This technical note is on the model reduction of distributed systems formed by discrete-time, linear time-varying, heterogeneous subsystems interconnected over arbitrary directed graphs and subjected to communication latency. We give two procedures to construct a strongly stable coprime factorization for a strongly stabilizable and strongly detectable system. One of the procedures ensures the contractiveness of the resulting factorization. Then, we apply the structure-preserving balanced truncation method for distributed systems. We illustrate the proposed methods through an example.