Condensed Consolidating Financials (Notes)

3 Months Ended

Mar. 31, 2017

Condensed Financial Information [Abstract]

Condensed Financial Statements [Text Block]

Condensed Consolidating Financial Statements

In connection with the June 2014 Convertible Note issuance, j2 Global, Inc. entered into a supplemental indenture related to the Senior Notes, pursuant to which it fully and unconditionally guaranteed, on an unsecured basis, the full and punctual payment of the Senior Notes issued by its wholly owned subsidiary, j2 Cloud Services, LLC. j2 Cloud Services, LLC is subject to restrictions on dividends in its existing indenture with respect to the Senior Notes. While substantially all of the Company’s assets (other than the net cash proceeds from the issuance of the Convertible Notes) are owned directly or indirectly by j2 Cloud Services, LLC, those contractual provisions did not, as of June 30, 2014, meaningfully restrict j2 Cloud Services, LLC’s ability to pay dividends to j2 Global, Inc.

The following condensed consolidating financial statements present, in separate columns, financial information for (i) j2 Global, Inc. (the “Parent”) on a parent-only basis, (ii) j2 Cloud Services, LLC, (iii) the non-guarantor subsidiaries on a combined basis, (iv) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (v) the Company on a consolidated basis. The condensed consolidating financial statements are presented in accordance with the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes. Intercompany charges (income) between the Parent and subsidiaries are recognized in the condensed consolidating financial statements during the period incurred and the settlement of intercompany balances is reflected in the condensed consolidating statement of cash flows based on the nature of the underlying transactions. Consolidating adjustments include consolidating and eliminating entries for investments in subsidiaries, intercompany activity and balances.

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2017

(Unaudited, in thousands except share and per share data)

BALANCE SHEET	j2 Global, Inc.		j2 Cloud Services		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
ASSETS
Cash and cash equivalents	$	15,150	$	34,395	$	137,864		$	—		$	187,409
Short-term investments	—		—		65			—			65
Accounts receivable, net	1		10,143		161,919			(1		)	172,062
Prepaid expenses and other current assets	38,296		1,766		22,295			(38,180		)	24,177
Intercompany receivable	679,103		299,743		149,971			(1,128,817		)	—
Total current assets	732,550		346,047		472,114			(1,166,998		)	383,713
Property and equipment, net	—		6,088		63,626			—			69,714
Trade names, net	—		10,439		102,900			—			113,339
Patent and patent licenses, net	—		565		11,988			—			12,553
Customer relationships, net	—		10,810		194,110			—			204,920
Goodwill	—		70,480		1,068,220			—			1,138,700
Other purchased intangibles, net	—		6,944		159,444			—			166,388
Investment in subsidiaries	1,121,423		751,821		(1,073		)	(1,872,171		)	—
Deferred income taxes, non-current	—		32,667		1,752			(27,507		)	6,912
Other assets	—		422		5,891			—			6,313
Total assets	$	1,853,973	$	1,236,283	$	2,078,972		$	(3,066,676	)	$	2,102,552
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	6,697	$	44,117	$	133,294		$	(38,181	)	$	145,927
Income taxes payable	—		94,709		—			(73,110		)	21,599
Deferred revenue, current	—		20,324		65,107			—			85,431
Line of credit	224,123		—		—			—			224,123
Other current liabilities	—		—		34			—			34
Intercompany payable	303,492		—		752,214			(1,055,706		)	—
Total current liabilities	534,312		159,150		950,649			(1,166,997		)	477,114
Long-term debt	357,462		246,811		—			—			604,273

Deferred revenue, non-current	—		822		—			—			822
Liability for uncertain tax positions	—		41,833		5,345			—			47,178
Deferred income taxes, non-current	31,738		—		35,521			(27,507		)	39,752
Other long-term liabilities	1,107		559		1,321			—			2,987
Total liabilities	924,619		449,175		992,836			(1,194,504		)	1,172,126
Commitments and contingencies	—		—		—			—			—
Preferred stock - Series A, $0.01 par value	—		—		—			—			—
Preferred stock - Series B, $0.01 par value	—		—		—			—			—
Common stock, $0.01 par value	475		—		—			—			475
Additional paid-in capital	468,359		89,066		424,399			(669,356		)	312,468
Retained earnings	460,520		697,822		713,024			(1,202,816		)	668,550
Accumulated other comprehensive income (loss)	—		220		(51,287		)	—			(51,067		)
Total stockholders’ equity	929,354		787,108		1,086,136			(1,872,172		)	930,426
Total liabilities and stockholders’ equity	$	1,853,973	$	1,236,283	$	2,078,972		$	(3,066,676	)	$	2,102,552

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2016

(Unaudited, in thousands except share and per share data)

BALANCE SHEET	j2 Global, Inc.		j2 Cloud Services		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
ASSETS
Cash and cash equivalents	$	23,935	$	22,949	$	77,066		$	—		$	123,950
Short-term investments	—		—		60			—			60
Accounts receivable, net	—		11,464		188,498			(91		)	199,871
Prepaid expenses and other current assets	25,922		2,266		21,246			(25,316		)	24,118
Intercompany receivable	635,740		281,078		166,210			(1,083,028		)	—
Total current assets	685,597		317,757		453,080			(1,108,435		)	347,999
Property and equipment, net	—		6,318		61,776			—			68,094
Trade names, net	—		10,097		105,756			—			115,853
Patent and patent licenses, net	—		601		13,327			—			13,928
Customer relationships, net	—		2,519		205,636			—			208,155
Goodwill	—		58,310		1,064,500			—			1,122,810
Other purchased intangibles, net	—		4,804		168,951			—			173,755
Investment in subsidiaries	1,091,412		730,153		(1,071		)	(1,820,494		)	—
Deferred income taxes, non-current	1,346		26,667		2,171			(24,895		)	5,289
Other assets	—		443		6,002			—			6,445
Total assets	$	1,778,355	$	1,157,669	$	2,080,128		$	(2,953,824	)	$	2,062,328
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	4,545	$	28,179	$	170,754		$	(25,407	)	$	178,071
Income taxes payable	—		82,795		—			(66,042		)	16,753
Deferred revenue, current	—		19,277		61,107			—			80,384
Line of credit	178,817		—		—			—			178,817
Other current liabilities	—		—		64			—			64
Intercompany payable	296,658		11		720,317			(1,016,986		)	—
Total current liabilities	480,020		130,262		952,242			(1,108,435		)	454,089
Long-term debt	355,143		246,604		(1		)	—			601,746
Deferred revenue, non-current	—		1,588		—			—			1,588
Liability for uncertain tax positions	—		41,259		5,278			—			46,537

Deferred income taxes, non-current	28,687		—		36,565			(24,895		)	40,357
Other long-term liabilities	1,040		505		1,930			—			3,475
Total liabilities	864,890		420,218		996,014			(1,133,330		)	1,147,792
Commitments and contingencies	—		—		—			—			—
Preferred stock - Series A, $0.01 par value	—		—		—			—			—
Preferred stock - Series B, $0.01 par value	—		—		—			—			—
Common stock, $0.01 par value	474		—		—			—			474
Additional paid-in capital	464,220		89,066		424,399			(669,356		)	308,329
Retained earnings	448,771		648,233		714,516			(1,151,138		)	660,382
Accumulated other comprehensive income (loss)	—		152		(54,801		)	—			(54,649		)
Total stockholders’ equity	913,465		737,451		1,084,114			(1,820,494		)	914,536
Total liabilities and stockholders’ equity	$	1,778,355	$	1,157,669	$	2,080,128		$	(2,953,824	)	$	2,062,328

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended March 31, 2017

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.			j2 Cloud Services			Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	75,336		$	207,888		$	(28,555	)	$	254,669
Cost of revenues	—			17,227			52,131			(28,548		)	40,810
Gross profit	—			58,109			155,757			(7		)	213,859
Operating expenses:
Sales and marketing	—			10,810			66,674			(7		)	77,477
Research, development and engineering	—			2,950			8,802			—			11,752
General and administrative	4,824			4,771			67,060			—			76,655
Total operating expenses	4,824			18,531			142,536			(7		)	165,884
Income (loss) from operations	(4,824		)	39,578			13,221			—			47,975
Equity earnings in subsidiaries	26,430			17,828			—			(44,258		)	—
Interest (income) expense, net	(5,309		)	5,207			12,512			—			12,410
Other income, net	—			(46		)	369			—			323
Income before income taxes	26,915			52,245			340			(44,258		)	35,242
Income tax expense	1,095			6,489			1,838			—			9,422
Net income	$	25,820		$	45,756		$	(1,498	)	$	(44,258	)	$	25,820

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended March 31, 2016

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.			j2 Cloud Services			Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	56,385		$	155,566	$	(11,449	)	$	200,502
Cost of revenues	—			17,489			28,202		(11,403		)	34,288
Gross profit	—			38,896			127,364		(46		)	166,214
Operating expenses:
Sales and marketing	—			10,628			37,530		(46		)	48,112
Research, development and engineering	—			3,289			5,699		—			8,988
General and administrative	4,672			5,471			45,633		—			55,776
Total operating expenses	4,672			19,388			88,862		(46		)	112,876
Income (loss) from operations	(4,672		)	19,508			38,502		—			53,338
Equity earnings in subsidiaries	34,323			27,696			—		(62,019		)	—
Interest expense, net	1,871			5,233			3,129		—			10,233
Other expense (income), net	91			(920		)	955		—			126
Income before income taxes	27,689			42,891			34,418		(62,019		)	42,979
Income tax expense (benefit)	(2,254		)	8,568			6,722		—			13,036
Net income	$	29,943		$	34,323		$	27,696	$	(62,019	)	$	29,943

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended March 31, 2017

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.		j2 Cloud Services		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
Net income	$	25,820	$	45,756	$	(1,498	)	$	(44,258	)	$	25,820
Other comprehensive income, net of tax:
Foreign currency translation adjustment	—		—		3,582			—			3,582
Change in fair value on available-for-sale investments, net of tax expense (benefit)	—		—		—			—			—
Other comprehensive income, net of tax	—		—		3,582			—			3,582
Comprehensive income	$	25,820	$	45,756	$	2,084		$	(44,258	)	$	29,402

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended March 31, 2016

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.			j2 Cloud Services		Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
Net income	$	29,943		$	34,323	$	27,696	$	(62,019	)	$	29,943
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	—			—		3,415		—			3,415
Change in fair value on available-for-sale investments, net of tax benefit	(2,361		)	—		—		—			(2,361		)
Other comprehensive income (loss), net of tax	(2,361		)	—		3,415		—			1,054
Comprehensive income	$	27,582		$	34,323	$	31,111	$	(62,019	)	$	30,997

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

Three Months Ended March 31, 2017

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.			j2 Cloud Services			Non-guarantor Subsidiaries			Consolidating Adjustments		j2 Global Consolidated
Net cash (used in) provided by operating activities	$	(71,295	)	$	20,798		$	101,688		$	—	$	51,191
Cash flows from investing activities:
Purchase of certificates of deposit	—			—			(5		)	—		(5		)
Purchases of property and equipment	—			(479		)	(9,181		)	—		(9,660		)
Acquisition of businesses, net of cash received	—			2			(3,565		)	—		(3,563		)
Purchases of intangible assets	—			(2		)	(140		)	—		(142		)
Net cash used in investing activities	—			(479		)	(12,891		)	—		(13,370		)
Cash flows from financing activities:
Proceeds from line of credit, net	44,981			—			—			—		44,981
Repurchases of common and restricted stock	(314		)	—			—			—		(314		)
Issuance of common stock under employee stock purchase plan	67			—			—			—		67
Exercise of stock options	695			—			—			—		695
Dividends paid	(17,575		)	—			—			—		(17,575		)
Deferred payments for acquisitions	—			(1,035		)	(1,264		)	—		(2,299		)
Other	—			—			(26		)	—		(26		)
Intercompany	34,656			(7,906		)	(26,750		)	—		—
Net cash (used in) provided by financing activities	62,510			(8,941		)	(28,040		)	—		25,529
Effect of exchange rate changes on cash and cash equivalents	—			68			41			—		109
Net change in cash and cash equivalents	(8,785		)	11,446			60,798			—		63,459
Cash and cash equivalents at beginning of period	23,935			22,949			77,066			—		123,950
Cash and cash equivalents at end of period	$	15,150		$	34,395		$	137,864		$	—	$	187,409

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

Three Months Ended March 31, 2016

(Unaudited, in thousands except share and per share data)

	j2 Global, Inc.			j2 Cloud Services			Non-guarantor Subsidiaries			Consolidating Adjustments		j2 Global Consolidated
Net cash (used in) provided by operating activities	$	5,686		$	(450	)	$	59,288		$	—	$	64,524
Cash flows from investing activities:
Maturity of available-for-sale investments	26,224			—			—			—		26,224
Purchase of available-for-sale investments	(21,402		)	—			—			—		(21,402		)
Purchases of property and equipment	—			(284		)	(4,037		)	—		(4,321		)
Acquisition of businesses, net of cash received	—			—			(47,989		)	—		(47,989		)
Purchases of intangible assets	—			—			(316		)	—		(316		)
Net cash (used in) provided by investing activities	4,822			(284		)	(52,342		)	—		(47,804		)
Cash flows from financing activities:
Repurchases of common stock and restricted stock	(1,786		)	—			—			—		(1,786		)
Issuance of common stock under employee stock purchase plan	58			—			—			—		58
Exercise of stock options	1,312			—			—			—		1,312
Dividends paid	(15,817		)	—			—			—		(15,817		)
Excess tax benefits from share-based compensation	264			—			—			—		264
Deferred payments for acquisitions	—			(528		)	(13,858		)	—		(14,386		)
Other	—			—			(25		)	—		(25		)
Intercompany	(13,327		)	(4,147		)	17,474			—		—
Net cash (used in) provided by financing activities	(29,296		)	(4,675		)	3,591			—		(30,380		)
Effect of exchange rate changes on cash and cash equivalents	(91		)	(30		)	1,006			—		885
Net change in cash and cash equivalents	(18,879		)	(5,439		)	11,543			—		(12,775		)
Cash and cash equivalents at beginning of period	55,516			9,975			190,039			—		255,530
Cash and cash equivalents at end of period	$	36,637		$	4,536		$	201,582		$	—	$	242,755