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Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of December 31, 2011:
_________
As of December 31, 2011, our liability for uncertain tax positions was $30.1 million. Future payments related to uncertain tax positions
have not been presented in the table above due to uncertainty of the amounts and timing of cash settlements with taxing authorities.
Credit Agreement
On January 5, 2009, we entered into a Credit Agreement with Union Bank, N.A. in order to further enhance our liquidity in the event of
potential acquisitions or other corporate purposes. On August 16, 2010, we entered into an amendment to the Credit Agreement with the Lender.
The Credit Agreement, as amended (the “Credit Agreement”),
provides for a $40.0 million revolving line of credit with a $10.0 million letter of
credit sublimit. We have not drawn down any amounts under the Credit Agreement. See Note 8 – Commitments and Contingencies –
for further
details regarding the Credit Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The following discussion of the market risks we face contains forward-looking statements. Forward-
looking statements are subject to
risks and uncertainties. Actual results could differ materially from those discussed in the forward-
looking statements. Readers are cautioned not
to place undue reliance on these forward-looking statements, which reflect management’
s opinions only as of the date hereof. j2 Global
undertakes no obligation to revise or publicly release the results of any revision to these forward-
looking statements. Readers should carefully
review the risk factors described in this document as well as in other documents we file from time to time with the SEC, including the Quarterly
Reports on Form 10
-Q and any Current Reports on Form 8-K filed or to be filed by us in 2012.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We maintain an investment
portfolio typically comprised of various holdings, types and maturities. The primary objectives of our investment activities are to preserve our
principal while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, we maintain our portfolio
of cash equivalents and investments in a mix of instruments that meet high credit quality standards, as specified in our investment policy. Our
cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 31,
2011, the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate
fluctuations.
Our short- and long-
term investments are typically comprised primarily of readily marketable corporate and governmental debt
securities and certificates of deposit. Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate
securities may have their fair market value adversely impacted due to a rise in interest rates. Our interest income is sensitive to changes in the
general level of U.S. and foreign countries’
interest rates. Due in part to these factors, our future investment income may fall short of
expectations due to changes in interest rates.
As of December 31, 2011 and 2010, we had investments in debt securities with effective maturities greater than one year of
approximately $43 million and $8.2 million, respectively. Such investments had a weighted-
average yield of 1.1% and 1.5% as of December 31,
2011 and 2010, respectively. As of December 31, 2011 and 2010 we had cash and short-
term cash equivalent investments in time deposits and
money market funds with maturities of 90 days or less of $177.9 million and $64.8 million respectively. Based on our cash and cash equivalents
and short-term and long-
term investment holdings as of December 31, 2011, an immediate 100 basis point decline in interest rates would
decrease our annual interest income by $2.2 million.
As noted above, we are parties to the Credit Agreement. If we were to borrow under the Credit Agreement we would be subject to the
prevailing interest rates and could be exposed to interest rate fluctuations.
Payments Due by Period
(In thousands)
Contractual Obligations
1 Year
2
-
3
Years
4
-
5
Years
More than
5
Years
Total
Operating leases (a)
$
2,563
$
4,214
$
3,273
$
4,829
$
14,879
Telecom services and co
-
location facilities (b)
6,181
2,984
16
—
9,181
Computer software and related services (c)
663
62
—
—
725
Holdback payments (d)
843
209
—
—
1,052
Other (e)
642
107
—
—
749
$
10,892
$
7,576
$
3,289
$
4,829
$
26,586
(a)
These amounts represent undiscounted future minimum rental commitments under noncancellable operating leases.
(b)
These amounts represent service commitments to various telecommunication providers.
(c)
These amounts represent software license commitments.
(d) These amounts represent the holdback amounts in connection with certain business acquisitions (see Note 3 – Business Acquisitions – for
further details.)
(e)
These amounts primarily represent certain marketing and consulting arrangements.