Condensed Consolidating Financials (Notes)

6 Months Ended

Jun. 30, 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 8.0% senior unsecured notes, pursuant to which it fully and unconditionally guaranteed, on an unsecured basis, the full and punctual payment of the 8.0% senior unsecured notes issued by its wholly owned subsidiary, j2 Cloud. j2 Cloud Services, LLC was subject to restrictions on dividends in its existing indenture with respect to the 8.0% senior unsecured notes until their redemption in full in August 2017 (see Note 8 - Long-Term Debt). While substantially all of the Company’s assets are owned directly or indirectly by j2 Cloud Services, LLC, those contractual provisions did not, as of June 30, 2017, 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

June 30, 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	$	4,248	$	169,330	$	157,165		$	—		$	330,743
Restricted cash	—		265,000		—			—			265,000
Short-term investments	—		—		65			—			65
Accounts receivable, net	—		11,678		169,996			(146		)	181,528
Prepaid expenses and other current assets	41,434		1,682		21,082			(41,844		)	22,354
Current assets held for sale	—		—		5,770			—			5,770
Intercompany receivable	687,229		530,478		157,243			(1,374,950		)	—
Total current assets	732,911		978,168		511,321			(1,416,940		)	805,460
Property and equipment, net	—		5,715		65,458			—			71,173
Trade names, net	—		10,767		99,677			—			110,444
Patent and patent licenses, net	—		534		11,374			—			11,908
Customer relationships, net	—		17,491		175,689			—			193,180
Goodwill	—		83,298		1,056,128			—			1,139,426
Other purchased intangibles, net	—		7,114		145,439			—			152,553
Investment in subsidiaries	1,167,712		803,353		(1,071		)	(1,969,994		)	—
Deferred income taxes, non-current	—		22,933		3,391			(19,096		)	7,228
Other assets	—		435		6,134			—			6,569
Non-current assets held for sale	—		—		29,720			—			29,720
Total assets	$	1,900,623	$	1,929,808	$	2,103,260		$	(3,406,030	)	$	2,527,661
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	5,567	$	42,227	$	129,669		$	(41,990	)	$	135,473
Income taxes payable	—		101,314		39			(88,508		)	12,845
Deferred revenue, current	—		20,966		67,187			—			88,153
Current maturities of long-term debt	—		246,652		—			—			246,652
Other current liabilities	—		—		24			—			24

Current liabilities held for sale	—		—		523			—			523
Intercompany payable	547,092		—		739,350			(1,286,442		)	—
Total current liabilities	552,659		411,159		936,792			(1,416,940		)	483,670
Long-term debt	359,820		636,557		—			—			996,377
Deferred revenue, non-current	—		57		—			—			57
Liability for uncertain tax positions	—		40,254		6,734			—			46,988
Deferred income taxes, non-current	32,515		—		21,345			(19,096		)	34,764
Other long-term liabilities	1,141		1,972		2,030			—			5,143
Non-current liabilities held for sale	—		—		5,103			—			5,103
Total liabilities	946,135		1,089,999		972,004			(1,436,036		)	1,572,102
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	476		—		—			—			476
Additional paid-in capital	470,681		89,066		424,399			(669,356		)	314,790
Retained earnings	483,331		750,667		745,669			(1,300,638		)	679,029
Accumulated other comprehensive income (loss)	—		76		(38,812		)	—			(38,736		)
Total stockholders’ equity	954,488		839,809		1,131,256			(1,969,994		)	955,559
Total liabilities and stockholders’ equity	$	1,900,623	$	1,929,808	$	2,103,260		$	(3,406,030	)	$	2,527,661

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 June 30, 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	$	—		$	60,706		$	224,039		$	(11,571	)	$	273,174
Cost of revenues	—			18,341			36,389			(11,571		)	43,159
Gross profit	—			42,365			187,650			—			230,015
Operating expenses:
Sales and marketing	—			10,845			70,017			—			80,862
Research, development and engineering	—			2,845			8,710			—			11,555
General and administrative	9,678			7,200			62,160			—			79,038
Total operating expenses	9,678			20,890			140,887			—			171,455
Income (loss) from operations	(9,678		)	21,475			46,763			—			58,560
Equity earnings in subsidiaries	33,960			39,948			—			(73,908		)	—
Interest (income) expense, net	(5,284		)	5,545			13,409			—			13,670
Other (income) expense, net	—			(129		)	4,356			—			4,227
Income before income taxes	29,566			56,007			28,998			(73,908		)	40,663
Income tax (benefit) expense	(1,809		)	14,750			(3,654		)	—			9,287
Net income	$	31,375		$	41,257		$	32,652		$	(73,908	)	$	31,376

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended June 30, 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	$	—		$	66,254		$	166,079	$	(20,533	)	$	211,800
Cost of revenues	—			16,992			39,087		(20,488		)	35,591
Gross profit	—			49,262			126,992		(45		)	176,209
Operating expenses:
Sales and marketing	—			10,260			38,402		(45		)	48,617
Research, development and engineering	—			2,930			6,283		—			9,213
General and administrative	5,078			4,431			49,925		—			59,434
Total operating expenses	5,078			17,621			94,610		(45		)	117,264
Income (loss) from operations	(5,078		)	31,641			32,382		—			58,945
Equity earnings in subsidiaries	38,019			20,786			—		(58,805		)	—
Interest expense, net	1,591			5,193			3,517		—			10,301
Other (income) expense, net	(300		)	(93		)	180		—			(213		)
Income before income taxes	31,650			47,327			28,685		(58,805		)	48,857
Income tax (benefit) expense	(2,120		)	9,308			7,899		—			15,087
Net income	$	33,770		$	38,019		$	20,786	$	(58,805	)	$	33,770

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 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	$	—		$	136,042		$	431,927		$	(40,126	)	$	527,843
Cost of revenues	—			35,568			88,520			(40,119		)	83,969
Gross profit	—			100,474			343,407			(7		)	443,874
Operating expenses:
Sales and marketing	—			21,655			136,691			(7		)	158,339
Research, development and engineering	—			5,795			17,512			—			23,307
General and administrative	14,502			11,971			129,220			—			155,693
Total operating expenses	14,502			39,421			283,423			(7		)	337,339
Income (loss) from operations	(14,502		)	61,053			59,984			—			106,535
Equity earnings in subsidiaries	60,390			57,776			—			(118,166		)	—
Interest (income) expense, net	(10,593		)	10,752			25,920			—			26,079
Other income, net	—			(175		)	4,726			—			4,551
Income before income taxes	56,481			108,252			29,338			(118,166		)	75,905
Income tax expense	(714		)	21,239			(1,816		)	—			18,709
Net income	$	57,195		$	87,013		$	31,154		$	(118,166	)	$	57,196

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 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	$	—		$	122,639		$	321,645	$	(31,982	)	$	412,302
Cost of revenues	—			34,481			67,288		(31,891		)	69,878
Gross profit	—			88,158			254,357		(91		)	342,424
Operating expenses:
Sales and marketing	—			20,888			75,932		(91		)	96,729
Research, development and engineering	—			6,219			11,982		—			18,201
General and administrative	9,750			9,902			95,559		—			115,211
Total operating expenses	9,750			37,009			183,473		(91		)	230,141
Income (loss) from operations	(9,750		)	51,149			70,884		—			112,283
Equity earnings in subsidiaries	72,342			48,482			—		(120,824		)	—
Interest expense, net	3,462			10,425			6,647		—			20,534
Other (income) expense, net	(209		)	(1,013		)	1,135		—			(87		)
Income before income taxes	59,339			90,219			63,102		(120,824		)	91,836
Income tax (benefit) expense	(4,374		)	17,877			14,620		—			28,123
Net income	$	63,713		$	72,342		$	48,482	$	(120,824	)	$	63,713

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended June 30, 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	$	31,375	$	41,257	$	32,652	$	(73,908	)	$	31,376
Other comprehensive income, net of tax:
Foreign currency translation adjustment	—		—		12,331		—			12,331
Change in fair value on available-for-sale investments, net of tax expense (benefit)	—		—		—		—			—
Other comprehensive income, net of tax	—		—		12,331		—			12,331
Comprehensive income	$	31,375	$	41,257	$	44,983	$	(73,908	)	$	43,707

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended June 30, 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	$	33,770	$	38,019	$	20,786		$	(58,805	)	$	33,770
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	—		—		(12,653		)	—			(12,653		)
Change in fair value on available-for-sale investments, net of tax benefit	2,251		—		—			—			2,251
Other comprehensive income (loss), net of tax	2,251		—		(12,653		)	—			(10,402		)
Comprehensive income	$	36,021	$	38,019	$	8,133		$	(58,805	)	$	23,368

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Six Months Ended June 30, 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	$	57,195	$	87,013	$	31,154	$	(118,166	)	$	57,196
Other comprehensive income, net of tax:
Foreign currency translation adjustment	—		—		15,913		—			15,913
Change in fair value on available-for-sale investments, net of tax expense (benefit)	—		—		—		—			—
Other comprehensive income, net of tax	—		—		15,913		—			15,913
Comprehensive income	$	57,195	$	87,013	$	47,067	$	(118,166	)	$	73,109

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Six Months Ended June 30, 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	$	63,713		$	72,342	$	48,482		$	(120,824	)	$	63,713
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	—			—		(9,238		)	—			(9,238		)
Change in fair value on available-for-sale investments, net of tax expense (benefit)	(110		)	—		—			—			(110		)
Other comprehensive loss, net of tax	(110		)	—		(9,238		)	—			(9,348		)
Comprehensive income	$	63,603		$	72,342	$	39,244		$	(120,824	)	$	54,365

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

Six Months Ended June 30, 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	$	(79,270	)	$	26,037		$	164,888		$	—	$	111,655
Cash flows from investing activities:
Purchase of available-for-sale investments	—			—			(5		)	—		(5		)
Purchases of property and equipment	—			(820		)	(18,125		)	—		(18,945		)
Acquisition of businesses, net of cash received	—			(22,453		)	(13,977		)	—		(36,430		)
Purchases of intangible assets	—			(8		)	(760		)	—		(768		)
Net cash used in investing activities	—			(23,281		)	(32,867		)	—		(56,148		)
Cash flows from financing activities:
Issuance of long-term debt	—			636,178			—			—		636,178
Proceeds from line of credit, net	44,981			—			—			—		44,981
Repayment of line of credit, net	(225,000		)	—			—			—		(225,000		)
Repurchases of common and restricted stock	(6,738		)	—			—			—		(6,738		)
Issuance of common stock under employee stock purchase plan	133			—			—			—		133
Exercise of stock options	1,051			—			—			—		1,051
Dividends paid	(35,707		)	—			—			—		(35,707		)
Deferred payments for acquisitions	—			(1,035		)	(2,304		)	—		(3,339		)
Other	—			—			(36		)	—		(36		)
Intercompany	280,863			(226,442		)	(54,421		)	—		—
Net cash provided by (used in) financing activities	59,583			408,701			(56,761		)	—		411,523
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			(76		)	5,652			—		5,576
Net change in cash, cash equivalents and restricted cash	(19,687		)	411,381			80,912			—		472,606
Net change in cash balance included in assets held for sale	—			—			(813		)	—		(813		)
Cash, cash equivalents and restricted cash at beginning of period	23,935			22,949			77,066			—		123,950
Cash, cash equivalents and restricted cash at end of period	$	4,248		$	434,330		$	157,165		$	—	$	595,743

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

Six Months Ended June 30, 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	$	(695	)	$	25,755		$	106,992		$	—	$	132,052
Cash flows from investing activities:
Maturity of available-for-sale investments	112,631			—			—			—		112,631
Purchase of available-for-sale investments	(47,207		)	—			—			—		(47,207		)
Purchases of property and equipment	—			(542		)	(8,644		)	—		(9,186		)
Acquisition of businesses, net of cash received	—			—			(76,725		)	—		(76,725		)
Purchases of intangible assets	—			(104		)	(1,711		)	—		(1,815		)
Net cash provided (used in) by investing activities	65,424			(646		)	(87,080		)	—		(22,302		)
Cash flows from financing activities:
Repurchases of common stock and restricted stock	(3,356		)	—			—			—		(3,356		)
Issuance of common stock under employee stock purchase plan	123			—			—			—		123
Exercise of stock options	1,911			—			—			—		1,911
Dividends paid	(32,202		)	—			—			—		(32,202		)
Deferred payments for acquisitions	—			(873		)	(15,677		)	—		(16,550		)
Other	1,097			—			(254		)	—		843
Intercompany	(13,674		)	5,683			7,991			—		—
Net cash (used in) provided by financing activities	(46,101		)	4,810			(7,940		)	—		(49,231		)
Effect of exchange rate changes on cash and cash equivalents	53			(239		)	(2,109		)	—		(2,295		)
Net change in cash and cash equivalents	18,681			29,680			9,863			—		58,224
Cash and cash equivalents at beginning of period	55,516			9,975			190,039			—		255,530
Cash and cash equivalents at end of period	$	74,197		$	39,655		$	199,902		$	—	$	313,754