A Fundamental Analysis of Journal Communications, Inc. (JRN)

 A Fundamental Analysis of Journal Communications, Inc. (JRN)

Important Note: The publicly traded company Journal Communications, Inc. (JRN) is no longer an active, standalone entity. Its operations were part of a series of mergers and spin-offs, making a traditional fundamental analysis on its former ticker symbol irrelevant for current investment decisions. The information below details the company's past structure, the transactions that led to its dissolution, and the context for an analysis prior to these events.

A Fundamental Analysis of Journal Communications, Inc. (JRN)

---

Company Overview and Business Context

Journal Communications, Inc. (JRN) was a diversified media company in the United States, operating in both broadcasting (television and radio) and newspaper publishing. Before its major restructuring, the company's performance was heavily tied to the traditional media industry, which faced significant challenges from the shift of advertising revenue to digital platforms. A fundamental analysis, had it been conducted before the announced mergers, would have focused on its ability to manage this transition while maintaining profitable legacy businesses.

The Critical Merger and Spin-off: The End of JRN

The most critical factor in analyzing JRN is its ultimate corporate restructuring.

1. July 2014: Journal Communications, Inc. (JRN) and The E.W. Scripps Company (Scripps) announced an agreement to merge their broadcast operations and spin off their respective newspaper businesses into a separate public company.

2. April 1, 2015: The transaction was finalized.

   • The broadcast assets of both companies merged under The E.W. Scripps Company (SSP). JRN ceased trading on this date.

   • The newspaper assets of both companies were spun off and merged to form a new, independent public company called Journal Media Group (JMG), headquartered in Milwaukee.

3. April 8, 2016: Journal Media Group (JMG) was subsequently acquired by Gannett Co. for approximately $280 million.

This sequence of events means that any fundamental analysis of JRN stock focuses not on its organic growth potential, but on the value creation and shareholder compensation provided by the corporate actions leading to its acquisition.

---

Key Fundamental Metrics (Historical Context)

A traditional fundamental analysis of JRN would have concentrated on the following areas:

1. Revenue and Growth Analysis

In the years leading up to the merger, revenue growth for JRN, particularly in the publishing division, was likely stagnant or declining due to secular trends in the newspaper industry.

• Broadcasting Revenue: This segment likely offered more stability, driven by local advertising, political advertising (during election years), and retransmission consent fees, potentially offsetting publishing losses.

• Publishing Revenue: This part of the business was the major headwind, with print advertising and circulation revenues under continuous pressure from digital alternatives.

• Digital Transformation: An analysis would assess the company's success in monetizing its digital media assets, which was crucial for its long-term viability.

2. Profitability Metrics

• Operating Margin: How effectively the company was controlling costs in the face of falling revenues. The efficiency gains through cost-cutting in the legacy print business were a major focus.

• Earnings Per Share (EPS) and P/E Ratio: The P/E ratio (Price-to-Earnings) would indicate how the market valued its earnings. Low EPS figures or volatile earnings were common in the sector, suggesting a need for substantial restructuring.

3. Balance Sheet and Financial Health

• Debt-to-Equity Ratio: A key measure of financial risk. Media companies in the early 2010s often carried debt to finance acquisitions or maintain operations. Low debt levels would signal greater financial flexibility during the industry transition.

• Cash Flow from Operations (CFO): The ability to generate consistent, positive cash flow was paramount to covering operating expenses, capital expenditures, and potential dividend payments.

• Asset Quality: An analysis of the value of its tangible assets, specifically its broadcast licenses and real estate holdings, which often held significant intrinsic value that could exceed the market's valuation of the stock.

---

Valuation Focus: The Merger Premium

Ultimately, the fundamental value for JRN shareholders was realized through the merger. For each share of JRN stock, shareholders received a combination of:

• Shares of the new, merged broadcasting company (Scripps - SSP).

• Shares of the new, spun-off publishing company (Journal Media Group - JMG).

• Cash (paid as a special dividend to Scripps shareholders, a factor in the overall deal structure).

The analysis shifted from an intrinsic valuation of JRN's operating businesses to determining if the exchange ratio and the resulting ownership in the two new entities were favorable. The core fundamental argument for the deal was that separating the high-growth/stable broadcasting business from the declining publishing business would unlock greater value for shareholders in two specialized, more manageable public companies. This process, a "Reverse Morris Trust" structure, aimed to be tax-efficient for the shareholders involved.

This video from 2014 discusses the merger between Journal Communications Inc. and E.W. Scripps Co., which ultimately led to the end of JRN as a standalone company.

Journal Communications Inc., E.W. Scripps Co. announce deal