Attached files
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| 8-K - CURRENT REPORT - IDT CORP | f8k031710_idt.htm |
Exhibit 99.1
IDT Corporation
Second Quarter Fiscal 2010 Results -
Questions and Answers
March 17, 2010
IDT
Corporation
Second Quarter Fiscal 2010
Results - Questions and Answers
Within
its Q2 fiscal 2010 earnings release and during management’s discussion of
results for the quarter, IDT Corporation (NYSE: IDT; IDT.C) offered to respond
in writing to questions from investors and other interested
persons.
We asked
questioners to e-mail questions to invest@idt.net by the
close of business on Friday, March 12, 2010. We said that, in those
instances where we could provide a constructive answer, we would post the
questions received along with the name of the questioner and the questioner’s
business affiliation – if any – and our answers on IDT Corporation’s website as
early as the close of business on Wednesday, March 17th
after market close. This document was prepared and posted on the IDT
website to fulfill that commitment. It is also being filed with the
SEC in a Form 8-K.
Thank you
for your continued interest in IDT Corporation.
In
this document, all statements that are not purely about historical facts,
including, but not limited to, those in which we use 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. While these forward-looking
statements represent our current judgment of what may happen in the future,
actual results may differ materially from the results expressed or implied by
these statements due to numerous important factors, including, but not limited
to, those described in our most recent report on SEC Form 10-K (under the
headings “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”), which may be revised or supplemented in
subsequent reports on SEC Forms 10-Q and 8-K. These factors include, but
are not limited to, the following: potential declines in prices for our products
and services; our ability to maintain and grow our prepaid calling card
business, our wholesale telecommunication businesses and our retail energy
business; availability of termination capacity to particular destinations; our
ability to maintain carrier agreements with foreign carriers; our ability to
obtain telecommunications products or services required for our products and
services; the business and regulatory evolution of and competition and unfair
business practices in, the energy services business in New York State; financial
stability of our major customers; our ability to reduce our losses and improve
our cash flow; impact of government regulation; effectiveness of our marketing
and distribution efforts; and general economic conditions. We are under no
obligation, and expressly disclaim any obligation, to update the forward-looking
statements in this document whether as a result of new information, future
events or otherwise.
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IDT Corporation
Second Quarter Fiscal 2010 Results -
Questions and Answers
March 17,
2010
Questions from Vadim
Perelman, Baker Street Capital Management
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1.
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There
were many reports that the 520 Broad building in Newark has been leased to
the City. When does IDT expect to start receiving lease payments,
and would you look to sell this building? If you can, please comment on
the amount of cash that might be required to fund tenant
improvements.
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The
State of New Jersey, Department of the Treasury, Division of Property Management
and Construction, posted information regarding a potential lease of office space
at 520 Broad Street in Newark on its website. We provide the
link below as a convenience for readers and assume no responsibility for the
accuracy or completeness of the information posted.
http://www.state.nj.us/treasury/dpmc/Real_Estate/SPR%20NEWARK%20Notice%20of%20Intent%20to%20Award%20for%20Webpage.pdf
.
There
is no further information to disclose at this time since no lease has yet been
awarded in connection with this announcement, nor has any agreement been signed.
If and when events develop on this matter, we will make appropriate
disclosures.
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2.
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Considering
the significant cash balances and profitability of the energy and telecom
businesses, could you please provide shareholders specific insights into
where you are looking to invest the excess cash? As share
repurchases were de
minimis in Q2, at what point can shareholders expect a return of
capital? For those of us who have hung in through the tough times at
IDT, it is important to understand where excess shareholder capital will
be invested and when it can be returned. You were very helpful in
providing thoughts on capital structure at CTM Media and we would love to
get the same type of insight at IDT, where the market is ascribing a very
large discount to the cash due to the uncertainty of if/how it will be
spent.
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As
Howard Jonas stated in his remarks on the results for the quarter, IDT is
committed to building long term shareholder value by pursuing growth
opportunities in a focused, measured way that rationally allocates the Company’s
capital.
A
key objective for management has been to increase the Company’s liquidity and
working capital, which totaled $63.8 million as of January 31,
2010.
IDT
continues to work to increase its levels of working capital for a variety of
potential purposes, which, depending on circumstances, could
include:
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·
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Organic
and strategic investments to continue the growth of our core
telecommunications and energy
businesses;
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·
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Continued
investment in several initiatives with the potential for significant long
term returns including our alternative energy initiative in Israel, IEI,
our oil shale development JV with Total SA in Colorado, Zedge, and
Fabrix;
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·
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To
hedge against unanticipated, adverse legal, tax and regulatory potential
liabilities; and
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·
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Stock
repurchases authorized under the Company’s existing stock buyback
program.
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IDT Corporation
Second Quarter Fiscal 2010 Results -
Questions and Answers
March 17,
2010
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3.
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Can
you please comment on how you think about the large accrued expenses on
the balance sheet that arise from IDT Telecom operations? If those
accruals were inherited by someone else, either through a sale or spinoff
of IDT Telecom, there would be over $9 per share of net cash at IDT, as
well as profit Genie Energy and a fully leased building. Isn’t this an
effective way to unlock hidden value in IDT for the benefit of all
shareholders?
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The
accruals on IDT’s balance sheet – the majority of which are attributable to IDT
Telecom – are determined in accordance with GAAP and reflect a focused,
coordinated effort to identify and record costs that have been incurred but not
billed, invoiced or paid at the reporting date so as to provide a balanced and
fairly presented picture of available working capital and the financial
performance of the business units.
When
evaluating the impact of IDT Telecom on IDT’s balance sheet, bear in mind that
in addition to accrued expenses, IDT Telecom has various other assets and other
liabilities that impact the Company’s liquidity and working
capital.
IDT
has no current plans to spin off or sell IDT Telecom. However, IDT management is
always looking to enhance or create value for our company and shareholders, as
we recently did with CTM, and will explore any attractive opportunities that are
presented.
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4.
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Do
you think that IDT Telecom would be more valuable if combined with a
similar network platform, considering the scale nature of the
business?
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As
in many other industries, there are certainly economies of scale for businesses
in the telecommunications space. IDT Telecom’s management regularly
evaluates opportunities to enhance shareholder value and more effectively
leverage our existing wholesale and retail distribution capabilities and
transaction processing platform. When opportunities to increase the long term
value of IDT Telecom arise either through the purchase or sale of assets, we
will pursue them consistent with the competing demands on our working
capital.
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IDT Corporation
Second Quarter Fiscal 2010 Results -
Questions and Answers
March 17, 2010
Questions from John Banks,
BG Capital
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1.
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Congrats
on the great quarter and turnaround. The
spinoff of CTM Media was a huge success for shareholders so thank you very
much. Does the company have any plans to spin off any more companies
this year?
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We have no such current
plans. For additional thoughts on this topic, please see our answer
to question #3 from Mr. Perelman above.
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2.
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CTM
Media just declared a dividend and Mr. Jonas stated, "We are also
demonstrating that we do not intend to retain cash beyond our
foreseeable needs unless we have a firm plan for deploying that cash and
generating returns.' IDT has close to $200 million in cash and
I was wondering - based on that statement - why isn't IDT paying a
dividend? IDT could pay a $25-$50 million dollar dividend and
the Company would still be in great shape
liquidity-wise. We currently own around 400,000 shares
for retail accounts and their constant questions are not just about growth
but dividends. I think if IDT had a dividend it would attract
a new class of shareholders that were long term at this position if they
knew they would get back any excess cash in the
future. The great thing is that it’s a good problem to
have.
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We
have no current plans to provide a dividend to shareholders for, among other
reasons, those discussed in the answer to Mr. Perelman’s question #2
above. A dividend to shareholders may become appropriate once we are
able to generate positive cash-flow over a sustained period on a consistent
basis, although payment of a dividend would need to be considered along with
other potential deployments of the cash that could provide greater value to
shareholders.
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