Lee Enterprises looks to widen use of cash beyond debt reduction; may include print, digital acquisitions

After reporting an upswing in third quarter earnings Thursday (8/3), Lee Enterprises, Inc. executives told analysts the company will look to widen the use of cash flow beyond debt reduction and may seek additional print or digital acquisitions.

The Davenport-based media company acquired its Quad Cities newspaper competitor, The Dispatch-Argus, in June for $7 million. The Dispatch-Argus primarily served the Illinois Quad Cities (East Moline, Moline and Rock Island), while the Quad City Times serves mainly readers in the Iowa Quad Cities (Bettendorf and Davenport).

"We expect the acquisition to be accretive to earnings and free cash flow in our September (4th) quarter," President and Chief Executive Officer Kevin Mowbray said. "The transition is off to a good start and we are pleased with the contributions we are already seeing from the Dispatch-Argus."

The company also stated in the news release about the conference call with analysts that the company "is actively evaluating" the economics of refinancing all or part of the company's $568 million long-term debt.

Lee has been focused on reducing its debt since buying the St. Louis Post-Dispatch 12 years ago for nearly $1.5 billion. That acquisition nearly bankrupted the company, but the firm has steadily paid down its long-term debt. During the past 12 months, the company reported it has reduced debt by $72 million.

The company reported earnings of $6.29 million (11 cents per share) for the third quarter ended June 25, compared with $4.09 million (8 cents per share) for the same period last year. This year's third quarter income included more than $3 million in non-operating revenues as a result of a change in the value of stock warrants. Without the adjustment, earnings would have been $2.95 million, or 5 cents per share.

Operating revenues for the quarter were $139.4 million, down 7.7 percent from the same period last year and total advertising and marketing service revenue fell 12 percent compared with a year ago to $81.2 million. Total digital revenue was up 6.4 percent to $27.1 million compared with the third quarter of 2016.

Average daily newspaper circulation (which includes digital subscribers and those of partially owned newspaper properties in Madison, WI and Tuscon, AR) totaled 800,000 in the third quarter, according to the Lee earnings news release. That's down from circulation of 900,000 reported a year ago. The average Sunday circulation totaled 1.1 million for the third quarter, compared with 1.2 million reported a year ago.

CLICK HERE to download the company's third quarter financials.

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