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J2 GLOBAL, INC.
FORM 10-K
(Annual Report)
Filed 02/29/16 for the Period Ending 12/31/15
Address 6922 HOLLYWOOD BLVD
LEGAL DEPT - 5TH FLOOR
LOS ANGELES, CA 90028
Telephone 3238609200
CIK 0001084048
Symbol JCOM
SIC Code 4822 - Telegraph and Other Message Communications
Industry Communications Services
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2016, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    J2 GLOBAL, INC. FORM 10-K (Annual Report) Filed 02/29/16 for the Period Ending 12/31/15 Address 6922 HOLLYWOOD BLVD LEGAL DEPT - 5TH FLOOR LOS ANGELES, CA 90028 3238609200 0001084048 JCOM 4822 - Telegraph and Other Message Communications Communications Services Services 12/31 Telephone CIK Symbol...

  • Page 2
    ...Boulevard, Suite 500, Los Angeles, California 90028, (323) 860-9200 (Address and telephone number of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value (Title of class...

  • Page 3
    ... Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 123 123 123...

  • Page 4
    ... costs, increase sales and enhance productivity, mobility, business continuity and security. Our eFax® and MyFax® online fax services enable users to receive faxes into their email inboxes and to send faxes via the Internet. eVoice® and Onebox® provide our customers a virtual phone system...

  • Page 5
    ... including MyFax® , eFax Plus ®, eFax Pro™, eFax Corporate™ and eFax Developer™ . Voice and Unified Communications eVoice® is a virtual phone system that provides small and medium-sized businesses on-demand voice communications services, featuring a toll-free or local company number, auto...

  • Page 6
    ... of online self-help, email communications, interactive chat sessions and telephone calls. Our Internet-based online self-help tools enable customers to resolve simple issues on their own, eliminating the need to speak or write to our customer service representatives. We use internal personnel...

  • Page 7
    ... sites, from the sale of customer clicks to online merchants and business-to-business leads to IT vendors, and through the licensing of technology, data and other intellectual material to clients. During 2015, our Digital Media web properties attracted 4.0 billion visits and 10.3 billion page views...

  • Page 8
    ... applications, no patent rights can be enforced. We have obtained patent licenses for certain technologies where such licenses are necessary or advantageous. We own and use a number of trademarks in connection with our services, including word and logo trademarks for eFax, MyFax, eFax Corporate...

  • Page 9
    ... a work stoppage. We believe our relationship with our employees is good. Web Availability of Reports The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange...

  • Page 10
    ... and debt service requirements. We may also use cash to make acquisitions, which may limit our availability of cash for other uses, such as interest payments, stock repurchases or dividends. We will be required to review goodwill and other intangible assets for impairment in connection with past...

  • Page 11
    ...from other businesses. If we are unable to develop compelling content of our own, we may be required to engage freelance services or obtain licensed content which may not be at reasonable prices which could harm our operating results. Users are increasingly using mobile devices to access our content...

  • Page 12
    .... We are subject to examination of our income tax returns by the U.S. Internal Revenue Service ("IRS") and other domestic and foreign tax authorities. We are currently under audit by the IRS, the California Franchise Tax Board ("FTB") for tax years 2012 and 2013, the New York State Department of...

  • Page 13
    ... set of requirements for enhancing payment account data security. Failure to comply with the security requirements or rectify a security issue may result in fines or a restriction on accepting payment cards. Credit card companies may change the standards required to utilize their services...

  • Page 14
    ... and networking sites which are attracting a substantial and increasing share of users and users' online time, and may continue to attract an increasing share of online advertising dollars. In addition, several competitors offer products and services that directly compete for users with our Digital...

  • Page 15
    ... covering new brands and territories. Some regulators and competitors have taken the view that certain of our brands, such as eFax and eVoice, are descriptive or generic when applied to the products and services offered by our Business Cloud Services segment. Nevertheless, we have obtained U.S. and...

  • Page 16
    ..., pay damages and royalties, develop new intellectual property, modify, design around, or discontinue existing products, services, or features, or acquire licenses to the intellectual property that is the subject of the infringement claims. These licenses, if required, may not be available at...

  • Page 17
    ... adverse change in their terms and conditions of use or services, or any failure by them to handle current or higher volumes of activity could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. To obtain new cloud services customers, we...

  • Page 18
    ... the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other elements of our business strategy and other general corporate purposes, including share repurchases and payment of dividends; limit our flexibility in planning for, or reacting to, changes in...

  • Page 19
    ... right to require our subsidiary, j2 Cloud Services, to repurchase the Senior Notes upon the occurrence of a change in control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and...

  • Page 20
    ..., the FCC, and a number of states require regulated telecommunications carriers to contribute to federal and/or state Universal Service Funds ("USF"). Generally, USF is used to subsidize the cost of providing service to low-income customers and those living in high cost or rural areas. Congress...

  • Page 21
    ... will also be subject to any new laws and regulations directly applicable to our domestic and international activities. Further, the application of existing laws to us or our subsidiaries regulating or requiring licenses for certain businesses of our advertisers including, for example, distribution...

  • Page 22
    ... use such information to work with our advertisers to more effectively target ads to relevant users and consumers, which ads command a higher rate. The use of such consumer data by online service providers and advertising networks is a topic of active interest among federal, state, and international...

  • Page 23
    ... if providers of broadband Internet access services block, impair or degrade our services. Our business is dependent on the ability of our cloud services customers and visitors to our digital media properties to access our services and applications over broadband Internet connections. In March, 2015...

  • Page 24
    ... Internet or mobile display advertising. Most of our Digital Media segment revenues are derived from fees paid by advertisers in connection with the display of advertisements or clicks on advertisements on web pages or mobile devices. As a result, such technologies and tools are reducing the number...

  • Page 25
    ... the sending or receiving of email messages, the cost of providing our services could increase and, if significant, could materially adversely affect our business, prospects, financial condition, operating results and cash flows. Risks Related To Our Stock The fundamental change purchase feature of...

  • Page 26
    ...1.75 to 1. While j2 Cloud Services is currently in compliance with such covenants, its ability to comply with such covenants is subject to conditions outside its control. If we cannot obtain cash from our subsidiaries, we may not be able to pay dividends on our stock, pay interest on the Convertible...

  • Page 27
    ... or competitive developments affecting our markets; Investor perceptions of us and comparable public companies; Conditions and trends in the communications, messaging and Internet-related industries; Announcements of technological innovations and acquisitions; Introduction of new services by...

  • Page 28
    ... 16, 2015. The Massachusetts Appellate Tax Board has not yet rendered its decision. On January 18, 2013, Paldo Sign and Display Co. ("Paldo") filed an amended complaint adding two j2 Global affiliates and a former employee as additional defendants in an existing purported class action pending...

  • Page 29
    Item 4. Mine Safety Disclosures Not applicable. - 28 -

  • Page 30
    ... Purchases of Equity Securities Market Information Our common stock is traded on the NASDAQ Global Select Market under the symbol "JCOM". The following table sets forth the high and low closing sale prices for our common stock for the periods indicated, as reported by the NASDAQ Global Select Market...

  • Page 31
    ...options and/or the vesting of restricted stock issued to employees. Equity Compensation Plan Information plans: The following table provides information as of December 31, 2015 regarding shares outstanding and available for issuance under j2 Global's existing equity compensation Number of Securities...

  • Page 32
    ...Section and shall not be deemed to be incorporated by reference into any filing of j2 Global under the Securities Act of 1933, as amended, or the Exchange Act. The following graph compares the cumulative total stockholder return for j2 Global, the NASDAQ Computer Index and an index of companies that...

  • Page 33
    [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] - 32 -

  • Page 34
    ...(income), net Other expense (income), net Income before income taxes Income tax expense Net income Less net income attributable to noncontrolling interest Less extinguishment of Series A preferred stock Net income attributable to j2 Global, Inc. common shareholders Net income per common share: Basic...

  • Page 35
    ...cloud services to businesses of all sizes, from individuals to enterprises, and license our intellectual property ("IP") to third parties. In addition, the Business Cloud Services Division includes our j2 Cloud Connect business which primarily focused on our voice and fax products. Our Digital Media...

  • Page 36
    ... Cloud Business Customers is defined as paying direct inward dialing numbers for fax and voice services, and direct and resellers' accounts for other services. (3) Cancel Rate is defined as cancels of small and medium business and individual Cloud Business Customers with greater than four months of...

  • Page 37
    ... defers and recognizes subscriber activation fees and related direct incremental costs over a subscriber's estimated useful life. j2 Global's Business Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractually determined fully...

  • Page 38
    ... service period using the straight-line method. The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate...

  • Page 39
    ...the first step, it is measured by comparing the implied fair value of goodwill and intangible assets to their carrying value at the reporting unit level. In connection with the annual impairment test for intangible assets, we have the option to perform a qualitative assessment in determining whether...

  • Page 40
    ...tax positions are fully supportable. We adjust these reserves when changing events and circumstances arise. Non-Income Tax Contingencies We are currently under audit by various state, local and foreign taxing authorities for direct and indirect non-income related taxes, including Canadian sales tax...

  • Page 41
    ... access or discriminatory taxes on the Internet. The new law allows "grandfathered" states and local authorities to continue their existing taxes on internet access through June 2020. On February 27, 2013, the Office of Finance for the City of Los Angeles (the "Los Angeles Office of Finance") issued...

  • Page 42
    ... to shift from offline to online. The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and those included within our advertising networks, reflecting our commitment to constantly improve their overall web experience. As a result, we...

  • Page 43
    ... voice transmission, numbers, network operations, customer service, editorial and production costs, online processing fees and equipment depreciation. The increase in cost of revenues for the year ended December 31, 2015 was primarily due to an increase in costs associated with businesses acquired...

  • Page 44
    ...-related expenses. The increase in research, development and engineering costs from 2014 to 2015 and 2013 to 2014 was primarily due to an an increase in personnel costs associated with acquisitions within the Business Cloud Service and Digital Media segments and additional expenses for professional...

  • Page 45
    ...that all of the state enterprise zone credits will be available for use before their expiration. Income tax expense amounted to $23.3 million , $29.8 million and $35.2 million for the years ended December 31, 2015 , 2014 and 2013, respectively. Our effective tax rates for 2015, 2014 and 2013 were 15...

  • Page 46
    .... Our reportable business segments are: (i) Business Cloud Services; and (ii) Digital Media. We evaluate the performance of our operating segments based on segment revenues, including both external and intersegment net sales, and segment operating income. We account for intersegment sales and...

  • Page 47
    ...: Fax and Voice Other Total Business Cloud Services revenues: Digital Media revenues: Media Elimination of inter-segment revenues Total revenues Business Cloud Services The following segment results are presented for fiscal year 2015 , 2014 and 2013 (in thousands): 2015 External net sales Inter...

  • Page 48
    ... business acquisitions subsequent to the prior comparable period, partially offset by reduced operating costs as the Digital Media segment leverages its scale and completes the integration process of prior acquisitions. As a result of these factors, segment operating income of $30.4 million in 2015...

  • Page 49
    ... operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and interest payments associated with our debt. The increase in our net cash provided by operating activities in 2015 compared to...

  • Page 50
    ... 2013 , respectively. Net cash used in financing activities in 2015 was primarily attributable to dividends paid, deferred payments for acquisitions and the repurchase of stock, partially offset by the exercise of stock options and excess tax benefit from share-based compensation. Net cash provided...

  • Page 51
    ...-term liability on the consolidated balance sheet at December 31, 2015. Finally, with the acquisition of Salesify, acquired on September 17, 2015 (see Note 3 - Business Acquisitions), contingent consideration of up to an aggregate of $17.0 million may be payable upon achieving certain future income...

  • Page 52
    ... operating strategies. As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Annual Report on Form 10...

  • Page 53
    ... 31, 2015 and 2014 , cumulative translation adjustments included in other comprehensive income amounted to $(15.1) million and $(14.7) million, respectively. We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such...

  • Page 54
    ... the standards of the Public Company Accounting Oversight Board (United States), j2 Global, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations...

  • Page 55
    ...Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts...

  • Page 56
    ... Short-term investments Accounts receivable, net of allowances of $4,261 and $3,685, respectively Prepaid expenses and other current assets Deferred income taxes, current Total current assets Long-term investments Property and equipment, net Trade names, net Patent and patent licenses, net Customer...

  • Page 57
    j2 GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2015, 2014 and 2013 (In thousands, except share and per share data) 2015 Revenues: Total revenues Cost of revenues (1) Gross profit Operating expenses: Sales and marketing (1) Research, development and ...

  • Page 58
    ... 2013 (In thousands) 2015 Net Income Other comprehensive income (loss), net of tax: Foreign currency translation adjustment, net of tax expense (benefit) of zero, zero and ($122) for the year ended 2015, 2014 and 2013, respectively Unrealized gain (loss) on available-for-sale investments, net of tax...

  • Page 59
    ... and restricted stock Issuance of common stock under employee stock purchase plan Exercise of stock options Dividends paid Excess tax benefits from share-based compensation Deferred payments for acquisitions Other Net cash (used in) provided by financing activities Effect of exchange rate changes on...

  • Page 60
    ... stock options Issuance of shares under Employee Stock Purchase Plan Vested restricted stock Retirement of common shares Repurchase of restricted stock Share based compensation Excess tax benefit on share based compensation Balance, December 31, 2013 Net income Other comprehensive income, net of tax...

  • Page 61
    benefit on share based compensation Balance, December 31, 2015 - 47,950,677 $ - 479 - - $ - - $ - - - - $ - - $ - - $ 4,486 292,064 - - $ - - $ - 626,789 $ - (29,124) $ 4,486 890,208 $ - - $ 4,486 890,208 See Notes to Consolidated Financial Statements - 59 -

  • Page 62
    ... j2 Global reserves for receivables it may not be able to collect. These reserves for the Company's Business Cloud Services are typically driven by the volume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions...

  • Page 63
    ... defers and recognizes subscriber activation fees and related direct incremental costs over a subscriber's estimated useful life. j2 Global's Business Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractually determined fully...

  • Page 64
    ...expense over the life of the borrowing or term of the credit facility using the interest method. (i) Derivative Instruments j2 Global currently holds an embedded derivative instrument related to contingent interest in connection with its 3.25% Convertible Notes issued on June 10, 2014. This embedded...

  • Page 65
    ... 31, 2015, 2014 and 2013, respectively. (l) Property and Equipment Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the...

  • Page 66
    ... fair value related to changes in all other unobservable inputs are reported in operating income. (p) Income Taxes j2 Global's income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company's tax positions and determining...

  • Page 67
    ... service period using the straight-line method. The measurement of share-based compensation expense is based on several criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate...

  • Page 68
    ... Sales Taxes The Company may collect sales taxes from certain customers which are remitted to governmental authorities as required and are excluded from revenues. (w) Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as a new Topic...

  • Page 69
    ... issued ASU No. 2015-05, Intangibles - Goodwill and Other Internal - Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license...

  • Page 70
    ... California-based provider of email marketing services; (d) an asset purchase of SugarSync®, Inc., a California-based provider of online file backup, synchronization and sharing assets; (e) an asset purchase of Popfax, a France-based global provider of internet fax services; (f) a stock purchase of...

  • Page 71
    ...toll free phone numbers in over 80 countries; (b) all of the shares and certain assets of Securstore, an Iceland-based provider of cloud backup and recovery services for corporate and enterprise networks; (c) all of the shares of Livedrive®, a UK-based provider of online backup with added file sync...

  • Page 72
    ... e-mail and web security services; (n) all of the shares of Comendo A/S, a Danish-based provider of e-mail security; (o) certain assets of TestudoData LLC, a Nevada-based provider of e-mail security; and (p) certain other immaterial acquisitions of fax, online data backup and application businesses...

  • Page 73
    ...(e) Email Protection Agency Limited, a UK-based provider of email security, email management and network security services; (f) TechBargains.com, the leading deal aggregation website for electronic products; and (g) certain other immaterial share and asset acquisitions in the Business Cloud Services...

  • Page 74
    ... 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, 2015 Due within 1 year Due...

  • Page 75
    ... 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...

  • Page 76
    ... 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...

  • Page 77
    ... As of December 31, 2015 Less than 12 Months Fair Value Corporate debt securities Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies Debt securities issued by states of the United States and political subdivisions of the states Total $ $ 74,807 Unrealized...

  • Page 78
    ...dealer quotes for such securities, which are Level 1 inputs. The fair value of the Senior Notes (see Note 8 - Long-Term Debt) is determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 2 inputs. The fair value...

  • Page 79
    ...): December 31, 2015 Assets: Cash equivalents: Money market and other funds Time deposits Certificates of Deposit Equity securities Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies Debt securities issued by states of the United States and political...

  • Page 80
    ... (gains) losses reported in earnings Transfers into or out of Level 3 Balance as of December 31, 2015 $ $ $ $ - 15,000 - - 15,000 (600) 16,200 - 30,600 Not applicable General and administrative Not Applicable Affected line item in the Statement of Income In connection with the acquisition of Ookla...

  • Page 81
    ... one to 20 years. The changes in carrying amounts of goodwill for the year ended December 31, 2015 and 2014 are as follows (in thousands): Business Cloud Services Balance as of January 1, 2014 Goodwill acquired Purchase Accounting Adjustments Foreign exchange translation Balance as of December 31...

  • Page 82
    ... the annual impairment test for intangible assets with indefinite lives for fiscal 2015 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events. j2 Global concluded...

  • Page 83
    ... as of December 31, 2015 , which is recorded within long-term other assets. The net proceeds were available for general corporate purposes, including acquisitions. Interest is payable semi-annually on February 1 and August 1 of each year. j2 Cloud Services, Inc. has the option to call the Senior...

  • Page 84
    ...of the product of (a) the closing sale price of j2 Global common stock on each such trading day and (b) the applicable conversion rate on each such trading day; (iii) if j2 Global calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the business day...

  • Page 85
    ... are Level 1 inputs (see Note 5 - Fair Value Measurements). If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature. As of December 31, 2015 and 2014...

  • Page 86
    ... 16, 2015. The Massachusetts Appellate Tax Board has not yet rendered its decision. On January 18, 2013, Paldo Sign and Display Co. ("Paldo") filed an amended complaint adding two j2 Global affiliates and a former employee as additional defendants in an existing purported class action pending...

  • Page 87
    ...") filed a purported class action against a j2 Global affiliate in the Superior Court for the State of California, County of Los Angeles ("Los Angeles Superior Court") (No. BC549422). The complaint alleges two California statutory violations relating to late fees levied in certain eVoice® accounts...

  • Page 88
    ... their existing taxes on internet access through June 2020. The Company is currently under audit for indirect taxes in several states and municipalities. On February 27, 2013, the Office of Finance for the City of Los Angeles (the "Los Angeles Office of Finance") issued assessments to a j2 Global...

  • Page 89
    ... 35 % 0.6 (13.8) (2.2) 2.6 (0.5) (2.5) 19.2 % 2013 35 % 0.3 (17.9) 4.3 1.9 (0.5) 1.6 24.7 % The Company's effective rate for each year is normally lower than the 35% U.S. federal statutory plus applicable state income tax rates primarily due to earnings of j2 Global's subsidiaries outside of the...

  • Page 90
    .... The state enterprise zone credits expire through the year 2025 . j2 Global estimates that all of the state enterprise zone credits will be available for use before their expiration. Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on...

  • Page 91
    ...and penalty (benefit) expense in 2015 , 2014 and 2013 of $(1.4) million , $(0.1) million and $0.7 million , respectively. Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes...

  • Page 92
    ... of the IRS audit for such tax years. In July 2015, the Company was notified by the New York State Department of Taxation and Finance that its tax returns for tax years 2011 through 2013 would be audited. The Company is also currently under income tax audit by the New York City Department of Finance...

  • Page 93
    ... sole good faith judgment, but in no event in an amount that would exceed the series A cap. If not in connection with such a transaction, the redemption price will be the series A cap. j2 Series B Stock The j2 Series B Stock is not convertible into any other securities. In the event ZD LLC pays any...

  • Page 94
    ... amount of commission fees). Periodically, participants in j2 Global's stock plans surrender to the Company shares of j2 Global stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the year...

  • Page 95
    .... The number of authorized shares of common stock that may be used for 2007 Plan purposes is 4,500,000 . Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of j2 Global...

  • Page 96
    ... Intrinsic Value Number of Shares Options outstanding at January 1, 2013 Granted Exercised Canceled Options outstanding at December 31, 2013 Granted Exercised Canceled Options outstanding at December 31, 2014 Granted Exercised Canceled Options outstanding at December 31, 2015 Exercisable at...

  • Page 97
    ... behavior of our employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors...

  • Page 98
    ..., 2015 . Restricted stock award activity for the years ended December 31, 2015 , 2014 and 2013 is set forth below: Weighted-Average Grant-Date Fair Value $ 23.08 13.57 21.46 24.46 $ 17.86 45.66 15.63 35.55 $ 26.57 68.11 25.16 40.97 $ 39.08 Shares Nonvested at January 1, 2013 Granted Vested Canceled...

  • Page 99
    Restricted stock unit activity for the years ended December 31, 2015 , 2014 and 2013 is set forth below: Weighted-Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value Number of Shares Outstanding at January 1, 2013 Granted Vested Canceled Outstanding at December 31, 2013 Granted ...

  • Page 100
    ... thousands, except share and per share data): Years Ended December 31, 2015 Numerator for basic and diluted net income per common share: Net income attributable to j2 Global, Inc. common shareholders Net income available to participating securities (a) Net income available to j2 Global, Inc. common...

  • Page 101
    ... Direct costs by segment (1) : Business Cloud Services Digital Media Direct costs by segment (1) : Business Cloud Services operating income Digital Media operating income Segment operating income Global operating costs (2) Income from operations (1) 2014 $ 431,475 167,814 (259) 599,030 $ 2013...

  • Page 102
    ...253 346,615 1,792,868 2015 Capital expenditures: Business Cloud Services Digital Media Total from reportable segments Corporate Total capital expenditures Depreciation and amortization: Business Cloud Services Digital Media Total from reportable segments Corporate Total depreciation and amortization...

  • Page 103
    ... did not, as of June 30, 2014, meaningfully restrict j2 Cloud Services, Inc.'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...

  • Page 104
    ...cash equivalents Short-term investments Accounts receivable, net Prepaid expenses and other current assets Deferred income taxes Intercompany receivable Total current assets Long-term investments Property and equipment, net Trade names, net Patent and patent licenses, net Customer relationships, net...

  • Page 105
    ... debt Capital lease, non-current Liability for uncertain tax positions Deferred income taxes, non-current Deferred revenue, non-current Other long-term liabilities Total liabilities Commitments and contingencies Preferred stock - Series A, $0.01 par value Preferred stock - Series B, $0.01 par value...

  • Page 106
    ... equivalents Short-term investments Accounts receivable, net Prepaid expenses and other current assets Deferred income taxes, current Intercompany receivable Total current assets Long-term investments Property and equipment, net Trade names, net Patent and patent licenses, net Customer relationships...

  • Page 107
    ..., non-current Liability for uncertain tax positions Deferred income taxes, non-current Deferred revenue, non-current Other long-term liabilities Total liabilities Commitments and contingencies Preferred stock - Series A, $0.01 par value Preferred stock - Series B, $0.01 par value Common stock, $0.01...

  • Page 108
    ... - 42,458 5 156,919 23,283 133,636 j2 Global, Inc. Revenues: Total revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research, development and engineering General and administrative Total operating expenses Income (loss) from operations Equity earnings in Subsidiaries...

  • Page 109
    ...), net Income before income taxes Income tax expense (benefit) Net income Less extinguishment of Series A preferred stock Net income attributable to j2 Global, $ Inc. common shareholders - - 6,401 6,401 (6,401) 135,838 10,442 (23) 119,018 (6,309) 125,327 (991) 124,336 $ - - - j2 Cloud Services, Inc...

  • Page 110
    ...: Sales and marketing Research, development and engineering General and administrative Total operating expenses Income from operations Equity earnings in Subsidiaries Interest expense, net Other expense (income), net Income before income taxes Income tax expense Net income j2 Cloud Services...

  • Page 111
    ... currency translation adjustment, net of tax expense (benefit) Unrealized gain (loss) on availablefor-sale investments, net of tax expense (benefit) Other comprehensive loss, net of tax Comprehensive income $ $ 133,636 j2 Cloud Services, Inc. $ 151,894 j2 Global Consolidated 133,636 (268,036...

  • Page 112
    ... expense (benefit) Unrealized gain (loss) on availablefor-sale investments, net of tax expense (benefit) Other comprehensive income (loss), net of tax Comprehensive income $ - $ 125,327 j2 Cloud Services, Inc. $ 135,838 j2 Global Consolidated 125,327 (212,889) $ (478) (14,216) - (14,694) 15...

  • Page 113
    ...) Unrealized gain (loss) on availablefor-sale investments, net of tax expense (benefit) Other comprehensive income, net of tax Comprehensive income $ Comprehensive income attributable to $ j2 Global, Inc. $ - j2 Cloud Services, Inc. $ 107,522 j2 Global Consolidated 107,522 (61,551) $ - (43...

  • Page 114
    ... of available-for-sale investments Purchase of available-for-sale investments Purchases of property and equipment Acquisition of businesses, net of cash received Purchases of intangible assets Investment in subsidiaries Intercompany Net cash (used in) provided by investing activities Cash flows from...

  • Page 115
    Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ (82,631) 8,222 (171,...

  • Page 116
    ... available-for-sale investments Purchases of property and equipment Proceeds from sale of assets Acquisition of businesses, net of cash received Purchases of intangible assets Investment in subsidiaries Net cash used in investing activities Cash flows from financing activities: Issuance of long-term...

  • Page 117
    Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 267,705 - 226,790 - ...

  • Page 118
    ... and equipment Proceeds from sale of assets Acquisition of businesses, net of cash received Purchases of intangible assets Investment in subsidiaries Other Net cash used in investing activities Cash flows from financing activities: Debt issuance costs Repurchases of common stock and restricted stock...

  • Page 119
    Net cash (used in) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ - - - - - $ (88,551) - (42,306) ...

  • Page 120
    ... and interest on settled acquisition holdback. Cash paid for income taxes net of refunds received was $42.0 million , $49.5 million and $28.3 million during the years ended December 31, 2015 , 2014 and 2013 , respectively. The Company acquired property and equipment for $0.6 million , $0.6 million...

  • Page 121
    ... Year Ended December 31, 2015 Year Ended December 31, 2014 Affected Line Item in the Statement of Income Unrealized gain (loss) on available-for-sale investments $ (274) (274) 104 (170) $ (23) (23) 9 (14) Other expense (income), net Total, before income taxes Income tax expense (benefit) Total...

  • Page 122
    ... of results for any future period. Year Ended December 31, 2015 Fourth Quarter Revenues Gross profit Net income Net income attributable to j2 Global, Inc. common shareholders Net income per common share: Basic Diluted Weighted average shares outstanding Basic Diluted 47,849,748 48,772,061 47,696,224...

  • Page 123
    ...(in thousands): December 31, 2015 ASSETS Cash and cash equivalents Accounts receivable Prepaid expenses and other current assets Deferred income taxes, current Total current assets Property and equipment, net Trade names, net Patent and patent licenses, net Customer relationships, net Goodwill Other...

  • Page 124
    ..., 2016, in a cash transaction, the Company acquired certain assets of Mailout Interactive Inc., a Canada based provider of email services. On February 10, 2016 , the Company's Board of Directors declared a quarterly cash dividend of $0.3250 per share of common stock payable on March 10, 2016 to all...

  • Page 125
    ...the Exchange Act) for j2 Global. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued...

  • Page 126
    ... PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders j2 Global, Inc. Los Angeles, California We have audited j2 Global, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by...

  • Page 127
    ... Accounting Fees and Services The information required by this item is incorporated by reference to the information to be set forth in our 2015 Proxy Statement. PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements. The following financial statements are filed...

  • Page 128
    ... by reference to j2 Global's Annual Report on Form 10-K filed with the Commission on April 1, 2002. (5) Incorporated by reference to j2 Global's Current Report on Form 8-K filed with the Commission on May 3, 2006. (6) Incorporated by reference to j2 Global's Quarterly Report on Form 10-Q filed with...

  • Page 129
    ... by reference to j2 Global's Current Report on Form 8-K filed with the Commission on June 17, 2014. (13) Incorporated by reference to Annex A to j2 Global's Definitive Proxy Statement on Schedule 14A filed with the Commission on March 26, 2015. (14) Incorporated by reference to j2 Global's Current...

  • Page 130
    ..., on February 29, 2016 . j2 Global, Inc. By: /s/ NEHEMIA ZUCKER Nehemia Zucker Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and...

  • Page 131
    ... Ended December 31, 2015: Allowance for doubtful accounts Deferred tax asset valuation allowance Year Ended December 31, 2014: Allowance for doubtful accounts Deferred tax asset valuation allowance Year Ended December 31, 2013: Allowance for doubtful accounts Deferred tax asset valuation allowance...

  • Page 132
    ... Mail (Ireland) Limited j2 Global Holdings Limited j2 Global Ireland Limited j2 Global Canada, Inc. Ziff Davis, LLP IGN Entertainment, Inc. j2 Global UK Limited State or Other Jurisdiction of Incorporation United States Ireland Ireland Ireland Ontario, Canada United States United States United...

  • Page 133
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM j2 Global, Inc. Los Angeles, California We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149641, 333-64986, 333-135340, 333-87504, 333-55402, 33331064 and 333-203913) of j2 Global, Inc. of our...

  • Page 134
    ... is March 2, 2015, relating to our audit of the consolidated financial statements and the financial statement schedule, which appear in this Annual Report on Form 10-K of j2 Global, Inc. and subsidiaries for the year ended December 31, 2015. /s/ SingerLewak LLP Los Angeles, California February 29...

  • Page 135
    ... EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Nehemia Zucker, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 136
    ... OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, R. Scott Turicchi, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 137
    ... OF 2002 In connection with the Annual Report on Form 10-K of j2 Global, Inc. (the "Company") for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Nehemia Zucker, as Chief Executive Officer (Principal Executive Officer) of the...