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, 2005
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 8, 2005, the registrant had the following shares outstanding:
| Common Stock, $.01 par value: |
18,593,923 shares outstanding (excluding 6,480,937 treasury shares) | |
| Class A common stock, $.01 par value: |
9,816,988 shares outstanding | |
| Class B common stock, $.01 par value: |
73,513,774 shares outstanding (excluding 1,713,053 treasury shares) |
TABLE OF CONTENTS
2
| Item 1. | Financial Statements (Unaudited) |
CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, 2005 |
July 31, 2004 |
|||||||
| (Unaudited) | (Note 1) | |||||||
| (in thousands, except share data) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 161,242 | $ | 142,177 | ||||
| Marketable securities |
835,283 | 897,130 | ||||||
| Trade accounts receivable, net |
181,121 | 184,125 | ||||||
| Other current assets |
118,309 | 102,416 | ||||||
| Total current assets |
1,295,955 | 1,325,848 | ||||||
| Property, plant and equipment, net |
292,235 | 273,479 | ||||||
| Goodwill |
92,275 | 89,534 | ||||||
| Licenses and other intangibles, net |
26,652 | 32,928 | ||||||
| Investments |
83,937 | 66,870 | ||||||
| Restricted cash and marketable securities |
19,716 | 22,620 | ||||||
| Other assets |
59,738 | 62,637 | ||||||
| Total assets |
$ | 1,870,508 | $ | 1,873,916 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 119,593 | $ | 140,296 | ||||
| Accrued expenses |
227,093 | 213,116 | ||||||
| Deferred revenue |
127,610 | 140,314 | ||||||
| Capital lease obligations—current portion |
23,743 | 21,793 | ||||||
| Other current liabilities |
50,023 | 9,404 | ||||||
| Total current liabilities |
548,062 | 524,923 | ||||||
| Deferred tax liabilities, net |
145,262 | 145,037 | ||||||
| Capital lease obligations—long-term portion |
28,757 | 31,810 | ||||||
| Other liabilities |
33,948 | 48,218 | ||||||
| Total liabilities |
756,029 | 749,988 | ||||||
| Minority interests |
126,881 | 132,695 | ||||||
| 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, 2005 and July 31, 2004; 18,593,923 and 19,140,933 shares outstanding at January 31, 2005 and July 31, 2004, respectively |
251 | 251 | ||||||
| Class A common stock, $.01 par value; authorized shares—35,000,000; 9,816,988 shares issued and outstanding at January 31, 2005 and July 31, 2004 |
98 | 98 | ||||||
| Class B common stock, $.01 par value; authorized shares—100,000,000; 71,469,048 and 68,727,201 shares issued at January 31, 2005 and July 31, 2004, respectively; 69,756,756 and 67,118,911 shares outstanding at January 31, 2005 and July 31, 2004, respectively |
715 | 687 | ||||||
| Additional paid-in capital |
837,347 | 800,618 | ||||||
| Treasury stock, at cost, consisting of 6,480,937 and 5,933,927 shares of common stock and 1,712,292 and 1,608,290 shares of Class B common stock at January 31, 2005 and July 31, 2004, respectively |
(131,596 | ) | (122,044 | ) | ||||
| Deferred compensation |
(29,082 | ) | (13,795 | ) | ||||
| Accumulated other comprehensive income |
33,813 | 19,909 | ||||||
| Retained earnings |
276,052 | 305,509 | ||||||
| Total stockholders’ equity |
987,598 | 991,233 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,870,508 | $ | 1,873,916 | ||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended January 31, |
Six Months Ended January 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Revenues |
$ | 608,846 | $ | 526,973 | $ | 1,238,565 | $ | 1,040,028 | ||||||||
| Costs and expenses: |
||||||||||||||||
| Direct cost of revenues (exclusive of depreciation and amortization) |
447,515 | 396,054 | 917,452 | 790,262 | ||||||||||||
| Selling, general and administrative |
143,777 | 116,001 | 283,628 | 222,604 | ||||||||||||
| Depreciation and amortization |
28,296 | 25,230 | 52,675 | 47,953 | ||||||||||||
| Non-cash compensation (all of which is attributable to selling, general and administrative) |
5,059 | 5,012 | 9,892 | 8,603 | ||||||||||||
| Restructuring and impairment charges |
8,780 | 833 | 11,415 | 5,204 | ||||||||||||
| Total costs and expenses |
633,427 | 543,130 | 1,275,062 | 1,074,626 | ||||||||||||
| Loss from operations |
(24,581 | ) | (16,157 | ) | (36,497 | ) | (34,598 | ) | ||||||||
| Interest income, net |
5,415 | 4,766 | 10,903 | 11,424 | ||||||||||||
| Other income |
||||||||||||||||
| Gain on sale of subsidiary stock |
— | 9,418 | — | 9,418 | ||||||||||||
| Arbitration award |
— | 21,618 | — | 21,618 | ||||||||||||
| Investment and other income, net |
5,797 | 1,296 | 7,141 | 16,879 | ||||||||||||
| Income (loss) before minority interests and income taxes |
(13,369 | ) | 20,941 | (18,453 | ) | 24,741 | ||||||||||
| Minority interests |
(805 | ) | 402 | (3,488 | ) | (12,633 | ) | |||||||||
| Provision for income taxes |
(3,551 | ) | (2,927 | ) | (7,517 | ) | (7,658 | ) | ||||||||
| Net income (loss) |
$ | (17,725 | ) | $ | 18,416 | $ | (29,458 | ) | $ | 4,450 | ||||||
| Earnings (loss) per share: |
||||||||||||||||
| Net income (loss): |
||||||||||||||||
| Basic |
$ | (0.19 | ) | $ | 0.22 | $ | (0.31 | ) | $ | 0.05 | ||||||
| Diluted |
$ | (0.19 | ) | $ | 0.20 | $ | (0.31 | ) | $ | 0.05 | ||||||
| Weighted-average number of shares used in calculation of earnings (loss) per share: |
||||||||||||||||
| Basic |
95,635 | 85,618 | 95,412 | 84,122 | ||||||||||||
| Diluted |
95,635 | 92,012 | 95,412 | 90,000 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended January 31, |
||||||||
| 2005 |
2004 |
|||||||
| (In thousands) | ||||||||
| Net cash (used in) provided by operating activities |
$ | (984 | ) | $ | 45,549 | |||
| Investing activities |
||||||||
| Capital expenditures |
(39,659 | ) | (39,557 | ) | ||||
| (Issuance) collection of notes receivable |
(5,650 | ) | 15,320 | |||||
| Investments and acquisitions, net of cash acquired |
(11,674 | ) | (66,332 | ) | ||||
| Sales and maturities of marketable securities |
2,767,922 | 1,084,415 | ||||||
| Purchases of marketable securities |
(2,669,120 | ) | (1,027,939 | ) | ||||
| Net cash provided by (used in) investing activities |
41,819 | (34,093 | ) | |||||
| Financing activities |
||||||||
| Proceeds from exercise of stock options |
2,756 | 48,291 | ||||||
| Proceeds from exercise of stock options of Net2Phone |
53 | 5,298 | ||||||
| Proceeds from offering of common stock by Net2Phone |
— | 53,069 | ||||||
| Proceeds from employee stock purchase plan |
893 | — | ||||||
| Purchase of Class B common stock |
(1,985 | ) | — | |||||
| Cash and marketable securities restricted against letters of credit |
2,904 | (2,294 | ) | |||||
| Repayments of capital lease obligations |
(13,429 | ) | (16,190 | ) | ||||
| Distributions to minority shareholders of subsidiaries |
(16,630 | ) | (13,835 | ) | ||||
| Net cash (used in) provided by financing activities |
(25,438 | ) | 74,339 | |||||
| Effect of exchange rate changes on cash and cash equivalents |
3,668 | 3,644 | ||||||
| Net increase in cash and cash equivalents |
19,065 | 89,439 | ||||||
| Cash and cash equivalents, beginning of period |
142,177 | 99,046 | ||||||
| Cash and cash equivalents, end of period |
$ | 161,242 | $ | 188,485 | ||||
| Supplemental schedule of non-cash investing and financing activities |
||||||||
| Purchases of property, plant and equipment through capital lease obligations |
$ | 12,853 | ||||||