Hollinger returns to profit on asset sales

Hollinger International Inc. bounced back from a $74.3-million (U.S.) loss in 2003 to earn a $234.7-million profit in 2004, mainly thanks to huge one-time gains from selling off great chunks of its publishing group.

Last year, Hollinger, once the core of Conrad Black's media empire, also spent $60.1-million in its legal fights against him.

Unaudited financial results for 2004, released yesterday, showed that the company generated a loss of $163.9-million from its continuing operations, which consist mainly of the Chicago Sun-Times newspapers, affiliated papers in the U.S. Midwest, and Canadian business magazines and community newspapers. Last year's sale of London's Telegraph Group and the Jerusalem Post produced a one-time gain of $398.6-million, more than enough to generate an overall profit of $2.59 a share.

In 2003, Hollinger lost 85 cents a share. In 2002, the overall loss was $230.6-million or $2.40 a share.

The money spent fighting lawsuits against Lord Black and others includes $26.6-million for the expenses of the special committee of Hollinger's board, which issued a report last fall accusing the Canadian media baron of conducting a "corporate kleptocracy" at the company.

There were also $15.5-million in legal costs related to the special committee's work, and another $18-million that was advanced to Lord Black and other shareholders under contracts that specified they had to be indemnified for legal costs.

Hollinger said it believes Lord Black is obliged to pay back $5.8-million of this amount because a Delaware court found that he breached his fiduciary duties to the company. Hollinger also took a financial hit in 2004 for the circulation scandal at the Sun-Times, where its audit committee found that the paper had been overstating circulation figures since 1998.

The company made restitution payments to advertisers, taking a $2.9-million hit in 2004, after recording a charge of $24.1-million in 2003.

Yesterday, the company said it has now reached a tentative settlement in the consolidated class-action suits that were filed by advertisers after the circulation scandal broke. It has agreed to pay out $7.7-million in cash, up to $7.3-million in free advertising or discounts, and as much as $5.8-million in fees and expenses.

Hollinger's financial statement reveals that it still generates about 16 per cent of its operating revenue from Canada, where it owns the Sherbrooke Record in Quebec, about a dozen small papers in British Columbia, and several dozen business magazines, directories and newsletters.

That Canadian revenue amounted to about $89.5-million in 2004, up from $80.5-million in 2003. Operating profit was $4.1-million in 2004, compared with a loss of $5-million the year before.

Hollinger stock closed up 5 cents to $10.50 on the News York Stock Exchange yesterday.