UNITED STATES
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 JANUARY 31, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 1-16371
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 ¨
As of March 11, 2004, the registrant had the following shares outstanding:
| Common Stock, $.01 par value: |
20,509,468 shares outstanding (excluding 4,565,392 treasury shares) | |
| Class A common stock, $.01 par value: |
9,816,988 shares outstanding | |
| Class B common stock, $.01 par value: |
60,890,979 shares outstanding (excluding 2,008,997 treasury shares) |
TABLE OF CONTENTS
| PART I. |
3 | |||
| Item 1. |
3 | |||
| Condensed Consolidated Balance Sheets as of January 31, 2004 and July 31, 2003 |
3 | |||
| 4 | ||||
| Condensed Consolidated Statements of Cash Flows for the six months ended January 31, 2004 and 2003 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results Of Operations |
16 | ||
| Item 3. |
38 | |||
| Item 4. |
38 | |||
| PART II. |
39 | |||
| Item 1. |
39 | |||
| Item 2. |
40 | |||
| Item 3. |
41 | |||
| Item 4. |
41 | |||
| Item 5. |
41 | |||
| Item 6. |
42 | |||
| 43 | ||||
2
Item 1. Financial Statements (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, 2004 |
July 31, 2003 |
|||||||
| (Unaudited) | (Note 1) | |||||||
| (in thousands, except share data) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 188,485 | $ | 99,046 | ||||
| Marketable securities |
882,130 | 921,669 | ||||||
| Trade accounts receivable, net |
159,236 | 126,303 | ||||||
| Other current assets |
92,139 | 81,304 | ||||||
| Total current assets |
1,321,990 | 1,228,322 | ||||||
| Property, plant and equipment, net |
291,749 | 286,807 | ||||||
| Goodwill |
67,198 | 41,651 | ||||||
| Licenses and other intangibles, net |
30,878 | 23,503 | ||||||
| Investments |
51,295 | 41,628 | ||||||
| Restricted cash |
25,358 | 23,064 | ||||||
| Other assets |
76,006 | 87,367 | ||||||
| Total assets |
$ | 1,864,474 | $ | 1,732,342 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 121,993 | $ | 106,836 | ||||
| Accrued expenses |
183,066 | 186,254 | ||||||
| Deferred revenue |
146,406 | 145,343 | ||||||
| Capital lease obligations—current portion |
23,333 | 27,862 | ||||||
| Other current liabilities |
14,867 | 8,061 | ||||||
| Total current liabilities |
489,665 | 474,356 | ||||||
| Deferred tax liabilities, net |
144,527 | 143,542 | ||||||
| Capital lease obligations—long-term portion |
43,753 | 45,084 | ||||||
| Other liabilities |
22,314 | 24,486 | ||||||
| Total liabilities |
700,259 | 687,468 | ||||||
| Minority interests |
181,368 | 147,347 | ||||||
| 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; 25,074,860 shares issued at January 31, 2004 and July 31, 2003, respectively; 21,009,468 and 22,067,468 shares outstanding at January 31, 2004 and July 31, 2003, respectively |
210 | 221 | ||||||
| Class A common stock, $.01 par value; authorized shares—35,000,000; 9,816,988 shares issued and outstanding at January 31, 2004 and July 31, 2003 |
98 | 98 | ||||||
| Class B common stock, $.01 par value; authorized shares—100,000,000; 62,013,343 and 56,342,853 shares issued at January 31, 2004 and July 31, 2003, respectively; 57,142,445 and 50,102,100 shares outstanding at January 31, 2004 and July 31, 2003, respectively |
571 | 501 | ||||||
| Additional paid-in capital |
729,867 | 654,170 | ||||||
| Treasury stock, at cost, consisting of 4,065,392 and 3,007,392 shares of common stock and 4,870,898 and 6,240,753 shares of Class B common stock at January 31, 2004 and July 31, 2003, respectively |
(144,382 | ) | (150,603 | ) | ||||
| Deferred compensation |
(21,237 | ) | — | |||||
| Accumulated other comprehensive loss |
12,050 | (8,080 | ) | |||||
| Retained earnings |
405,670 | 401,220 | ||||||
| Total stockholders’ equity |
982,847 | 897,527 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,864,474 | $ | 1,732,342 | ||||
See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended January 31, |
Six Months Ended January 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Revenues |
$ | 526,973 | $ | 450,767 | $ | 1,040,028 | $ | 893,938 | ||||||||
| Costs and expenses: |
||||||||||||||||
| Direct cost of revenues (exclusive of depreciation and amortization) |
396,054 | 348,988 | 790,262 | 689,055 | ||||||||||||
| Selling, general and administrative |
116,001 | 106,564 | 222,604 | 211,896 | ||||||||||||
| Depreciation and amortization |
25,230 | 21,644 | 47,953 | 42,930 | ||||||||||||
| Settlement of litigation |
— | 395 | — | (58,034 | ) | |||||||||||
| Non-cash compensation (all of which is attributable to selling, general and administrative) |
5,012 | 3,227 | 8,603 | 7,133 | ||||||||||||
| Restructuring, severance and impairment charges |
833 | 653 | 5,204 | 7,326 | ||||||||||||
| Total costs and expenses |
543,130 | 481,471 | 1,074,626 | 900,306 | ||||||||||||
| Loss from operations |
(16,157 | ) | (30,704 | ) | (34,598 | ) | (6,368 | ) | ||||||||
| Interest income, net |
4,766 | 6,865 | 11,424 | 14,624 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Gain on sale of subsidiary stock |
9,418 | — | 9,418 | — | ||||||||||||
| Arbitration award |
21,618 | — | 21,618 | — | ||||||||||||
| Equity in loss of affiliates |
— | (1,615 | ) | — | (3,811 | ) | ||||||||||
| Investment and other income (expense), net |
1,296 | (3,834 | ) | 16,879 | (5,003 | ) | ||||||||||
| Income (loss) before minority interests and income taxes |
20,941 | (29,288 | ) | 24,741 | (558 | ) | ||||||||||
| Minority interests |
402 | 517 | (12,633 | ) | (45,950 | ) | ||||||||||
| (Provision for) benefit from income taxes |
(2,927 | ) | 16,312 | (7,658 | ) | 29,958 | ||||||||||
| Net income (loss) |
$ | 18,416 | $ | (12,459 | ) | $ | 4,450 | $ | (16,550 | ) | ||||||
| Earnings per share: |
||||||||||||||||
| Net income (loss): |
||||||||||||||||
| Basic |
$ | 0.22 | $ | (0.16 | ) | $ | 0.05 | $ | (0.21 | ) | ||||||
| Diluted |
$ | 0.20 | $ | (0.16 | ) | $ | 0.05 | $ | (0.21 | ) | ||||||
| Weighted-average number of shares used in calculation of earnings per share: |
||||||||||||||||
| Basic |
85,618 | 79,725 | 84,122 | 79,581 | ||||||||||||
| Diluted |
92,012 | 79,725 | 90,000 | 79,581 | ||||||||||||
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended January 31, |
||||||||
| 2004 |
2003 |
|||||||
| (In thousands) | ||||||||
| Net cash provided by operating activities |
$ | 45,549 | $ | 8,282 | ||||
| Investing activities |
||||||||
| Capital expenditures |
(39,557 | ) | (26,890 | ) | ||||
| Repayment (issuance) of notes receivable |
15,320 | (3,543 | ) | |||||
| Investments and acquisitions, net of cash acquired |
(66,332 | ) | (2,015 | ) | ||||
| Sales and maturities of marketable securities |
1,084,415 | 1,108,079 | ||||||
| Purchases of marketable securities |
(1,027,939 | ) | (1,319,608 | ) | ||||
| Net cash used in investing activities |
(34,093 | ) | (243,977 | ) | ||||
| Financing activities |
||||||||
| Proceeds from exercise of stock options |
48,291 | 4,799 | ||||||
| Proceeds from exercise of stock options for Net2Phone |
5,298 | — | ||||||
| Proceeds from offering of common stock by Net2Phone |
53,069 | — | ||||||
| Cash restricted against letters of credit |
(2,294 | ) | — | |||||
| Repayments of capital lease obligations |
(16,190 | ) | (13,408 | ) | ||||
| Distributions to minority shareholders of subsidiaries |
(13,835 | ) | (11,044 | ) | ||||
| Net cash provided by (used in) financing activities |
74,339 | (19,653 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents |
3,644 | 1,894 | ||||||
| Net increase (decrease) in cash and cash equivalents |
89,439 | (253,454 | ) | |||||
| Cash and cash equivalents, beginning of period |
99,046 | 415,464 | ||||||