IDT Corporation (NYSE: IDT, IDT.C) announces operating results for
its fourth quarter and fiscal 2008 year July 31, 2008. Q4 revenues:
$480.0 million, down 2.6% year-over-year. Q4 net loss: ($86.4)
million, versus net loss of ($112.4) million one year ago. Q4 loss
from operations ($79.3) million, compared with ($123.7) million in
the year-ago period. Q4 net loss per share ($1.15), versus net loss
per share of ($1.38) one year ago. Fiscal 2008 revenues: $1,878.0
million, versus $2,012.7 million in fiscal 2007. Fiscal 2008 net
loss: ($224.3) million, versus net income of $58.6 million in
fiscal 2007, of which ($4.9) million and $198.1 million,
respectively, were due to discontinued operations. Fiscal 2008 loss
from operations ($198.3) million, compared with ($172.7) million
from operations in fiscal 2007. Fiscal 2008 net loss per share
($2.95) and loss per share from continuing operations ($2.88),
versus net income per share of $0.71 and loss per share from
continuing operations of ($1.70) in fiscal 2007. Cash, cash
equivalents, marketable securities, and investments totaled $343.3
million; $82.9 million of the cash, cash equivalents and marketable
securities was restricted as of the end of the fiscal year. SUMMARY
OF OPERATING RESULTS The following table summarizes the operating
performance of IDT�s continuing businesses: $ millions � Revenues �
Income (Loss) from Operations Fiscal'08 � Fiscal'07 � Q4'08 � Q3'08
� Q4'07 � Fiscal'08 � Fiscal'07 � Q4'08 � Q3'08 � Q4'07 Wholesale
Telecom $1,062.6 � $1,220.6 � $270.0 � $248.1 � $301.8 � $26.7 �
($19.8 ) � ($6.8 ) � ($10.4 ) � ($8.7 ) Prepaid Products 778.4
971.8 183.9 182.8 228.7 (86.2 ) (109.0 ) (30.7 ) (24.5 ) (72.3 )
Consumer Phone Service 88.0 148.8 18.9 20.8 30.0 19.3 65.6 2.5 7.6
9.8 Inter-segment (400.5 ) � (575.5 ) � (94.3 ) � (90.6 ) � (128.6
) � - � � - � � - � � - � � - � IDT Telecom Total 1,528.5 1,765.7
378.5 361.0 431.9 (40.1 ) (63.2 ) (35.0 ) (27.3 ) (71.3 ) IDT
Energy 248.9 190.8 75.5 66.3 45.3 6.0 11.4 1.6 0.9 0.5 IDT Capital
55.0 50.8 14.8 13.5 13.5 (63.8 ) (26.6 ) (22.7 ) (17.0 ) (10.5 )
IDT Carmel 45.7 5.4 11.1 12.5 1.8 (25.3 ) (10.7 ) (16.9 ) 1.9 (5.2
) Corporate - � � - � � - � � - � � - � � (75.3 ) � (83.7 ) � (6.3
) � (28.9 ) � (37.1 ) Total IDT $1,878.0 $2,012.7 $480.0 $453.2
$492.6 ($198.3 ) ($172.7 ) ($79.3 ) ($70.5 ) ($123.7 ) Columns in
table may not add accurately due to rounding. In Q1 2008 we changed
our accounting for IDT Carmel operations, as described below. This
change accounts for the majority of the changes in revenues from
IDT Carmel operations as compared to the year-ago period. RECENT
DEVELOPMENTS On October 3, 2008, we announced a CEO succession
plan, an extended employment and compensation arrangement with
Howard Jonas, an agreement by Jim Courter, Vice Chairman/CEO to
accept his base salary in IDT stock in lieu of salary and the
retention of Jefferies & Company, Inc. to act as financial
advisor to the Company. Mr. Jonas has agreed to become the
Company's Chief Executive Officer upon the retirement of Jim
Courter. Mr. Jonas will enter into a five-year employment agreement
with IDT, providing for the payment of his base compensation in
shares of Common Stock for the five-year period beginning on
January 1, 2009. The New York Stock Exchange has notified us that
we are out of compliance with the Exchange�s listing standards by
virtue of IDT�s market capitalization and also with the Exchange�s
one dollar minimum price. Under the rules of the Exchange, we have
45 days from receipt of the Notification on the market
capitalization non-compliance to file a plan with the Exchange
demonstrating our ability to meet the listing requirements. We must
be in compliance with the market capitalization standard within 18
months and with the share price minimum within 6 months. On
September 4, 2008, we announced a new management team at IDT Carmel
Holdings, Inc., headed by President and COO Mark Meisenbacher. Mr.
Meisenbacher is a twenty year industry veteran who previously
served as COO of Axiant. As we continue our restructuring, we
recognize restructuring and impairment charges. In the fourth
quarter of fiscal 2008 we recognized $45.5 million in consolidated
restructuring and impairment charges, including $15.7 million
primarily for severance due to reductions in our workforce and
$29.8 million in write-downs of goodwill and fixed assets,
primarily in our Prepaid Products - Rechargeable and Wholesale
telecom business units. The $29.8 million of write-downs were
recorded primarily as a result of our annual assessment in
accordance with FAS 142, where the expected discounted future cash
flows of those businesses did not support the carrying value of the
assets. Accordingly we recorded an impairment charge as required by
FAS 142. In the fourth quarter of fiscal 2008, IDT Telecom recorded
$10.4 million of the restructuring charges and $24.6 million of the
impairment charges. In fiscal 2008 we recognized $66.2 million in
consolidated restructuring and impairment charges, of which $49.2
million related to IDT Telecom and $7.4 million was incurred by
Corporate, mostly due to workforce reductions. In June and August
2008 we received notices from the IRS assessing tax of
approximately $75 million for the period ending July�31, 2001,
approximately $1.0 million for adjustments carried forward to
fiscal years 2005 and 2006 and applicable interest of $39.5
million. In July 2008 we paid $10.0 million of the amount noted as
a good faith payment. We have initiated discussion with the IRS
regarding the timing of payment, however, we cannot assure you that
we will be able to conclude any arrangement with the IRS and the
balance could become due and payable in 30 days. RESULTS OF IDT
TELECOM OPERATIONS � � � � � � � Telecom Line of Business Detail $
millions, except % � Q1 07 � Q2 07 � Q3 07 � Q4 07 � FY 07 � Q1 08
� Q2 08 � Q3 08 � Q4 08 � FY 08 REVENUES � � � � � � TOTAL � 471.2
� 447.0 � 415.6 � 431.9 � 1,765.7 402.6 � 386.3 � 361.0 � 378.5 �
1,528.5 Prepaid Products 260.8 251.6 230.7 228.7 971.8 208.9 202.9
182.8 183.9 778.4 CC- United States 215.9 204.9 180.0 175.1 776.0
159.5 161.5 139.2 138.1 598.2 CC- Europe 25.9 25.9 25.4 27.5 104.7
23.4 24.1 22.2 23.6 93.3 CC- Rest of World 7.2 7.8 10.1 7.4 32.5
8.1 7.9 7.6 7.5 31.1 Other 11.8 12.9 15.2 18.8 58.7 17.8 9.4 13.8
14.7 55.8 Wholesale 315.1 314.6 289.2 301.8 1,220.6 280.1 264.4
248.1 270.0 1,062.6 Intersegment Revenues 158.5 153.5 134.9 128.6
575.5 111.6 103.9 90.6 94.3 400.5 Wholesale -Third Party 156.6
161.1 154.3 173.1 645.1 168.5 160.5 157.4 175.7 662.1 Consumer
Phone Services 53.8 34.3 30.7 30.0 148.8 25.3 23.0 20.8 18.9 88.0
United States 35.7 33.4 29.5 28.4 127.1 23.5 21.1 19.0 16.8 80.5
Europe 17.5 - - - 17.5 - - - - - Other 0.6 0.8 1.2 1.6 4.2 1.7 1.9
1.8 2.1 7.5 � � � � � � � � � � � � � � � � � � � � GROSS PROFIT
TOTAL � 107.7 � 86.2 � 80.6 � 75.1 � 349.6 86.9 � 84.8 � 78.7 �
89.1 � 339.5 Prepaid Products 50.4 34.4 37.3 32.2 154.3 38.5 38.2
33.4 45.7 155.8 Wholesale 36.3 36.5 30.6 27.6 130.9 35.7 36.0 31.8
34.0 137.5 Consumer Phone Services 21.0 15.3 12.8 15.4 64.5 12.7
10.6 13.6 9.4 46.2 � � � � � � � � � � � � � � � � � � � � GROSS
MARGIN TOTAL � 22.8% � 19.3% � 19.4% � 17.4% � 19.8% 21.6% � 22.0%
� 21.8% � 23.5% � 22.2% Prepaid Products 19.3% 13.7% 16.2% 14.1%
15.9% 18.4% 18.8% 18.3% 24.9% 20.0% Wholesale 11.5% 11.6% 10.6%
9.1% 10.7% 12.8% 13.6% 12.8% 12.6% 12.9% Consumer Phone Services �
39.0% � 44.8% � 41.6% � 51.3% � 43.3% 50.2% � 46.2% � 65.2% � 49.6%
� 52.6% SG&A including bad debt expense TOTAL � 83.8 � 81.3 �
80.5 � 113.0 � 358.5 78.4 � 78.0 � 77.1 � 75.0 � 308.5 Prepaid
Products 41.2 45.5 45.8 86.2 218.8 46.8 46.0 42.4 44.4 179.7
Wholesale 24.1 26.4 26.4 22.4 99.3 24.6 25.8 29.8 24.9 105.1
Consumer Phone Services 18.4 9.3 8.3 4.4 40.4 7.0 6.2 4.9 5.7 23.7
United States 8.3 7.7 6.5 2.8 25.3 5.6 4.7 3.4 4.3 18.0 Europe 8.8
- - - 8.8 - - - - - Other � 1.3 � 1.7 � 1.8 � 1.6 � 6.3 1.4 � 1.5 �
1.4 � 1.4 � 5.7 IDT Telecom carried 23.1 billion minutes of traffic
for third-party customers in fiscal 2008, a decrease of 1.1%
compared with fiscal 2007. Wholesale segment minutes increased
19.4%, and wholesale minutes carried for third-party customers set
company records both for the year and for the fourth quarter.
However, this increase was offset by a 23.1% decline in retail
minutes. For fiscal 2008, IDT Telecom�s traffic mix of minutes
carried was 62.6% wholesale minutes and 37.4% retail minutes. For
the fourth quarter of fiscal 2008, IDT Telecom carried 5.88 billion
minutes for third-party customers, a 5.8% sequential increase, but
a decrease of 0.3% versus the year-ago quarter. For the year, IDT
Telecom revenues declined 13.4%. Overall revenue per minute
declined 9.9%. Revenue per minute from our Prepaid Products segment
increased 3.5%, while revenue per minute from external customers in
our Wholesale segment declined 14.0%. Revenues from our Consumer
Phone Services segment declined 40.9%. In the fourth quarter of
fiscal 2008, IDT Telecom revenues declined 12.4% compared to the
year-ago result, and increased 4.9% sequentially. Overall revenue
per minute in Q4 2008 declined 9.5% versus the fiscal 2007 fourth
quarter, and declined 0.1% sequentially. Consumer phone services
revenue in Q4 2008 declined 37.0% compared with the year-ago
period, and 9.0% sequentially. For IDT Telecom overall, fiscal 2008
gross profit dollars were 2.9% lower than in fiscal 2007. This
decrease is due primarily to the continuing revenue decline in our
Consumer Phone Services segment, which we have been strategically
harvesting. Gross profit dollars for fiscal 2008 increased 5% in
our Wholesale segment, primarily as a result of the decrease in
direct cost of revenues due to continued reductions in connectivity
costs. In our Prepaid Products segment, we delivered a slight
increase in gross profit dollars for the year, due primarily to a
$16.7 million reversal in fiscal 2008 of accrued regulatory fees as
a result of the completion of an audit by USAC of our U.S. calling
card business for calendar years 2005 and 2006, of which $10.9
million was reversed in Q4 2008. Without such reversal, gross
profit dollars for fiscal 2008 would have decreased 9.8%, due
primarily to the revenue decline in our U.S. calling card
operations. Selling, general and administrative (�SG&A�)
expenses including bad debt expense for fiscal 2008 were 13.9%
lower than those of fiscal 2007 as a result of reductions in
compensation costs, sales and marketing expenses, consulting fees,
and facilities costs. Most of the decrease occurred in our Prepaid
Products segment, in which we had an accrual in Q4 2007 of $24.0
million relating to our previously announced settlement of
litigation with Aerotel, as well as a $3.1 million reversal of a
previously recorded legal accrual which was adjusted for in Q4
2008, partially offset by an additional $6 million accrual for the
Aerotel matter that we recorded in Q4 2008. As a percentage of
revenue, SG&A expenses including bad debt expense were
basically flat year-over-year at 20.2% in fiscal 2008 and 20.3% in
fiscal 2007. For the fourth quarter, SG&A expenses including
bad debt expense decreased 33.6% versus the year-ago period, and
2.7% sequentially. Depreciation and amortization expense for IDT
Telecom fell from $71.2 million in fiscal 2007 to $57.3 million in
fiscal 2008 due to assets becoming fully depreciated with limited
new capital spending in the last two years. In Q4 2008,
depreciation and amortization expense was $13.0 million, versus
$17.2 million in the year-ago quarter. Wholesale Telecommunications
Services In fiscal 2008, revenues from third-party customers
increased 2.6%. Blended gross profit margins (including margins on
minutes for internal customers) were 12.9% in fiscal 2008, compared
with 10.7% in fiscal 2007. SG&A expenses including bad debt
expense increased 5.8%, mostly due to compensation costs associated
with the $40 million Altice One arbitration award, which was
recognized in Q1. Operating income for fiscal 2008, which includes
the arbitration award, increased by $46.5 million, to $26.7
million. During the fourth quarter of fiscal 2008, we carried a
record number of minutes for third-party customers. Revenues from
third-party customers in Q4 2008 increased 1.5% year-over-year and
11.6% sequentially and also set company records. Gross profit
dollars of $34.0 million in Q4 2008 represented an increase of
23.4% year-over-year and 7.0% sequentially. Gross profit margins
were 12.6% in Q4 2008, compared with 12.8% in the previous quarter.
Prepaid Products In fiscal 2008, our Prepaid Products segment
terminated 8.65 billion minutes of traffic, compared with 11.24
billion minutes in fiscal 2007. Revenues declined 19.9% compared
with fiscal 2007, mostly due to weakness in our U.S. and European
calling card sales, partially offset by slight increases in Asia.
In the fourth quarter of fiscal 2008, our Prepaid Products segment
terminated 2.05 billion minutes of traffic, an 18.2% decrease from
the year-ago amount and a 0.8% increase sequentially. A sequential
increase was expected because our fourth quarter had 2.2% more days
than our third quarter, and one of them was Mother�s Day, the
heaviest calling day of the year. Revenues decreased 19.6% versus
the year-ago quarter, and increased 0.6% sequentially. RESULTS OF
IDT ENERGY OPERATIONS � � � $ millions, except % � Q1 07 � Q2 07 �
Q3 07 � Q4 07 � FY 2007 Q1 08 � Q2 08 � Q3 08 � Q4 08 � FY 2008
REVENUES $ 36.2 $ 51.9 $57.3 $45.3 $ 190.7 $ 42.1 $65.1 $ 66.3 $
75.5 $ 248.9 GROSS PROFIT 8.4 7.1 6.4 4.6 26.5 5.4 6.8 6.4 9.2 27.8
GROSS MARGIN % 23.2 % 13.7 % 11.2 % 10.1 % 13.9 % 12.9 % 10.4 % 9.7
% 12.2 % 11.2 % SG&A, including bad debt 3.5 3.5 4.0 4.0 14.9
3.8 4.7 5.5 7.6 21.6 ENDING METERS SERVED (000) 258 271 284 300 300
312 318 343 376 376 IDT Energy continues to expand its customer
base opportunistically in New York with the goal of acquiring
profitable customers in low-risk markets; more specifically in
regions where receivables are guaranteed under purchase of
receivables (POR) programs, billing is handled by the utility, and
commodity procurement can be effectuated on a real-time market
basis. IDT Energy also regularly monitors other deregulated markets
to determine if they are ripe for entry, and will initiate the
licensing process in any selected location, should deregulated
conditions develop favorably. In fiscal 2008, IDT Energy�s base of
meters served increased 25.3% compared to year-end fiscal 2007.
Three quarters of the net meter additions occurred in the second
half of our fiscal year when public utility energy prices were
increasing sharply. Revenue increased 30.5% in fiscal 2008 to
$248.9 million, due to both increased consumption generated by the
larger customer base and to increases in both electricity and gas
rates. Gross profit dollars increased 5.0% in fiscal 2008, although
gross margins fell from 13.9% in fiscal 2007 to 11.2% in fiscal
2008. SG&A expenses including bad debt expense increased 44.6%,
from 7.8% of IDT Energy�s revenues to 8.7%, mostly due to the
incremental customer acquisition costs in the second half of the
year. In the fourth quarter of fiscal 2008 IDT Energy added 33,000
net meters, the greatest quarterly increase in net meters in its
history. Revenues in Q4 2008 increased 66.4% year-over-year and
13.8% sequentially. Gross profit dollars increased 102.3%
year-over-year and 43.6% sequentially. Gross margins increased 210
basis points year-over-year and 250 basis points sequentially.
SG&A expenses including bad debt expense in Q4 2008 increased
90.9% year-over-year and 37.1% sequentially, mostly due to the
expenses of adding new customers, but also due to increases in
utility fees associated with the increased customer base. RESULTS
OF IDT CAPITAL OPERATIONS $ millions, except % � Q1 07 � Q2 07 � Q3
07 � Q4 07 � FY 2007 � Q1 08 � Q2 08 � Q3 08 � Q4 08 � FY 2008
REVENUES TOTAL $13.0 $12.8 $11.5 $13.6 $50.9 $13.6 $13.0 $13.5
$14.8 $55.0 Local Media 6.0 5.4 4.9 6.7 23.0 6.0 5.2 5.4 7.5 24.2
Internet Mobile Group - 0.1 0.1 1.5 1.7 2.3 2.4 2.6 3.4 10.7
Alternative Energy - - - - - - - - - - All Other 7.0 7.3 6.5 5.4
26.2 5.4 5.4 5.4 3.9 20.1 GROSS PROFIT TOTAL 6.8 8.7 5.0 7.4 27.9
6.0 5.8 5.1 9.3 26.2 Local Media 4.3 3.9 3.1 4.9 16.2 4.4 3.4 3.7
5.3 16.8 Internet Mobile Group 0.0 0.1 0.1 0.6 0.8 0.9 1.0 1.1 1.9
4.9 Alternative Energy - - - - - - - - - - All Other 2.5 4.7 1.8
1.9 10.9 0.7 1.4 0.3 2.2 4.6 GROSS MARGIN % TOTAL 53.0 % 68.1 %
43.1 % 54.2 % 54.9 % 43.9 % 44.7 % 37.5 % 62.9 % 47.7 % Local Media
72.6 % 72.6 % 62.6 % 73.3 % 70.7 % 72.7 % 66.2 % 67.6 % 70.2 % 69.4
% Internet Mobile Group - 100.0 % 83.5 % 37.9 % 43.2 % 39.5 % 42.1
% 41.3 % 55.6 % 45.7 % Alternative Energy - - - - - - - - - - All
Other, 36.2 % 64.5 % 27.7 % 34.7 % 41.6 % 13.4 % 25.3 % 5.4 % 57.3
% 23.1 % SG&A, including bad debt TOTAL 8.9 10.5 11.8 14.3 45.5
14.3 17.6 13.6 13.0 58.4 Local Media 3.6 4.3 4.1 5.0 17.0 4.6 5.2
4.7 5.2 19.6 Internet Mobile Group 0.3 1.0 0.6 1.5 3.4 1.9 2.6 2.4
1.9 8.8 Alternative Energy - - - - - - - - - - All Other 5.0 5.3
7.1 7.8 25.2 7.8 9.8 6.4 5.9 29.9 IDT Capital consists of the IDT
Local Media businesses (principally the CTM brochure distribution
operation and other advertising-based new product initiatives
focused on small to medium sized businesses, plus our WMET
Washington, D.C. based AM radio station), the Internet Mobile Group
(Zedge�a web based, worldwide destination for free, user-generated
mobile content distribution and sharing�and our majority holding in
IDW Publishing, an established leader in the publication of comic
books and graphic novels, and its newly formed children�s book
imprint), and Alternative Energy which consists of AMSO, our U.S.
oil shale initiative and other alternative energy initiatives. IDT
Capital also contains some of our intellectual property as well as
other smaller businesses, some of which are early stage
initiatives, which are summarized in the table above and in our
discussions as �All Other.� In fiscal 2008, IDT Capital reported
revenue of $55.0 million, an 8.1% gain versus the fiscal 2007
amount. The businesses in IDT Capital with the largest revenue in
fiscal 2008 were IDT Local Media, at $24.2 million, and the All
Other lines of business, at $20.1 million. The Internet Mobile
Group (IMG) accounted for the largest revenue gain in fiscal 2008,
an increase of $9.1 million to $10.7 million. Loss from operations
was ($63.8) million in fiscal 2008 compared to ($26.6) million in
fiscal 2007. Alternative Energy accounted for $7.0 million of the
additional loss from operations, primarily due to its research and
development expense. Also contributing to the loss from operations
increase in fiscal 2008 were losses on the disposal of businesses
of ($8.8) million and ($0.8) million from our Israel call center
and our aviation related toys and collectibles business,
respectively, both of which were transferred to their respective
managements in Q4 2008. The exclusion of the operating results from
these two businesses would have eliminated $20.8 million from IDT
Capital�s loss from operations in fiscal 2008. Local Media For
fiscal 2008 Local Media reported a revenue increase of 4.7%. Fourth
quarter revenue increases were 11.9% and 38.1% versus the year-ago
quarter and sequentially, respectively. Local Media�s operating
loss of ($8.0) million for fiscal 2008 represented a 258.2%
increase versus fiscal 2007. In the fourth quarter of fiscal 2008,
WMET recorded an impairment charge of $3.5 million related to
certain of its fixed assets. The majority of the remainder of the
loss ($3.8 million of the $4.5 million total) occurred in the
second and third quarters of the year, and was primarily
attributable to lower revenue in these quarters and increased
spending on SG&A devoted to the Local Media New Products Group.
CTM Brochure Display, which accounts for the majority of the Local
Media revenues, was profitable on an operating basis. It has been
successfully upselling other relevant products to its existing
customers, such as printing services and advertising in its owned
tourism guides. In addition, various restructurings have resulted
in a reduction in selling costs while not adversely affecting sales
growth. CTM continues to test new products. Similarly, the New
Products Group within Local Media has been testing new media
products, such as search engine marketing, with small to medium
sized businesses. Internet Mobile Group For fiscal 2008, the
Internet Mobile Group�s revenue increased from $1.7 million to
$10.7 million, principally because of the December 2006 acquisition
of Zedge and the June 2007 acquisition of IDW Publishing. Because
of the timing of these acquisitions, year-over-year comparisons are
not meaningful for fiscal 2008. Revenue growth was particularly
strong (30.3% sequentially) in the fourth quarter of fiscal 2008.
For the fiscal year the Group�s operating loss was ($5.5) million,
primarily due to expenditures to develop Zedge. In the fourth
quarter of fiscal 2008 the Group�s operating loss was reduced 39.0%
sequentially to ($0.9) million. Zedge (http://www.zedge.net), a
destination for free mobile content, released its 3.0 web site
design in April 2008. This upgrade to the website makes it
significantly easier for users to find the content that they want,
connect with one another, and create and share content. The site
has over 11 million registered users, mostly male in the 18 to 35
year old age bracket. Members upload over 6,000 items of content
per day. The content library, which exceeds 2.1 million items,
consists of ringtones, wallpaper, videos, games and themes. Zedge,
which has a truly global following, has become one of the most
popular sites for mobile content in the U.K. In the fourth quarter,
OpenZedge was launched on the mobile phone and on the website.
OpenZedge reduced the requirement for registration, expanding the
audience available to download Zedge�s content. Zedge also
initiated a number of content partnerships designed to drive
additional traffic to the site and build the content library.
Currently, close to 2 million downloads are performed on a daily
basis. There are close to 6 million unique users per month visiting
Zedge on the web and mobile, and over 13 million page views per
day. The first phase of a localization project, which uses
algorithms to match the content displayed to the country from which
the user is logging on, was implemented for many of our major
countries. Zedge�s revenues are derived from advertising and it
will continue to build advertising revenue by introducing direct
revenue streams on the site through its sales force. The group
expects to be break-even by the end of fiscal 2009. IDW Publishing
(http://www.idwpublishing.com), which currently accounts for the
majority of the revenue in the IDT Internet Mobile Group, operated
at a modest profit throughout fiscal 2008. IDW publishes 35 to 40
graphic novel titles a month and licenses properties for use by
film entertainment. The company plans to maintain its publishing
pace in fiscal 2009, and to set up some properties for TV or
feature development. Some IDW highlights in fiscal 2008 were: The
first major movie based on an IDW property was released in October
2007. 30 Days of Night was the #1 movie in its opening weekend. IDW
was again named 'Publisher of the Year' in 2008, and was also named
one of the Top 100 Global Licensees by License Magazine. IDW
launched its children's book division, Worthwhile Books. Major
comic book titles in 2008 included Angel, Transformers, Igor,
Mummy, Doctor Who, Ghost Whisperer, and Speed Racer. IDW sold the
entertainment rights for Locke & Key to Dimension Films. IDW
secured the comic book rights to GI Joe and Terminator 2, both of
which have major movies scheduled for 2009. Alternative Energy The
planning phase for the RD&D (Research, Development and
Demonstration) project for Alternative Energy is continuing and we
expect to initiate field work later this year, after the Bureau of
Land Management approves the plan of operations. We will begin with
characterizing the site to better understand the oil shale resource
as well as the hydrology. Our total expenditures and their timing
will depend on a number of factors, including the early results of
our R&D. Should we decide not to fund further research after
benchmarks have been achieved, our equity stake will be reduced.
Our Q4 2008 funding was $0.7 million. RESULTS OF IDT CARMEL
OPERATIONS � � $ millions, except % � Q1 07 Q2 07 Q3 07 � Q4 07 �
FY2007 Q1 08 Q2 08 � Q3 08 � Q4 08 � FY2008 REVENUES � $1.9 � $0.8
� $1.0 $1.8 $5.5 � $9.7 � $12.4 $12.5 $ 11.1 $ 45.6 GROSS PROFIT
0.5 (0.9 ) (2.3 ) (3.6 ) (6.3 ) 3.3 5.7 3.8 2.9 15.6 GROSS MARGIN %
26.9 % -113.7 % -241.3 % -202.9 % -116.7 % 34.2 % 46.0 % 30.4 %
26.0 % 34.3 % SG&A 0.7 1.0 1.0 1.5 4.2 1.2 1.7 1.8 1.5 6.1 BAD
DEBT EXPENSE - - - - - - 16.1 - 15.6 31.7 RECEIVABLES UNDER
MANAGEMENT 3.7 14.3 34.3 51.1 51.1 81.1 90.3 82.0 63.1 63.1 NET
EXPENDITURES TO PURCHASE RECEIVABLES 6.0 13.0 28.0 31.0 79.0 37.0
30.0 0.0 0.0 67.0 In fiscal 2008 IDT Carmel�s reported results were
impacted by two major factors: A change in the method of accounting
from Cost Recovery to Effective Yield for recognizing revenue in
our purchased debt portfolios business. Under Effective Yield,
revenue is recognized on a calculated internal rate of return based
on our cash flow expectations for each portfolio. Under Cost
Recovery, no revenue is recognized until the cost of the portfolio
is completely recovered or sold. We implemented the change
effective Q1 2008, and it was the primary reason for the increase
in revenues from $5.5 million in fiscal 2007 to $45.6 million in
fiscal 2008. Bad debt expense of $31.7 million recorded in Q2 and
Q4 2008, due to actual cash collections that were below
expectations and decreases in estimates of future cash collections.
This bad debt expense reflects in part the particularly challenging
collection environment as a result of factors in the U.S. economy
that IDT Carmel cannot control, which are likely to impact
consumers� willingness and ability to repay their debts to IDT
Carmel. We are undertaking steps to improve cash flow, including:
(1) recruiting an extremely experienced management team, headed by
President and COO Mark Meisenbacher, announced on September 4th,
(2) the consolidation of all collection activities to two centers
based in Minnesota, (3) technology implementations, including a
dialer, to improve the effectiveness of in-house collectors, (4)
sales of underperforming portfolios which are being investigated,
and (5) implementation of advanced skip tracing and location
services to increase collections which are in process. IDT Carmel�s
loss from operations increased from ($10.7) million to ($25.3)
million in the year to year comparison. Q4 2008 loss from
operations was ($16.9) million, down from income from operations of
$1.9 million in Q3 2008. IDT CONFERENCE CALL INFORMATION Conference
call today, October 6, 2008, at 5:00 PM Eastern Time. From the
U.S., please dial 877-407-8033, Passcode IDT. International
callers, please dial 201-689-8033, Passcode IDT. Replay available
for one week at:1-877-660-6853, Account #: 286; Conference ID #:
297144 for domestic callers, or1-201-612-7415, Account #: 286;
Conference ID #: 297144 for international callers. Webcast of the
conference call will be available at the direct link on
www.idt.net. An archived copy of the call will be available at the
IDT Website, in the Investor Relations section under the
Presentations heading for at least six months after the call.
Additional financial and statistical information is available on
the Investor Relations portion of IDT�s website, at
http://www.idt.net/about/ir/overview.asp. About IDT Corporation:
IDT Corporation (www.idt.net) is a multinational holding company
with subsidiaries spanning several industries including: IDT
Telecom, which provides telecommunications services to consumers
and businesses, including prepaid and rechargeable calling cards, a
range of voice over Internet protocol (VoIP) communications
services, wholesale carrier services and local, long distance and
wireless phone services;�IDT Energy (www.idtenergy.com), which
operates an Energy Services Company (ESCO) in New York State; IDT
Carmel, which manages receivables portfolios and performs debt
collection services; Zedge (www.zedge.net), which provides a
web-based, worldwide destination for free, user-generated mobile
content distribution and sharing; American Shale Oil Corporation
(AMSO) (www.amso.net), which manages IDT's U.S. oil shale
initiative, and IDT Capital, whose portfolio of companies includes
IDT Spectrum (www.idtspectrum.com), CTM Media Group
(www.ctmmediagroup.com), and IDW Publishing
(www.idwpublishing.com). IDT Corporation's Class B Common Stock and
Common Stock trade on the New York Stock Exchange under the ticker
symbols IDT and IDT.C, respectively. In this press release, all
statements that are not purely about historical facts, including,
but not limited to, those with the words "believe,� "anticipate,�
"expect,� "plan,� "intend,� "estimate,� "target� and similar
expressions, are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All
forward-looking statements and risk factors included in this
document are made as of the date hereof, based on information
available to IDT as of the date thereof, and IDT assumes no
obligation to update any forward-looking statements or risk
factors. IDT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS � �
� Year ended July 31(in thousands, except per share data) �
Unaudited 2008 � � 2007 � � � 2006 � REVENUES $ 1,877,990 $
2,012,739 $ 2,226,422 COSTS AND EXPENSES: Direct cost of revenues
(exclusive of depreciation and amortization) 1,468,784 1,615,047
1,779,980 Selling, general and administrative (i) 445,979 483,483
525,823 Depreciation and amortization 68,747 80,011 87,422 Bad debt
45,503 12,943 18,521 Research and development 11,567 5,232 11,817
Restructuring and impairment charges � � 66,187 � � � 33,404 � � �
23,646 � TOTAL COSTS AND EXPENSES 2,106,767 2,230,120 2,447,209
Arbitration award 40,000 � � (Loss) gain on sale of businesses � �
(9,569 ) � � 44,671 � � � � � Loss from operations (198,346 )
(172,710 ) (220,787 ) Interest income, net 4,766 18,069 9,416 Other
(expense) income, net � � (17,309 ) � � 28,980 � � � 7,284 � Loss
from continuing operations before minority interests and income
taxes (210,889 ) (125,661 ) (204,087 ) Minority interests 1,370
(10,180 ) (16,177 ) Provision for income taxes � � (9,923 ) � �
(3,605 ) � � (2,576 ) Loss from continuing operations (219,442 )
(139,446 ) (222,840 ) Discontinued operations, net of tax: Loss
from discontinued operations � (7,165 ) (35,883 ) (Loss) gain on
sale of discontinued operations � � (4,888 ) � � 205,235 � � �
80,069 � Total discontinued operations � � (4,888 ) � � 198,070 � �
� 44,186 � NET (LOSS) INCOME � $ (224,330 ) � $ 58,624 � � $
(178,654 ) Earnings per share: � Basic and diluted: Loss from
continuing operations $ (2.88 ) $ (1.70 ) $ (2.32 ) Total
discontinued operations � � (0.07 ) � � 2.41 � � � 0.46 � Net
(loss) income � $ (2.95 ) � $ 0.71 � � $ (1.86 ) Weighted-average
number of shares used in calculation of basic and diluted earnings
per share: � � 76,171 � � � 82,165 � � � 96,028 � (i) Stock based
compensation included in selling, general and administrative
expense � $ 4,407 � � $ 7,726 � � $ 21,521 � IDT CORPORATION
CONSOLIDATED BALANCE SHEETS � � July 31(in thousands) � Unaudited
2008 � 2007 ASSETS CURRENT ASSETS: Cash and cash equivalents $
169,019 $ 153,845 Marketable securities 111,462 388,140 Trade
accounts receivable, net of allowance for doubtful accounts of
$21,589 and $19,654 at July 31, 2008 and 2007, respectively 178,642
164,802 Prepaid expenses 23,881 28,920 Short-term investments
22,563 � Other current assets � � 70,416 � � � 60,452 � TOTAL
CURRENT ASSETS 575,983 796,159 Property, plant and equipment, net
229,931 251,318 Goodwill 74,509 101,515 Licenses and other
intangibles, net 9,437 13,824 Investments�long-term 40,295 119,052
Deferred income tax assets, net 2,300 � Other assets � � 70,520 � �
� 78,465 � TOTAL ASSETS � $ 1,002,975 � � $ 1,360,333 � LIABILITIES
AND STOCKHOLDERS� EQUITY CURRENT LIABILITIES: Trade accounts
payable $ 82,976 $ 47,467 Accrued expenses 203,487 288,017 Deferred
revenue 88,618 112,757 Income taxes payable 123,000 � Capital lease
obligations�current portion 9,316 21,049 Notes payable�current
portion 2,115 8,095 Other current liabilities � � 15,021 � � �
17,598 � TOTAL CURRENT LIABILITIES 524,533 494,983 Deferred income
tax liabilities, net � 105,049 Capital lease obligations�long-term
portion 11,148 23,401 Notes payable�long-term portion 100,150
82,847 Other liabilities � � 18,957 � � � 12,928 � TOTAL
LIABILITIES 654,788 719,208 Minority interests 5,850 10,963
Commitments and contingencies STOCKHOLDERS� EQUITY: Preferred
stock, $.01 par value; authorized shares�10,000; no shares issued �
� Common stock, $.01 par value; authorized shares�100,000; 25,075
and 25,075 shares issued and 14,542 and 14,996 shares outstanding
at July 31, 2008 and 2007, respectively 251 251 Class A common
stock, $.01 par value; authorized shares�35,000; 9,817 shares
issued and outstanding at July 31, 2008 and 2007 98 98 Class B
common stock, $.01 par value; authorized shares�200,000; 63,904 and
63,261 shares issued and 51,249 and 56,043 shares outstanding at
July 31, 2008 and 2007, respectively 639 633 Additional paid-in
capital 716,598 711,103 Treasury stock, at cost, consisting of
10,533 and 10,079 shares of common stock and 12,655 and 7,218
shares of Class B common stock at July 31, 2008 and 2007,
respectively (285,536 ) (240,355 ) Accumulated other comprehensive
income 6,754 10,750 Retained earnings (deficit) � � (96,467 ) � �
147,682 � TOTAL STOCKHOLDERS� EQUITY � � 342,337 � � � 630,162 �
TOTAL LIABILITIES AND STOCKHOLDERS� EQUITY � $ 1,002,975 � � $
1,360,333 � IDT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS �
� � Year ended July 31 (in thousands) � Unaudited 2008 � 2007 �
2006 OPERATING ACTIVITIES Net (loss) income $ (224,330 ) $ 58,624 $
(178,654 ) Adjustments to reconcile net (loss) income to net cash
used in operating activities: Net loss (income) from discontinued
operations 4,888 (198,070 ) (44,186 ) Depreciation and amortization
68,747 80,011 87,422 Restructuring and impairment charges 39,140
10,933 13,121 Minority interests (1,370 ) 10,180 16,177 Deferred
income taxes 5,832 (1,991 ) (5,648 ) Write-off of acquired research
and development assets 6,672 � � Provision for doubtful accounts
receivable 13,996 13,307 18,544 Provision for losses on purchased
debt portfolios 31,652 � � Net realized losses (gains) from sales
of marketable securities and investments 17,365 (4,909 ) (845 )
Gain on sale of building (4,146 ) � � Loss (gain) on sale of
businesses 9,569 (44,671 ) � Interest in the equity of investments
6,078 (22,416 ) � Stock-based compensation 4,407 7,726 21,521
Change in assets and liabilities, net of effects from
acquisitions/dispositions of businesses: Trade accounts receivable
(35,730 ) 3,090 (47,295 ) Other current assets and other assets
7,832 2,487 (2,950 ) Trade accounts payable, accrued expenses,
other current liabilities and other liabilities (59,673 ) 4,142
17,489 Income taxes payable (10,000 ) � � Deferred revenue � �
(24,139 ) � � (20,548 ) � � (7,400 ) Net cash used in operating
activities (143,210 ) (102,105 ) (112,704 ) INVESTING ACTIVITIES
Capital expenditures (20,286 ) (36,290 ) (53,523 ) Purchase of
building (24,778 ) � � Collection (issuance) of notes receivable,
net 15,003 (64 ) 836 Investments and acquisitions, net of cash
acquired (21,862 ) (49,159 ) (103,351 ) Proceeds from sales of
investments 70,105 � � Proceeds from sales of building 4,872 � �
Proceeds from sales of discontinued operations, net of cash sold
and transaction costs � 260,591 129,308 Proceeds from sale of
U.K.-based Toucan business, net of transaction costs � 38,379 �
Purchase of debt portfolios (67,332 ) (78,443 ) � Principal
collections and proceeds on resale of debt portfolios 23,733 28,070
� Proceeds from sales and maturities of marketable securities
695,714 1,684,344 1,760,705 Purchases of marketable securities � �
(442,945 ) � � (1,671,510 ) � � (1,446,237 ) Net cash provided by
investing activities 232,224 175,918 287,738 FINANCING ACTIVITIES
Dividends paid � (30,783 ) � Distributions to minority shareholders
of subsidiaries (4,087 ) (11,367 ) (25,420 ) Proceeds from exercise
of stock options 94 5,761 2,894 Proceeds from employee stock
purchase plan 1,173 2,284 2,347 Proceeds from borrowings � � 11,000
Proceeds from sale lease back transactions on capital leases �
13,319 � Repayments of capital lease obligations (25,296 ) (20,586
) (21,580 ) Repayments of borrowings (3,922 ) (3,588 ) (21,751 )
Repurchase of stock options in tender offer � � (15,829 )
Repurchases of common stock and Class B common stock � � (45,354 )
� � (22,522 ) � � (73,514 ) Net cash used in financing activities
(77,392 ) (67,482 ) (141,853 ) DISCONTINUED OPERATIONS Net cash
used in operating activities � (20,261 ) (130,339 ) Net cash
provided by investing activities � 3,847 12,078 Net cash provided
by financing activities � � � � � � 7,536 � � � 59,152 � Net cash
used in discontinued operations � (8,878 ) (59,109 ) Effect of
exchange rate changes on cash and cash equivalents � � 3,552 � � �
5,200 � � � 5,161 � Net increase (decrease) in cash and cash
equivalents 15,174 2,653 (20,767 ) Cash and cash equivalents
(including discontinued operations) at beginning of year � �
153,845 � � � 151,192 � � � 171,959 � Cash and cash equivalents
(including discontinued operations) at end of year 169,019 153,845
151,192 Less cash and cash equivalents of discontinued operations
at end of year � � � � � � � � � � (32,083 ) Cash and cash
equivalents (excluding discontinued operations) at end of year � $
169,019 � � $ 153,845 � � $ 119,109 � SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION Cash payments made for interest � $ 9,711 � �
$ 9,512 � � $ 10,148 � Cash payments made for income taxes � $
13,090 � � $ 1,507 � � $ 6,729 � SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES Assumption of mortgage payable
in connection with the purchase of the Company�s headquarters
office building � $ 26,851 � � $ � � � $ � � Receipt of the
Company�s Class B common stock and IDT Telecom shares as part of
the proceeds from the sale of IDT Entertainment � $ � � � $ 226,649
� � $ � � Receipt of marketable securities as part of the proceeds
from the sale of Toucan � $ � � � $ 7,851 � � $ � � Purchases of
property, plant and equipment through capital lease obligations � $
398 � � $ 293 � � $ 3,856 � Issuance of liabilities for
acquisitions � $ � � � $ 1,300 � � $ � � SELECTED CONSOLIDATED
FINANCIAL DATA THREE MONTHS ENDED JULY 31, 2008 � � � � � � � � �
Total IDT Inter- Wholesale Prepaid Products CPS IDT IDT IDT (In
thousands) Corporation � Segment � Telecom � Telecom � Telecom �
Carmel � Energy � Capital � Corporate � STATEMENT OF OPERATIONS
DATA � Revenues $ 479,951 $ (94,311 ) $ 270,026 $ 183,911 $ 18,912
$ 11,109 $ 75,456 $ 14,849 $ - Costs and expenses: Direct cost of
revenues (exclusive of depreciation and amortization) 369,396
(94,311 ) 236,019 138,186 9,540 8,219 66,239 5,504 - Selling,
general and administrative 95,208 - 23,921 42,188 4,512 1,451 7,152
12,298 3,687 Research and development 1,759 - - 1,063 - - - 696 -
Bad debt 21,131 - 990 2,214 1,192 15,600 440 693 - Depreciation and
amortization 16,720 - 6,965 5,699 367 141 30 2,764 754
Restructuring and impairment charges � 45,468 � � - � � � 8,951 � �
� 25,240 � � � 781 � � 2,631 � � � 8 � � 5,987 � � � 1,870 � Total
costs and expenses 549,682 (94,311 ) 276,846 214,590 16,392 28,042
73,869 27,942 6,311 Loss on sale of businesses � (9,569 ) � - � � �
- � � � - � � � - � � - � � � - � � (9,569 ) � � - � (Loss) income
from operations (79,300 ) $ - $ (6,820 ) $ (30,678 ) $ 2,520 $
(16,934 ) $ 1,587 $ (22,663 ) $ (6,311 ) � � � � � � � � � � � � �
� � Interest expense, net (534 ) Other expense, net � (7,676 ) Loss
from continuing operations before minority interests and income
taxes (87,510 ) Minority interests 2,351 Provision for income taxes
� ( 912 ) Loss from continuing operations (86,071 ) Loss on sale of
discontinued operations � (359 ) Net loss $ (86,430 )
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