Ziff Davis (ZD) 8-K/A Financial Statements and Exhibits

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
Cash and cash equivalents	$	287,514		$	4,438	$	(166,443	)	A	$	125,509
Short-term investments		143,628			—		—				143,628
Accounts receivable, net		25,332			12,383		—				37,715
Prepaid expenses and other current assets		14,285			918		—				15,203
Total current assets		470,759			17,739		(166,443	)			322,055
Long-term investments		38,687			—		—				38,687
Property and equipment, net		13,938			6,002		(380	)	B		19,560
Intangibles, net		101,560			18,434		(18,434	)	C		166,620
							65,060		D
Goodwill		293,687			20,059		(20,059	)	C		407,750
							114,063		E
Other assets		6,577			1,388		—				7,965
Total assets	$	925,208		$	63,622	$	(26,193	)		$	962,637
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses, and other current liabilities	$	37,974		$	6,942	$	(875	)	F	$	44,041
Deferred revenue		28,352			640		—				28,992
Total current liabilities		66,326			7,582		(875	)			73,033
Long term debt		245,081			—		—				245,081
Liability for uncertain tax positions		31,092			—		—				31,092
Deferred income taxes, and other long term liabilities		—			933		21,232		G		22,165
Other long-term liabilities		14,375			—		—				14,375
Total liabilities		356,874			8,515		20,357				385,746
Stockholders' equity:
Common stock, $0.01 par value.		451			5		(5	)	I		451
Additional paid-in capital		166,557			54,170		(54,170	)	I		166,557
Retained earnings		404,862			932		(932	)	I		404,862
Accumulated other comprehensive income (loss)		(3,536	)		—		—				(3,536	)
Total stockholders' equity		568,334			55,107		(55,107	)			568,334
Non-controlling interest
Non-controlling interest		—			—		8,557		E		8,557
Total equity		568,334			55,107		(46,550	)			576,891
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
	Historical			Historical			Adjustments				Pro Forma
Revenues	$	269,363		$	32,153		$	—			$	301,516
Cost of revenues		48,354			8,740			—				57,094
Gross profit		221,009			23,413			—				244,422
Operating expenses:
Sales and marketing		43,910			12,236			—				56,146
Research, development and engineering		13,798			806			—				14,604
General and administrative		43,387			10,733			(54	)	B		56,904
								2,838		D
Total operating expenses		101,095			23,775			2,784				127,654
Operating earnings		119,914			(362	)		(2,784	)			116,768
Interest income/(expense)		(2,657	)		—			(1,010	)	J		(3,667	)
Earnings before income taxes		117,257			(362	)		(3,794	)			113,101
Income tax expense		25,880			99			(1,464	)	H		24,515
Net earnings	$	91,377		$	(461	)	$	(2,330	)		$	88,586
Net earnings per common share:
Basic	$	1.97									$	1.91
Diluted	$	1.96									$	1.90
Weighted average shares outstanding:
Basic		45,590,160										45,590,160
Diluted		45,897,389										45,897,389
Cash dividend paid per common share		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		Pro Forma				j2 Global
	Historical		Historical		Adjustments				Pro Forma
Revenues	$	330,159	$	31,425	$	—			$	361,584
Cost of revenues		60,613		6,026		—				66,639
Gross profit		269,546		25,399		—				294,945
Operating expenses:
Sales and marketing		59,066		12,591		—				71,657
Research, development and engineering		16,373		1,160		—				17,533
General and administrative		58,157		8,515		(73	)	B		71,695
						5,096		D
Total operating expenses		133,596		22,266		5,023				160,885
Operating earnings		135,950		3,133		(5,023	)			134,060
Interest income/(expense)		1,166		—		(776	)	J		390
Earnings before income taxes		137,116		3,133		(5,799	)			134,450
Income tax expense		22,350		821		(2,257	)	H		20,914
Net earnings	$	114,766	$	2,312	$	(3,542	)		$	113,536
Net earnings per common share:
Basic	$	2.46							$	2.44
Diluted	$	2.43							$	2.41
Weighted average shares outstanding:
Basic		45,799,615								45,799,615
Diluted		46,384,848								46,384,848
Cash dividend paid per common share		0.41

j2 GLOBAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.   Description of the Transaction and Basis of Presentation

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

A.   Reflects the $166,443,000 of cash consideration paid for the Acquisition.

B.   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).

								Pro forma decrease / (increase) to depreciation expense
	Historical amounts		Fair value		Fair value adjustment			For the nine months ended September 30, 2012			For the twelve months ended December 31, 2011
Computers, hardware & software	$	555	$	538	$	(17	)	$	4		$	6
Other equipment		169		148		(21	)		5			7
Capitalized software & websites		5,187		4,780		(407	)		61			82
Leasehold improvements		91		156		65			(16	)		(22	)
Total	$	6,002	$	5,622	$	380		$	54		$	73

C.   Reflects the elimination of Ziff Davis’ historical intangible assets and goodwill.

D.   Reflects the fair value of identifiable intangible assets and related amortization expense adjustments, as follows (in thousands):

				Pro forma amortization expense
	Fair value		Remaining useful life	For the nine months ended September 30, 2012			For the twelve months ended December 31, 2011
Trade name	$	37,730	20 years	$	1,415		$	1,887
Customer relationships		5,380	8 years		504			673
Licensing relationships		4,910	6 years		614			818
Advertiser relationships		14,500	9 years		1,208			1,611
Subscriber relationships		620	5 years		93			124
Non-competition agreements		600	3 years		150			200
Content: Proprietary		330	1 year		248			330
Content: Reviews		510	0.5 year		510			510
Customer Lists		480	5 years		72			96
Total	$	65,060		$	4,814		$	6,249
Historical amortization Expense					(1,976	)		(1,153	)
Increase to pro forma amortization expense				$	2,838		$	5,096

E.   Reflects the preliminary purchase price allocation and recognition of goodwill arising from the Acquisition    as follows (in thousands):

Cash consideration paid	$	166,443
Non-controlling interest		8,557
Assumed liabilities		7,640
Deferred tax liability		21,232
Total purchase price to be allocated	$	203,872
Less: Estimated fair value of assets acquired:
Current assets	$	(17,739	)
Depreciable fixed assets and Other assets		(7,010	)
Trade names		(37,730	)
Customer & subscriber relationships		(6,000	)
Licensing relationships		(4,910	)
Advertiser relationships		(14,500	)
Other intangibles		(1,920	)
Goodwill	$	114,063

F.   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.

G.   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.

H.   Reflects the tax impact of the Acquisition based on a blended statutory rate of approximately 41.1%.

I.   Reflects the elimination of Ziff Davis’ historical stockholders’ equity balances.

J.   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%.