Boosted by the impact of the new federal tax legislation, Lee Enterprises reported improved profits in the first quarter during an earnings call Thursday.
Davenport-based publisher Lee reported earnings of $35.3 million, or 63 cents per share, for the quarter ended Dec. 24. That was up from $12.4 million, or 22 cents per share, a year ago.
Lee is the parent company of the Quad-City Times, Moline Dispatch/Rock Island Argus and the Muscatine Journal.
Lee said the federal Tax Cuts and Job Act, which cut the corporate tax rate from 35 percent to 21 percent, resulted in a provisional net decrease of $24.9 million in income tax expenses in the quarter.
In a conference call Thursday with analysts, company leaders said they are continuing to review the legislation's impact on the company.
"While advertising results in the past quarter started off softer than anticipated, we saw directional improvement in several key revenue categories with results strengthening as we moved through the quarter," Lee President and CEO Kevin Mowbray said a news release. "This was especially true in December, and we anticipate improved revenue performance for the remainder of the fiscal year."
Revenue decreased 6.6 percent in the quarter to $143.8 million, compared to a year ago. Total digital revenue, including digital advertising and services, was up 3.2 percent compared to a year ago, to $27.3 million for the quarter. Digital advertising represented 27.9 percent of total advertising. Subscription revenue decreased 1.3 percent.
Mowbray also noted these financial highlights:
- Digital retail advertising, which represented 62 percent of total digital advertising, grew 5.7 percent in the quarter.
- Revenue at TownNews.com, which Lee owns 82.5 percent of, increased 12.7 percent and totaled $3.4 million.
- Monthly visits to Lee mobile, tablet, desktop and app sites averaged 72.5 million, an increase of 6.1 percent over the prior year quarter.
- Total advertising and marketing services revenue decreased 9 percent in the quarter to $84.7 million.
Mowbray told analysts that although big box retail advertising is a challenge "the shift to digital marketing creates unique and unprecedented opportunities in our local markets."
Ron Mayo, Lee's treasurer and chief financial officer, told analysts that the company is "aggressively managing costs" and reducing debt.
Lee reduced its debt by $16.4 million in the quarter for a total debt reduction of $67.5 million over the past 12 months. The principal amount of debt was $532 million at the end of the quarter.
Cash costs were down 6.6 percent in the quarter and are expected to be down between 6 and 6.5 percent for the fiscal year. Compensation decreased 9.8 percent as a result of reduced staffing levels and lower medical costs.
According to Mayo, Lee is meeting with advisors to discuss refinancing all or a portion of its long-term debt.
In the analyst call, Executive Chairman Mary Junck said Lee's operating margin was 25.5 percent for the quarter and "significantly higher than the margins of our publicly traded peers."
Lee has about $15 million of real estate listed for sale, of which $12 million is under contract and expected to close in the first half of 2018, Mayo said.
The earnings call came on the same day Lee announced the sale of its media operations in Maysville, Kentucky, to Champion Media LLC. The sale includes The Ledger Independent, a daily that publishes five days a week with circulation of 3,654, and its website, maysville-online.com. Details of the transaction were not disclosed.
Lee acquired the newspaper in 2002 as part of its Howard Publications purchase. Champion owns four daily newspapers and 18 weeklies in North Carolina, South Carolina, Ohio and Minnesota.