Davenport publisher Lee Enterprises Inc. announced strong third-quarter earnings Thursday as it saw an improved revenue trend.
Lee, the parent company of the Quad-City Times and Muscatine Journal, reported earnings of $6.3 million, or 11 cents per diluted share, for the quarter ended June 25. That compares to $4.4 million, or 8 cents per diluted common share, for the same quarter a year ago.
"We saw good growth in both subscription and digital revenue this quarter, which improved the total revenue trend," Lee CEO Kevin Mowbray said in a news release. With a 6.6 percent decrease in total revenue, he described it as "the best quarterly trend performance of fiscal 2017."
Subscription revenue increased 1.6 percent because of second-quarter price increases and additional revenue from premium content. Digital advertising revenue rose 7.8 percent and represented 29.1 percent of total advertising revenue.
The earnings come on the heels of Lee's acquisition of the Moline Dispatch and Rock Island Argus. The previously announced $7.2 million deal closed June 30. The Dispatch-Argus is located across the Mississippi River from Lee's other two Quad-City-area newspapers, the Quad-City Times and Muscatine Journal.
On a conference call with analysts Thursday, Mowbray said the acquisition is "an ideal strategic fit offering substantial synergies."
"We are extremely pleased with the purchase and the transition is well under way," he said. The company will begin consolidating results with the new properties in September.
Mowbray also noted these same-property highlights for the quarter:
• Total digital revenue, including digital advertising and digital services, increased 6.4 percent to $27.1 million. Monthly page views of Lee mobile, tablet, desktop and app sites averaged 225.7 million, a 6.5 percent increase.
• Digital retail advertising grew 8.3 percent and represents 61 percent of total digital advertising.
• Total advertising and marketing services revenue decreased 10.8 percent as a result of softer print advertising.
In addition, Lee reported that operating revenue decreased 7.7 percent to $139.36 million. Advertising and marketing services revenue combined decreased 10.8 percent to $81.0 million, with retail advertising down 10.6 percent, classified down 11.8 percent and national down 6.3 percent.
Operating expenses decreased 4.7 percent. Cash costs, excluding workforce adjustments and other, decreased 8 percent. Compensation decreased 9.1 percent primarily because of a reduction in staffing levels.
Chief Financial Officer and Treasurer Ron Mayo said the 2017 quarter includes a $2.6 million expense to record a partial withdrawal liability from a multi-employer pension plan. The liability will be paid over the next 20 years and is expected to be about $200,000 a year, he said.
Mayo also said the company continues to reduce its interest expense as part of its aggressive debt reduction. Lee reduced debt by $16.4 million in the quarter, $48.7 million fiscal year to date and $71.8 million over the past 12 months.
Lee's principal debt was $568.5 million at the end of the quarter, he said.
In the analyst call, Executive Chairman Mary Junck said Lee's lower debt and leverage is enabling the company to evaluate "the best use of our free cash flow beyond debt reductions, including acquisitions such as the Dispatch-Argus ..."
According to Mayo, Lee has $17 million of real estate for sale and expects $7 million in deals to close in calendar 2017. He said the company is evaluating the sale of additional real estate not listed currently.
"We are actively evaluating the timing and economics of refinancing all or a portion of the company's long-term debt," he said.
Lee operates newspapers, specialty publications and digital products in 50 markets in 22 states.