Investments

Short-term investments consist generally of corporate and governmental debt securities and certificates of deposits which are stated at fair market value. Realized gains and losses of short and long-term investments are recorded using the specific identification method.

The following table summarizes j2 Global’s debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):



	December 31, 2012		December 31, 2011
Due within 1 year	$	46,681	$	30,512
Due within more than 1 year but less than 5 years	17,209		38,847
Due within more than 5 years but less than 10 years	—		—
Due 10 years or after	2,633		4,230
Total	$	66,523	$	73,589

The following table summarizes the Company’s investments designated as trading and available-for-sale (in thousands):



	December 31, 2012		December 31, 2011
Trading	$	3	$	2
Available-for-sale	90,017		73,589
Total	$	90,020	$	73,591

The following table summarizes the gross unrealized gains and losses and fair values for investments as of December 31, 2012 and December 31, 2011 aggregated by major security type (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2012
Debt Securities	$	66,541	$	149	$	(167	)	$	66,523
Equity Securities	20,610		3,251		(367		)	23,494
Total	$	87,151	$	3,400	$	(534	)	$	90,017
December 31, 2011
Debt Securities	$	73,731	$	99	$	(241	)	$	73,589
Total	$	73,731	$	99	$	(241	)	$	73,589

At December 31, 2012 and 2011, corporate and governmental debt securities were recorded as available-for-sale. These debt securities have a fixed interest rate. There have been no significant changes in the maturity dates and average interest rates for the Company’s debt investment portfolio and debt obligations subsequent to December 31, 2012. At December 31, 2012, equity securities were recorded as available-for-sale and primarily represent a strategic investment in Carbonite, Inc. On August 31, 2012, j2 Global submitted a preliminary non-binding proposal to acquire all outstanding shares for cash consideration of $10.50 per fully diluted share, representing a substantial premium to the market trading price of the shares on such date. On September 8, 2012, Carbonite, Inc. informed j2 Global that it had rejected the proposal, without making a counter-offer. There have been no further discussions between j2 Global and Carbonite, Inc. At December 31, 2012, the Company’s available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as a component of stockholders’ equity. Short-term investments include restricted balances which the Company may not liquidate until maturity, generally within 12 months. Restricted balances included in short-term investments were $34.9 million at December 31, 2012. For the year ended December 31, 2012, the Company recorded gain from the sale of investments of approximately $0.3 million, which included a reversal of unrealized gains from accumulated other comprehensive income of approximately $0.1 million. For the year ended December 31, 2011, the Company recorded gain from the sale of investments of approximately $0.6 million, which included a reversal of unrealized gains from accumulated other comprehensive income of approximately $0.3 million.

Investments that have been in an unrealized loss position as of December 31, 2012 and December 31, 2011 had a fair value of $31.8 million and $46.2 million, respectively, and have been in a continuous unrealized loss for less than 12 months. Investments in a continuous unrealized loss for 12 months and longer as of December 31, 2012 and December 31, 2011 had a fair value of $2.2 million and zero, respectively, which are determined to be temporary in nature.

Recognition and Measurement of Other-Than-Temporary Impairment

j2 Global regularly reviews and evaluates each investment that has an unrealized loss. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities, while such losses related to held-to-maturity securities are not recorded, as these investments are carried at their amortized cost.

Regardless of the classification of the securities as available-for-sale or held-to-maturity, the Company has assessed each position for impairment.

Factors considered in determining whether a loss is temporary include:


•	the length of time and the extent to which fair value has been below cost;


•	the severity of the impairment;


•	the cause of the impairment and the financial condition and near-term prospects of the issuer;


•	activity in the market of the issuer which may indicate adverse credit conditions; and


•	the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

j2 Global’s review for impairment generally entails:


•	identification and evaluation of investments that have indications of possible impairment;


•	analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;


•	discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having an other-than-temporary impairment and those that would not support an other-than-temporary impairment;


•	documentation of the results of these analyses, as required under business policies; and


•	information provided by third-party valuation experts.

For these securities, a critical component of the evaluation for other-than-temporary impairments is the identification of credit impairment, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. Credit impairment is assessed using a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market comparables method, where the security is valued based upon indications from the secondary market of what discounts buyers demand when purchasing similar securities. The cash flow model incorporates actual cash flows from the securities through the current period and then projects the remaining cash flows using relevant interest rate curves over the remaining term. These cash flows are discounted using a number of assumptions, some of which include prevailing implied credit risk premiums, incremental credit spreads and illiquidity risk premiums, among others.

Securities that have been identified as other-than-temporarily impaired are written down to their current fair value. For debt securities that are intended to be sold or that management believes it more-likely-than-not that will be required to sell prior to recovery, the full impairment is recognized immediately in earnings.

For available-for-sale and held-to-maturity securities that management has no intent to sell and believes that it more-likely-than-not that it will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the rest of the fair value impairment is recognized in other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security.