eFax 2012 Annual Report Download - page 38

debt expense, amortization of intangible assets relating to acquisitions closed during 2010 and 2011, and an increase in personnel costs associated with businesses acquired in
and subsequent to 2010, partially offset by a decrease in professional fees.
Share
-Based Compensation
The following table represents share-
based compensation expense included in cost of revenues and operating expenses in the accompanying condensed consolidated
statements of income for the year ended December 31, 2012 , 2011 and 2010 (in thousands):
Non
-Operating Income and Expenses
Interest and Other Income . Our interest and other income is generated primarily from interest earned on cash, cash equivalents and short-term and long-
term
investments, gain on sale of investments and gains from foreign currency transactions. Interest and other income was $1.8 million , $1.3 million , and $6.8 million
for the years
ended December 31, 2012
, 2011 and 2010, respectively. The increase in interest and other income from 2011 to 2012 was primarily due to additional interest income from
higher cash and investment balances following our July 2012 debt issuance. The decrease in interest and other income from 2010 to 2011 was primarily due to an approximately
$4.4 million gain on sale of investments recognized in 2010 and reduced interest income in 2011 due to lower cash and investment balances following an acquisition in the
fourth quarter of 2010.
Interest and Other Expense . Our interest and other expense was $9.0 million . $0.1 million , and $0.1 million for the years ended December 31, 2012
, 2011 and 2010,
respectively. Interest and other expense in 2012 is primarily due to interest accrued on our July 2012 debt issuance.
Income Taxes
Our effective tax rate is based on pre-
tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various
jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. When necessary, we
establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.
As of December 31, 2012 , the Company had federal and state (California) net operating loss carryforwards (“NOLs”)
of $5.9 million each, after considering substantial
restrictions on the utilization of these NOLs due to “ownership changes” as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).
j2 Global
estimates that all of the above-
mentioned federal NOL will be available for use before its expiration. However, the Company does not expect the state NOL to be utilizable and
thus recorded a full valuation allowance against it as of December 31, 2012
. These NOLs expire through the year 2028 for the federal and 2017 for the state. In addition, as of
December 31, 2012
and 2011, the Company had state research and development tax credits of $0.4 million and $0.2 million, which last indefinitely. As of December 31, 2012,
the Company also had state enterprise zone tax credits of $0.5 million, which last indefinitely.
Income tax expense amounted to $33.3 million , $22.4 million and $27.6 million for the years ended December 31, 2012
, 2011 and 2010, respectively. Our effective
tax rates for 2012, 2011 and 2010 were 21.5% , 16.3% and 24.9% , respectively.
- 37 -
Year Ended December 31,
2012
2011 2010
Cost of revenues
$
844
$
982
$
1,217
Operating expenses:
Sales and marketing
1,543
1,431
1,826
Research, development and engineering
459
477
815
General and administrative
6,286
6,103
7,079
Total
$
9,132
$
8,993
$
10,937