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(t) Recent Accounting Pronouncements
In May 2011, the FASB issued ASU No. 2011-
04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This guidance was issued to achieve common fair value measurement
and disclosure requirements between GAAP and International Financial Reporting Standards. This new guidance amends current fair value
measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This ASU is
effective for interim and annual periods beginning after December 15, 2011. The adoption of this new guidance is not expected to have
a significant impact on the Company’s fair value measurements, financial condition, results of operations or cash flows.
In June 2011, the FASB issued ASU No. 2011-
05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This
guidance is effective for interim and annual periods beginning December 15, 2011 and will require companies to present the components of net
income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present
components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard does not change the items
which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. In
addition, in December 2011, the FASB issued an amendment which defers the requirement to present components of reclassifications of other
comprehensive income on the face of the income statement. Because this guidance impacts presentation only, it will have no effect on the
Company's consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles –
Goodwill and Other (Topic 350), which simplifies how entities
test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-
step goodwill
impairment test. This ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15,
2011 (early adoption is permitted). The Company decided to early adopt this guidance which did not have a significant impact on the Company's
consolidated financial position or results of operations.
Reclassifications
Certain prior year reported amounts have been reclassified to conform to the 2011 presentation.
3. Business Acquisitions
In July 2011, the Company purchased for cash Data Haven Limited, an Ireland-
based provider of online data backup services for
businesses, and certain assets of the virtual PBX business of Buzz Networks Limited, a UK-
based provider of voice services. In October 2011,
the Company purchased for cash C Infinity, an Ireland-based provider of online data backup and hosting services for businesses (See Note 18
–
Subsequent Events for information on the three acquisitions closed thus far in 2012). The financial impact to j2 Global for these transactions
is immaterial as of the date of the acquisition. The consolidated statement of operations, since the date of the applicable acquisition, and balance
sheet as of December 31, 2011 reflect the results of operations of the acquisitions closed in 2011. Total consideration for these 2011 transactions
was $3.8 million, net of cash acquired.
2010
During 2010, j2 Global acquired eight businesses: (1) the voice assets of Reality Telecom Ltd, (2) the fax assets of Comodo
Communications, Inc, (3) the unified messaging and communications assets of mBox Pty, Ltd, (4) the assets associated with the email hosting
and email marketing businesses of FuseMail, LLC, (5) the assets of Alban Telecom Limited, a UK enhanced voice services provider, (6) Venali,
Inc., a Miami-based provider of enterprise Internet fax messaging solutions, (7) keepITsafe Data Solutions Ltd., an Ireland-
based provider of
online backup services, and (8) Protus IP Solutions, Inc. (now known as j2 Global Canada, Inc.), a Canadian provider of Software-as-a-
Service
(SaaS) communication services and solutions to the business market (“Protus”).
Protus
The Company acquired Protus on December 3, 2010 for cash with a purchase price of approximately $233 million, net of cash acquired
and including assumed liabilities of $25.6 million, subject to certain post-closing adjustments.
The consolidated statement of operations, since the date of the acquisition, and balance sheet as of December 31, 2010 reflects the
results of operations of Protus. For the year ended December 31, 2010, Protus contributed $6.2 million to the Company’
s total revenues.
Earnings contribution from Protus is not separately identifiable due to j2 Global’s integration activities.
The initial accounting of Protus was completed during the first quarter 2011 but remained subject to change during the measurement
period. The Company completed the valuation of certain intangible assets, finalized the working capital and recorded adjustments to the initial
purchase price allocation which resulted in a net decrease to goodwill in the amount of approximately $4.9 million in the first quarter 2011.
During the second quarter of 2011, the Company recorded an adjustment to the value of certain software due to insufficient licensing by the
seller prior to the acquisition. As a result, the Company has recorded an increase in goodwill in the amount of approximately $0.4 million to
adjust the fair value of these assets to the correct amount. Management has determined that this adjustment is immaterial to the previously
presented financial statements; accordingly, the adjustment is presented in the current period.
The following table summarizes the allocation of the purchase consideration as follows (in thousands):
Asset
Valuation