Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8K DATED NOVEMBER 9, 2012 - J2 GLOBAL, INC. | j2form8-k_17448.htm |
| EX-99.2 - UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS - J2 GLOBAL, INC. | exh992_17448.htm |
| EX-99.1 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS - J2 GLOBAL, INC. | exh991_17448.htm |
| EX-23.1 - CONSENT OF INDEPENDENT AUDITORS, MCGLADREY LLP - J2 GLOBAL, INC. | exh231_17448.htm |
EXHIBIT 99.3
j2 GLOBAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On November 9, 2012, j2 Global, Inc. (“j2 Global”) acquired Ziff Davis, Inc. (“Ziff Davis”) for a purchase price of approximately $166.4 million plus assumed liabilities, (the “Acquisition”). In connection with the Acquisition, certain management of Ziff Davis converted a portion of their shares in Ziff Davis into 8,557 shares of a new series of Series A cumulative participating preferred stock of Ziff Davis having a face value of $8,557,000 (“Non-controlling interest”). The following unaudited pro forma condensed combined balance sheet as of September 30, 2012 and the unaudited pro forma
condensed combined statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are based on the historical financial statements of j2 Global and Ziff Davis using the acquisition method of accounting.
The unaudited condensed combined pro forma balance sheet as of September 30, 2012 gives effect to the Acquisition as if it had occurred on September 30, 2012, and includes all adjustments that give effect to events that are directly attributable to the Acquisition and are factually supportable. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2011 and the nine months ended September 30, 2012 give effect to the Acquisition as if it had occurred on January 1, 2011, and include all adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing
impact, and are factually supportable.
The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not intended to represent or to be indicative of the results of operations or financial position that j2 Global would have reported had the Acquisition been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements reflect management’s preliminary estimates of the fair values of tangible and intangible assets acquired and liabilities assumed. Upon completion of the valuation for the Acquisition, the Company may make additional adjustments, and these valuations could change significantly from those used in the pro forma condensed combined financial statements.
These unaudited pro forma condensed combined financial statements should be read in conjunction with j2 Global’s historical consolidated financial statements and notes thereto contained in j2 Global’s Annual Report on Form 10-K for the year ended December 31, 2011, j2 Global’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, j2 Global’s Current Report on Form 8-K filed with the United States Securities and Exchange Commission on November 13, 2012, Ziff Davis’ historical financial statements and notes thereto for the period ended December 31, 2011 contained herein
as Exhibit 99.1 and historical unaudited consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011 contained herein as Exhibit 99.2.
j2 GLOBAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2012
(in thousands)
|
j2 Global
|
Ziff Davis
|
Pro Forma
|
j2 Global
|
|||||||||||||
|
Historical
|
Historical
|
Adjustments
|
Pro Forma
|
|||||||||||||
|
ASSETS
|
||||||||||||||||
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Cash and cash equivalents
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$ | 287,514 | $ | 4,438 | $ | (166,443 | ) | A | $ | 125,509 | ||||||
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Short-term investments
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143,628 | — | — | 143,628 | ||||||||||||
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Accounts receivable, net
|
25,332 | 12,383 | — | 37,715 | ||||||||||||
|
Prepaid expenses and other current assets
|
14,285 | 918 | — | 15,203 | ||||||||||||
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Total current assets
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470,759 | 17,739 | (166,443 | ) | 322,055 | |||||||||||
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Long-term investments
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38,687 | — | — | 38,687 | ||||||||||||
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Property and equipment, net
|
13,938 | 6,002 | (380 | ) | B | 19,560 | ||||||||||
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Intangibles, net
|
101,560 | 18,434 | (18,434 | ) | C | 166,620 | ||||||||||
| 65,060 | D | |||||||||||||||
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Goodwill
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293,687 | 20,059 | (20,059 | ) | C | 407,750 | ||||||||||
| 114,063 | E | |||||||||||||||
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Other assets
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6,577 | 1,388 | — | 7,965 | ||||||||||||
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Total assets
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$ | 925,208 | $ | 63,622 | $ | (26,193 | ) | $ | 962,637 | |||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||||||||||
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Accounts payable, accrued expenses, and other current liabilities
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$ | 37,974 | $ | 6,942 | $ | (875 | ) | F | $ | 44,041 | ||||||
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Deferred revenue
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28,352 | 640 | — | 28,992 | ||||||||||||
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Total current liabilities
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66,326 | 7,582 | (875 | ) | 73,033 | |||||||||||
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Long term debt
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245,081 | — | — | 245,081 | ||||||||||||
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Liability for uncertain tax positions
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31,092 | — | — | 31,092 | ||||||||||||
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Deferred income taxes, and other long term liabilities
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— | 933 | 21,232 | G | 22,165 | |||||||||||
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Other long-term liabilities
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14,375 | — | — | 14,375 | ||||||||||||
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Total liabilities
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356,874 | 8,515 | 20,357 | 385,746 | ||||||||||||
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Stockholders' equity:
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||||||||||||||||
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Common stock, $0.01 par value.
|
451 | 5 | (5 | ) | I | 451 | ||||||||||
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Additional paid-in capital
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166,557 | 54,170 | (54,170 | ) | I | 166,557 | ||||||||||
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Retained earnings
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404,862 | 932 | (932 | ) | I | 404,862 | ||||||||||
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Accumulated other comprehensive income (loss)
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(3,536 | ) | — | — | (3,536 | ) | ||||||||||
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Total stockholders' equity
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568,334 | 55,107 | (55,107 | ) | 568,334 | |||||||||||
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Non-controlling interest
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||||||||||||||||
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Non-controlling interest
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— | — | 8,557 | E | 8,557 | |||||||||||
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Total equity
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568,334 | 55,107 | (46,550 | ) | 576,891 | |||||||||||
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Total liabilities and equity
|
$ | 925,208 | $ | 63,622 | $ | (26,193 | ) | $ | 962,637 | |||||||
j2 GLOBAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands, except per share amounts)
|
j2 Global
|
Ziff Davis
|
Pro Forma
|
j2 Global
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|||||||||||||
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Historical
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Historical
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Adjustments
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Pro Forma
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|||||||||||||
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Revenues
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$ | 269,363 | $ | 32,153 | $ | — | $ | 301,516 | ||||||||
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Cost of revenues
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48,354 | 8,740 | — | 57,094 | ||||||||||||
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Gross profit
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221,009 | 23,413 | — | 244,422 | ||||||||||||
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Operating expenses:
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Sales and marketing
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43,910 | 12,236 | — | 56,146 | ||||||||||||
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Research, development and engineering
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13,798 | 806 | — | 14,604 | ||||||||||||
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General and administrative
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43,387 | 10,733 | (54 | ) | B | 56,904 | ||||||||||
| 2,838 | D | |||||||||||||||
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Total operating expenses
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101,095 | 23,775 | 2,784 | 127,654 | ||||||||||||
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Operating earnings
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119,914 | (362 | ) | (2,784 | ) | 116,768 | ||||||||||
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Interest income/(expense)
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(2,657 | ) | — | (1,010 | ) | J | (3,667 | ) | ||||||||
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Earnings before income taxes
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117,257 | (362 | ) | (3,794 | ) | 113,101 | ||||||||||
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Income tax expense
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25,880 | 99 | (1,464 | ) | H | 24,515 | ||||||||||
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Net earnings
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$ | 91,377 | $ | (461 | ) | $ | (2,330 | ) | $ | 88,586 | ||||||
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Net earnings per common share:
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||||||||||||||||
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Basic
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$ | 1.97 | $ | 1.91 | ||||||||||||
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Diluted
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$ | 1.96 | $ | 1.90 | ||||||||||||
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Weighted average shares outstanding:
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||||||||||||||||
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Basic
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45,590,160 | 45,590,160 | ||||||||||||||
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Diluted
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45,897,389 | 45,897,389 | ||||||||||||||
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Cash dividend paid per common share
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0.65 | |||||||||||||||
j2 GLOBAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(in thousands, except per share amounts)
|
|
j2 Global
|
Ziff Davis
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Pro Forma
|
j2 Global
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||||||||||||
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Historical
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Historical
|
Adjustments
|
Pro Forma
|
|||||||||||||
|
Revenues
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$ | 330,159 | $ | 31,425 | $ | — | $ | 361,584 | ||||||||
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Cost of revenues
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60,613 | 6,026 | — | 66,639 | ||||||||||||
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Gross profit
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269,546 | 25,399 | — | 294,945 | ||||||||||||
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Operating expenses:
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||||||||||||||||
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Sales and marketing
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59,066 | 12,591 | — | 71,657 | ||||||||||||
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Research, development and engineering
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16,373 | 1,160 | — | 17,533 | ||||||||||||
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General and administrative
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58,157 | 8,515 | (73 | ) | B | 71,695 | ||||||||||
| 5,096 | D | |||||||||||||||
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Total operating expenses
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133,596 | 22,266 | 5,023 | 160,885 | ||||||||||||
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Operating earnings
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135,950 | 3,133 | (5,023 | ) | 134,060 | |||||||||||
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Interest income/(expense)
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1,166 | — | (776 | ) | J | 390 | ||||||||||
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Earnings before income taxes
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137,116 | 3,133 | (5,799 | ) | 134,450 | |||||||||||
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Income tax expense
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22,350 | 821 | (2,257 | ) | H | 20,914 | ||||||||||
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Net earnings
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$ | 114,766 | $ | 2,312 | $ | (3,542 | ) | $ | 113,536 | |||||||
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Net earnings per common share:
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||||||||||||||||
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Basic
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$ | 2.46 | $ | 2.44 | ||||||||||||
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Diluted
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$ | 2.43 | $ | 2.41 | ||||||||||||
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Weighted average shares outstanding:
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||||||||||||||||
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Basic
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45,799,615 | 45,799,615 | ||||||||||||||
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Diluted
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46,384,848 | 46,384,848 | ||||||||||||||
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Cash dividend paid per common share
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0.41 | |||||||||||||||
j2 GLOBAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
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1.
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Description of the Transaction and Basis of Presentation
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The unaudited pro forma condensed combined financial statements have been prepared based on j2 Global’s and Ziff Davis’ historical financial information, giving effect to the Acquisition and related adjustments described in these notes. Ziff Davis prepares its consolidated financial statements in accordance with US generally accepted accounting principles (“U.S. GAAP”). Certain note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the Securities and Exchange Commission rules and regulations.
j2 Global accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, “Business Combinations”. The purchase price for the Acquisition has been allocated to the assets and liabilities acquired based on a preliminary valuation of their respective fair values and may change when the final valuation of certain intangible assets and acquired working capital is determined.
Pro Forma Footnotes
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A.
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Reflects the $166,443,000 of cash consideration paid for the Acquisition.
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B.
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Reflects fair value adjustments for fixed assets acquired and related pro forma depreciation expense adjustments. Pro forma depreciation expense is calculated based on an average remaining useful life of 3 to 5 years for the acquired assets (dollar amounts in thousands).
|
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Pro forma decrease / (increase)
to depreciation expense
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||||||||||||||||||||
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Historical amounts
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Fair value
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Fair value adjustment
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For the nine months ended September 30, 2012
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For the twelve months ended December 31, 2011
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||||||||||||||||
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Computers, hardware & software
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$ | 555 | $ | 538 | $ | (17 | ) | $ | 4 | $ | 6 | |||||||||
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Other equipment
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169 | 148 | (21 | ) | 5 | 7 | ||||||||||||||
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Capitalized software & websites
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5,187 | 4,780 | (407 | ) | 61 | 82 | ||||||||||||||
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Leasehold improvements
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91 | 156 | 65 | (16 | ) | (22 | ) | |||||||||||||
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Total
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$ | 6,002 | $ | 5,622 | $ | 380 | $ | 54 | $ | 73 | ||||||||||
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C.
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Reflects the elimination of Ziff Davis’ historical intangible assets and goodwill.
|
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D.
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Reflects the fair value of identifiable intangible assets and related amortization expense adjustments, as follows (in thousands):
|
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Pro forma amortization expense
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|||||||||||||
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Fair value
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Remaining useful life
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For the nine months ended September 30, 2012
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For the twelve months ended December 31, 2011
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||||||||||
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Trade name
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$ | 37,730 |
20 years
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$ | 1,415 | $ | 1,887 | ||||||
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Customer relationships
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5,380 |
8 years
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504 | 673 | |||||||||
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Licensing relationships
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4,910 |
6 years
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614 | 818 | |||||||||
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Advertiser relationships
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14,500 |
9 years
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1,208 | 1,611 | |||||||||
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Subscriber relationships
|
620 |
5 years
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93 | 124 | |||||||||
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Non-competition agreements
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600 |
3 years
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150 | 200 | |||||||||
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Content: Proprietary
|
330 |
1 year
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248 | 330 | |||||||||
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Content: Reviews
|
510 |
0.5 year
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510 | 510 | |||||||||
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Customer Lists
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480 |
5 years
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72 | 96 | |||||||||
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Total
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$ | 65,060 | $ | 4,814 | $ | 6,249 | |||||||
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Historical amortization Expense
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(1,976 | ) | (1,153 | ) | |||||||||
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Increase to pro forma amortization expense
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$ | 2,838 | $ | 5,096 | |||||||||
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E.
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Reflects the preliminary purchase price allocation and recognition of goodwill arising from the Acquisition as follows (in thousands):
|
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Cash consideration paid
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$ | 166,443 | ||
|
Non-controlling interest
|
8,557 | |||
|
Assumed liabilities
|
7,640 | |||
|
Deferred tax liability
|
21,232 | |||
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Total purchase price to be allocated
|
$ | 203,872 | ||
|
Less: Estimated fair value of assets acquired:
|
||||
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Current assets
|
$ | (17,739 | ) | |
|
Depreciable fixed assets and Other assets
|
(7,010 | ) | ||
|
Trade names
|
(37,730 | ) | ||
|
Customer & subscriber relationships
|
(6,000 | ) | ||
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Licensing relationships
|
(4,910 | ) | ||
|
Advertiser relationships
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(14,500 | ) | ||
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Other intangibles
|
(1,920 | ) | ||
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Goodwill
|
$ | 114,063 |
|
F.
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Reflects the elimination of a one-time expense of $0.9 million in 2012 related to an earn-out arrangement from a previous acquisition of Ziff Davis, Inc. that is included within historical liabilities and was not acquired by j2 Global, Inc.
|
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G.
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No adjustments to the tax basis of Ziff Davis’ assets and liabilities are expected as a result of the Acquisition. Accordingly, deferred income taxes at September 30, 2012 have been adjusted by approximately $21.2 million caused by book and tax differences after the allocation of the pro forma purchase price.
|
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H.
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Reflects the tax impact of the Acquisition based on a blended statutory rate of approximately 41.1%.
|
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I.
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Reflects the elimination of Ziff Davis’ historical stockholders’ equity balances.
|
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J.
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Reflects the elimination of interest income for the year ended December 31, 2011 and the reduction of interest income for the nine months ended September 30, 2012 related to interest income earned on cash consideration for the Acquisition. As of January 1, 2011, j2 Global did not have sufficient cash and investments on hand to fund the Acquisition. Accordingly, the pro forma unaudited combined statement of operations for the year ended December 31, 2011 reflects the elimination of all interest income recognized on j2 Global’s cash and investments. Interest income in the pro forma unaudited combined statement of operations for the nine months ended September 30, 2012 reflects a reduction of $1 million,
representing the interest earned on the $166.4 million cash consideration for the Acquisition at an average annual interest rate of 0.6%.
|