UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Commission File No. 1-14164

HOLLINGER INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code

(212) 586-5666

      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 o          No þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

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

EXPLANATORY NOTE

      The Company is filing this quarterly report on Form 10-Q for the three and nine month periods ended September 30, 2004 following its review of the report of the Special Committee of Independent Directors (the “Special Committee”). The Company’s Board of Directors formed the Special Committee on June 17, 2003 to investigate, among other things, allegations described in a beneficial ownership report on Schedule 13D filed with the Securities and Exchange Commission (“SEC”) by Tweedy, Browne & Company, LLC, an unaffiliated stockholder of the Company, on May 19, 2003, as amended on June 11, 2003, and any other matters the Special Committee determined should be investigated. The Special Committee filed its report with the U.S. District Court for the Northern District of Illinois on August 30, 2004. The Company included the full text of the report as an exhibit to a current report on Form 8-K filed with the SEC on August 31, 2004, as amended by a current report on Form 8-K/ A filed with the SEC on December 15, 2004.

      The Company previously made public its need to review the Special Committee’s report before it could complete its annual report on Form 10-K for the year ended December 31, 2003 and its quarterly reports on Form 10-Q for each of the three quarters in 2004. The annual report on Form 10-K for the year ended December 31, 2003 was filed on January 18, 2005.

TABLE OF CONTENTS

INDEX

HOLLINGER INTERNATIONAL INC.

FORWARD LOOKING STATEMENTS

      This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. These statements relate to future events or the Company’s future financial performance with respect to its financial condition, results of operations, business plans and strategies, operating efficiencies, competitive positions, growth opportunities, plans and objectives of management, capital expenditures, growth and other matters. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance and achievements of the Company or the newspaper industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions and such expectations may prove to be incorrect. Some of the things that could cause the Company’s actual results to differ substantially from its current expectations are:

      The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Company does not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption “Risk Factors” in the Company’s Form  10-K for the year ended December 31, 2003.

      The Company operates in a continually changing business environment, and new risks emerge from time to time. Management cannot predict such new risks, nor can it assess either the impact, if any, of such risks on the Company’s businesses or the extent to which any risk or combination of risks may cause actual results to differ materially from those projected in any forward-looking statements. In light of these risks, uncertainties and assumptions, it should be kept in mind that any forward-looking statement made in this quarterly report on Form 10-Q might not occur.

PART I. FINANCIAL INFORMATION

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended September 30, 2004 and 2003

(Amounts in thousands, except per share data)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three and Nine Months Ended September 30, 2004 and 2003

(Amounts in thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2004 and December 31, 2003

(Amounts in thousands except share data)

See accompanying notes to condensed consolidated financial statements.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2004 and 2003

(Amounts in thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

      The accompanying condensed consolidated financial statements of Hollinger International Inc. and subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in comprehensive annual financial statements presented in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission (“SEC”) rules and regulations.

      Management believes that the accompanying condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial condition, results of operations and cash flows for the periods presented. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 filed with the SEC on January 18, 2005.

      The Company is a subsidiary of Hollinger Inc., a Canadian corporation, which at May 4, 2005 held, directly or indirectly, approximately 17.4% of the combined equity and approximately 66.8% of the combined voting power of the outstanding common stock of the Company.

      The condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. At September 30, 2004, the Company’s interest in Hollinger Canadian Newspapers, Limited Partnership (“Hollinger L.P.”) was approximately 87%.

      All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made in the 2003 financial statements to conform to the 2004 presentation.

      During the course of preparing its consolidated financial statements for the year ended December 31, 2003, the Company determined that certain previously reported financial information required restatement arising from the findings of the special committee of independent directors established by the Board of Directors on June 17, 2003 (the “Special Committee”). See Notes 11 and 14. The accompanying condensed consolidated financial statements for the three and nine month periods ended September 30, 2003 have been restated to record additional accruals for tax contingencies to cover interest that the Company may be required to pay. The effect of this restatement resulted in an increase to income tax expense of $1.2 million and $3.4 million for the three and nine month periods ended September 30, 2003, respectively. As a result, the loss from continuing operations and basic loss per share from continuing operations increased by $1.2 million, or $0.01 per share, respectively, for the three months ended September 30, 2003 and the earnings from continuing operations and basic earnings per share from continuing operations decreased by $3.4 million, or $0.04 per share, respectively, for the nine months ended September 30, 2003.

      In addition, as of September 30, 2003 and December 31, 2002, the Company has reclassified overdrafts which were reflected as a reduction of “Cash and cash equivalents” in prior periods to “Accounts payable and accrued expenses”. This reclassification has been reflected in the accompanying Condensed Consolidated

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Statement of Cash Flows for the nine months ended September 30, 2003 and affected the 2003 cash and cash equivalents by $23.8 million and $27.0 million at the beginning and end of the period, respectively, and the changes in working capital accounts, net by $3.2 million.

      Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). SFAS No. 143 addresses the recognition and measurement of obligations associated with the retirement of tangible long-lived assets. There was no material impact on the consolidated financial statements on adoption of this standard.

      In April 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”). SFAS No. 145 addresses, among other things, the income statement treatment of gains and losses related to debt extinguishments requiring that such expenses no longer be treated as extraordinary items unless the items meet the definition of extraordinary per APB Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. As a result of the Company’s adoption of SFAS No. 145, losses of $38.2 million largely incurred on the January 22, 2003 extinguishment of Senior Subordinated Notes have been included in “Other income (expense), net” for the nine month period ended September 30, 2003.

      As described in Note 12, the Company fully repaid all amounts outstanding under its senior credit facility (the “Senior Credit Facility”) on July 30, 2004 ($213.4 million) with proceeds from the sale of the Telegraph Group Limited (“Telegraph Group”) and expensed the related deferred financing costs of $5.2 million. These costs are reflected in “Gain from disposal of business segment (net of income taxes)” in the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2004 and the related indebtedness is included in “Liabilities of operations to be disposed of” in the Condensed Consolidated Balance Sheet at December 31, 2003. The Company also completed a tender offer for the retirement of the 9% Senior Notes due 2010 (the “9% Senior Notes”). Approximately $290.6 million, or 97%, of the 9% Senior Notes were tendered for retirement on July 30, 2004 and all covenants were removed from the untendered notes. In addition, $3.4 million in principal of the remaining 9% Senior Notes was purchased on the open market for approximately $3.9 million and retired during September 2004. The cost of these early retirements was $60.4 million, including expensing of related deferred financing costs of $9.2 million, which is reflected in “Other income (expense), net” in the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2004. See Note 13(b) regarding termination of the related swap arrangements.

      In December 2003, the FASB issued SFAS No. 132 (Revised) — “Employers’ Disclosures about Pensions and Other Post-Retirement Benefits” (“SFAS No. 132R”) — that modified FASB disclosure requirements for pensions and other post-retirement benefit plans. SFAS No. 132R requires additional disclosures about defined benefit pension plans and other post-retirement benefit plans. It does not change the way liabilities are valued or how expenses are calculated for those plans.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      SFAS No. 132R requires companies to provide more complete details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. In addition to expanded disclosures, SFAS No. 132R improves information available to investors in interim financial statements, and requires, among other things, additional disclosures about the assets held in employer sponsored pension plans, disclosures relating to plan asset investment policy and practices, disclosure of expected contributions to be made to the plans and expected benefit payments to be made by the plans. SFAS No. 132R is generally effective for fiscal years ended after December 31, 2003 and for quarters beginning after December 31, 2003. See Note 16 which contains the additional disclosures required by SFAS No. 132R.

      The Company uses the intrinsic value based method of accounting for its stock-based compensation arrangements. Stock options granted to employees of The Ravelston Corporation Limited (“Ravelston”), the parent company of Hollinger Inc., are recorded using the fair value based method and are reflected as a dividend in kind. During the three and nine month periods ended September 30, 2004, such dividends amounted to nil, as no stock options were granted.

      Had the Company determined compensation costs based on the fair value of its stock options at the grant date under SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company’s net earnings (loss) and net earnings (loss) per share would have been adjusted to the pro forma amounts indicated in the following table:

      The Company has corrected certain assumptions used in error in the first three quarters of 2003, in the calculation of the fair value of stock options issued to employees of the Company and to employees of Ravelston. The corrections affected the estimated life of the options issued and the volatility. The assumptions listed below, and the pro forma amounts indicated in the preceding table, reflect such corrections.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      The fair value of each stock option granted was estimated on the date of grant for pro forma disclosure purposes using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and nine month periods ended September 30, 2003: dividend yield of 3.39%; expected volatility of 36.18%; risk-free interest rate of 2.69%; expected lives of 5 years. Weighted average fair value of options granted by the Company during the three and nine month periods ended September 30, 2003 was $2.41. As the Company has not granted any new stock options during 2004, the expense recognized during 2004 represents the variable expense of the stock options modified in prior periods, the value of deferred stock units issued and the modification of certain options as discussed following.

      On January 14, 2004, the Company issued 68,494 Deferred Stock Units (“DSU’s”) pursuant to the 1999 Stock Incentive Plan. Each DSU is convertible into one share of Class A Common Stock upon the earliest to occur of (i) the grantee’s resignation from the Company or termination of employment, (ii) the date falling one business day before the date of any change in control, as defined, or (iii) the death of the grantee. The value of the DSU’s on the date of issuance ($1.1 million) was recognized as employee compensation expense with an increase to additional paid in capital on such date. The DSU’s are reflected in the basic earnings per share computation upon vesting (immediately for all DSU’s issued in 2004).

      Effective May 1, 2004, the Company suspended option exercises under its stock option plans until such time that the Company again becomes current with its reporting obligations under the Securities Exchange Act of 1934 and the Company’s registration statement with respect to these shares becomes effective (the “Suspension Period”). The suspension does not affect the vesting schedule with respect to previously granted options. In addition, the terms of the option plans generally provide that participants have 30 days following the date of termination of employment with the Company to exercise options that were exercisable on the date of termination. If the employment of a participant is terminated during the Suspension Period, the Company will extend the 30-day exercise period to provide participants with 30 days after the conclusion of the Suspension Period to exercise vested options. The extension of the exercise period does not affect, or extend, the contractual life of the options.

      As a result of the Company’s inability to issue common stock upon the exercise of stock options during the Suspension Period, the exercise period with respect to those stock options which would have been forfeited during the Suspension Period has been extended to a date that is thirty days following the Suspension Period. These extensions constitute amendments to the life of the stock options, for those employees expected to benefit from the extension, as contemplated by Financial Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation” (“FIN 44”). Under FIN 44, the Company is required to recognize compensation expense for the modification of the option grants. The additional compensation charge for the affected options, calculated as the difference between the intrinsic value on the award date and the intrinsic value on the modification date, amounted to nil and $5.4 million for the three and nine months ended September 30, 2004, respectively.

      Certain former non-employee directors and officers were granted similar extensions. The compensation charges for those modifications were calculated in accordance with Emerging Issues Task Force Issue 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The compensation charges for the affected options amounted to nil and $1.9 million for the three and nine months ended September 30, 2004, respectively.

Note 5 — Acquisitions

      The Company, through a 70% owned subsidiary, completed an acquisition of a newspaper in Alberta, Canada on September 30, 2004 for Cdn.$1.9 million. This acquisition is not considered material and the Company does not expect it to have a significant impact on its consolidated financial position or results of operations.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      At September 30, 2004, included in “Other current assets” on the Condensed Consolidated Balance Sheet, are the following assets related to the Chicago Sun-Times premises and 401 N. Wabash Venture LLC (collectively, the “401 N. Wabash Venture”) which have been identified as “Assets held for sale”.

      In June 2004, the Company announced that it had entered into an agreement to sell the 401 N. Wabash Venture for $73.0 million. The Company received $4.0 million in June 2004, and the balance of approximately $66.7 million, net of closing costs and adjustments, was received in cash at closing on October 15, 2004. The resulting gain before taxes on the transaction, which will be recognized in the fourth quarter of 2004, is approximately $44.2 million. The Chicago Sun-Times has entered into a 15-year operating lease for new office space and incurred capital expenditures of approximately $10.3 million related to leasehold improvements and other property, plant and equipment through September 30, 2004.

      At December 31, 2003, the Company owned corporate apartments in both Chicago and New York and an aircraft which were considered non-core assets. During the second quarter of 2004, the apartments were sold for net proceeds of $3.2 million resulting in a gain on sale of $0.8 million and the aircraft was sold for $7.1 million resulting in a net gain on sale of $0.1 million.

      In November 2003, the Company announced that the Board of Directors had retained Lazard Frères & Co. LLC and Lazard & Co., Limited (collectively, “Lazard”) as financial advisor to explore alternative strategic transactions on the Company’s behalf (the “Strategic Process”), including a possible sale of the Company, a sale of one or more of its major properties, or other transactions.

      As part of the Strategic Process, in June 2004, the Company agreed to terms and signed an agreement to sell The Daily Telegraph, The Sunday Telegraph, The Weekly Telegraph, telegraph.co.uk, and The Spectator and Apollo magazines (collectively, the “Telegraph Group”). Under the terms of the agreement, Press Acquisitions Limited acquired all of the outstanding shares of the Telegraph Group, representing substantially all of the Company’s U.K. operations, for a purchase price of £729.6 million in cash (or approximately $1,323.9 million at an exchange rate of $1.8145 to £1). This purchase price was subject to adjustment depending on certain working capital levels in the Telegraph Group, but such adjustment was not material (less than 1% of the purchase price). The transaction closed on July 30, 2004.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      As a result of the sale of the Telegraph Group, the Company’s accompanying condensed consolidated financial statements as of December 31, 2003 and for the three and nine month periods ended September 30, 2003 have been revised to reflect the Telegraph Group as discontinued operations in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. The following table presents information about the operating results of the Telegraph Group through July 30, 2004:

      For the three and nine months ended September 30, 2004, the Company recognized a gain on the sale of the Telegraph Group of $354.6 million, net of taxes of $221.0 million. For the three and nine months ended September 30, 2004, earnings from operations of business segment disposed of were $11.7 million and $24.8 million, net of income taxes of $6.3 million and $7.6 million, respectively. For the three and nine months ended September 30, 2003, earnings from operations of business segment disposed of were $5.2 million and $6.9 million, respectively, net of taxes of $3.1 million and $4.1 million, respectively.

      Internal Revenue Code Section 965 (“Section 965”), enacted as part of the American Jobs Creation Act of 2004 in October 2004, allows U.S. companies to repatriate earnings from their foreign subsidiaries at a reduced tax rate. Section 965 provides that U.S. companies may elect, for one tax year, an 85% dividends received deduction for eligible dividends from their foreign subsidiaries. Repatriated funds must be invested by the company in the United States pursuant to a domestic reinvestment plan approved by company management before the funds are repatriated.

      Pursuant to this legislation, in November 2004, the Company’s management approved a domestic reinvestment plan and received a dividend from its U.K. subsidiary of $100.0 million. Accordingly, the Company estimates that it will derive a benefit of approximately $24.0 million in its 2004 tax year as a result of this legislation.

      See Note 21(b) for information on dispositions subsequent to September 30, 2004.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      On June 15, 2004, the Company announced that the Audit Committee of the Board of Directors (“Audit Committee”) was conducting an internal review into practices that resulted in the overstatement of circulation figures for the Chicago Sun-Times. On October 5, 2004, the Company announced the results of this internal review. The review by the Audit Committee determined that weekday and Sunday average circulation of the Chicago Sun-Times, as reported in the audit reports issued by the Audit Bureau of Circulations (“ABC”) commencing in 1998, had been overstated. The Audit Committee found no overstatement of Saturday circulation data. The inflated circulation figures were submitted by the Company to the ABC, which then reported these figures in its annual audit reports issued with respect to the Chicago Sun-Times.

      Inflation of the Chicago Sun-Times single-copy circulation began modestly and increased over time. In the most recent report of the Chicago Sun-Times circulation published by the ABC for the period ended March 2003, the average single-copy circulation was found by the Audit Committee to have been overstated by approximately 50,000 weekday copies and 17,000 Sunday copies. The inflation of circulation continued to grow during the twelve-month period ended March 28, 2004, but these circulation figures were not included in an ABC audit report.

      The Chicago Sun-Times announced a plan intended to make restitution to its advertisers for losses associated with the overstatements in the ABC circulation figures. To cover the estimated cost of restitution and settlement of related lawsuits filed against the Company, the Company recorded pre-tax charges of approximately $24.1 million in the fourth quarter of 2003 and approximately $2.9 million in the first quarter of 2004. This charge has been reflected in “Other Operating Costs” in the accompanying Condensed Consolidated Statement of Operations for the nine months ended September 30, 2004. The Company evaluates the adequacy of the reserve on a regular basis and believes the reserve to be adequate at September 30, 2004. See Note 11.

      Basic earnings (loss) per share was calculated by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share was calculated by dividing net earnings (loss) available to common stockholders after assumed conversion of dilutive securities by the sum of the weighted average number of common shares outstanding plus all additional common shares that would have been outstanding if potentially dilutive common shares had been issued. In certain periods, diluted earnings (loss) per share is the same as basic net earnings (loss) per share due to the anti-dilutive effect (i.e. the effect of reducing basic loss per share) or immaterial effect of the Company’s stock options.

      The following table reconciles the numerator and denominator for the calculation of basic and diluted earnings (loss) per share from continuing operations for the three and nine month periods ended September 30, 2004 and 2003:

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      The Company operates principally in the business of publishing, printing and distributing newspapers and magazines and holds investments principally in companies that operate in the same business as the Company. The Chicago Group includes the Chicago Sun-Times, Post Tribune, Daily Southtown and other city and suburban newspapers in the Chicago metropolitan area. The Community Group includes the results of The Jerusalem Post (See Note 21(b) regarding sale of The Jerusalem Post on December 15, 2004). The Canadian Newspaper Group includes the operations of Hollinger Canadian Publishing Holdings Co. (“HCPH Co.”) and Hollinger L.P. As described in Note 7, the Company completed the sale of the Telegraph Group on July 30, 2004. The Telegraph Group comprised substantially all of the operations of the U.K. Newspaper Group. The remainder of the U. K. Newspaper Group, consisting largely of the holding companies which held

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

investments in the Telegraph Group, is now included with the Investment and Corporate Group. The following is a summary of the segmented financial data of the Company:

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Note 11 — Other Operating Costs

      Included in “Other Operating Costs” are the following items that the Company believes may make meaningful comparisons of results between reporting periods difficult based on their nature, magnitude and infrequency.

Note 12 — Long-term Debt

      In December 2002, Hollinger International Publishing Inc. (“Publishing”), a wholly owned subsidiary of the Company, completed an offering of the 9% Senior Notes due 2010, (“the 9% Senior Notes”) for an aggregate principal amount outstanding of $300.0 million. Proceeds from the 9% Senior Notes and the Senior Credit Facility were used to repay Publishing’s 9.25% Senior Subordinated Notes due in 2006 and 2007 (the “9.25% Senior Subordinated Notes”). Publishing gave notice of redemption to the holders of the 9.25% Senior Subordinated Notes on December 23, 2002 and retired the notes in January 2003. Premiums on early redemption totaled $19.7 million and the write-off of related deferred financing costs totaled $17.6 million for a loss on extinguishment of $37.3 million and is included in “Other income (expense), net” for the nine month period ended September 30, 2003. (See Note 13).

      As described in Note 3(c), on July 30, 2004, the Company repaid the Senior Credit Facility (previously reflected in the U.K. Newspaper Group) with proceeds from the sale of the Telegraph Group. The Company paid approximately $2.1 million in fees for the early termination of the Senior Credit Facility. This cost was included in the determination of the “Gain from disposal of business segment (net of income taxes)” in the

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

accompanying Condensed Consolidated Statements of Operations. The Company also completed a tender offer for the retirement of the 9% Senior Notes. Approximately 97% of the 9% Senior Notes were tendered for retirement. The Company incurred costs of approximately $59.9 million related to premiums and other fees associated with the 9% Senior Notes tendered for retirement on July 30, 2004. In conjunction with the tender, all covenants were removed from the remaining notes. The Company has incurred costs of approximately $0.5 million related to premiums and other fees to purchase and retire an additional $3.4 million of principal of the 9% Senior Notes during September 2004. The costs to retire the 9% Senior Notes were included in “Other income (expense), net” in the accompanying Condensed Consolidated Statements of Operations (See Note 13). The Company intends to purchase the remaining principal of the outstanding 9% Senior Notes as they become available on the open market. Accordingly, the $6.0 million outstanding on the 9% Senior Notes has been reflected as “Current portion of long-term debt” in the accompanying Condensed Consolidated Balance Sheet at September 30, 2004.

      The Company has historically entered into various swap, option and forward contracts from time to time when management believed conditions warranted. Such contracts were limited to those that relate to the Company’s actual exposure to commodity prices, interest rates and foreign currency exchange rates.

      The Company had cross-currency interest rate swaps on its Senior Credit Facility and interest rate swaps on the 9% Senior Notes. Upon completion of the sale of the Telegraph Group and the repayment of the Senior Credit Facility and the completion of the tender offer for the 9% Senior Notes, the Company terminated these swap agreements. The Company paid $32.3 million, including $29.7 million previously recognized in mark-to-market adjustments, upon early termination of the cross-currency interest rate swaps on the Senior Credit

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Facility and $10.5 million related to the interest rate swaps on the 9% Senior Notes (See Note 12). The termination costs on the cross-currency interest rate swaps have been included in the “Gain from disposal of discontinued operations” and the costs on the interest rate swaps on the 9% Senior Notes have been included in “Other income (expense), net”.

      The mark-to-market impact of the interest rate swaps was a gain of $0.3 million and a loss of $4.9 million for the three and nine month periods ended September 30, 2004, respectively, and a loss of $6.5 million and a gain of $0.8 million for the three and nine month periods ended September 30, 2003, respectively, and was reflected in “Interest expense”.

      On June 17, 2003, the Board of Directors established the Special Committee to investigate, among other things, certain allegations regarding various related party transactions, including allegations described in a beneficial ownership report on Schedule 13D filed with the SEC by Tweedy Browne & Company LLC (“Tweedy Browne”), an unaffiliated stockholder of the Company, on May 19, 2003, as amended on June 11, 2003.

      On August 30, 2004, the Special Committee released its report setting out the scope and results of its investigation into certain related party transactions involving certain former executive officers and certain current and former directors of the Company and Hollinger Inc. and its affiliates. The report was delivered to the SEC and filed with the U.S. District Court for the Northern District of Illinois. In addition, on August 31, 2004, the Company filed a copy of the report with the SEC as an exhibit to a current report on Form 8-K, as amended by a current report on Form 8-K/ A filed with the SEC on December 15, 2004. The report, as filed with the SEC in an amended form on such date, is hereinafter referred to as the “Report”.

      The annual report on Form 10-K for the year ended December 31, 2003 filed with the SEC on January 18, 2005 contains a summary of the results of the Special Committee’s investigation as set out in the Report. For a complete discussion of the results of the investigation of the Special Committee, see the Report included as an exhibit to the Company’s Form 8-K/ A filed with the SEC.

      The Company is involved in a series of disputes, investigations and legal proceedings relating to transactions between the Company and certain former executive officers and certain current and former directors of the Company and their affiliates. The potential impact of these disputes, investigations and legal proceedings on the Company’s financial condition and results of operations cannot currently be estimated. Costs incurred as a result of the investigation of the Special Committee and related litigation involving Lord Conrad M. Black of Crossharbour (“Black”), F. David Radler (“Radler”) and others are reflected in “Other operating costs” in the Condensed Consolidated Statements of Operations. See Note 11. These costs primarily consist of legal and other professional fees.

      The legal fees include those incurred directly by the Special Committee in its investigation, the costs of litigation initiated by the Special Committee on behalf of the Company, costs to defend the Company from litigation brought by the Company’s direct and indirect controlling shareholders and various former members of the Company’s management following the Special Committee’s findings and the Company’s actions in November of 2003, costs to defend the court order in the January 2004 SEC action against challenges by Hollinger Inc., costs of cooperating with the various government agencies investigating the matters discussed in the Report, and attorneys’ and other professional fees advanced by the Company to various current and former Company officers, directors and employees, as provided for by the Company’s by-laws, subject to the undertaking of the recipients to repay the advanced fees should it ultimately be determined by a court of law that they were not entitled to be indemnified.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      The Company has incurred substantial legal costs arising out of litigation on behalf of the Company brought by the Special Committee to redress what the Special Committee has concluded to be repeated violations of the fiduciary duties of Hollinger Inc., Black and certain of their affiliates or associates, and related matters. The costs amounted to approximately $13.3 million and $44.6 million for the three and nine months ended September 30, 2004, respectively, as further discussed below, in addition to $10.1 million of costs incurred for the year ended December 31, 2003.

      The costs of $13.3 million and $44.6 million for the three and nine months ended September 30, 2004, respectively, include approximately $5.7 million and $20.4 million for the three and nine months ended September 30, 2004, respectively, in costs and expenses arising from the Special Committee’s work. These amounts include the fees and costs of the Special Committee’s members, counsel, advisors and experts, including but not limited to fees and expenses of (i) conducting the investigation, (ii) preparing the Report, (iii) preparing, filing and pursuing litigation on behalf of the Company seeking more than $500 million in damages arising out of the actions of the Company’s controlling stockholders and other current and former officers and directors of the Company, (iv) defending the Court Order in the January 2004 SEC action against challenges by Hollinger Inc.; (v) defending and defeating the counterclaims of Hollinger Inc. and Black in the Delaware litigation; (vi) defending and defeating the anti-suit injunction motion and appeal brought by Ravelston and its affiliates in Canada to prevent prosecution in the United States of the Company’s claims; and (vii) cooperating with various government agencies investigating the conduct that is the subject of the Report.

      In addition to the costs for the Special Committee’s work, the Company has incurred other legal costs and other professional fees of $5.4 million and $15.5 million for the three and nine months ended September 30, 2004, respectively. The legal and other professional fees are primarily comprised of costs to defend the Company in litigation that has arisen as a result of the issues the Special Committee has investigated, including costs to defend the counterclaims of Hollinger Inc. and Black in the Delaware litigation.

      The Company has also incurred legal costs of approximately $2.2 million and $8.7 million for the three and nine month periods ended September 30, 2004, respectively, that the Company has been required to advance in fees and costs to indemnified parties, including the indirect controlling stockholders and their affiliates and associates who are defendants in the litigation brought by the Company. As a result of the Delaware Supreme Court’s April 19, 2005 affirmation of the Chancery Court’s finding that Black repeatedly breached his fiduciary duty, Black is obligated to repay the Company all amounts advanced to him relating to this, and potentially other, proceedings.

      During 2003, the Company received from its former executive officers a total of $1.2 million in restitution in accordance with the terms of an agreement. Through September 30, 2004, the Company was paid additional amounts in restitution totaling $30.3 million, excluding interest, in accordance with the terms of the agreement. These amounts were reflected in the Company’s Consolidated Statement of Operations for the three months and year ended December 31, 2003 as “Other income (expense), net”.

      On April 27, 2004, the Company reached a settlement with a former director and officer of the Company, Peter Y. Atkinson (“Atkinson”). The terms of the settlement are subject to approval by the Delaware Chancery Court in the December 2003 derivative action. Under the settlement with the Company, Atkinson agreed to pay the Company all the proceeds of the “non-competition” and Hollinger Digital Incentive Plan payments he received, plus interest, which total approximately $2.8 million. Prior to the end of December 2003, Atkinson paid the Company $0.4 million. Atkinson exercised his vested options and the option proceeds of $4.0 million were deposited pursuant to an escrow agreement and reflected as restricted cash. Upon the Delaware Chancery Court’s approval of the settlement agreement, the Company will receive $2.4 million and Atkinson will receive the remainder. The Company recorded approximately $1.7 million of this settlement,

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

excluding interest, in the second quarter of 2004 which is included in “Other income (expense), net” in the accompanying Condensed Consolidated Statement of Operations for the nine months ended September 30, 2004.

      On May 3, 2005, certain of the Company’s current and former independent directors agreed to settle claims brought against them in Cardinal Value Equity Partners, L.P. v. Black, et al. The settlement provides for $50.0 million to be paid to the Company. The settlement, which is conditioned upon funding of the settlement amount by proceeds from certain of the Company’s directors and officers liability insurance policies is also subject to court approval.

      On May 13, 2005, Black commenced a lawsuit in Delaware Chancery Court seeking reimbursement of approximately $6.8 million in legal fees and expenses allegedly incurred for one law firm representing Black in connection with investigations by the U.S. Department of Justice and the SEC, as well as in connection with a civil fraud lawsuit initiated by SEC against Black and others.

      See Note 21 for an update on legal proceedings.

      In November 2000, the Company and Hollinger L.P. sold a substantial portion of their Canadian assets to CanWest Global Communications Corporation (“CanWest”) and received, in partial consideration, approximately Cdn.$766.8 million aggregate principal amount of 12¹/8% Fixed Rate Subordinated Debentures due November 15, 2010 (the “CanWest Debentures”) issued by a wholly-owned subsidiary of CanWest and guaranteed by CanWest. In 2001, the Company and Hollinger L.P. sold participations of approximately Cdn.$756.8 million ($490.5 million) principal amount of the CanWest Debentures to a special purpose trust (the “Participation Trust”). Notes of the Participation Trust, denominated in U.S. dollars (the “Trust Notes”), were in turn issued and sold by the Participation Trust to third parties.

      On April 10, 2003, CanWest notified the Company of its intention to redeem Cdn.$265.0 million of the CanWest Debentures on May 11, 2003. Of the total proceeds received, $159.8 million related to debentures for which Participations were sold to the Participation Trust and has been paid to the Participation Trust. The balance of $27.6 million was retained by the Company in respect of its interest in the debentures, of which an estimated $16.7 million was restricted cash under the terms of the Participation Trust and unavailable for general corporate purposes until November 18, 2004, when the Participation Trust was unwound. See below.

      As of September 30, 2004, there was outstanding approximately Cdn.$889.5 million aggregate principal amount of CanWest Debentures. The Company and Hollinger L.P. were the record owners of all of these CanWest Debentures, but as of September 30, 2004, beneficially owned approximately Cdn.$4.7 million and Cdn.$83.8 million principal amount, respectively, of CanWest Debentures, with the balance beneficially owned by the Participation Trust.

      On October 7, 2004, the Company and Hollinger L.P. entered into an agreement (the “Facilitation Agreement”) with CanWest, pursuant to which the parties agreed to redeem the CanWest Debentures and dissolve the Participation Trust. CanWest exchanged the Trust Notes for new debentures issued by CanWest (the “CanWest Exchange Offer”). In the Facilitation Agreement, the Company agreed, among other things, to sell to CanWest, for cash, all of the CanWest Debentures beneficially owned by the Company. The Company’s obligation to sell the CanWest Debentures to CanWest, and CanWest’s obligation to purchase the CanWest Debentures from the Company, was conditioned upon the closing of the CanWest Exchange Offer. The CanWest Exchange Offer was subject to a number of conditions, including that at least two-thirds of the outstanding principal amount of Trust Notes be tendered in the CanWest Exchange Offer. On October 28, 2004, CanWest announced that holders of substantially more than 66²/3% in aggregate principal amount of the Trust Notes had agreed in writing to tender their Trust Notes in the CanWest Exchange Offer. The CanWest

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Exchange Offer closed on November 18, 2004. The Company received approximately $133.6 million, of which Hollinger L.P. received approximately $84.5 million, in respect of CanWest Debentures owned and their residual interest in the Participation Trust that was attributable to foreign currency exchange. As a result of the completion of the transaction, the Participation Trust was dissolved and the Company has no further ownership interest in the CanWest Debentures. The Company will record a realized loss of approximately $83.6 million in the fourth quarter of 2004 on this transaction largely due to previously recognized foreign currency gains which were not ultimately realized.

      As of September 30, 2004, $3.7 million of contributions have been made to both domestic and foreign plans, all in cash. The Company contributed a total of $4.4 million to fund its pension plans in 2004.

      As of September 30, 2004, $1.6 million of contributions have been made, all in cash. The Company contributed a total of $2.2 million to fund its post-retirement plans in 2004.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

      Shareholder Rights Plan (“SRP”) — On February 27, 2004, the Company paid a dividend of one preferred share purchase right (a “Right”) for each share of Class A Common Stock and Class B Common Stock held of record at the close of business on February 5, 2004. Each Right, if and when exercisable, entitles its holder to purchase from the Company one one-thousandth of a share of a new series of preferred stock at an exercise price of $50.00.

      The SRP provides that the Rights will separate from the Class A Common Stock and Class B Common Stock and become exercisable only if a person or group beneficially acquires, directly or indirectly, 20% or more of the outstanding stockholder voting power of the Company without the approval of the Company’s directors, or if a person or group announces a tender offer which if consummated would result in such person or group beneficially owning 20% or more of such voting power. The Company may redeem the Rights at $0.001 per Right or amend the terms of the plan at any time prior to the separation of the Rights from the Class A Common Stock and Class B Common Stock.

      Under most circumstances involving an acquisition by a person or group of 20% or more of the stockholder voting power of the Company, each Right will entitle its holder (other than such person or group), in lieu of purchasing preferred stock, the right to purchase shares of Class A Common Stock of the Company at a 50% discount to the current per share market price. In addition, in the event of certain business combinations following such an acquisition, each Right will entitle its holder to purchase the common stock of an acquirer of the Company at a 50% discount from the market value of the acquirer’s stock.

      Black and each of his controlled affiliates, including Hollinger Inc., are considered “exempt stockholders” under the terms of the plan. This means that so long as Black and his controlled affiliates do not collectively, directly or indirectly, increase the number of shares of Class A and Class B Common Stock above the level owned by them when the plan was adopted, their ownership will not cause the Rights to separate from the Common Stock. This exclusion would not apply to any person or group to whom Black or one of his affiliates transfers ownership, whether directly or indirectly, of any of the Company’s shares. Consequently, the Rights may become exercisable if Black transfers sufficient voting power to an unaffiliated third party through a sale of interests in the Company, Hollinger Inc., Ravelston or another affiliate. As a result of the filing on April 22, 2005 by Ravelston and Ravelston Management Inc. (“RMI”), seeking court protection under Canadian insolvency laws, and the appointment of a court-appointed receiver for Ravelston and RMI, on May 10, 2005, the Board’s Corporate Review Committee amended the SRP to include the receiver, RSM Richter, as an “exempt stockholder” for purposes of the SRP.

      The SRP provides that on or before January 25, 2005, the Special Committee (or any other committee of independent directors of the Board of Directors who were not the subject of the Report delivered by the Special Committee) would re-evaluate the plan to determine whether it remained in the best interests of the Company’s stockholders and whether to recommend amendments to the terms of the plan, or redemption of the Rights. Unless earlier redeemed, exercised or exchanged, the Rights will expire on January 25, 2014. On January 27, 2005, the Special Committee reaffirmed the SRP following the re-evaluation and it remains in effect.

      The Company becomes involved from time to time in various claims and lawsuits incidental to the ordinary course of business, including such matters as libel, defamation and privacy actions. In addition, the Company is involved from time to time in various governmental and administrative proceedings with respect to employee terminations and other labor matters, environmental compliance, tax and other matters.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Management believes that the outcome of any such pending claims or proceedings incidental to the ordinary course of business will not have a material adverse effect on the Company taken as a whole.

      As discussed in Notes 14, 20 and 21, the Company is also subject to numerous disputes, investigations and legal proceedings with former executive officers and certain current and former directors as well as certain other non-ordinary course matters such as the Chicago Sun-Times circulation cases and the CanWest arbitration.

      In connection with the Company’s insurance program, letters of credit are required to support certain projected workers’ compensation obligations. At September 30, 2004, letters of credit in the amount of $5.0 million were outstanding.

Note 19 — Supplemental Condensed Consolidating Financial Information (Unaudited)

      The 9% Senior Notes are obligations of Publishing. These obligations are guaranteed fully and unconditionally by Hollinger International Inc. No other subsidiary of the Company or of Publishing has guaranteed the securities.

      Supplemental condensed consolidating financial information of Hollinger International Inc. and Publishing is presented below. Hollinger International Inc.’s other directly owned subsidiary, Hollinger Telegraph New Media LLC, is minor and therefore its financial information has not been disclosed separately. The Company’s and Publishing’s investments in subsidiaries are presented on the equity method basis. The Eliminations column reflects the elimination of investments in subsidiaries and intercompany balances and transactions, and the inclusion of assets and liabilities, revenues, expenses and cash flows of Publishing’s subsidiaries.

      On March 31, 2005, the Company notified the SEC of the termination of the registration of the 9% Senior Notes under Section 12(g) of the Securities Exchange Act of 1934 and the suspension of the Company’s duty to file reports under Section 13 and 15(d) of the Securities Exchange Act of 1934 in respect of the 9% Senior Notes. Pending the effectiveness of the termination of registration, which takes effect in 90 days from the date of the notice to the SEC, the Company’s duty to file any reports in respect of the 9% Senior Notes under Section 13 is suspended. Accordingly, the Company expects to discontinue providing supplemental condensed consolidating financial information commencing with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005.

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Hollinger International Inc.

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2004

(Amounts in thousands)