Lee Enterprises, Inc. reported higher earnings for the first quarter Thursday as revenues declined and the company continued its "aggressive and substantial debt reduction."
In preliminary results for the quarter ended Dec. 27, Lee reported income of $11.2 million, or 21 cents per diluted share, compared with income of $9.8 million, or 18 cents per diluted share, for the same period a year ago. Excluding unusual matters, adjusted earnings were 22 cents per diluted common share, or the same as a year ago.
"We are off to a strong start in 2016 and we're optimistic about the year," Lee chairman and CEO Mary Junck told analysts in a conference call Thursday. "Our growing revenue categories, which include digital advertising, subscriptions, digital services and other revenue, including commercial printing and distribution deals, accounted for more than half of our total revenue in the quarter."
Lee, headquartered in Davenport, is the parent company of the Quad-City Times and 45 other daily newspapers.
Operating revenue decreased 5 percent to $168.4 million in the quarter compared with a year ago. Combined advertising and marketing services revenue decreased 8.8 percent to $105.6 million. But Junck said "both categories steadily improved throughout the quarter."
Junck told the analysts Lee continues to carefully manage cash costs and expects another year of strong cash flow in 2016, "allowing our aggressive debt reduction."
According to Ron Mayo, chief financial officer and treasurer, Lee reduced debt by nearly $22 million in the first quarter, and has paid down more than $80 million in the past year. As of Dec. 27, the principal amount of debt was $704.0 million.
He added that Lee received an insurance settlement of more than $30 million in January, much of which was used to repay debt. "Total debt as of today is $678 million after including $20 million of insurance proceeds ... " he said.
Executives said Lee plans to continue using substantially all of its free cash flow to reduce debt and strengthen the company's capital structure.
Other financial highlights for the quarter:
- Digital ad revenue was up 7.2 percent, representing 20.6 percent of total advertising revenue.
- Mobile advertising revenue (included in digital advertising) increased 12.4 percent.
- Digital services revenue, primarily TownNews.com, increased 5.7 percent to $3.3 million.
- Subscription revenue increased 0.1 percent.
- First quarter operating cash flow totaled $43.6 million, a 5.2 percent decline from prior year.
Junck added that Lee relaunched several websites with a new design as part of an initiative it calls the "daVinci Project." The change, she said "not only improves the look and ease of use of our newspapers, but also, through resource consolidation, creates significant cost savings."
Cash costs decreased 4.9 percent for the quarter with compensation decreasing 5.3 percent primarily as a result of reduced staffing levels.
Mayo said Lee still plans to cut costs for the fiscal year by 3.5 to 4 percent.