j2 Global Communications Inc (JCOM) filed Quarterly Report for the period ended 2009-09-30.
j2 Global Communications Inc. provides enhanced value-added messaging and communications services. The Company offers its patented services and software through three distinct sales channels: Web Corporate and Licensed Services; and markets those services under the eFax? jConnect? Hotsend? Papermaster? Protofax? and Documagix? brands. j2's industry accolades include the Deloitte & Touche Fast 50 and Fast 500 Awards Forbes Best of the Web Award PC Magazine's Top 100 Websites Award British Telecom's Tech Award and many others. J2 Global Communications Inc has a market cap of $933.2 million; its shares were traded at around $20.71 with a P/E ratio of 12 and P/S ratio of 3.9. J2 Global Communications Inc had an annual average earning growth of 28.1% over the past 5 years.
Highlight of Business Operations:
Other Revenues. Other revenues were $0.8 million and $1.1 million for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, other revenues were $2.9 million and $3.7 million, respectively. Other revenues consist primarily of patent sales and licensing revenues and advertising revenues generated by delivering email messages to our free customers on behalf of advertisers. The decrease in other revenues resulted primarily from a reduction in patent licensing revenues resulting from our recent acquisitions of patent licensees and a reduction in advertising revenues due to the general economic environment partially offset by other revenues from the sale of non-core intellectual property during the period.
Cost of revenues is primarily comprised of costs associated with data and voice transmission, telephone numbers, sales and other non-income based taxes, network operations, customer service, on-line processing fees and equipment depreciation. Cost of revenues was $11.3 million, or 18% of total revenues, and $11.7 million, or 19% of total revenues, for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, cost of revenues was $34.2 million, or 19% of total revenues, and $35.0 million, or 19% of total revenues, respectively. The decrease in cost of revenues was primarily due to increased efficiency of network operations and customer service.
Research, Development and Engineering. Our research, development and engineering costs consist primarily of personnel-related expenses. Research, development and engineering costs were $2.9 million, or 5% of total revenues, and $3.0 million, or 5% of total revenues, for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, research, development and engineering costs were $8.7 million, or 5% of total revenues, and $9.2 million, or 5% of total revenues, respectively. The decrease in research, development and engineering costs for the three and nine months ended September 30, 2009 compared to the same period in the prior year was primarily due to increased efficiency and synergies from the integration of acquisitions.
General and Administrative. Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, share-based compensation expense, bad debt expense and insurance costs. General and administrative costs were $11.7 million, or 19% of total revenues, and $10.9 million, or 18% of total revenues, for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, general and administrative costs were $33.6 million, or 18% of total revenues, and $33.4 million, or 18% of total revenues, respectively. The increase in expense for the three months ended was primarily due increased amortization resulting from acquisitions and compensation costs offset by decreased professional fee expense. The increase in the nine months ended was primarily due to increased amortization resulting from acquisitions and compensation costs offset by decreased bad debt and professional fee expenses.
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. Income tax expense amounted to approximately $7.4 million and $8.1 million for the three months ended September 30, 2009 and 2008, respectively. Income tax expense for the nine months ended September 30, 2009 and 2008 was $22.9 million and $23.0 million, respectively. Our effective tax rate was approximately 27.6% compared to 30.0% and 31.8% compared to 30.5% for the three and nine months ended September 30, 2009 and 2008, respectively. The decrease in expense for the three and nine months ended is primarily due to a change in the state apportionment factor during the third quarter and an increase in foreign income as a percentage of total income offset by the impairment of debt and preferred securities in the amount of $9.2 million which is not deductible for income tax purposes for the year.
At September 30, 2009, we had cash and investments of $222.5 million compared to cash and investments of $161.9 million at December 31, 2008. The increase in cash and investments resulted primarily from cash provided by operations offset by cash used in connection with business acquisitions. At September 30, 2009, cash and investments consisted of cash and cash equivalents of $188.4 million, short-term investments of $31.2 million and long-term investments of $3.0 million. Our investments are comprised primarily of readily marketable corporate debt securities, auction rate debt and preferred securities and certificates of deposits. For financial statement presentation, we classify our investments primarily as held-to-maturity and, thus, they are reported as short and long-term based upon their maturity dates. Short-term investments mature within one year of the date of the financial statements and long-term investments mature one year or more from the date of the financial statements. We retain a substantial portion of our cash in foreign jurisdictions for future reinvestment. If we were to repatriate funds held overseas, we would incur U.S. income tax on the repatriated amount at an approximate blended federal and state rate of 40%.
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