SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended April 30, 2003 |
or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 0-27898
IDT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 22-3415036 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 520 Broad Street, Newark, New Jersey | 07102 | |
| (Address of principal executive offices) | (Zip Code) | |
(973) 438-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Common Stock, $.01 par value – 25,074,860 shares outstanding as of June 11, 2003 (excluding 5,419,963 treasury shares)
Class A common stock, $.01 par value – 9,816,988 shares outstanding as of June 11, 2003
Class B common stock, $.01 par value – 55,239,832 shares outstanding as of June 11, 2003 (excluding 4,019,163 treasury shares)
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date)
IDT CORPORATION
| 3 | ||||
| Item 1. |
3 | |||
| Condensed Consolidated Balance Sheets as of April 30, 2003 and July 31, 2002 |
3 | |||
| 4 | ||||
| Condensed Consolidated Statements of Cash Flows for the nine months ended April 30, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
15 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risks. |
36 | ||
| Item 4. |
37 | |||
| 38 | ||||
| Item 1. |
38 | |||
| Item 2. |
39 | |||
| Item 3. |
39 | |||
| Item 4. |
39 | |||
| Item 5. |
39 | |||
| Item 6. |
40 | |||
| 41 | ||||
| 42 | ||||
| 43 | ||||
2
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
IDT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| April 30, 2003 |
July 31, 2002 |
|||||||
| (Unaudited) | (Note 1) | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 243,415 | $ | 351,248 | ||||
| Marketable securities |
794,259 | 658,731 | ||||||
| Trade accounts receivable, net |
133,127 | 126,153 | ||||||
| Other current assets |
88,199 | 65,291 | ||||||
| Total current assets |
1,259,000 | 1,201,423 | ||||||
| Property, plant and equipment, net |
288,070 | 250,631 | ||||||
| Restricted cash |
21,290 | — | ||||||
| Goodwill |
34,424 | 32,702 | ||||||
| Licenses and other intangibles, net |
24,310 | 25,503 | ||||||
| Investments |
39,471 | 58,903 | ||||||
| Other assets |
54,928 | 38,758 | ||||||
| Total assets |
$ | 1,721,493 | $ | 1,607,920 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 97,760 | $ | 121,529 | ||||
| Accrued expenses |
173,601 | 132,892 | ||||||
| Deferred revenue |
120,836 | 112,183 | ||||||
| Capital lease obligations—current portion |
25,318 | 22,960 | ||||||
| Other current liabilities |
33,412 | 11,866 | ||||||
| Total current liabilities |
450,927 | 401,430 | ||||||
| Deferred tax liabilities, net |
191,436 | 233,518 | ||||||
| Capital lease obligations—long-term portion |
38,502 | 45,398 | ||||||
| Other liabilities |
14,299 | 3,088 | ||||||
| Total liabilities |
695,164 | 683,434 | ||||||
| Minority interests |
162,184 | 54,956 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value; authorized shares—10,000,000; no shares issued |
— | — | ||||||
| Common stock, $.01 par value; authorized shares—100,000,000; 25,147,360 and 24,988,597 shares issued at April 30, 2003 and July 31, 2002, respectively; 19,727,397 and 19,568,634 shares outstanding at April 30, 2003 and July 31, 2002, respectively |
197 | 196 | ||||||
| Class A common stock, $.01 par value; authorized shares—35,000,000; 9,816,988 shares issued and outstanding at April 30, 2003 and July 31, 2002 |
98 | 98 | ||||||
| Class B common stock, $.01 par value; authorized shares—100,000,000; 55,044,832 and 54,009,844 shares issued at April 30, 2003 and July 31, 2002, respectively; 51,025,669 and 49,990,681 shares outstanding at April 30, 2003 and July 31, 2002, respectively |
510 | 500 | ||||||
| Additional paid-in capital |
636,445 | 606,387 | ||||||
| Deferred compensation |
(7,907 | ) | — | |||||
| Treasury stock, at cost, consisting of 5,419,963 shares of common stock and 4,019,163 shares of Class B common stock |
(153,713 | ) | (153,713 | ) | ||||
| Accumulated other comprehensive loss |
(4,369 | ) | (2,675 | ) | ||||
| Retained earnings |
392,884 | 418,737 | ||||||
| Total stockholders’ equity |
864,145 | 869,530 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,721,493 | $ | 1,607,920 | ||||
See notes to condensed consolidated financial statements.
3
IDT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenues |
$ | 454,870 | $ | 401,653 | $ | 1,348,808 | $ | 1,114,887 | ||||||||
| Costs and expenses: |
||||||||||||||||
| Direct cost of revenues (exclusive of items shown below) |
347,117 | 319,002 | 1,036,172 | 879,607 | ||||||||||||
| Selling, general and administrative |
104,967 | 106,409 | 316,863 | 266,501 | ||||||||||||
| Depreciation and amortization |
22,349 | 16,745 | 65,279 | 46,840 | ||||||||||||
| Settlement by Net2Phone of litigation |
— | — | (58,034 | ) | — | |||||||||||
| Non-cash compensation |
16,629 | 2,326 | 23,762 | 2,326 | ||||||||||||
| Restructuring, severance and impairment charges |
1,707 | — | 9,033 | 2,781 | ||||||||||||
| Total costs and expenses |
492,769 | 444,482 | 1,393,075 | 1,198,055 | ||||||||||||
| Loss from operations |
(37,899 | ) | (42,829 | ) | (44,267 | ) | (83,168 | ) | ||||||||
| Interest income, net |
6,721 | 3,947 | 21,345 | 15,496 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Gain on sale of subsidiary stock |
22,422 | — | 22,422 | — | ||||||||||||
| Equity in loss of affiliates |
— | (25,125 | ) | (3,811 | ) | (41,794 | ) | |||||||||
| Investment and other income (expense), net |
(10,362 | ) | (2,503 | ) | (15,365 | ) | (8,315 | ) | ||||||||
| Loss before minority interests, income taxes and cumulative effect of accounting change |
(19,118 | ) | (66,510 | ) | (19,676 | ) | (117,781 | ) | ||||||||
| Minority interests |
(1,003 | ) | (4,316 | ) | (46,953 | ) | (15,529 | ) | ||||||||
| Benefit from income taxes |
10,818 | 21,233 | 40,776 | 55,173 | ||||||||||||
| Loss before cumulative effect of accounting change |
(9,303 | ) | (49,593 | ) | (25,853 | ) | (78,137 | ) | ||||||||
| Cumulative effect of accounting change, net of income taxes of $3,525 |
— | — | — | (146,983 | ) | |||||||||||
| Net loss |
$ | (9,303 | ) | $ | (49,593 | ) | $ | (25,853 | ) | $ | (225,120 | ) | ||||
| Earnings per share: |
||||||||||||||||
| Loss before cumulative effect of accounting change: |
||||||||||||||||
| Basic |
$ | (0.12 | ) | $ | (0.64 | ) | $ | (0.32 | ) | $ | (1.06 | ) | ||||
| Diluted |
$ | (0.12 | ) | $ | (0.64 | ) | $ | (0.32 | ) | $ | (1.06 | ) | ||||
| Cumulative effect of accounting change, net of income taxes: |
||||||||||||||||
| Basic |
$ | — | $ | — | $ | — | $ | (2.00 | ) | |||||||
| Diluted |
$ | — | $ | — | $ | — | $ | (2.00 | ) | |||||||
| Net loss: |
||||||||||||||||
| Basic |
$ | (0.12 | ) | $ | (0.64 | ) | $ | (0.32 | ) | $ | (3.06 | ) | ||||
| Diluted |
$ | (0.12 | ) | $ | (0.64 | ) | $ | (0.32 | ) | $ | (3.06 | ) | ||||
| Weighted-average number of shares used in calculation of earnings per share: |
||||||||||||||||
| Basic |
80,262 | 76,938 | 79,808 | 73,592 | ||||||||||||
| Diluted |
80,262 | 76,938 | 79,808 | 73,592 | ||||||||||||
See notes to condensed consolidated financial statements.
4
IDT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended April 30, |
||||||||
| 2003 |
2002 |
|||||||
| Net cash provided by operating activities |
$ | 12,845 | $ | 16,249 | ||||
| Investing activities |
||||||||
| Purchases of property, plant and equipment |
(51,436 | ) | (28,286 | ) | ||||
| Issuance of notes receivable |
(6,971 | ) | (8,949 | ) | ||||
| Purchases of investments |
(10,348 | ) | (44,974 | ) | ||||
| Acquisitions |
— | (33,465 | ) | |||||
| Increase in cash from consolidation of Net2Phone |
41,266 | — | ||||||
| Purchases of marketable securities |
(1,741,131 | ) | ||||||