revenue from Internet operations grew from $1.8 million in 1999 to $6.4 million in 2000 reflecting the expanding success of these operations. Internet related EBITDA losses grew from $2.4 million to $5.8 million over the same time frame as Hollinger continues to build and improve various Internet sites associated with the newspaper operations. Hollinger is a Canadian-based international newspaper company that, through its subsidiaries, is engaged in the publishing, printing and distribution of newspapers and magazines in the United Kingdom, the United States, Canada and Israel. Web sites are operated at all of its major newspapers. It owns the Canada.com national portal site and a variety of other specialized sites. Through its Hollinger Digital subsidiary, it has taken investment positions in various Internet-based companies. More detailed information about the operations of Hollinger International Inc., and its divisions and subsidiaries may be found in their press release dated April 27, 2000. For more information please call: J. A. Boultbee Executive Vice-President and Chief Financial Officer Hollinger Inc. (416) 363-8721 EX-99.2 3 0003.txt INTERIM REPORT OF HOLLINGER, INC. 1 EXHIBIT 99.2 ON PAPER ONLINE 1 Interim Report 3 Months Ended March 31,2000 Hollinger Inc. 2 CONSOLIDATED FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31 2000 1999 -------------------- (millions of dollars) Total revenue 811.9 811.7 ----- ----- Net earnings 13.0 109.4 ----- ----- Cash flow provided by operations (note) 77.6 94.4 ----- ----- (dollars) Net earnings per retractable common share 0.35 3.33 ----- ----- Cash flow provided by operations per retractable common share (note) 2.09 2.87 ----- -----
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. 3 TO THE SHAREHOLDERS ============================================================================== FIRST QUARTER RESULTS Earnings before unusual items, income taxes and minority interest were $33.3 million for the three months ended March 31, 2000 as compared to $24.9 million for 1999. Net earnings for the period ended March 31, 2000 amounted to $13.0 million or $0.35 per share compared with $109.4 million or $3.33 per share in 1999. Excluding the net effect of unusual items, net earnings were $2.0 million, or $0.05 per share in the first quarter of 2000 compared with a net loss of $0.5 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 first quarter 2000 was $11.1 million, a $6.4 million improvement over the EBITDA loss of $17.5 million in the first quarter of 1999, reflecting a 44% increase in revenue year-over-year. Unusual items in 1999 include the gain on sale of community newspapers by Hollinger International Inc. In 2000, unusual items include gains on the disposition of the Company's interest in Trip.com and a partial disposition of its interest in Interactive Investor International (III). The Company retains a 29% interest in III. Interest expense for the quarter rose over 1999 as a result of increased interest rates and increased debt levels. First quarter revenue from Internet operations grew from $1.8 million in 1999 to $6.4 million in 2000 reflecting the expanding success of these operations. Internet related EBITDA losses grew from $2.4 million to $5.8 million over the same time frame as Hollinger continues to build and improve various Internet sites associated with the newspaper operations. 4 ============================================================================== CHANGE IN ACCOUNTING POLICY 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 corporate income taxes. Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. Pursuant to the deferral method, which was applied prior to January 1, 2000, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes. Deferred income tax was determined using the tax rate applicable for the year of calculation. Under the deferral method, deferred taxes were not adjusted for subsequent changes in tax rates. The cumulative effect of adopting this new standard resulted in a net charge to retained earnings as at January 1, 2000 of approximately $291,000,000. 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. Prior years' financial statements have not been restated for this change in accounting policy. RESTRUCTURING PROCESS On April 25, 2000, Hollinger International announced that its board of directors had approved a process whereby most of the company's community newspaper assets will be made available for sale and some of its metropolitan newspaper assets will be made available for merger or affiliation on terms consistent with the full enterprise value of such assets. Morgan Stanley Dean Witter has 5 ============================================================================== been retained to act as the company's professional adviser and in that role will coordinate the process. Cash proceeds from such transactions will be utilized to reduce debt, to purchase and cancel Hollinger International's own shares and, if deemed advisable, to distribute to its shareholders. As has been stated in successive annual reports and at shareholders' meetings, 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 these assets is to sell some of them and apply the proceeds to debt reduction and share cancellation. HOLLINGER INTERNATIONAL INC. Hollinger International's operations are composed of the Chicago Group including the Chicago Sun-Times, the Community Group which includes The Jerusalem Post, the U.K. Newspaper Group, consisting of the Telegraph Group Limited, and the Canadian Newspaper Group (held by HCPH) primarily consisting of Southam Inc. and Hollinger Canadian Newspapers, Limited Partnership. TELEGRAPH GROUP LIMITED EBITDA for the three months ended 31 March 2000 was (pound)28.5 million, compared to (pound)24.3 million during the corresponding period in 1999, an increase of over 17%. The ABC net circulation figure for The Daily Telegraph for the period October 1999 to March 2000 was 1,032,745, more than 309,000 ahead of its nearest competitor The Times. The Daily Telegraph sold an average of 1,038,079 copies during March 2000. The ABC net circulation figure for The Sunday Telegraph for the period October 1999 to March 2000 was 819,167. The ABC weekly circulation figure for The Spectator magazine for the period July to December 1999 was 58,459 compared to 57,247 for the same period in 1998. 6 Advertising revenue in local currency for the first quarter was up 17.1% year on year. Classified sections continue to perform well, in particular the recruitment, travel and property sections where revenue has increased year-on-year by 12.4%, 11.9% and 23.1% respectively. Display advertising also performed strongly during the first quarter with an increase of 23.2% over the same period last year. In January a new separate travel supplement was added to The Sunday Telegraph package and in March, The Sunday Telegraph was awarded National Newspaper of the Year in the British Press Awards. Hollinger Telegraph New Media Limited (HTNM) was established early in 2000 as a separate entity, to drive Hollinger's UK and European online and digital activities. HTNM now incorporates the Electronic Telegraph network which currently has 18 websites. HTNM also oversees Hollinger's interests in UKMax.com a UK portal, handbag.com, a joint venture with Boots which has established itself as the leading woman's portal site in the UK, and Interactive Investor International (29% interest), a leading website for financial investors. Electronic Telegraph (ET) is now focusing on the further development of commercially-driven channels which are separate businesses built around the News and Features hub of ET. ET remains the pre-eminent online news service in the UK, currently reaching up to 75,000 individuals per day, and serving 16 million page impressions per month. The ET sales team which generates banner, sponsorship and e-commerce revenues has greatly increased revenues by 138% over the same period last year. Significant investment is currently being made in the infrastructure delivering ET to exploit the current technology and application systems now available which are materially better than when ET was launched over five years ago. THE CHICAGO GROUP The Chicago Group revenue in local currency grew 2% for the first quarter from 1999 to 2000 primarily resulting from increased advertising revenue. National advertising was up year-over-year, 7 driven by telecom, dot-com and financial advertising. Classified and retail advertising were basically flat versus last year; however, the Chicago Sun-Times has recently announced certain organizational changes which should support future advertising growth. During the quarter, Classifieds Chicago (a joint venture with Copley Chicago Newspapers and Paddock Publications, the parent of the Daily Herald), which includes classified advertising from over 100 titles in the Chicago area, was launched to support growth in Internet-related classified advertising revenue. Also during the quarter, development has continued on an enhanced Chicago Sun-Times site adding new e-commerce opportunities with several partners and improved features and functionality. EBITDA in local currency for the quarter increased 1% over 1999. Newsprint expense has declined year-over-year as first quarter 2000 pricing is still lower than first quarter 1999 by approximately 14%. THE COMMUNITY GROUP In February 1999, the Community Group sold approximately 45 newspapers with a total paid daily circulation of approximately 296,000. This resulted in an overall decrease in Community Group operating revenue, EBITDA and operating income. On a "same store" basis in local currency the Community Group first quarter 2000 operating revenue increased 12% from 1999 and EBITDA increased 11% from 1999. CANADIAN NEWSPAPER GROUP First quarter operating revenue for the Canadian Newspaper Group was $406.6 million compared with $387.2 million in 1999. EBITDA for the first quarter of 2000 was $62.3 million compared to $54.1 million in 1999. This represents a growth from 1999 in EBITDA of 15.2%. The improvement in EBITDA was in large part, the result of improved operating results at the National Post partly offset by increased losses from internet operations. The National Post EBITDA loss for the first 8 quarter 2000 was $11.1 million, a $6.4 million improvement over the EBITDA loss of $17.5 million in the first quarter of 1999, reflecting a 44% increase in revenue year-over-year. EBITDA losses from internet operations were $4.6 million in 2000 compared with a loss of $2.2 million in 1999. All of the major units performed well and the Calgary Herald was unaffected, both in circulation and profitability, by the strike of certain journalists and mailroom employees that continued throughout the quarter. 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 RETRACTION PRICE OF RETRACTABLE COMMON SHARES The retraction price of the outstanding retractable common shares of the Company as of April 3, 2000 was $10.00 per share. SHARE CAPITAL INFORMATION As at May 17, 2000, the issued shares and options to purchase retractable common shares of the Company were as follows: Preference shares Retractable common shares Options 12,508,198 Series II 37,132,105 928,000 10,147,225 Series III 9 GENERAL At March 31, 2000, Hollinger's publishing interests included 77 daily newspapers and 302 non-daily newspapers. Total paid daily circulation, including The Daily Telegraph and the Chicago Sun-Times, was approximately $4.0 million. The total circulation of the non-dailies was approximately $7.5 million. Web sites are operated at all of the major newspapers. Through its Hollinger Digital subsidiary, it operates the Canada.com national portal site and a variety of other specialized sites. DIVIDENDS A regular quarterly dividend of 15 (cent) per retractable common share has been declared payable on June 10, 2000 to shareholders of record on May 26, 2000. May 17, 2000 Conrad M. Black (signed) Chairman of the Board and Chief Executive Officer 10 MARKET VALUE INFORMATION BALANCE SHEET (in thousands of dollars except where noted)
March 31 December 31 2000 1999 ----------- ----------- (not audited) ASSETS Investment in Hollinger International................. $ 748,439 $ 903,753 Other investments..................................... 12,285 12,004 Other assets.......................................... 38,342 26,775 ----------- ----------- $ 799,066 $ 942,532 ----------- ----------- LIABILITIES Exchangeable shares................................... $ 253,433 $ 285,211 Other liabilities..................................... 309,865 310,583 ----------- ----------- 563,298 595,794 ----------- ----------- NET ASSETS REPRESENTING SHAREHOLDERS' EQUITY Capital stock......................................... 315,229 315,229 Net unrealized appreciation of investments............ 44,365 181,798 Net unrealized increase in liabilities................ 32,340 15,429 Retained earnings..................................... (156,166) (165,718) ----------- ----------- 235,768 346,738 ----------- ----------- $ 799,066 $ 942,532 ----------- ----------- RETRACTABLE COMMON SHARES OUTSTANDING................. 37,196,415 37,196,415 ----------- ----------- NET ASSET VALUE PER RETRACTABLE COMMON SHARE.......... $ 6.34 $ 9.32 =========== ===========
STATEMENT OF INCOME AND EXPENSES (not audited) (in thousands of dollars)
THREE MONTHS ENDED MARCH 31 ------------------------ 2000 1999 -------- -------- INCOME Dividends ...................................... $ 11,340 $ 12,774 Interest and other ............................. 1,105 3,412 Net management fees ............................ 5,519 4,593 -------- -------- 17,964 20,779 -------- -------- EXPENSES Administrative and other expenses .............. 2,955 5,338 Interest expense ............................... 7,643 13,996 -------- -------- 10,598 19,334 -------- -------- Income before the undernoted ................... 7,366 1,445 Unusual items .................................. 70 21,050 Income tax expense ............................. (583) (665) -------- -------- Net income for the period ...................... $ 6,853 $ 21,830 -------- -------- EARNINGS PER RETRACTABLE COMMON SHARE .......... $ 0.18 $ 0.66 -------- --------
11 SCHEDULE OF SEGMENTED EARNINGS (not audited) (in thousands of dollars)
U.K. CANADIAN CORPORATE CHICAGO COMMUNITY NEWSPAPER NEWSPAPER AND CONSOLIDATED GROUP GROUP GROUP GROUP OTHER TOTAL ---------- ---------- ---------- ---------- ---------- ------------ THREE MONTHS ENDED MARCH 31, 2000 ----------------------------------------------------------------------------- Sales revenue .......... $ 135,385 $ 28,923 $ 238,570 $ 406,628 $ -- $ 809,506 Cost of sales and expenses ............. 115,577 24,144 172,152 344,336 1,650 657,859 ---------- ---------- ---------- ---------- ---------- ---------- Income before interest, taxes, depreciation and amortization...... 19,808 4,779 66,418 62,292 (1,650) 151,647 Depreciation and amortization ......... 7,249 2,301 15,149 29,479 1,625 55,803 ---------- ---------- ---------- ---------- ---------- ---------- Operating income........ $ 12,559 $ 2,478 $ 51,269 $ 32,813 $ (3,275) $ 95,844 ---------- ---------- ---------- ---------- ---------- ---------- Total assets ........... $ 757,337 $ 246,970 $1,203,143 $3,105,231 $ 316,799 $5,629,480 ---------- ---------- ---------- ---------- ---------- ---------- Expenditures on capital assets................ $ 13,581 $ 1,439 $ 8,110 $ 13,694 $ 157 $ 36,981 ---------- ---------- ---------- ---------- ---------- ---------- THREE MONTHS ENDED MARCH 31, 1999 ----------------------------------------------------------------------------- Sales revenue .......... $ 137,457 $ 50,086 $ 228,006 $ 387,158 $ 1,300 $ 804,007 Cost of sales and expenses.............. 115,911 41,009 168,184 333,077 6,152 664,333 ---------- ---------- ---------- ---------- ---------- ---------- Income before interest, taxes, depreciation and amortization...... 21,546 9,077 59,822 54,081 (4,852) 139,674 Depreciation and amortization.......... 8,645 4,375 15,696 28,129 1,814 58,659 ---------- ---------- ---------- ---------- ---------- ---------- Operating income ....... $ 12,901 $ 4,702 $ 44,126 $ 25,952 $ (6,666) $ 81,015 ---------- ---------- ---------- ---------- ---------- ---------- Total assets ........... $ 672,374 $ 415,674 $1,360,313 $3,069,469 $ 341,423 $5,859,253 ---------- ---------- ---------- ---------- ---------- ---------- Expenditures on capital assets................ $ 22,567 $ 3,588 $ 13,480 $ 17,352 $ 1,088 $ 58,075 ---------- ---------- ---------- ---------- ---------- ----------
NOTE 1. Corporate and Other revenue includes revenues of miscellaneous newspaper operations. 12 CONSOLIDATED BALANCE SHEET (in thousands of dollars)
March 31 December 31 2000 1999 ---------- ---------- (not audited) ASSETS CURRENT ASSETS Cash .............................................. $ 62,579 $ 74,441 ---------- ---------- Accounts receivable ............................... 526,733 528,072 Inventory ......................................... 64,429 50,089 653,741 652,602 INVESTMENTS ....................................... 183,378 159,744 CAPITAL ASSETS .................................... 3,898,395 3,915,168 GOODWILL AND OTHER ASSETS ......................... 893,966 922,920 ---------- ---------- $5,629,480 $5,650,434 ---------- ---------- LIABILITIES CURRENT LIABILITIES Bank indebtedness ................................. $ 311,227 $ 307,961 Accounts payable and accrued expenses ............. 540,670 603,441 Income taxes payable .............................. 55,260 73,863 Current portion of long-term debt ................. 69,891 71,437 Exchangeable shares ............................... 52,647 51,421 ---------- ---------- 1,029,695 1,108,123 LONG-TERM DEBT .................................... 2,470,581 2,393,979 EXCHANGEABLE SHARES ............................... 200,786 233,790 Deferred unrealized gain .......................... 37,992 21,139 Future income taxes ............................... 925,766 401,294 ---------- ---------- 4,664,820 4,158,325 ---------- ---------- MINORITY INTEREST AND DEFERRED CREDITS ............ 1,122,890 1,353,221 ---------- ---------- SHAREHOLDERS' EQUITY Capital stock ..................................... 315,229 315,229 Deficit (note 1) .................................. (464,351) (180,732) ---------- ---------- (149,122) 134,497 Equity adjustment from foreign currency translation (9,108) 4,391 ---------- ---------- (158,230) 138,888 ---------- ---------- $5,629,480 $5,650,434 ========== ==========
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. 13 CONSOLIDATED STATEMENT OF EARNINGS (not audited) (in thousands of dollars)
THREE MONTHS ENDED MARCH 31 ---------------------- 2000 1999 --------- --------- REVENUE Sales ............................................ $ 809,506 $ 804,007 Investment and other income ...................... 2,385 7,714 --------- --------- 811,891 811,721 --------- --------- EXPENSES Cost of sales and expenses ....................... 657,859 664,333 Depreciation and amortization .................... 55,803 58,659 Interest expense ................................. 66,101 62,319 --------- --------- 779,763 785,311 --------- --------- NET EARNINGS (LOSS) IN EQUITY ACCOUNTED COMPANIES ........................................ 639 (223) --------- --------- NET FOREIGN CURRENCY GAINS(LOSSES) ............... 490 (1,239) --------- --------- EARNINGS BEFORE THE UNDERNOTED ................... 33,257 24,948 Unusual items .................................... 37,194 323,162 Income taxes ..................................... (28,121) (135,769) Minority interest ................................ (29,366) (102,932) --------- --------- NET EARNINGS ..................................... $ 12,964 $ 109,409 ========= ========= (dollars) NET EARNINGS PER RETRACTABLE COMMON SHARE Basic ............................................ $ 0.35 $ 3.33 --------- --------- Fully diluted .................................... $ 0.29 $ 2.87 --------- --------- CASH FLOW PROVIDED BY OPERATIONS PER RETRACTABLE COMMON SHARE Basic ............................................ $ 2.09 $ 2.87 --------- --------- Fully diluted .................................... $ 2.04 $ 2.70 --------- ---------
NOTE 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 and other costs and foreign currency translation adjustment. 14 CONSOLIDATED STATEMENT OF CASH FLOW (not audited) (in thousands of dollars)
THREE MONTHS ENDED MARCH 31 ------------------------- 2000 1999 --------- --------- CASH PROVIDED BY (USED FOR): OPERATIONS Net earnings ................................... $ 12,964 $ 109,409 Unusual items .................................. (37,194) (323,162) Current income taxes related to unusual items... 7,325 144,383 Items not involving cash: Depreciation and amortization .................. 55,803 58,659 Future income taxes ............................ 10,207 1,633 Net earnings in equity accounted companies, net of dividends received..................... (519) 223 Minority interest .............................. 29,366 102,932 Other .......................................... (352) 302 --------- --------- CASH FLOW PROVIDED BY OPERATIONS ............... 77,600 94,379 Change in non-cash operating working capital.... (166,941) 427,530 Cash used for discontinued operations........... (473) (520) Other costs .................................... (3,005) (1,911) --------- --------- (92,819) 519,478 --------- --------- FINANCING Redemption and cancellation of capital stock.... -- (821) Redemption and cancellation of exchangeable shares ....................................... (962) -- Issue of common shares of subsidiaries.......... -- 56 Capital stock of subsidiaries purchased for cancellation by subsidiaries ................. -- (68,162) Increase (decrease) in long-term debt and deferred liabilities.......................... 129,767 (270,199) Decrease in capital lease obligations........... (700) (363) Retirement of liquid yield option notes......... -- (122) Dividends ...................................... (5,580) (4,935) Dividends and distributions paid to minority interests..................................... (16,745) (13,469) --------- --------- 105,780 (358,015) --------- --------- INVESTMENT Proceeds on disposal of fixed assets............ 1,775 370 Additions to fixed assets and assets under capital leases................................ (27,529) (43,637) Additions to investments ....................... (21,504) (956) Proceeds on disposal of investments............. 35,826 2,659 Additions to circulation ....................... (9,452) (14,438) Increase in goodwill and other assets........... (1,376) (41,009) Investment in newspaper operations ............. (2,471) (600,240) Proceeds on disposal of newspaper operations ... -- 557,887 --------- --------- (24,731) (139,364) --------- --------- Effect of exchange rate changes on cash............................... (92) (1,415) --------- --------- (DECREASE) INCREASE IN CASH POSITION ........... (11,862) 20,684 CASH AT BEGINNING OF PERIOD .................... 74,441 128,061 --------- --------- CASH AT END OF PERIOD .......................... $ 62,579 $ 148,745 ========= =========
15 RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (not audited) (in thousands of Canadian dollars)
THREE MONTHS ENDED MARCH 31 ----------------------- 2000 1999 --------- --------- (note 5) NET EARNINGS NET EARNINGS FOR THE PERIOD BASED ON CANADIAN GAAP ............................. $ 12,964 $ 109,409 Capitalization of betterments, net of related amortization ...................... (1,228) (3,234) Acquired tax losses (note 6) ....................... -- 173 Foreign exchange (note 2) .......................... (1,003) -- Compensation to employees .......................... -- (103) Business combinations (note 4) ..................... 233 233 Adjustment to tax provision (note 6) ............... -- (4,000) Financial instruments (note 3) ..................... 3,687 9,402 Other .............................................. 19 38 --------- --------- NET EARNINGS FOR THE PERIOD BASED ON U.S. GAAP .......................... $ 14,672 $ 111,918 --------- --------- BASIC EARNINGS PER RETRACTABLE COMMON SHARE: ....... (dollars) Earnings before extraordinary items (note 3) ....... $ 0.77 $ 3.14 --------- --------- Net earnings ....................................... $ 0.77 $ 3.14 --------- --------- DILUTED EARNINGS PER RETRACTABLE COMMON SHARE: Earnings before extraordinary items ................ $ 0.72 $ 2.86 --------- --------- Net earnings ....................................... $ 0.72 $ 2.86 --------- ---------
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 three months ended March 31, 2000 and March 31, 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. 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 $16,683,000 as at March 31, 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 three months ended March 31, 1999 have been increased by $8,494,000 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. 16 TRANSFER AGENTS AND REGISTRARS MAJOR ELECTRONIC WEB SITES Retractable Common Shares and Series II and Hollinger International http://www.hollinger.com III Preference Shares: Telegraph http://www.telegraph.co.uk Montreal Trust Company of Canada, 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 NVESTOR INFORMATION UniMedia http://www.unimedia.ca National Post http://www.nationalpost.com Holders of the Company's securities and other 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: Montreal Trust Company of Canada, Tel: (416) 981-9633 or 1-800-663-9097 (toll free in Canada and U.S.) Fax: (416) 981-9800 e-mail: faq@montrealtrust.com Hollinger Inc. 10 Toronto Street, Toronto, Ontario, M5C 2B7 General Enquiries: Telephone (416) 363-8721 Fax: (416) 364-2088
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