DAVENPORT, Iowa -- Davenport-based publisher Lee Enterprises Inc. reported lower second quarter earnings Thursday as total revenue decreased and print advertising remains a challenge — particularly among big box retailers, company leaders said.
Lee reported earnings of $6.4 million, or 11 cents per diluted common share, for the second fiscal quarter ended March 26. That compares to earnings of $19.5 million, or 36 cents per share, a year ago. Adjusted earnings before interest, tax, depreciation and amortization, or EBITDA, for the 2017 second quarter was $28.8 million.
For the first 26 weeks, Lee reported income of $18.3 million, compared to income of $30.5 million a year ago. Adjusted EBITDA year-to-date was $72.1 million.
(Lee is the parent company of The Times and Democrat.)
In a conference call Thursday with analysts, Lee Executive Chairman Mary Junck said, "While the overall revenue trend didn't improve from the first quarter, we saw gains in some key categories." Among them was classified advertising, which she said saw its best quarter in more than a year.
"Total digital revenue growth was 10 percent and digital advertising grew 11.3 percent, including growth of 14.1 percent in digital retail advertising," Lee President and CEO Kevin Mowbray said. Digital advertising revenue represented 28.7 percent of the total advertising revenue in the quarter.
In an earnings news release, Mowbray said cash costs declined 8.2 percent from prior year. "We expect the cost reductions we made in the March quarter to have a significant impact on the second half of the year and into 2018."
Total revenue was down 7.9 percent in the quarter. "We continue to see headwinds in print advertising, and the challenges with big box retailers continue,'' he told analysts. "Softer print advertising was the largest contributor to the decline."
Ron Mayo, Lee's chief financial officer and treasurer, told analysts that Lee continues to aggressively reduce the company's debt. As of March 26, the principal amount of debt was $584.9 million.
He said debt was reduced $14.5 million for the quarter, $32.2 million fiscal year-to-date and $71.6 million over the past twelve months. The reduction also lowered interest expense by $8.2 million, or 12.0 percent, in the past 12 months.
Mayo said cash costs decreased 8.2 percent and operating expenses decreased 9.2 percent. Compensation was down 9.9 percent, primarily as a result of lower self-insured medical costs and staffing reductions mainly associated with the business transformation and outsourcing, he added.
Year-to-date, Lee said operating revenues totaled $287.4 million, which was down 8.8 percent from a year ago. Advertising and marketing services revenue combined was down 10.7 percent to $170.6 million. Total digital revenue was $52.1 million, up 8.2 percent. Subscription revenue decreased 2.2 percent in the 26 weeks.
"Our steady cash flow has kept, and will continue to keep us, ahead of schedule in retiring debt, which we believe increases our shareholder value," Junck told analysts. She added that Lee is "among industry leaders in margins and other key performance measures..."