Item 1.
|
Financial Statements (Unaudited)
|
IDT
CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
April
30,
2016
|
|
|
July 31,
2015
|
|
|
|
(Unaudited)
|
|
|
(Note
1)
|
|
|
|
(in
thousands, except per share data)
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
101,135
|
|
|
$
|
110,361
|
|
Restricted
cash and cash equivalents
|
|
|
99,846
|
|
|
|
91,035
|
|
Marketable
securities
|
|
|
46,637
|
|
|
|
40,287
|
|
Trade
accounts receivable, net of allowance for doubtful accounts of $4,027 at April 30, 2016 and $5,645 at July 31, 2015
|
|
|
53,517
|
|
|
|
58,543
|
|
Receivable
from sale of interest in Fabrix Systems Ltd.
|
|
|
4,788
|
|
|
|
8,471
|
|
Prepaid
expenses
|
|
|
16,442
|
|
|
|
17,304
|
|
Other
current assets
|
|
|
14,392
|
|
|
|
14,344
|
|
Total
current assets
|
|
|
336,757
|
|
|
|
340,345
|
|
Property, plant and
equipment, net
|
|
|
89,939
|
|
|
|
91,316
|
|
Goodwill
|
|
|
13,747
|
|
|
|
14,388
|
|
Other intangibles,
net
|
|
|
958
|
|
|
|
1,277
|
|
Investments
|
|
|
12,327
|
|
|
|
12,344
|
|
Deferred income tax
assets, net
|
|
|
7,984
|
|
|
|
13,324
|
|
Other
assets
|
|
|
7,566
|
|
|
|
12,688
|
|
Total
assets
|
|
$
|
469,278
|
|
|
$
|
485,682
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
$
|
26,695
|
|
|
$
|
29,140
|
|
Accrued
expenses
|
|
|
119,845
|
|
|
|
139,272
|
|
Deferred
revenue
|
|
|
88,570
|
|
|
|
86,302
|
|
Customer
deposits
|
|
|
96,109
|
|
|
|
84,454
|
|
Income
taxes payable
|
|
|
456
|
|
|
|
391
|
|
Notes
payable—current portion
|
|
|
—
|
|
|
|
6,353
|
|
Other
current liabilities
|
|
|
3,659
|
|
|
|
3,000
|
|
Total
current liabilities
|
|
|
335,334
|
|
|
|
348,912
|
|
Other
liabilities
|
|
|
2,180
|
|
|
|
1,830
|
|
Total
liabilities
|
|
|
337,514
|
|
|
|
350,742
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
IDT
Corporation stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; authorized shares—10,000; no shares issued
|
|
|
—
|
|
|
|
—
|
|
Class A
common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and 1,574 shares outstanding at April 30,
2016 and July 31, 2015
|
|
|
33
|
|
|
|
33
|
|
Class
B common stock, $.01 par value; authorized shares—200,000; 25,386 and 25,276 shares issued and 21,455 and 21,755 shares
outstanding at April 30, 2016 and July 31, 2015, respectively
|
|
|
254
|
|
|
|
253
|
|
Additional
paid-in capital
|
|
|
406,873
|
|
|
|
403,146
|
|
Treasury
stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 3,931 and 3,521 shares of Class B common
stock at April 30, 2016 and July 31, 2015, respectively
|
|
|
(115,316
|
)
|
|
|
(110,543
|
)
|
Accumulated
other comprehensive (loss) income
|
|
|
(782
|
)
|
|
|
771
|
|
Accumulated
deficit
|
|
|
(160,316
|
)
|
|
|
(159,829
|
)
|
Total
IDT Corporation stockholders’ equity
|
|
|
130,746
|
|
|
|
133,831
|
|
Noncontrolling
interests
|
|
|
1,018
|
|
|
|
1,109
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
131,764
|
|
|
|
134,940
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
|
$
|
469,278
|
|
|
$
|
485,682
|
|
See
accompanying notes to consolidated financial statements.
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands, except per share data)
|
|
Revenues
|
|
$
|
355,154
|
|
|
$
|
383,930
|
|
|
$
|
1,128,186
|
|
|
$
|
1,190,981
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
cost of revenues (exclusive of depreciation and amortization)
|
|
|
293,220
|
|
|
|
316,508
|
|
|
|
937,455
|
|
|
|
989,052
|
|
Selling,
general and administrative (i)
|
|
|
51,594
|
|
|
|
53,792
|
|
|
|
155,738
|
|
|
|
168,184
|
|
Depreciation
and amortization
|
|
|
5,518
|
|
|
|
4,617
|
|
|
|
15,543
|
|
|
|
13,462
|
|
Research
and development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,656
|
|
Severance
|
|
|
232
|
|
|
|
6,226
|
|
|
|
232
|
|
|
|
8,126
|
|
Total
costs and expenses
|
|
|
350,564
|
|
|
|
381,143
|
|
|
|
1,108,968
|
|
|
|
1,180,480
|
|
Other
operating losses
|
|
|
—
|
|
|
|
(1,552
|
)
|
|
|
(326
|
)
|
|
|
(1,552
|
)
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
1,086
|
|
|
|
1,235
|
|
|
|
1,086
|
|
|
|
76,864
|
|
Income
from operations
|
|
|
5,676
|
|
|
|
2,470
|
|
|
|
19,978
|
|
|
|
85,813
|
|
Interest
income (expense), net
|
|
|
244
|
|
|
|
(54
|
)
|
|
|
936
|
|
|
|
(184
|
)
|
Other
income (expense), net
|
|
|
120
|
|
|
|
(1,352
|
)
|
|
|
(723
|
)
|
|
|
937
|
|
Income
before income taxes
|
|
|
6,040
|
|
|
|
1,064
|
|
|
|
20,191
|
|
|
|
86,566
|
|
(Provision
for) benefit from income taxes
|
|
|
(1,339
|
)
|
|
|
59
|
|
|
|
(6,250
|
)
|
|
|
(2,332
|
)
|
Net
income
|
|
|
4,701
|
|
|
|
1,123
|
|
|
|
13,941
|
|
|
|
84,234
|
|
Net
income attributable to noncontrolling interests
|
|
|
(464
|
)
|
|
|
(558
|
)
|
|
|
(1,445
|
)
|
|
|
(1,003
|
)
|
Net
income attributable to IDT Corporation
|
|
$
|
4,237
|
|
|
$
|
565
|
|
|
$
|
12,496
|
|
|
$
|
83,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share attributable to IDT Corporation common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.19
|
|
|
$
|
0.02
|
|
|
$
|
0.55
|
|
|
$
|
3.64
|
|
Diluted
|
|
$
|
0.19
|
|
|
$
|
0.02
|
|
|
$
|
0.55
|
|
|
$
|
3.58
|
|
Weighted-average
number of shares used in calculation of earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,635
|
|
|
|
23,034
|
|
|
|
22,790
|
|
|
|
22,867
|
|
Diluted
|
|
|
22,680
|
|
|
|
23,468
|
|
|
|
22,816
|
|
|
|
23,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per common share
|
|
$
|
0.19
|
|
|
$
|
0.18
|
|
|
$
|
0.56
|
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
Stock-based compensation included in selling, general and administrative expenses
|
|
$
|
673
|
|
|
$
|
992
|
|
|
$
|
2,317
|
|
|
$
|
4,012
|
|
See
accompanying notes to consolidated financial statements.
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Net income
|
|
$
|
4,701
|
|
|
$
|
1,123
|
|
|
$
|
13,941
|
|
|
$
|
84,234
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized
gain on available-for-sale securities
|
|
|
63
|
|
|
|
(3
|
)
|
|
|
448
|
|
|
|
12
|
|
Foreign
currency translation adjustments
|
|
|
1,899
|
|
|
|
1,065
|
|
|
|
(2,001
|
)
|
|
|
(2,912
|
)
|
Other comprehensive
income (loss)
|
|
|
1,962
|
|
|
|
1,062
|
|
|
|
(1,553
|
)
|
|
|
(2,900
|
)
|
Comprehensive income
|
|
|
6,663
|
|
|
|
2,185
|
|
|
|
12,388
|
|
|
|
81,334
|
|
Comprehensive
income attributable to noncontrolling interests
|
|
|
(464
|
)
|
|
|
(558
|
)
|
|
|
(1,445
|
)
|
|
|
(1,003
|
)
|
Comprehensive income
attributable to IDT Corporation
|
|
$
|
6,199
|
|
|
$
|
1,627
|
|
|
$
|
10,943
|
|
|
$
|
80,331
|
|
See
accompanying notes to consolidated financial statements.
IDT
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Operating activities
|
|
|
|
|
|
|
Net income
|
|
$
|
13,941
|
|
|
$
|
84,234
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
15,543
|
|
|
|
13,462
|
|
Deferred income
taxes
|
|
|
5,913
|
|
|
|
2,176
|
|
Provision for doubtful
accounts receivable
|
|
|
600
|
|
|
|
90
|
|
Gain on sale of
interest in Fabrix Systems Ltd.
|
|
|
(1,086
|
)
|
|
|
(76,864
|
)
|
Realized gain on marketable securities
|
|
|
(543
|
)
|
|
|
—
|
|
Interest in the
equity of investments
|
|
|
379
|
|
|
|
(1,655
|
)
|
Stock-based compensation
|
|
|
2,317
|
|
|
|
4,012
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted cash
and cash equivalents
|
|
|
(14,657
|
)
|
|
|
(11,400
|
)
|
Trade accounts receivable
|
|
|
1,758
|
|
|
|
8,544
|
|
Prepaid expenses,
other current assets and other assets
|
|
|
6,450
|
|
|
|
2,604
|
|
Trade accounts payable,
accrued expenses, other current liabilities and other liabilities
|
|
|
(14,972
|
)
|
|
|
(5,287
|
)
|
Customer deposits
|
|
|
17,028
|
|
|
|
11,169
|
|
Income taxes payable
|
|
|
65
|
|
|
|
(278
|
)
|
Deferred
revenue
|
|
|
3,097
|
|
|
|
(3,024
|
)
|
Net cash provided by operating activities
|
|
|
35,833
|
|
|
|
27,783
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(13,964
|
)
|
|
|
(22,810
|
)
|
Proceeds from sale
of interest in Fabrix Systems Ltd., net of cash and cash equivalents sold.
|
|
|
4,769
|
|
|
|
36,455
|
|
Purchase of investments
|
|
|
(1,850
|
)
|
|
|
(125
|
)
|
Proceeds from sale
and redemption of investments
|
|
|
632
|
|
|
|
71
|
|
Purchases of marketable
securities
|
|
|
(29,800
|
)
|
|
|
(35,502
|
)
|
Proceeds
from maturities and sales of marketable securities
|
|
|
24,176
|
|
|
|
16,840
|
|
Net cash used in investing activities
|
|
|
(16,037
|
)
|
|
|
(5,071
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(12,983
|
)
|
|
|
(43,171
|
)
|
Distributions to
noncontrolling interests
|
|
|
(1,545
|
)
|
|
|
(1,450
|
)
|
Proceeds from exercise
of stock options.
|
|
|
—
|
|
|
|
3,317
|
|
Repayments of revolving
credit loan payable and other borrowings
|
|
|
(6,353
|
)
|
|
|
(13,201
|
)
|
Repurchases
of Class B common stock
|
|
|
(4,773
|
)
|
|
|
(703
|
)
|
Net cash used in financing activities
|
|
|
(25,654
|
)
|
|
|
(55,208
|
)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(3,368
|
)
|
|
|
(6,573
|
)
|
Net decrease in cash and cash equivalents
|
|
|
(9,226
|
)
|
|
|
(39,069
|
)
|
Cash and cash
equivalents at beginning of period
|
|
|
110,361
|
|
|
|
153,823
|
|
Cash and cash equivalents
at end of period
|
|
$
|
101,135
|
|
|
$
|
114,754
|
|
Supplemental schedule
of non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
Net
liabilities excluding cash and cash equivalents of Fabrix Systems Ltd. sold
|
|
$
|
—
|
|
|
$
|
14,333
|
|
See
accompanying notes to consolidated financial statements.
IDT
CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Basis of Presentation
The
accompanying unaudited consolidated financial statements of IDT Corporation and its subsidiaries (the “Company” or
“IDT”) have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine months ended April 30, 2016 are not necessarily indicative of the
results that may be expected for the fiscal year ending July 31, 2016. The balance sheet at July 31, 2015 has been derived
from the Company’s audited financial statements at that date but does not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements
and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2015, as filed with
the U.S. Securities and Exchange Commission (“SEC”).
The
Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal
year ending in the calendar year indicated (e.g., fiscal 2016 refers to the fiscal year ending July 31, 2016).
On
June 1, 2016, the Company completed a pro rata distribution of the common stock that the Company held in the Company’s subsidiary
Zedge, Inc. (“Zedge”) to the Company’s stockholders of record as of the close of business on May 26, 2016 (the
“Zedge Spin-Off”). The disposition of Zedge did not meet the criteria to be reported as a discontinued operation and
accordingly, its assets, liabilities, results of operations and cash flows have not been reclassified. Zedge provides a content
platform that enables consumers to personalize their mobile devices with free, high quality ringtones, wallpapers, home screen
app icons and notification sounds. In connection with the Zedge Spin-Off, each of the Company’s stockholders received one
share of Zedge Class A common stock for every three shares of the Company’s Class A common stock, and one share of Zedge
Class B common stock for every three shares of the Company’s Class B common stock, held of record as of the close of business
on May 26, 2016. The Company received a legal opinion that the Zedge Spin-Off should qualify as a tax-free transaction for U.S.
federal income tax purposes.
In
August 2015, the Company’s Board of Directors approved a plan to reorganize the Company into three separate entities by
spinning off two business units to its stockholders. The three separate companies are expected to consist of (1) IDT Telecom,
(2) Zedge and (3) other holdings. The reorganization and the specific components are subject to change and both internal and third
party contingencies, and must receive final approval from the Company’s Board of Directors and certain third parties. The
Company continues to advance the effort on the remainder of the reorganization.
Note
2—Sale of Interest in Fabrix Systems Ltd.
On
October 8, 2014, the Company completed the sale of its interest in Fabrix Systems Ltd. (“Fabrix”) to Telefonaktiebolget
LM Ericsson (publ) (“Ericsson”). The final sale price for 100% of the shares in Fabrix was $95 million in cash, excluding
transaction costs and working capital and other adjustments. The Company owned approximately 78% of Fabrix on a fully diluted
basis. The Company’s share of the sale price was $69.2 million, after reflecting the impact of working capital and other
adjustments. At April 30, 2016, the Company had received cash of $64.4 million and had aggregate receivables of $4.8 million,
which was classified as “Receivable from sale of interest in Fabrix Systems Ltd.” in the accompanying consolidated
balance sheet. In May 2016, the Company received the remaining $4.8 million. The Company and the other shareholders placed $13.0
million of the proceeds in escrow for the resolution of post-closing claims, of which $6.5 million was released in October 2015
and $6.5 million was released in April 2016. In the three months ended April 30, 2016 and 2015, the Company recorded gain on the
sale of its interest in Fabrix of $1.1 million and $1.2 million, respectively, which represented adjustments to the Company’s
share of Fabrix’ working capital and estimated transaction costs. The Company recorded gain on the sale of its interest
in Fabrix of $1.1 million and $76.9 million in the nine months ended April 30, 2016 and 2015, respectively.
Fabrix’
income before income taxes and income before income taxes attributable to the Company, which is included in the accompanying consolidated
statements of income, were as follows:
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Income
before income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to IDT Corporation
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,325
|
|
Note
3—Marketable Securities
The
following is a summary of marketable securities:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized Gains
|
|
|
Gross
Unrealized Losses
|
|
|
Fair
Value
|
|
|
|
(in
thousands)
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit*
|
|
$
|
18,309
|
|
|
$
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
18,313
|
|
Federal Government
Sponsored Enterprise notes
|
|
|
5,821
|
|
|
|
10
|
|
|
|
(3
|
)
|
|
|
5,828
|
|
Mutual funds
|
|
|
5,092
|
|
|
|
—
|
|
|
|
(102
|
)
|
|
|
4,990
|
|
Corporate bonds
|
|
|
2,570
|
|
|
|
24
|
|
|
|
—
|
|
|
|
2,594
|
|
Equity
|
|
|
2,463
|
|
|
|
—
|
|
|
|
(109
|
)
|
|
|
2,354
|
|
U.S. Treasury notes
|
|
|
2,686
|
|
|
|
43
|
|
|
|
—
|
|
|
|
2,729
|
|
Municipal
bonds
|
|
|
9,822
|
|
|
|
9
|
|
|
|
(2
|
)
|
|
|
9,829
|
|
Total
|
|
$
|
46,763
|
|
|
$
|
91
|
|
|
$
|
(217
|
)
|
|
$
|
46,637
|
|
July 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit*
|
|
$
|
22,736
|
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
22,737
|
|
Federal Home Loan
Bank bonds
|
|
|
795
|
|
|
|
—
|
|
|
|
—
|
|
|
|
795
|
|
International agency
notes
|
|
|
1,120
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
1,119
|
|
Mutual funds
|
|
|
5,000
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
4,982
|
|
Straight Path Communications
Inc. common stock
|
|
|
2,086
|
|
|
|
—
|
|
|
|
(563
|
)
|
|
|
1,523
|
|
Municipal
bonds
|
|
|
9,125
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
9,131
|
|
Total
|
|
$
|
40,862
|
|
|
$
|
12
|
|
|
$
|
(587
|
)
|
|
$
|
40,287
|
|
*
Each of the Company’s certificates of deposit has a CUSIP, was purchased in the secondary market through a broker and may
be sold in the secondary market.
In
July 2015, the Company received 64,624 shares of Straight Path Communications Inc. (“Straight Path”) Class B common
stock in connection with the lapsing of restrictions on awards of Straight Path restricted stock to certain of the Company’s
employees and the payment of taxes related thereto. The Company spun-off Straight Path in July 2013. As part of the Straight Path
spin-off, holders of the Company’s restricted Class B common stock received, in respect of those restricted shares, one
share of Straight Path’s Class B common stock for every two restricted shares of the Company that they held as of the record
date for the Straight Path spin-off. The Company received the Straight Path shares in exchange for the payment of an aggregate
of $2.1 million for the employees’ tax withholding obligations upon the vesting event. The number of shares was determined
based on their fair market value on the trading day immediately prior to the vesting date. In September and October 2015, the
Company sold all of the shares for $2.6 million and recorded a gain on the sale of $0.5 million.
Proceeds
from maturities and sales of available-for-sale securities were $5.5 million and $4.7 million in the three months ended April
30, 2016 and 2015, respectively, and $24.2 million and $16.8 million in the nine months ended April 30, 2016 and 2015, respectively.
There were no gross realized gains or losses as a result of sales in the three months ended April 30, 2016 and 2015. The gross
realized gains or losses that were included in earnings as a result of sales were gains of $0.5 million and losses of $54,000
in the nine months ended April 30, 2016 and 2015, respectively. The Company uses the specific identification method in computing
the gross realized gains and gross realized losses on the sales of marketable securities.
The
contractual maturities of the Company’s available-for-sale debt securities at April 30, 2016 were as follows:
|
|
Fair
Value
|
|
|
|
(in
thousands)
|
|
Within one year
|
|
$
|
19,174
|
|
After one year through five years
|
|
|
18,301
|
|
After five years through ten years
|
|
|
1,556
|
|
After ten years
|
|
|
262
|
|
Total
|
|
$
|
39,293
|
|
The
following available-for-sale securities were in an unrealized loss position for which other-than-temporary impairments have not
been recognized:
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
|
(in
thousands)
|
|
April 30, 2016:
|
|
|
|
Certificates of deposit
|
|
$
|
1
|
|
|
$
|
3,586
|
|
Federal Government Sponsored Enterprise
notes
|
|
|
3
|
|
|
|
1,852
|
|
Mutual funds
|
|
|
102
|
|
|
|
4,990
|
|
Equity
|
|
|
109
|
|
|
|
2,354
|
|
Municipal bonds
|
|
|
2
|
|
|
|
4,957
|
|
Total
|
|
$
|
217
|
|
|
$
|
17,739
|
|
July 31, 2015:
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
2
|
|
|
$
|
2,194
|
|
International agency notes
|
|
|
1
|
|
|
|
1,119
|
|
Mutual funds
|
|
|
18
|
|
|
|
4,982
|
|
Straight Path Communications Inc. common
stock
|
|
|
563
|
|
|
|
1,523
|
|
Municipal bonds
|
|
|
3
|
|
|
|
3,466
|
|
Total
|
|
$
|
587
|
|
|
$
|
13,284
|
|
At
April 30, 2016 and July 31, 2015, there were no securities in a continuous unrealized loss position for 12 months or longer.
Note
4—Fair Value Measurements
The
following tables present the balance of assets and liabilities measured at fair value on a recurring basis:
|
|
Level 1 (1)
|
|
|
Level 2 (2)
|
|
|
Level 3 (3)
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
10,073
|
|
|
$
|
36,564
|
|
|
$
|
—
|
|
|
$
|
46,637
|
|
Foreign
exchange forward contracts
|
|
|
—
|
|
|
|
46
|
|
|
|
—
|
|
|
|
46
|
|
Total
|
|
$
|
10,073
|
|
|
$
|
36,610
|
|
|
$
|
—
|
|
|
$
|
46,683
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange forward contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
$
|
6,505
|
|
|
$
|
33,782
|
|
|
$
|
—
|
|
|
$
|
40,287
|
|
Foreign
exchange forward contracts
|
|
|
—
|
|
|
|
38
|
|
|
|
—
|
|
|
|
38
|
|
Total
|
|
$
|
6,505
|
|
|
$
|
33,820
|
|
|
$
|
—
|
|
|
$
|
40,325
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange forward contracts
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
39
|
|
(1)
– quoted prices in active markets for identical assets or liabilities
(2)
– observable inputs other than quoted prices in active markets for identical assets and liabilities
(3)
– no observable pricing inputs in the market
At
April 30, 2016 and July 31, 2015, the Company had $8.1 million and $9.1 million, respectively, in investments in hedge funds,
which were included in “Investments” in the accompanying consolidated balance sheets. The Company’s investments
in hedge funds are accounted for using the equity method or the cost method; therefore investments in hedge funds are not measured
at fair value.
Fair
Value of Other Financial Instruments
The
estimated fair value of the Company’s other financial instruments was determined using available market information or other
appropriate valuation methodologies. However, considerable judgment is required in interpreting these data to develop estimates
of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid
in a current market exchange.
Cash
and cash equivalents, restricted cash and cash equivalents, other current assets, customer deposits, notes payable—current
portion and other current liabilities.
At April 30, 2016 and July 31, 2015, the carrying amount of these assets and liabilities
approximated fair value because of the short period of time to maturity. The fair value estimates for cash, cash equivalents and
restricted cash and cash equivalents were classified as Level 1 and other current assets, customer deposits, notes payable—current
portion and other current liabilities were classified as Level 2 of the fair value hierarchy.
Other
assets and other liabilities.
At April 30, 2016 and July 31, 2015, the carrying amount of these assets and liabilities approximated
fair value. The fair values were estimated based on the Company’s assumptions, which were classified as Level 3 of the fair
value hierarchy.
The
Company’s investments at April 30, 2016 and July 31, 2015 included investments in the equity of certain privately held entities
and other investments that are accounted for at cost. It is not practicable to estimate the fair value of these investments because
of the lack of a quoted market price for the shares of these entities, and the inability to estimate their fair value without
incurring excessive cost. The carrying value of these investments was $5.4 million and $3.4 million at April 30, 2016 and July
31, 2015, respectively, which the Company believes was not impaired.
Note
5—Derivative Instruments
The
primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts
are entered into as hedges against unfavorable fluctuations in the U.S. Dollar – Norwegian Krone (“NOK”) exchange
rate. Zedge is based in New York and Norway and much of its operations are located in Norway. The Company does not apply hedge
accounting to these contracts, therefore the changes in fair value are recorded in earnings. By using derivative instruments to
mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty
to perform under the terms of the contract. The Company minimizes the credit or repayment risk by entering into transactions with
high-quality counterparties.
The
Company’s outstanding contracts at April 30, 2016 were as follows:
Settlement
Date
|
|
U.S.
Dollar Amount
|
|
|
NOK
Amount
|
|
May
2016
|
|
|
1,000,000
|
|
|
|
8,238,600
|
|
July 2016
|
|
|
1,000,000
|
|
|
|
8,200,000
|
|
October 2016
|
|
|
500,000
|
|
|
|
4,087,318
|
|
The
fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows:
Asset
Derivatives
|
|
Balance
Sheet Location
|
|
April
30, 2016
|
|
|
July
31, 2015
|
|
|
|
|
|
(in
thousands)
|
|
Derivatives
not designated or not qualifying as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign
exchange forward contracts
|
|
Other
current assets
|
|
$
|
46
|
|
|
$
|
38
|
|
The
fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were
as follows:
Liability
Derivatives
|
|
Balance
Sheet Location
|
|
April
30, 2016
|
|
|
July
31, 2015
|
|
|
|
|
|
(in
thousands)
|
|
Derivatives
not designated or not qualifying as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign
exchange forward contracts
|
|
Other
current liabilities
|
|
$
|
—
|
|
|
$
|
39
|
|
The
effects of derivative instruments on the consolidated statements of operations were as follows:
|
|
Amount
of Gain (Loss) Recognized on Derivatives
|
|
|
|
Three
Months Ended
April
30,
|
|
|
Nine
Months Ended
April
30,
|
|
Derivatives
not designated or not qualifying as hedging instruments
|
|
Location
of Gain (Loss) Recognized on Derivatives
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
(in
thousands)
|
|
Foreign
exchange forward contracts
|
|
Other
income (expense), net
|
|
$
|
156
|
|
|
$
|
—
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
Note
6—Equity
Changes
in the components of equity were as follows:
|
|
Nine
Months Ended April 30, 2016
|
|
|
|
Attributable
to IDT Corporation
|
|
|
Noncontrolling
Interests
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Balance,
July 31, 2015
|
|
$
|
133,831
|
|
|
$
|
1,109
|
|
|
$
|
134,940
|
|
Dividends
declared ($0.56 per share)
|
|
|
(12,983
|
)
|
|
|
—
|
|
|
|
(12,983
|
)
|
Restricted
Class B common stock purchased from employees
|
|
|
(134
|
)
|
|
|
—
|
|
|
|
(134
|
)
|
Repurchases
of Class B common stock through repurchase program
|
|
|
(4,639
|
)
|
|
|
—
|
|
|
|
(4,639
|
)
|
Exercise
of subsidiary stock options
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
Stock
issued for matching contributions to the 401(k) Plan
|
|
|
1,411
|
|
|
|
—
|
|
|
|
1,411
|
|
Distributions
to noncontrolling interests
|
|
|
—
|
|
|
|
(1,545
|
)
|
|
|
(1,545
|
)
|
Stock-based
compensation
|
|
|
2,317
|
|
|
|
—
|
|
|
|
2,317
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
12,496
|
|
|
|
1,445
|
|
|
|
13,941
|
|
Other
comprehensive loss
|
|
|
(1,553
|
)
|
|
|
—
|
|
|
|
(1,553
|
)
|
Comprehensive
income
|
|
|
10,943
|
|
|
|
1,445
|
|
|
|
12,388
|
|
Balance,
April 30, 2016
|
|
$
|
130,746
|
|
|
$
|
1,018
|
|
|
$
|
131,764
|
|
Dividend
Payments
In
the nine months ended April 30, 2016, the Company paid aggregate cash dividends of $0.56 per share on its Class A common
stock and Class B common stock, or $13.0 million in total. In the nine months ended April 30, 2015, the Company paid aggregate
cash dividends of $1.85 per share on its Class A common stock and Class B common stock, or $43.2 million in total. The aggregate
cash dividends in the nine months ended April 30, 2015 included special dividends of $0.68 per share and $0.64 per share
paid in November 2014 and January 2015, respectively.
In
June 2016, the Company’s Board of Directors declared a dividend of $0.19 per share for the third quarter of fiscal 2016
to holders of the Company’s Class A common stock and Class B common stock. The dividend will be paid on or about June 17,
2016 to stockholders of record as of the close of business on June 13, 2016.
Stock
Repurchases
The
Company had a stock repurchase program for the repurchase of up to an aggregate of 8.3 million shares of the Company’s
Class B common stock. On January 22, 2016, the Company’s Board of Directors approved a stock repurchase program to
purchase up to 8.0 million shares of the Company’s Class B common stock and cancelled the previous stock repurchase
program, which had 4.6 million shares remaining available for repurchase. In the nine months ended April 30, 2016, the Company
repurchased 398,376 shares of Class B common stock for an aggregate purchase price of $4.6 million. In the nine months ended April
30, 2015, the Company repurchased 29,675 shares of Class B common stock for an aggregate purchase price of $0.4 million. At April
30, 2016, 8.0 million shares remained available for repurchase under the stock repurchase program.
In
the nine months ended April 30, 2016 and 2015, the Company paid $0.1 million and $0.3 million, respectively, to repurchase 11,250
and 16,330 shares of Class B common stock, respectively, that were tendered by employees of the Company to satisfy the employees’
tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares are repurchased
by the Company based on their fair market value on the trading day immediately prior to the vesting date.
401(k)
Plan Matching Contributions
The
Company contributed 94,712 and 70,843 shares of its Class B common stock to the Company’s 401(k) Plan for matching
contributions in the nine months ended April 30, 2016 and 2015, respectively. The Company’s cost for contributions to the
401(k) Plan was $1.4 million and $1.3 million in the nine months ended April 30, 2016 and 2015, respectively.
2015
Stock Option and Incentive Plan
On
December 14, 2015, the Company’s stockholders approved an amendment to the Company’s 2015 Stock Option and Incentive
Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder
by an additional 0.1 million shares.
Stock
Option Modification in connection with the Zedge Spin-Off
On June 7, 2016, in connection
with the Zedge Spin-Off, the Compensation Committee of the Company’s Board of Directors approved a $2.25 reduction in the
exercise price of each outstanding option to purchase the Company’s Class B common stock. The Company accounted for the
reduction in the exercise price of the Company’s outstanding stock options as a modification. The Company determined that
there was no incremental value from the modification, therefore, the Company was not required to record a stock-based compensation
charge.
Note
7—Earnings Per Share
Basic
earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the
weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per
share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted
stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock
method, unless the effect of such increase is anti-dilutive.
The
weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s
common stockholders consists of the following:
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Basic
weighted-average number of shares
|
|
|
22,635
|
|
|
|
23,034
|
|
|
|
22,790
|
|
|
|
22,867
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
—
|
|
|
|
20
|
|
|
|
—
|
|
|
|
33
|
|
Non-vested
restricted Class B common stock
|
|
|
45
|
|
|
|
414
|
|
|
|
26
|
|
|
|
359
|
|
Diluted
weighted-average number of shares
|
|
|
22,680
|
|
|
|
23,468
|
|
|
|
22,816
|
|
|
|
23,259
|
|
The
following outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise price
of the stock option was greater than the average market price of the Company’s stock during the period:
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Shares
excluded from the calculation of diluted earnings per share
|
|
|
264
|
|
|
|
15
|
|
|
|
265
|
|
|
|
166
|
|
Note
8—Revolving Credit Loan Payable
The
Company’s subsidiary, IDT Telecom, Inc., entered into a credit agreement, dated July 12, 2012, with TD Bank, N.A. for
a line of credit facility for up to a maximum principal amount of $25.0 million. IDT Telecom may use the proceeds to finance working
capital requirements, acquisitions and for other general corporate purposes. The line of credit facility is secured by primarily
all of IDT Telecom’s assets. The principal outstanding bears interest per annum, at the option of IDT Telecom, at either
(a) the U.S. Prime Rate less 125 basis points, or (b) the LIBOR rate adjusted by the Regulation D maximum reserve requirement
plus 150 basis points. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on
the maturity date. In January 2016, the maturity date was extended to January 31, 2018. At April 30, 2016 and July 31, 2015, there
were no amounts outstanding under the facility. The Company intends to borrow under the facility from time to time. IDT Telecom
pays a quarterly unused commitment fee of 0.375% per annum on the average daily balance of the unused portion of the $25.0
million commitment. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain
financial targets and ratios during the term of the line of credit, including IDT Telecom may not pay any dividend on its capital
stock and IDT Telecom’s aggregate loans and advances to affiliates or subsidiaries may not exceed $110.0 million. At April
30, 2016 and July 31, 2015, there were no amounts utilized for letters of credit under the line of credit, IDT Telecom was in
compliance with all of the covenants, and IDT Telecom’s aggregate loans and advances to affiliates and subsidiaries was
$85.1 million and $90.1 million, respectively.
Note
9—Accumulated Other Comprehensive (Loss) Income
The
accumulated balances for each classification of other comprehensive income (loss) were as follows:
|
|
Unrealized
(Loss) Gain on Available-for-Sale Securities
|
|
|
Foreign
Currency Translation
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Location
of (Gain) Loss Recognized
|
|
|
(in thousands)
|
Balance,
July 31, 2015
|
|
$
|
(575
|
)
|
|
$
|
1,346
|
|
|
$
|
771
|
|
|
|
Other
comprehensive income (loss) attributable to IDT Corporation before reclassifications
|
|
|
992
|
|
|
|
(2,002
|
)
|
|
|
(1,010
|
)
|
|
|
Less:
reclassification for gain included in net income
|
|
|
(543
|
)
|
|
|
—
|
|
|
|
(543
|
)
|
|
Other
income (expense), net
|
Net
other comprehensive income (loss) attributable to IDT Corporation
|
|
|
449
|
|
|
|
(2,002
|
)
|
|
|
(1,553
|
)
|
|
|
Balance,
April 30, 2016
|
|
$
|
(126
|
)
|
|
$
|
(656
|
)
|
|
$
|
(782
|
)
|
|
|
Note
10—Business Segment Information
The
Company has two reportable business segments, Telecom Platform Services and Consumer Phone Services. Operating segments that are
not reportable individually are included in All Other. The Company’s reportable segments are distinguished by types of service,
customers and methods used to provide their services. The operating results of these business segments are regularly reviewed
by the Company’s chief operating decision maker.
The
Telecom Platform Services segment provides retail telecommunications and payment offerings as well as wholesale international
long distance traffic termination. The Consumer Phone Services segment provides consumer local and long distance services in certain
U.S. states. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division. Prior to the Zedge Spin-Off,
All Other included Zedge, which provides a content platform that enables consumers to personalize their mobile devices with free,
high quality ringtones, wallpapers, home screen app icons and notification sounds. All Other also includes the Company’s
real estate holdings and other, smaller, businesses. Until the sale of Fabrix in October 2014, All Other included Fabrix, a software
development company offering a cloud-based scale-out storage and computing platform optimized for big data, virtualization and
media storage, processing and delivery. Corporate costs include certain services, such as compensation, consulting fees, treasury
and accounts payable, tax and accounting services, human resources and payroll, corporate purchasing, corporate governance including
Board of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, business
development, and other corporate-related general and administrative expenses including, among others, facilities costs, charitable
contributions and travel, as well as depreciation expense on corporate assets. Corporate does not generate any revenues, nor does
it incur any direct cost of revenues.
The
accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the
performance of its business segments based primarily on income (loss) from operations. IDT Telecom depreciation and amortization
are allocated to Telecom Platform Services and Consumer Phone Services because the related assets are not tracked separately by
segment. There are no other significant asymmetrical allocations to segments.
Operating
results for the business segments of the Company are as follows:
(in
thousands)
|
|
Telecom
Platform
Services
|
|
|
Consumer
Phone
Services
|
|
|
All
Other
|
|
|
Corporate
|
|
|
Total
|
|
Three Months Ended
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
350,399
|
|
|
$
|
1,682
|
|
|
$
|
3,073
|
|
|
$
|
—
|
|
|
$
|
355,154
|
|
Income
(loss) from operations
|
|
|
6,319
|
|
|
|
351
|
|
|
|
1,804
|
|
|
|
(2,798
|
)
|
|
|
5,676
|
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
1,086
|
|
|
|
—
|
|
|
|
1,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
379,139
|
|
|
$
|
2,098
|
|
|
$
|
2,693
|
|
|
$
|
—
|
|
|
$
|
383,930
|
|
Income
(loss) from operations
|
|
|
5,602
|
|
|
|
324
|
|
|
|
1,584
|
|
|
|
(5,040
|
)
|
|
|
2,470
|
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
1,235
|
|
|
|
—
|
|
|
|
1,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,112,779
|
|
|
$
|
5,277
|
|
|
$
|
10,130
|
|
|
$
|
—
|
|
|
$
|
1,128,186
|
|
Income
(loss) from operations
|
|
|
22,346
|
|
|
|
980
|
|
|
|
4,079
|
|
|
|
(7,427
|
)
|
|
|
19,978
|
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
1,086
|
|
|
|
—
|
|
|
|
1,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,171,897
|
|
|
$
|
6,652
|
|
|
$
|
12,432
|
|
|
$
|
—
|
|
|
$
|
1,190,981
|
|
Income
(loss) from operations
|
|
|
18,142
|
|
|
|
985
|
|
|
|
77,520
|
|
|
|
(10,834
|
)
|
|
|
85,813
|
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
76,864
|
|
|
|
—
|
|
|
|
76,864
|
|
Note
11—Commitments and Contingencies
Legal
Proceedings
On
May 5, 2004, the Company filed a complaint in the Supreme Court of the State of New York, County of New York, seeking injunctive
relief and damages against Tyco Group, S.A.R.L., Tyco Telecommunications (US) Inc. (f/k/a TyCom (US) Inc.), Tyco International,
Ltd., Tyco International (US) Inc., and TyCom Ltd. (collectively “Tyco”). The Company alleged that Tyco breached a
settlement agreement that it had entered into with the Company to resolve certain disputes and civil actions among the parties.
The Company alleged that Tyco did not provide the Company, as required under the settlement agreement, free of charge and for
the Company’s exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the
settlement agreement) on a global undersea fiber optic network that Tyco was deploying at that time. After extensive proceedings,
including several decisions and appeals, the New York Court of Appeals affirmed a lower court decision to dismiss the Company’s
claim and denied the Company’s motion for re-argument of that decision. On June 23, 2015, the Company filed a new summons
and complaint against Tyco in the Supreme Court of the State of New York, County of New York alleging that Tyco breached the settlement
agreement. In September 2015, Tyco filed a motion to dismiss the complaint, which the Company opposed. Oral arguments were held
on March 9, 2016. The parties are now awaiting a decision from the Court.
In
addition to the foregoing, the Company is subject to other legal proceedings that have arisen in the ordinary course of business
and have not been finally adjudicated. Although there can be no assurance in this regard, the Company believes that none of the
other legal proceedings to which the Company is a party will have a material adverse effect on the Company’s results of
operations, cash flows or financial condition.
Purchase
Commitments
The
Company had purchase commitments of $1.9 million at April 30, 2016.
Letters
of Credit
At
April 30, 2016, the Company had letters of credit outstanding totaling $0.2 million for IDT Telecom’s business. The letters
of credit outstanding at April 30, 2016 expire in the twelve month period ending April 30, 2017.
Performance
Bonds
IDT
Payment Services and IDT Telecom have performance bonds issued through third parties for the benefit of various states in order
to comply with the states’ financial requirements for money remittance licenses and telecommunications resellers, respectively.
At April 30, 2016, the Company had aggregate performance bonds of $13.3 million outstanding.
Customer
Deposits
At
April 30, 2016 and July 31, 2015, “Customer deposits” in the Company’s consolidated balance sheets included
refundable customer deposits of $96.1 million and $84.5 million, respectively, related to IDT Financial Services Ltd., the Company’s
Gibraltar-based bank.
Substantially
Restricted Cash and Cash Equivalents
The
Company treats unrestricted cash and cash equivalents held by IDT Payment Services and IDT Financial Services Ltd. as substantially
restricted and unavailable for other purposes. At April 30, 2016 and July 31, 2015, “Cash and cash equivalents” in
the Company’s consolidated balance sheets included an aggregate of $9.1 million and $7.5 million, respectively, held by
IDT Payment Services and IDT Financial Services Ltd. that was unavailable for other purposes.
Restricted
Cash and Cash Equivalents
Restricted
cash and cash equivalents consist of the following:
|
|
April
30,
2016
|
|
|
July 31,
2015
|
|
|
|
(in
thousands)
|
|
IDT
Financial Services customer deposits
|
|
$
|
99,456
|
|
|
$
|
87,613
|
|
Related
to letters of credit
|
|
|
169
|
|
|
|
3,163
|
|
Other
|
|
|
221
|
|
|
|
259
|
|
Total
restricted cash and cash equivalents
|
|
$
|
99,846
|
|
|
$
|
91,035
|
|
Note
12—Other Operating Losses
The
following table summarizes the other operating losses by business segment:
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Telecom
Platform Services-loss on disposal of property, plant and equipment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(326
|
)
|
|
$
|
—
|
|
Corporate-losses
related to legal matters
|
|
|
—
|
|
|
|
(1,552
|
)
|
|
|
—
|
|
|
|
(1,552
|
)
|
Total
other operating losses
|
|
$
|
—
|
|
|
$
|
(1,552
|
)
|
|
$
|
(326
|
)
|
|
$
|
(1,552
|
)
|
The
loss on disposal of property, plant and equipment in the nine months ended April 30, 2016 was due to the write-off of capitalized
costs of certain projects that were terminated prior to completion.
Note
13—Other Income (Expense), Net
Other
income (expense), net consists of the following:
|
|
Three Months Ended
April 30,
|
|
|
Nine Months Ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Foreign
currency transaction gains (losses)
|
|
$
|
571
|
|
|
$
|
(1,865
|
)
|
|
$
|
(1,687
|
)
|
|
$
|
(776
|
)
|
Gain
(loss) on marketable securities
|
|
|
—
|
|
|
|
4
|
|
|
|
543
|
|
|
|
(54
|
)
|
(Loss)
gain on investments
|
|
|
(457
|
)
|
|
|
196
|
|
|
|
(377
|
)
|
|
|
1,655
|
|
Other
|
|
|
6
|
|
|
|
313
|
|
|
|
798
|
|
|
|
112
|
|
Total
other income (expense), net
|
|
$
|
120
|
|
|
$
|
(1,352
|
)
|
|
$
|
(723
|
)
|
|
$
|
937
|
|
Note
14—Recently Adopted Accounting Standard and Recently Issued Accounting Standards Not Yet Adopted
In
November 2015, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”)
to simplify the presentation of deferred income taxes, as well as align the presentation of deferred income tax assets and liabilities
with International Financial Reporting Standards (“IFRS”). The amendments in the ASU require that deferred tax assets
and liabilities be classified as noncurrent in a classified balance sheet instead of separated into current and noncurrent amounts.
The Company adopted the ASU on November 1, 2015 and retrospectively applied the change. As a result, $0.8 million of deferred
income tax assets that were included in current assets at July 31, 2015 were reclassified to noncurrent in the accompanying consolidated
balance sheet.
In
May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard
that will supersede most of the current revenue recognition guidance under U.S. GAAP and IFRS. The goals of the revenue recognition
project were to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that
would streamline and enhance revenue recognition requirements. The Company will adopt this standard on August 1, 2018. Entities
have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The
Company is evaluating the impact that the standard will have on its consolidated financial statements.
In
January 2016, the FASB issued an ASU to provide more information about recognition, measurement, presentation and disclosure of
financial instruments. The amendments in the ASU include, among other changes, the following: (1) equity investments (except those
accounted for under the equity method or that result in consolidation) will be measured at fair value with changes in fair value
recognized in net income, (2) a qualitative assessment each reporting period to identify impairment of equity investments without
readily determinable fair values, (3) financial assets and financial liabilities will be presented separately by measurement category
and form of financial asset on the balance sheet or the notes to the financial statements, and (4) an entity should evaluate the
need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s
other deferred tax assets. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities
classified as available-for-sale in other comprehensive income. In addition, a practicability exception will be available for
equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient.
These investments may be measured at cost, less any impairment, plus or minus changes resulting from observable price changes
in orderly transactions for an identical or similar investment of the same issuer. Entities will have to reassess at each reporting
period whether an investment qualifies for this practicability exception. The Company will adopt the amendments in this ASU on
August 1, 2018. The Company is evaluating the impact that the ASU will have on its consolidated financial statements.
In
February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use (“ROU”)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer
than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense
recognition in the income statement. The Company will adopt the new standard on August 1, 2019. A modified retrospective transition
approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating
the impact that the new standard will have on its consolidated financial statements.
Note
15—IDT Financial Services Ltd. Recent Transactions
In
December 2015, MasterCard Europe released a security deposit in the amount of $4.7 million made by IDT Financial Services Ltd.
At July 31, 2015, this security deposit was included in “Other assets” in the accompanying consolidated balance sheet.
On
November 2, 2015, Visa Inc. entered into an agreement to acquire Visa Europe Limited subject to regulatory approvals. IDT Financial
Services Ltd. is a member of Visa Europe and, if the transaction is consummated, will receive part of the consideration from the
intended sale. On April 21, 2016, Visa Inc. announced that, in response to feedback received from the European Commission, Visa
Inc. and Visa Europe reached a preliminary agreement to amend their agreement. Pursuant to the original agreement, Visa Inc. would
have paid for the acquisition in two tranches. The first tranche will include cash and preferred stock convertible into Visa Inc.
Class A common stock. Visa Europe estimated that IDT Financial Services Ltd. will receive, subject to adjustment, €4.7 million
($5.4 million at April 30, 2016) in cash and €1.6 million ($1.9 million at April 30, 2016) in Visa Inc. preferred stock.
The second tranche was a potential earn-out, subject to certain achievements that if fulfilled, would have been paid in 2020.
In the amendment to the agreement, which remains subject to the negotiation of definitive documentation of the amendment, the
parties agreed to eliminate the earn-out portion of the consideration. Instead of an earn-out, the cash consideration payable
will be increased by €1.75 billion ($2.0 billion at April 30, 2016), of which €750 million ($859.0 million at April
30, 2016) will be payable upon closing and €1.0 billion ($1.1 billion at April 30, 2016), plus 4% compound annual interest,
will be payable on the third anniversary of closing. The transaction remains subject to regulatory approval. The closing may extend
beyond the end of the second quarter of calendar 2016. The amount of consideration expected to be received is preliminary, the
amounts may change, and the closing of the transaction cannot be assured. The Visa Inc. preferred stock would become fully convertible
into Class A common stock of Visa Inc. twelve years after the closing. Beginning four years after closing, Visa Inc. will assess
whether it is appropriate to effect a partial conversion. In addition, there will be restrictions on transferring the preferred
stock until it is converted into Class A common stock. The preferred stock may only be transferred to other Visa Europe members,
or to existing qualifying holders of Visa Inc.’s Class B common stock. Also, the preferred stock will not be registered
under the U.S. Securities Act of 1933 and therefore is not transferable unless such transfer is registered or an exemption from
registration is available.
Item 2.
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
|
The
following information should be read in conjunction with the accompanying consolidated financial statements and the associated
notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s
Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year
ended July 31, 2015, as filed with the U.S. Securities and Exchange Commission (or SEC).
As
used below, unless the context otherwise requires, the terms “the Company,” “IDT,” “we,” “us,”
and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications,
Corp., a New York corporation, and their subsidiaries, collectively.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,”
“anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These
forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the
results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements,
other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those
discussed under Item 1A to Part I “Risk Factors” in our Form 10-K for the year ended July 31, 2015, and in Item 1A
to Part II “Risk Factors” in this Form 10-Q. The forward-looking statements are made as of the date of this report
and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ
from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report
and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933
and the Securities Exchange Act of 1934, including our Form 10-K for the year ended July 31, 2015.
Overview
We
are a multinational holding company with operations primarily in the telecommunications and payment industries. We have two reportable
business segments, Telecom Platform Services and Consumer Phone Services. Telecom Platform Services provides retail telecommunications
and payment offerings as well as wholesale international long distance traffic termination. Consumer Phone Services provides consumer
local and long distance services in certain U.S. states. Telecom Platform Services and Consumer Phone Services comprise our IDT
Telecom division. Operating segments not reportable individually are included in All Other. Prior to the Zedge Spin-Off, All Other
included Zedge, Inc., or Zedge, which provides a content platform that enables consumers to personalize their mobile devices with
free, high quality ringtones, wallpapers, home screen app icons and notification sounds. All Other also includes our real estate
holdings and other, smaller, businesses. Until the sale of Fabrix Systems Ltd., or Fabrix, in October 2014, All Other included
Fabrix, a software development company offering a cloud-based scale-out storage and computing platform optimized for big data,
virtualization and media storage, processing and delivery.
On
June 1, 2016, we completed the Zedge Spin-Off, which was a pro rata distribution of the common stock we held in our subsidiary
Zedge to our stockholders of record as of the close of business on May 26, 2016. The disposition of Zedge did not meet the criteria
to be reported as a discontinued operation and accordingly, its assets, liabilities, results of operations and cash flows have
not been reclassified. In connection with the Zedge Spin-Off, each of our stockholders received one share of Zedge Class A common
stock for every three shares of our Class A common stock, and one share of Zedge Class B common stock for every three shares of
our Class B common stock, held of record as of the close of business on May 26, 2016. We received a legal opinion that the Zedge
Spin-Off should qualify as a tax-free transaction for U.S. federal income tax purposes.
In
August 2015, our Board of Directors approved a plan to reorganize us into three separate entities by spinning off two business
units to our stockholders. The three separate companies are expected to consist of (1) IDT Telecom, (2) Zedge and (3) other holdings.
The reorganization and the specific components are subject to change and both internal and third party contingencies, and must
receive final approval from our Board of Directors and certain third parties. We continue to advance the effort on the remainder
of the reorganization.
Since
our inception, we have derived the majority of our revenues and operating expenses from IDT Telecom’s businesses. IDT Telecom’s
revenues represented 99.1% and 99.0% of our total revenues in the nine months ended April 30, 2016 and 2015, respectively.
Telecom
Platform Services, which represented 99.5% and 99.4% of IDT Telecom’s total revenues in the nine months ended April 30,
2016 and 2015, respectively, markets and distributes multiple communications and payment services across four broad business verticals:
|
●
|
Retail
Communications provides international long-distance calling products primarily to foreign-born
communities worldwide, with its core markets in the United States;
|
|
●
|
Wholesale
Carrier Services is a global telecom carrier, terminating international long distance
calls around the world for Tier 1 fixed line and mobile network operators, as well as
other service providers;
|
|
●
|
Payment
Services provides payment offerings, including international and domestic airtime top-up
and international money transfer sold over our Boss Revolution platform and other channels;
and
|
|
●
|
Hosted
Platform Solutions provides customized communications services that leverage our proprietary
networks, platforms and/or technology to cable companies and other service providers.
|
520
Broad Street Building Leases
We
own our headquarters building and parking garage located at 520 Broad Street, Newark, New Jersey. In April 2016, we entered into
two leases for space in the building. The first lease is for a portion of the sixth floor for an eleven year term, of which the
first six years are non-cancellable. The second lease is for a portion of the ground floor and basement for a term of ten years,
seven months. The tenant under this lease has the right to extend the term for three consecutive periods of five years each. The
leases will commence after the completion of our work to prepare the space for the tenant’s possession.
Critical
Accounting Policies
Our
consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted
in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated
financial statements included in our Form 10-K for fiscal 2015. The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure
of contingent assets and liabilities. Critical accounting policies are those that require application of management’s most
subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods.
Our critical accounting policies include those related to the allowance for doubtful accounts, goodwill, valuation of long-lived
and intangible assets, income taxes and regulatory agency fees, and IDT Telecom direct cost of revenues—disputed amounts.
Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion
of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results
of Operations in our Form 10-K for fiscal 2015.
Recently
Issued Accounting Standards Not Yet Adopted
In
May 2014, the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board jointly issued a
comprehensive new revenue recognition standard that will supersede most of the current revenue recognition guidance under U.S.
GAAP and International Financial Reporting Standards, or IFRS. The goals of the revenue recognition project were to clarify and
converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance
revenue recognition requirements. We will adopt this standard on August 1, 2018. Entities have the option of using either a full
retrospective or modified retrospective approach for the adoption of the standard. We are evaluating the impact that the standard
will have on our consolidated financial statements.
In
January 2016, the FASB issued an Accounting Standards Update, or
ASU, to provide more information about recognition, measurement, presentation and disclosure
of financial instruments. The amendments in the ASU include, among other changes, the following: (1) equity investments (except
those accounted for under the equity method or that result in consolidation) will be measured at fair value with changes in fair
value recognized in net income, (2) a qualitative assessment each reporting period to identify impairment of equity investments
without readily determinable fair values, (3) financial assets and financial liabilities will be presented separately by measurement
category and form of financial asset on the balance sheet or the notes to the financial statements, and (4) an entity should evaluate
the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s
other deferred tax assets. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities
classified as available-for-sale in other comprehensive income. In addition, a practicability exception will be available for
equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient.
These investments may be measured at cost, less any impairment, plus or minus changes resulting from observable price changes
in orderly transactions for an identical or similar investment of the same issuer. Entities will have to reassess at each reporting
period whether an investment qualifies for this practicability exception. We will adopt the amendments in this ASU on August 1,
2018. We are evaluating the impact that the ASU will have on our consolidated financial statements.
In
February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use, or ROU,
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer
than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense
recognition in the income statement. We will adopt the new standard on August 1, 2019. A modified retrospective transition approach
is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative
period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that the
new standard will have on our consolidated financial statements.
Results
of Operations
Three
and Nine Months Ended April 30, 2016 Compared to Three and Nine Months Ended April 30, 2015
We
evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the
income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results
of operations.
IDT
Telecom—Telecom Platform Services and Consumer Phone Services Segments
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine
months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
350.4
|
|
|
$
|
379.1
|
|
|
$
|
(28.7
|
)
|
|
|
(7.6
|
)%
|
|
$
|
1,112.8
|
|
|
$
|
1,171.9
|
|
|
$
|
(59.1
|
)
|
|
|
(5.0
|
)%
|
Consumer
Phone Services
|
|
|
1.7
|
|
|
|
2.1
|
|
|
|
(0.4
|
)
|
|
|
(19.8
|
)
|
|
|
5.3
|
|
|
|
6.6
|
|
|
|
(1.3
|
)
|
|
|
(20.7
|
)
|
Total
revenues
|
|
$
|
352.1
|
|
|
$
|
381.2
|
|
|
$
|
(29.1
|
)
|
|
|
(7.6
|
)%
|
|
$
|
1,118.1
|
|
|
$
|
1,178.5
|
|
|
$
|
(60.4
|
)
|
|
|
(5.1
|
)%
|
Revenues.
IDT Telecom revenues decreased in the three and nine months ended April 30, 2016 compared to the similar periods in fiscal
2015 due to decreases in both Telecom Platform Services’ and Consumer Phone Services’ revenues. Telecom Platform Services’
revenues, minutes of use and average revenue per minute for the three and nine months ended April 30, 2016 and 2015 by business
vertical consisted of the following:
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine
months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$/#
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$/#
|
|
|
%
|
|
|
|
(in
millions, except revenue per minute)
|
|
Telecom
Platform Services Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Communications
|
|
$
|
164.5
|
|
|
$
|
183.0
|
|
|
$
|
(18.5
|
)
|
|
|
(10.1
|
)%
|
|
$
|
506.9
|
|
|
$
|
550.1
|
|
|
$
|
(43.2
|
)
|
|
|
(7.9
|
)%
|
Wholesale
Carrier Services
|
|
|
123.3
|
|
|
|
134.9
|
|
|
|
(11.6
|
)
|
|
|
(8.6
|
)
|
|
|
418.6
|
|
|
|
439.4
|
|
|
|
(20.8
|
)
|
|
|
(4.7
|
)
|
Payment
Services
|
|
|
55.0
|
|
|
|
51.7
|
|
|
|
3.3
|
|
|
|
6.5
|
|
|
|
163.8
|
|
|
|
152.6
|
|
|
|
11.2
|
|
|
|
7.3
|
|
Hosted
Platform Solutions
|
|
|
7.6
|
|
|
|
9.5
|
|
|
|
(1.9
|
)
|
|
|
(20.1
|
)
|
|
|
23.5
|
|
|
|
29.8
|
|
|
|
(6.3
|
)
|
|
|
(21.0
|
)
|
Total
Telecom Platform Services revenues
|
|
$
|
350.4
|
|
|
$
|
379.1
|
|
|
$
|
(28.7
|
)
|
|
|
(7.6
|
)%
|
|
$
|
1,112.8
|
|
|
$
|
1,171.9
|
|
|
$
|
(59.1
|
)
|
|
|
(5.0
|
)%
|
Minutes
of use
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Communications
|
|
|
2,051
|
|
|
|
2,318
|
|
|
|
(267
|
)
|
|
|
(11.5
|
)%
|
|
|
6,291
|
|
|
|
7,172
|
|
|
|
(881
|
)
|
|
|
(12.3
|
)%
|
Wholesale
Carrier Services
|
|
|
4,763
|
|
|
|
4,642
|
|
|
|
121
|
|
|
|
2.6
|
|
|
|
14,380
|
|
|
|
14,415
|
|
|
|
(35
|
)
|
|
|
(0.2
|
)
|
Hosted
Platform Solutions
|
|
|
157
|
|
|
|
187
|
|
|
|
(30
|
)
|
|
|
(16.0
|
)
|
|
|
495
|
|
|
|
574
|
|
|
|
(79
|
)
|
|
|
(13.7
|
)
|
Total
minutes of use
|
|
|
6,971
|
|
|
|
7,147
|
|
|
|
(176
|
)
|
|
|
(2.5
|
)%
|
|
|
21,166
|
|
|
|
22,161
|
|
|
|
(995
|
)
|
|
|
(4.5
|
)%
|
Average
revenue per minute
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Communications
|
|
$
|
0.0802
|
|
|
$
|
0.0790
|
|
|
$
|
0.0012
|
|
|
|
1.6
|
%
|
|
$
|
0.0806
|
|
|
$
|
0.0767
|
|
|
$
|
0.0039
|
|
|
|
5.1
|
%
|
Wholesale
Carrier Services
|
|
|
0.0259
|
|
|
|
0.0291
|
|
|
|
(0.0032
|
)
|
|
|
(11.0
|
)
|
|
|
0.0291
|
|
|
|
0.0305
|
|
|
|
(0.0014
|
)
|
|
|
(4.5
|
)
|
Retail
Communications’ revenue decreased 10.1% and 7.9% in the three and nine months ended April 30, 2016, respectively, compared
to the similar periods in fiscal 2015. Revenue from our Boss Revolution international calling service, which is Retail Communications’
most significant offering, declined 4.5% and 1.9% in the three and nine months ended April 30, 2016, respectively, compared to
the similar periods in fiscal 2015, due primarily to a decline in minutes of use and revenue from calls terminating in Mexico.
Following regulatory changes intended to increase domestic competition in the Mexican telecommunications market, the cost of terminating
international calls to Mexico has declined significantly. As a result, many of our competitors, including some of the large U.S.
mobile operators, began offering unlimited Mexico calling as part of their monthly pricing plans. In addition, the decrease in
Retail Communications’ revenue in the three and nine months ended April 30, 2016 compared to the similar periods in fiscal
2015 was due to continuing revenue declines in Europe, South America and Asia, and continuing revenue declines from traditional
disposable calling cards in the U.S. Retail Communications’ minutes of use decreased 11.5% and 12.3% in the three and nine
months ended April 30, 2016, respectively, compared to the similar periods in fiscal 2015 because of decreases in Boss Revolution
and traditional disposable calling cards’ minutes of use. In addition, minutes of use decreased in Europe and Asia in the
three and nine months ended April 30, 2016 compared to the similar periods in fiscal 2015. Minutes of use in South America decreased
in the three months ended April 30, 2016 compared to the similar period in fiscal 2015, although South America’s minutes
of use increased in the nine months ended April 30, 2016 compared to the similar period in fiscal 2015. We intend to launch a
new version of the Boss Revolution app including peer-to-peer voice calling and instant messaging in the third calendar quarter
of 2016. We expect the updated app will increase Boss Revolution’s market penetration and enhance the brand. Retail Communications’
revenue comprised 45.6% and 46.9% of Telecom Platform Services’ revenue in the nine months ended April 30, 2016 and 2015,
respectively.
Wholesale
Carrier Services’ revenue decreased 8.6% and 4.7% in the three and nine months ended April 30, 2016 compared to the similar
periods in fiscal 2015. In the three months ended April 30, 2016 compared to the similar period in fiscal 2015, the traffic mix
shifted towards lower revenue per minute destinations and certain exchange rate driven arbitrage-pricing opportunities in Latin
America continued to decline. In the nine months ended April 30, 2016 compared to the similar period in fiscal 2015, most of the
decrease in Wholesale Carrier Services’ revenue was due to the decline in the exchange rate driven arbitrage-pricing opportunities
in Latin America. In the three months ended April 30, 2016 compared to the similar period in fiscal 2015, Wholesale Carrier Services’
minutes of use increased 2.6%, and average revenue per minute decreased 11.0%. In the nine months ended April 30, 2016 compared
to the similar period in fiscal 2015, Wholesale Carrier Services’ minutes of use decreased 0.2% and average revenue per
minute decreased 4.5%. Wholesale Carrier Services’ revenue comprised 37.6% and 37.5% of Telecom Platform Services’
revenue in the nine months ended April 30, 2016 and 2015, respectively.
Payment
Services’ revenue increased 6.5% and 7.3% in the three and nine months ended April 30, 2016, respectively, compared to the
similar periods in fiscal 2015 due to an increase in international airtime top-up revenue, as well as increases in revenue from
our international money transfer service and IDT Financial Services Ltd., our Gibraltar-based bank. At April 30, 2016, we had
money transmitter licenses in 45 of the 47 U.S. states that require such a license, as well as in Puerto Rico and Washington,
D.C., and have an application pending in one additional state. Future growth is expected from geographic expansion of our international
money transfer service, which is currently operating in only a dozen states, as well as from the recent addition of international
airtime top-up and money transfer to the Boss Revolution mobile app. Payment Services’ revenue comprised 14.7% and 13.0%
of Telecom Platform Services’ revenue in the nine months ended April 30, 2016 and 2015, respectively.
Hosted
Platform Solutions’ revenue declined 20.1% and 21.0% in the three and nine months ended April 30, 2016, respectively, compared
to the similar periods in fiscal 2015. The declines were due to decreases in revenues from managed services and from our cable
telephony business. Within our cable telephony business, we renewed multi-year contracts with key cable telephony customers
in the second half of fiscal 2014, but at lower rates, reflecting the long-term decline in the underlying costs of hosted telephony
services. In addition, several of our other managed services operators are continuing to experience attrition in their customer
base. Hosted Platform Solutions’ revenue comprised 2.1% and 2.6% of Telecom Platform Services’ revenue in the nine
months ended April 30, 2016 and 2015, respectively. Hosted Platform Solutions minutes of use decreased 16.0% and 13.7% in the
three and nine months ended April 30, 2016, respectively, compared to the similar periods in fiscal 2015, primarily as a result
of the decline in minutes of use from managed services and cable telephony customers. In general, since our Hosted Platform Solutions
business’ revenues and cash flows are driven far more by the number of existing subscribers in the form of a per-subscriber
fee rather than by subscriber minutes of use, we do not view Hosted Platform Solutions minutes of use as a significant metric
for evaluating that business’ performance.
Consumer
Phone Services revenues declined 19.8% and 20.7% in the three and nine months ended April 30, 2016, respectively, compared to
the similar periods in fiscal 2015 as we continued to operate the business in harvest mode. This strategy has been in effect since
calendar 2005 when the FCC decided to terminate the UNE-P pricing regime, which resulted in significantly inferior economics in
the operating model for this business. The customer base for our bundled, unlimited local and long distance services business
was approximately 4,400 at April 30, 2016 compared to 5,300 at April 30, 2015. We currently offer local service in the following
11 states: New York, New Jersey, Pennsylvania, Maryland, Delaware, Massachusetts, New Hampshire, West Virginia, Maine, Rhode Island
and California. In addition, the customer base for our long distance-only services was approximately 19,100 at April 30, 2016
compared to 24,000 at April 30, 2015. We anticipate that Consumer Phone Services’ customer base and revenues will continue
to decline. Minutes of use relating to our Consumer Phone Services segment is not tracked as a meaningful business metric as the
domestic traffic generated by this segment is not carried on our network, and the international traffic generated by this segment,
though carried on our own network, is insignificant.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine
months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Direct cost of
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
292.2
|
|
|
$
|
315.2
|
|
|
$
|
(23.0
|
)
|
|
|
(7.3
|
)%
|
|
$
|
934.2
|
|
|
$
|
984.2
|
|
|
$
|
(50.0
|
)
|
|
|
(5.1
|
)%
|
Consumer
Phone Services
|
|
|
0.7
|
|
|
|
1.0
|
|
|
|
(0.3
|
)
|
|
|
(27.8
|
)
|
|
|
2.3
|
|
|
|
3.1
|
|
|
|
(0.8
|
)
|
|
|
(24.0
|
)
|
Total
direct cost of revenues
|
|
$
|
292.9
|
|
|
$
|
316.2
|
|
|
$
|
(23.3
|
)
|
|
|
(7.4
|
)%
|
|
$
|
936.5
|
|
|
$
|
987.3
|
|
|
$
|
(50.8
|
)
|
|
|
(5.1
|
)%
|
|
|
Three months ended
April 30,
|
|
|
|
|
|
Nine months ended
April 30,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Direct
cost of revenues as a percentage of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
|
83.4
|
%
|
|
|
83.1
|
%
|
|
|
0.3
|
%
|
|
|
84.0
|
%
|
|
|
84.0
|
%
|
|
|
—
|
%
|
Consumer
Phone Services
|
|
|
42.3
|
|
|
|
47.0
|
|
|
|
(4.7
|
)
|
|
|
44.7
|
|
|
|
46.6
|
|
|
|
(1.9
|
)
|
Total
|
|
|
83.2
|
%
|
|
|
83.0
|
%
|
|
|
0.2
|
%
|
|
|
83.8
|
%
|
|
|
83.8
|
%
|
|
|
—
|
%
|
Direct
Cost of Revenues
. Direct cost of revenues in Telecom Platform Services decreased in the three and nine months ended April
30, 2016 compared to the similar periods in fiscal 2015 mainly due to the 2.5% and 4.5% decrease in Telecom Platform Services’
minutes of use in the three and nine months ended April 30, 2016, respectively, compared to the similar periods in fiscal 2015.
Direct cost of revenues as a percentage of revenues in Telecom Platform Services increased 30 basis points in the three months
ended April 30, 2016 compared to the similar period in fiscal 2015 primarily as a result of increases in Retail Communications’
and Wholesale Carrier Services’ direct cost of revenues as a percentage of revenues in the three months ended April 30,
2016 compared to the similar period in fiscal 2015. Direct cost of revenues as a percentage of revenues in Telecom Platform Services
was unchanged in the nine months ended April 30, 2016 compared to the similar period in fiscal 2015 primarily as a result of the
5.1% increase in Retail Communications’ average revenue per minute in the nine months ended April 30, 2016 compared to the
similar period in fiscal 2015, offset by the 4.5% decrease in Wholesale Carrier Services’ average revenue per minute in
the nine months ended April 30, 2016 compared to the similar period in fiscal 2015.
Direct
cost of revenues in our Consumer Phone Services segment decreased the three and nine months ended April 30, 2016 compared to the
similar periods in fiscal 2015 primarily as a result of the declining customer base.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Selling, general
and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
46.7
|
|
|
$
|
48.6
|
|
|
$
|
(1.9
|
)
|
|
|
(3.9
|
)%
|
|
$
|
141.7
|
|
|
$
|
150.3
|
|
|
$
|
(8.6
|
)
|
|
|
(5.7
|
)%
|
Consumer
Phone Services
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
(0.2
|
)
|
|
|
(21.4
|
)
|
|
|
1.9
|
|
|
|
2.5
|
|
|
|
(0.6
|
)
|
|
|
(24.3
|
)
|
Total
selling, general and administrative expenses
|
|
$
|
47.3
|
|
|
$
|
49.4
|
|
|
$
|
(2.1
|
)
|
|
|
(4.2
|
)%
|
|
$
|
143.6
|
|
|
$
|
152.8
|
|
|
$
|
(9.2
|
)
|
|
|
(6.0
|
)%
|
Selling,
General and Administrative
. Selling, general and administrative expenses in our Telecom Platform Services segment decreased
in the three and nine months ended April 30, 2016 compared to the similar periods in fiscal 2015 primarily due to decreases in
employee compensation, marketing and advertising costs, and call center expenses. The decrease in employee compensation was the
result of the headcount reductions in fiscal 2015 that were partially offset by annual payroll increases. Marketing and advertising
costs in each of the first three quarters of fiscal 2016 were lower than in any quarter in fiscal 2015, although marketing and
advertising costs in the three months ended April 30, 2016 increased compared to the prior quarter. The decrease in selling, general
and administrative expenses in our Telecom Platform Services segment in the three months ended April 30, 2016 compared to the
similar period in fiscal 2015 was also due to a decrease in legal fees, and a decrease in commission expense contributed to the
decrease in selling, general and administrative expenses in our Telecom Platform Services segment in the nine months ended April
30, 2016 compared to the similar period in fiscal 2015. As a percentage of Telecom Platform Services’ revenue, Telecom Platform
Services’ selling, general and administrative expenses increased to 13.3% from 12.8% in the three months ended April 30,
2016 and 2015, respectively, and decreased to 12.7% from 12.8% in the nine months ended April 30, 2016 and 2015, respectively.
Selling,
general and administrative expenses in our Consumer Phone Services segment decreased in the three and nine months ended April
30, 2016 compared to the similar periods in fiscal 2015 as the cost structure for this segment continued to be right-sized to
the needs of its declining revenue base.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
4.9
|
|
|
$
|
4.1
|
|
|
$
|
0.8
|
|
|
|
20.9
|
%
|
|
$
|
14.0
|
|
|
$
|
11.8
|
|
|
$
|
2.2
|
|
|
|
18.6
|
%
|
Consumer
Phone Services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
depreciation and amortization
|
|
$
|
4.9
|
|
|
$
|
4.1
|
|
|
$
|
0.8
|
|
|
|
20.9
|
%
|
|
$
|
14.0
|
|
|
$
|
11.8
|
|
|
$
|
2.2
|
|
|
|
18.6
|
%
|
Depreciation
and Amortization.
The increase in depreciation and amortization expense in the three and nine months ended April 30,
2016 compared to the similar periods in fiscal 2015 was due to increases in depreciation of capitalized costs of consultants and
employees developing internal use software.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Severance expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
0.2
|
|
|
$
|
5.6
|
|
|
$
|
(5.4
|
)
|
|
|
(95.9
|
)%
|
|
$
|
0.2
|
|
|
$
|
7.5
|
|
|
$
|
(7.3
|
)
|
|
|
(96.9
|
)%
|
Consumer
Phone Services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
severance expense
|
|
$
|
0.2
|
|
|
$
|
5.6
|
|
|
$
|
(5.4
|
)
|
|
|
(95.9
|
)%
|
|
$
|
0.2
|
|
|
$
|
7.5
|
|
|
$
|
(7.3
|
)
|
|
|
(96.9
|
)%
|
Severance
expense.
Severance expense in the three and nine months ended April 30, 2016 was due to a downsizing of Retail Communications
in Europe. Severance expense in the three months ended April 30, 2015 was due to a reduction in our workforce in February and
March 2015. Severance expense in the nine months ended April 30, 2015 also included $1.9 million due to a downsizing of certain
Telecom Platform Services’ sales and administrative functions in Europe and the U.S. in the first quarter of fiscal 2015.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Other operating
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
|
nm
|
|
Consumer
Phone Services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
other operating loss
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
|
nm
|
|
nm—not
meaningful
Other
operating loss.
Other operating loss in the nine months ended April 30, 2016 was a loss on disposal of property, plant and
equipment due to the write-off of capitalized costs of certain projects that were terminated prior to completion.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Income from
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Platform Services
|
|
$
|
6.3
|
|
|
$
|
5.6
|
|
|
$
|
0.7
|
|
|
|
12.8
|
%
|
|
$
|
22.3
|
|
|
$
|
18.1
|
|
|
$
|
4.2
|
|
|
|
23.2
|
%
|
Consumer
Phone Services
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
8.4
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
—
|
|
|
|
(0.6
|
)
|
Total
income from operations
|
|
$
|
6.7
|
|
|
$
|
5.9
|
|
|
$
|
0.8
|
|
|
|
12.5
|
%
|
|
$
|
23.3
|
|
|
$
|
19.1
|
|
|
$
|
4.2
|
|
|
|
21.9
|
%
|
All
Other
Currently,
we report aggregate results for all of our operating businesses other than IDT Telecom in All Other. On June 1, 2016, we completed
the Zedge Spin-Off. The disposition of Zedge did not meet the criteria to be reported as a discontinued operation and accordingly,
its assets, liabilities, results of operations and cash flows have not been reclassified. In addition, Fabrix was included in
All Other until it was sold in October 2014. Therefore, in fiscal 2015, All Other included two months of Fabrix’ results
of operations.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine
months ended April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Revenues
|
|
$
|
3.1
|
|
|
$
|
2.7
|
|
|
$
|
0.4
|
|
|
|
14.1
|
%
|
|
$
|
10.1
|
|
|
$
|
12.4
|
|
|
$
|
(2.3
|
)
|
|
|
(18.5
|
)%
|
Direct
cost of revenues
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
(13.3
|
)
|
|
|
(0.9
|
)
|
|
|
(1.7
|
)
|
|
|
0.8
|
|
|
|
47.8
|
|
Selling,
general and administrative
|
|
|
(1.5
|
)
|
|
|
(1.5
|
)
|
|
|
—
|
|
|
|
5.1
|
|
|
|
(4.7
|
)
|
|
|
(6.7
|
)
|
|
|
2.0
|
|
|
|
29.8
|
|
Depreciation
|
|
|
(0.6
|
)
|
|
|
(0.5
|
)
|
|
|
(0.1
|
)
|
|
|
(9.2
|
)
|
|
|
(1.5
|
)
|
|
|
(1.7
|
)
|
|
|
0.2
|
|
|
|
7.0
|
|
Research
and development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.7
|
)
|
|
|
1.7
|
|
|
|
100.0
|
|
Gain
on sale of interest in Fabrix Systems Ltd.
|
|
|
1.1
|
|
|
|
1.2
|
|
|
|
(0.1
|
)
|
|
|
(12.1
|
)
|
|
|
1.1
|
|
|
|
76.9
|
|
|
|
(75.8
|
)
|
|
|
(98.6
|
)
|
Income
from operations
|
|
$
|
1.8
|
|
|
$
|
1.6
|
|
|
$
|
0.2
|
|
|
|
14.0
|
%
|
|
$
|
4.1
|
|
|
$
|
77.5
|
|
|
$
|
(73.4
|
)
|
|
|
(94.7
|
)%
|
Following
are the results of operations of Fabrix, which were included in All Other until it was sold in October 2014:
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine
months ended
April 30,
|
|
|
Change
|
|
Fabrix
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
4.2
|
|
|
$
|
(4.2
|
)
|
|
|
(100.0
|
)%
|
Direct
cost of revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.9
|
|
|
|
(0.9
|
)
|
|
|
(100.0
|
)
|
Selling,
general and administrative
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.6
|
|
|
|
(0.6
|
)
|
|
|
(100.0
|
)
|
Depreciation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(100.0
|
)
|
Research
and development
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.7
|
|
|
|
(1.7
|
)
|
|
|
(100.0
|
)
|
Income
from operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
(0.9
|
)
|
|
|
(100.0
|
)%
|
Revenues.
The increase in All Other’s revenues in the three months ended April 30, 2016 compared to the similar period in fiscal
2015 was mostly due to an increase in Zedge’s revenues, which increased to $2.6 million in the three months ended April
30, 2016 from $2.2 million in the three months ended April 30, 2015. Excluding Fabrix’ revenues that were included in All
Other in the nine months ended April 30, 2015, the increase in All Other’s revenues in the nine months ended April 30, 2016
compared to the similar period in fiscal 2015 was primarily due to an increase in Zedge’s revenues, which increased to $8.7
million in the nine months ended April 30, 2016 from $6.6 million in the nine months ended April 30, 2015. The increase in Zedge’s
revenues in the three and nine months ended April 30, 2016 compared to the similar periods in fiscal 2015 was driven by continued
user growth and increased customer engagement.
Direct
Cost of Revenues
. Direct cost of revenues in All Other in the three months ended April 30, 2016 and 2015 were incurred by
Zedge and were basically unchanged in the three months ended April 30, 2016 compared to the similar period in fiscal 2015. The
decrease in direct cost of revenues in the nine months ended April 30, 2016 compared to the similar period in fiscal 2015 was
primarily due to the sale of Fabrix in October 2014. Direct cost of revenues incurred by Zedge in the nine months ended April
30, 2016 and 2015 were $0.9 million and $0.8 million, respectively.
Selling,
General and Administrative
. Selling, general and administrative expense in All Other was basically unchanged in the three
months ended April 30, 2016 compared to the similar period in fiscal 2015. The decrease in selling, general and administrative
expense in All Other in the nine months ended April 30, 2016 compared to the similar period in fiscal 2015was primarily due to
a decrease in Zedge’s stock-based compensation expense as well as the sale of Fabrix in October 2014.
Gain
on Sale of Interest in Fabrix Systems Ltd.
On October 8, 2014, we completed the sale of our interest in Fabrix to Telefonaktiebolget
LM Ericsson (publ), or Ericsson. The final sale price for 100% of the shares in Fabrix was $95 million in cash, excluding transaction
costs and working capital and other adjustments. We owned approximately 78% of Fabrix on a fully diluted basis. Our share of the
sale price was $69.2 million, after reflecting the impact of working capital and other adjustments. We and the other shareholders
placed $13.0 million of the proceeds in escrow for the resolution of post-closing claims, of which $6.5 million was released in
October 2015 and $6.5 million was released in April 2016. In the three months ended April 30, 2016 and 2015, we recorded gain
on the sale of our interest in Fabrix of $1.1 million and $1.2 million, respectively, which represented adjustments to our share
of Fabrix’ working capital and estimated transaction costs. We recorded gain on the sale of our interest in Fabrix of $1.1
million and $76.9 million in the nine months ended April 30, 2016 and 2015, respectively.
Income
from operations.
Income from operations in All Other increased in the three months ended April 30, 2016 compared to the similar
period in fiscal 2015. Included in income from operations in the three months ended April 30, 2016 compared to the similar period
in fiscal 2015 was an increase in Zedge’s income from operations from $0.1 million in the three months ended April 30, 2015
to $0.2 million in the three months ended April 30, 2016. Income from operations in All Other decreased in the nine months ended
April 30, 2016 compared to the similar period in fiscal 2015 due to the gain on sale of interest in Fabrix of $76.9 million which
was recognized in the nine months ended April 30, 2015. Excluding the gain on sale of interest in Fabrix and Fabrix’ income
from operations that were included in All Other’s income from operations in the nine months ended April 30, 2015, income
from operations increased from loss of $0.3 million in the nine months ended April 30, 2015 to income of $3.0 million in the nine
months ended April 30, 2016 primarily due to the increase in Zedge’s income from operations in the nine months ended April
30, 2016 compared to the similar period in fiscal 2015.
Corporate
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
General
and administrative expenses
|
|
$
|
2.8
|
|
|
$
|
2.9
|
|
|
$
|
(0.1
|
)
|
|
|
(2.0
|
)%
|
|
$
|
7.4
|
|
|
$
|
8.7
|
|
|
$
|
(1.3
|
)
|
|
|
(14.1
|
)%
|
Severance
expense
|
|
|
—
|
|
|
|
0.6
|
|
|
|
(0.6
|
)
|
|
|
(100.0
|
)
|
|
|
—
|
|
|
|
0.6
|
|
|
|
(0.6
|
)
|
|
|
(100.0
|
)
|
Other
operating loss
|
|
|
—
|
|
|
|
1.5
|
|
|
|
(1.5
|
)
|
|
|
(100.0
|
)
|
|
|
—
|
|
|
|
1.5
|
|
|
|
(1.5
|
)
|
|
|
(100.0
|
)
|
Loss
from operations
|
|
$
|
2.8
|
|
|
$
|
5.0
|
|
|
$
|
(2.2
|
)
|
|
|
(44.5
|
)%
|
|
$
|
7.4
|
|
|
$
|
10.8
|
|
|
$
|
(3.4
|
)
|
|
|
(31.5
|
)%
|
Corporate
costs include compensation, consulting fees, treasury and accounts payable, tax and accounting services, human resources and payroll,
corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit, investor relations,
corporate insurance, corporate legal, business development, and other corporate-related general and administrative expenses, including,
among others, facilities costs, charitable contributions and travel, as well as depreciation expense on corporate assets. Corporate
does not generate any revenues, nor does it incur any direct cost of revenues.
General
and Administrative.
The decrease in Corporate general and administrative expenses in the three months ended April 30,
2016 compared to the similar period in fiscal 2015 was primarily due to a decrease in stock-based compensation expense. The decrease
in Corporate general and administrative expenses in the nine months ended April 30, 2016 compared to the similar period in fiscal
2015 was due to decreases in stock-based compensation expense, legal fees and insurance expense, partially offset by an increase
in employee compensation expense.
Corporate
general and administrative expenses in the three and nine months ended April 30, 2016 and 2015 were net of amounts billed to our
former subsidiaries Genie Energy Ltd., or Genie, which was spun-off in October 2011, and Straight Path Communications Inc., or
Straight Path, which was spun-off in July 2013. Straight Path utilizes other vendors for the transition services that we were
providing although Straight Path may seek services from us on an ad hoc basis. The fees charged to Genie, net of amounts charged
by Genie to us, were $0.4 million and $0.6 million in the three months ended April 30, 2016 and 2015, respectively, and $1.9 million
and $2.2 million in the nine months ended April 30, 2016 and 2015, respectively. The fees charged to Straight Path were nil in
both the three months ended April 30, 2016 and 2015. The fees charged to Straight Path were nil and $1.1 million in the nine months
ended April 30, 2016 and 2015, respectively. As a percentage of our total consolidated revenues, Corporate general and administrative
expenses was 0.8% and 0.7% in the three months ended April 30, 2016 and 2015, respectively, and 0.7% in the nine months ended
April 30, 2016 and 2015.
Severance
expense.
Severance expense in the three and nine months ended April 30, 2015 was due to a reduction in our workforce in February
and March 2015.
Other
Operating Loss.
Corporate’s loss from operations in the three and nine months ended April 30, 2015 included a loss
of $1.5 million related to legal matters.
Consolidated
The
following is a discussion of our consolidated stock-based compensation expense, and our consolidated income and expense line items
below income from operations.
Stock-Based
Compensation Expense.
Stock-based compensation expense included in consolidated selling, general and administrative expenses
was $0.7 million and $1.0 million in the three months ended April 30, 2016 and 2015, respectively, and $2.3 million and $4.0 million
in the nine months ended April 30, 2016 and 2015, respectively. At April 30, 2016, unrecognized compensation cost related to non-vested
stock-based compensation, including stock options and restricted stock, was an aggregate of $5.1 million. The unrecognized compensation
cost is expected to be recognized over the remaining vesting period that ends in 2020.
|
|
Three months ended
April 30,
|
|
|
Change
|
|
|
Nine months ended
April 30,
|
|
|
Change
|
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
(in
millions)
|
|
Income
from operations
|
|
$
|
5.7
|
|
|
$
|
2.5
|
|
|
$
|
3.2
|
|
|
|
129.8
|
%
|
|
$
|
20.0
|
|
|
$
|
85.8
|
|
|
$
|
(65.8
|
)
|
|
|
(76.7
|
)%
|
Interest
income (expense), net
|
|
|
0.2
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
551.9
|
|
|
|
0.9
|
|
|
|
(0.2
|
)
|
|
|
1.1
|
|
|
|
608.7
|
|
Other
income (expense), net
|
|
|
0.1
|
|
|
|
(1.4
|
)
|
|
|
1.5
|
|
|
|
108.9
|
|
|
|
(0.7
|
)
|
|
|
0.9
|
|
|
|
(1.6
|
)
|
|
|
(177.2
|
)
|
Provision
for income taxes
|
|
|
(1.3
|
)
|
|
|
—
|
|
|
|
(1.3
|
)
|
|
|
nm
|
|
|
|
(6.3
|
)
|
|
|
(2.3
|
)
|
|
|
(4.0
|
)
|
|
|
(168.0
|
)
|
Net
income
|
|
|
4.7
|
|
|
|
1.1
|
|
|
|
3.6
|
|
|
|
318.6
|
|
|
|
13.9
|
|
|
|
84.2
|
|
|
|
(70.3
|
)
|
|
|
(83.4
|
)
|
Net
income attributable to noncontrolling interests
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
|
|
—
|
|
|
|
16.8
|
|
|
|
(1.4
|
)
|
|
|
(1.0
|
)
|
|
|
(0.4
|
)
|
|
|
(44.1
|
)
|
Net
income attributable to IDT Corporation
|
|
$
|
4.2
|
|
|
$
|
0.6
|
|
|
$
|
3.6
|
|
|
|
649.9
|
%
|
|
$
|
12.5
|
|
|
$
|
83.2
|
|
|
$
|
(70.7
|
)
|
|
|
(85.0
|
)%
|
nm—not
meaningful
Other
Income (Expense), net.
Other income (expense), net consists of the following:
|
|
Three months ended
April 30,
|
|
|
Nine months ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
millions)
|
|
Foreign
currency transaction gains (losses)
|
|
$
|
0.6
|
|
|
$
|
(1.9
|
)
|
|
$
|
(1.7
|
)
|
|
$
|
(0.8
|
)
|
Gain
(loss) on marketable securities
|
|
|
—
|
|
|
|
—
|
|
|
|
0.5
|
|
|
|
(0.1
|
)
|
(Loss)
gain on investments
|
|
|
(0.5
|
)
|
|
|
0.2
|
|
|
|
(0.4
|
)
|
|
|
1.7
|
|
Other
|
|
|
—
|
|
|
|
0.3
|
|
|
|
0.9
|
|
|
|
0.1
|
|
Total
other income (expense), net
|
|
$
|
0.1
|
|
|
$
|
(1.4
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
0.9
|
|
Income
Taxes.
The gain on the sale of our interest in Fabrix of $1.1 million and $76.9 million in the nine months ended April 30,
2016 and 2015, respectively, was recorded by a wholly-owned non-U.S. subsidiary. The gain is not taxable in the subsidiary’s
tax domicile and is not subject to U.S. tax until repatriated. There are no current plans to repatriate the proceeds of the sale.
The increase in income tax expense in the three and nine months ended April 30, 2016 compared to the similar periods in fiscal
2015 was primarily due to the increase in income before income taxes excluding the gain on the sale of our interest in Fabrix,
as well as an increase in the effective income tax rate used in the tax provision, based upon the tax rates in the jurisdictions
in which the income was earned.
Net
Income Attributable to Noncontrolling Interests
. The change in the net income attributable to noncontrolling interests in
the three and nine months ended April 30, 2016 compared to the similar periods in fiscal 2015 was due to the change in the results
of operations of Zedge, which changed from a net loss in the three and nine months ended April 30, 2015 to net income in the three
and nine months ended April 30, 2016. The change in the net income attributable to noncontrolling interests in the nine months
ended April 30, 2016 compared to the similar period in fiscal 2015 was also due to the reduction in the net loss in Fabrix, partially
offset by a decrease in net income of certain IDT Telecom subsidiaries.
Liquidity
and Capital Resources
General
We
currently expect our cash from operations in the next twelve months and the balance of cash, cash equivalents and marketable securities
that we held as of April 30, 2016 to be sufficient to meet our currently anticipated working capital and capital expenditure requirements
during the twelve month period ending April 30, 2017.
At
April 30, 2016, we had cash, cash equivalents and marketable securities of $147.8 million and working capital (current assets
in excess of current liabilities) of $1.4 million. At April 30, 2016, we also had $8.1 million in investments in hedge funds,
which were included in “Investments” in our consolidated balance sheet.
We
treat unrestricted cash and cash equivalents held by IDT Payment Services and IDT Financial Services Ltd. as substantially restricted
and unavailable for other purposes. At April 30, 2016, “Cash and cash equivalents” in our consolidated balance sheet
included an aggregate of $9.1 million held by IDT Payment Services and IDT Financial Services Ltd. that was unavailable for other
purposes.
At
April 30, 2016, we had restricted cash and cash equivalents of $99.8 million, which was included in “Restricted cash and
cash equivalents” in our consolidated balance sheet. Our restricted cash and cash equivalents primarily include customer
deposits related to IDT Financial Services Ltd. and restricted balances pursuant to banking regulatory and other requirements.
|
|
Nine
months ended
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
millions)
|
|
Cash flows
provided by (used in):
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
35.8
|
|
|
$
|
27.8
|
|
Investing
activities
|
|
|
(16.0
|
)
|
|
|
(5.1
|
)
|
Financing
activities
|
|
|
(25.7
|
)
|
|
|
(55.2
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(3.3
|
)
|
|
|
(6.6
|
)
|
Decrease
in cash and cash equivalents
|
|
$
|
(9.2
|
)
|
|
$
|
(39.1
|
)
|
Operating
Activities
Our
cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results
and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.
In
December 2015, MasterCard Europe released a security deposit in the amount of $4.7 million made by IDT Financial Services Ltd.
At July 31, 2015, this security deposit was included in “Other assets” in the accompanying consolidated balance sheet.
On
November 2, 2015, Visa Inc. entered into an agreement to acquire Visa Europe Limited subject to regulatory approvals. IDT Financial
Services Ltd. is a member of Visa Europe and, if the transaction is consummated, will receive part of the consideration from the
intended sale. On April 21, 2016, Visa Inc. announced that, in response to feedback received from the European Commission, Visa
Inc. and Visa Europe reached a preliminary agreement to amend their agreement. Pursuant to the original agreement, Visa Inc. would
have paid for the acquisition in two tranches. The first tranche will include cash and preferred stock convertible into Visa Inc.
Class A common stock. Visa Europe estimated that IDT Financial Services Ltd. will receive, subject to adjustment, €4.7 million
($5.4 million at April 30, 2016) in cash and €1.6 million ($1.9 million at April 30, 2016) in Visa Inc. preferred stock.
The second tranche was a potential earn-out, subject to certain achievements that if fulfilled, would have been paid in 2020.
In the amendment to the agreement, which remains subject to the negotiation of definitive documentation of the amendment, the
parties agreed to eliminate the earn-out portion of the consideration. Instead of an earn-out, the cash consideration payable
will be increased by €1.75 billion ($2.0 billion at April 30, 2016), of which €750 million ($859.0 million at April
30, 2016) will be payable upon closing and €1.0 billion ($1.1 billion at April 30, 2016), plus 4% compound annual interest,
will be payable on the third anniversary of closing. The transaction remains subject to regulatory approval. The closing may extend
beyond the end of the second quarter of calendar 2016.The amount of consideration expected to be received is preliminary, the
amounts may change, and the closing of the transaction cannot be assured.
The Visa Inc. preferred stock would become fully
convertible into Class A common stock of Visa Inc. twelve years after the closing. Beginning four years after closing, Visa Inc.
will assess whether it is appropriate to effect a partial conversion. In addition, there will be restrictions on transferring
the preferred stock until it is converted into Class A common stock. The preferred stock may only be transferred to other Visa
Europe members, or to existing qualifying holders of Visa Inc.’s Class B common stock. Also, the preferred stock will not
be registered under the U.S. Securities Act of 1933 and therefore is not transferable unless such transfer is registered or an
exemption from registration is available.
Investing
Activities
Our
capital expenditures were $14.0 million and $22.8 million in the nine months ended April 30, 2016 and 2015, respectively. Capital
expenditures in the nine months ended April 30, 2015 were primarily due to expenditures for the renovations of the first four
floors of our building located at 520 Broad Street, Newark, New Jersey. We currently anticipate that total capital expenditures
for the twelve month period ending April 30, 2017 will be between $18 million and $20 million. We expect to fund our capital expenditures
with our net cash provided by operating activities and cash, cash equivalents and marketable securities on hand.
On
October 8, 2014, we completed the sale of our interest in Fabrix to Ericsson. The final sale price for 100% of the shares in Fabrix
was $95 million in cash, excluding transaction costs and working capital and other adjustments. We owned approximately 78% of
Fabrix on a fully diluted basis. Our share of the sale price was $69.2 million, after reflecting the impact of working capital
and other adjustments. At April 30, 2016, we had received cash of $64.4 million and had aggregate receivables of $4.8 million,
which was classified as “Receivable from sale of interest in Fabrix Systems Ltd.” in our consolidated balance sheet.
In May 2016, we received the remaining $4.8 million. We and the other shareholders placed $13.0 million of the proceeds in escrow
for the resolution of post-closing claims, of which $6.5 million was released in October 2015 and $6.5 million was released in
April 2016. In the three months ended April 30, 2016 and 2015, we recorded gain on the sale of our interest in Fabrix of $1.1
million and $1.2 million, respectively, which represented adjustments to our share of Fabrix’ working capital and estimated
transaction costs. We recorded gain on the sale of our interest in Fabrix of $1.1 million and $76.9 million in the nine months
ended April 30, 2016 and 2015, respectively.
In
the nine months ended April 30, 2016 and 2015, we used cash of $1.9 million and $0.1 million, respectively, for additional investments.
We
received $0.6 million and $0.1 million in the nine months ended April 30, 2016 and 2015, respectively, from the sale and redemption
of certain of our investments.
Purchases
of marketable securities were $29.8 million and $35.5 million in the nine months ended April 30, 2016 and 2015, respectively.
Proceeds from maturities and sales of marketable securities were $24.2 million and $16.8 million in the nine months ended April
30, 2016 and 2015, respectively.
Financing
Activities
In
the nine months ended April 30, 2016, we paid aggregate cash dividends of $0.56 per share on our Class A common stock and Class
B common stock, or $13.0 million in total. In the nine months ended April 30, 2015, we paid cash dividends of $1.85 per share
on our Class A common stock and Class B common stock, or $43.2 million in total. The aggregate cash dividends in the nine months
ended April 30, 2015 included special dividends of $0.68 per share and $0.64 per share paid in November 2014 and January 2015,
respectively. In June 2016, our Board of Directors declared a dividend of $0.19 per share for the third quarter of fiscal 2016
to holders of our Class A common stock and Class B common stock. The dividend will be paid on or about June 17, 2016 to stockholders
of record as of the close of business on June 13, 2016.
We
distributed cash of $1.5 million and $1.5 million in the nine months ended April 30, 2016 and 2015, respectively, to the holders
of noncontrolling interests in certain of our IDT Telecom subsidiaries.
We
received proceeds from the exercise of stock options of nil and $3.3 million in the nine months ended April 30, 2016 and 2015,
respectively.
We
paid the outstanding principal of $6.4 million on the mortgage on our building in Piscataway, New Jersey on the maturity date
of September 1, 2015.
Our
subsidiary, IDT Telecom, Inc., entered into a credit agreement, dated July 12, 2012, with TD Bank, N.A. for a line of credit
facility for up to a maximum principal amount of $25.0 million. IDT Telecom may use the proceeds to finance working capital requirements,
acquisitions and for other general corporate purposes. The line of credit facility is secured by primarily all of IDT Telecom’s
assets. The principal outstanding bears interest per annum, at the option of IDT Telecom, at either (a) the U.S. Prime Rate
less 125 basis points, or (b) the LIBOR rate adjusted by the Regulation D maximum reserve requirement plus 150 basis points.
Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date. In
January 2016, the maturity date was extended to January 31, 2018. IDT Telecom pays a quarterly unused commitment fee of 0.375% per
annum on the average daily balance of the unused portion of the $25.0 million commitment. IDT Telecom is required to comply with
various affirmative and negative covenants as well as maintain certain financial targets and ratios during the term of the line
of credit, including IDT Telecom may not pay any dividend on its capital stock and IDT Telecom’s aggregate loans and advances
to affiliates or subsidiaries may not exceed $110.0 million. At April 30, 2016, there were no amounts borrowed or utilized for
letters of credit under the line of credit, IDT Telecom was in compliance with all of the covenants, and IDT Telecom’s aggregate
loans and advances to affiliates and subsidiaries was $85.1 million. We intend to borrow under the facility from time to time.
In the nine months ended April 30, 2015, IDT Telecom repaid $13.0 million, which was the outstanding principal at the time.
Repayments
of other borrowings were $0.2 million in the nine months ended April 30, 2015.
In
the nine months ended April 30, 2016 and 2015, we paid $0.1 million and $0.3 million, respectively, to repurchase 11,250 and 16,330
shares of Class B common stock, respectively, that were tendered by employees of ours to satisfy the employees’ tax withholding
obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares are repurchased by us based
on their fair market value on the trading day immediately prior to the vesting date.
We
had a stock repurchase program for the repurchase of up to an aggregate of 8.3 million shares of our Class B common
stock. In the nine months ended April 30, 2016, we repurchased 398,376 shares of Class B common stock for an aggregate purchase
price of $4.6 million. In the nine months ended April 30, 2015, we repurchased 29,675 shares of Class B common stock for an aggregate
purchase price of $0.4 million. On January 22, 2016, our Board of Directors approved a stock repurchase program to purchase up
to 8.0 million shares of our Class B common stock and cancelled the previous stock repurchase program, which had 4.6 million
shares remaining available for repurchase. At April 30, 2016, 8.0 million shares remained available for repurchase under the stock
repurchase program.
Changes
in Trade Accounts Receivable and Allowance for Doubtful Accounts
Gross
trade accounts receivable decreased to $57.5 million at April 30, 2016 from $64.2 million at July 31, 2015 due to a $6.8 million
decrease in IDT Telecom’s gross trade accounts receivable balance, partially offset by a $0.2 million increase in Zedge’s
gross trade accounts receivable balance.
The
allowance for doubtful accounts as a percentage of gross trade accounts receivable was 7.0% at April 30, 2016 and 8.8% at July
31, 2015 as a result of a 28.7% decline in the allowance balance and a 10.4% decrease in the gross trade accounts receivable balance.
Other
Sources and Uses of Resources
We
intend to, where appropriate, make strategic investments and acquisitions to complement, expand, and/or enter into new businesses.
In considering acquisitions and investments, we search for opportunities to profitably grow our existing businesses and/or to
add qualitatively to the range and diversification of businesses in our portfolio. At this time, we cannot guarantee that we will
be presented with acquisition opportunities that meet our return on investment criteria, or that our efforts to make acquisitions
that meet our criteria will be successful.
Contractual
Obligations and Other Commercial Commitments
The
following tables quantify our future contractual obligations and commercial commitments at April 30, 2016:
Contractual
Obligations
Payments
Due by Period
(in
millions)
|
|
Total
|
|
|
Less than
1 year
|
|
|
1–3 years
|
|
|
4–5 years
|
|
|
After 5 years
|
|
Operating leases
|
|
$
|
6.7
|
|
|
$
|
3.3
|
|
|
$
|
2.1
|
|
|
$
|
1.2
|
|
|
$
|
0.1
|
|
Revolving credit unused commitment fee
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
Purchase commitments
|
|
|
1.9
|
|
|
|
1.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total contractual
obligations
|
|
$
|
8.8
|
|
|
$
|
5.3
|
|
|
$
|
2.2
|
|
|
$
|
1.2
|
|
|
$
|
0.1
|
|
Other
Commercial Commitments
Payments
Due by Period
(in
millions)
|
|
Total
|
|
|
Less than
1 year
|
|
|
1–3 years
|
|
|
4–5 years
|
|
|
After 5 years
|
|
Standby
letters of credit (1)
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
The
above table does not include an aggregate of $13.3 million in performance bonds due to the uncertainty of the amount and/or
timing of any such payments.
|
Off-Balance
Sheet Arrangements
We
do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely
to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital
resources, other than the following.
In
connection with our spin-off of Genie Energy Ltd., or Genie, in October 2011, we and Genie entered into various agreements prior
to the spin-off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship
with Genie after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Genie with respect
to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the spin-off,
the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.
Pursuant to the Separation and Distribution Agreement, among other things, we indemnify Genie and Genie indemnifies us for losses
related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in
the agreement. Pursuant to the Tax Separation Agreement, among other things, we indemnify Genie from all liability for taxes of
ours with respect to any taxable period, and Genie indemnifies us from all liability for taxes of Genie and its subsidiaries with
respect to any taxable period, including, without limitation, the ongoing tax audits related to Genie’s business.
In
connection with our spin-off of Straight Path Communications Inc., or Straight Path, in July 2013, we and Straight Path entered
into various agreements prior to the spin-off including a Separation and Distribution Agreement to effect the separation and provide
a framework for our relationship with Straight Path after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities
of us and Straight Path with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods
before and including the spin-off, the preparation and filing of tax returns for such periods and disputes with taxing authorities
regarding taxes for such periods. Pursuant to the Separation and Distribution Agreement, we indemnify Straight Path and Straight
Path indemnifies us for losses related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities
and obligations set forth in the agreement. Pursuant to the Tax Separation Agreement, we indemnify Straight Path from all liability
for taxes of Straight Path or any of its subsidiaries or relating to the Straight Path business with respect to taxable periods
ending on or before the spin-off, from all liability for taxes of ours, other than Straight Path and its subsidiaries, for any
taxable period, and from all liability for taxes due to the spin-off.
In
connection with the Zedge Spin-Off in June 2016, we and Zedge entered into various agreements prior to the Zedge Spin-Off including
a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with Zedge after
the Zedge Spin-Off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Zedge with respect to, among
other things, liabilities for federal, state, local and foreign taxes for periods before and including the Zedge Spin-Off, the
preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.
Pursuant to Separation and Distribution Agreement, among other things, we indemnify Zedge and Zedge indemnifies us for losses
related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in
the agreement. Pursuant to the Tax Separation Agreement, among other things, Zedge indemnifies us from all liability for taxes
of Zedge and any of Zedge’s subsidiaries or relating to Zedge’s business accruing after the Zedge Spin-Off, and we
indemnify Zedge from all liability for taxes of Zedge and any of Zedge’s subsidiaries or relating to Zedge’s business
with respect to taxable periods ending on or before the Zedge Spin-Off.
IDT
Payment Services and IDT Telecom have performance bonds issued through third parties for the benefit of various states in order
to comply with the states’ financial requirements for money remittance licenses and telecommunications resellers, respectively.
At April 30, 2016, we had aggregate performance bonds of $13.3 million outstanding.