Item
15. Exhibits, Financial Statement Schedules.
(a)
|
The
following documents are filed as part of this Report:
|
1.
|
Report
of Management on Internal Control Over Financial Reporting
Report
of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
Report
of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Consolidated
Financial Statements covered by Report of Independent Registered Public Accounting Firm
|
2.
|
Financial
Statement Schedule.
All
schedules have been omitted since they are either included in the Notes to Consolidated Financial Statements or not required
or not applicable.
|
3.
|
Exhibits.
Exhibit Numbers 10.03, 10.04, 10.05, 10.06 and 10.08 are management contracts or compensatory plans or arrangements.
The
exhibits listed in paragraph (b) of this item are filed, furnished, or incorporated by reference as part of this
Form 10—K.
Certain
of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the
agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
|
|
●
|
may have been qualified
by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures
are not necessarily reflected in the agreements;
|
|
●
|
may apply standards
of materiality that differ from those of a reasonable investor; and
|
|
●
|
were made only as of
specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
|
|
Accordingly,
these representations and warranties may not describe the actual state of affairs as of the date that these representations
and warranties were made or at any other time. Investors should not rely on them as statements of fact.
|
(b)
Exhibits.
Exhibit
Number
|
Description of Exhibits
|
|
|
3.01(1)
|
Third Restated Certificate of Incorporation of the Registrant.
|
|
|
3.02(2)
|
Fourth Amended and Restated By-laws of the Registrant.
|
|
|
10.03(3)
|
Third Amended and Restated Employment Agreement, dated December 20, 2013, between the Registrant and Howard S. Jonas.
|
|
|
10.04(4)
|
1996 Stock Option and Incentive Plan, as amended and restated, of IDT Corporation.
|
|
|
10.05(5)
|
2005 Stock Option and Incentive Plan, as amended and restated, of IDT Corporation.
|
|
|
10.06(6)
|
2015 Stock Option and Incentive Plan of IDT Corporation.
|
|
|
|
|
10.06(7)
|
Employment Agreement, dated January 12, 2015, between IDT Telecom and Bill Pereira.
|
|
Exhibit
Number
|
Description of Exhibits
|
10.07(8)
|
Credit Agreement, dated July 12, 2012, between IDT Telecom, Inc. and TD Bank, N.A.
|
|
|
10.08(9)
|
Stock Grant Agreement between the Registrant and Howard Jonas, dated December 27, 2012.
|
|
|
21.01*
|
Subsidiaries of the Registrant.
|
|
|
23.01*
|
Consent of Grant Thornton LLP.
|
|
|
31.01*
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.02*
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.01*
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.02*
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
XBRL Instance Document
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
(1)
|
Incorporated by reference to Form 8-K, filed April 5, 2011.
|
|
(2)
|
Incorporated by reference to Form 8-K, filed September 23, 2009.
|
|
(3)
|
Incorporated by reference to Form 8-K/A, filed December 27, 2013.
|
|
(4)
|
Incorporated by reference to Schedule 14A, filed November 3, 2004.
|
|
(5)
|
Incorporated by reference to Schedule 14A, filed November 5, 2013.
|
|
(6)
|
Incorporated by reference to Schedule 14A, filed October 31, 2015.
|
|
(7)
|
Incorporated by reference to Form 8-K, filed January 14, 2015.
|
|
(8)
|
Incorporated by reference to Form 10-K for the fiscal year ended July 31, 2012, filed October 15, 2012
|
|
(9)
|
Incorporated by reference to Form 8-K, filed December 31, 2012.
|
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
IDT CORPORATION
|
|
|
|
|
By:
|
/s/ Shmuel Jonas
|
|
|
Shmuel Jonas
Chief Executive Officer
|
Date: October 14, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature
|
|
Titles
|
|
Date
|
|
|
|
|
|
/s/ Shmuel Jonas
|
|
Chief Executive Officer (Principal Executive Officer)
|
|
October 14, 2016
|
Shmuel Jonas
|
|
|
|
|
|
|
|
|
|
/s/ Howard S. Jonas
|
|
Chairman of the Board
|
|
October 14, 2016
|
Howard S. Jonas
|
|
|
|
|
|
|
|
|
|
/s/ Marcelo Fischer
|
|
Senior Vice President-Finance (Principal Financial Officer)
|
|
October 14, 2016
|
Marcelo Fischer
|
|
|
|
|
|
|
|
|
|
/s/ Mitch Silberman
|
|
Chief Accounting Officer and Controller
|
|
October 14, 2016
|
Mitch Silberman
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Bill Pereira
|
|
Director
|
|
October 14, 2016
|
Bill Pereira
|
|
|
|
|
|
|
|
|
|
/s/ Michael Chenkin
|
|
Director
|
|
October 14, 2016
|
Michael Chenkin
|
|
|
|
|
|
|
|
|
|
/s/ Eric F. Cosentino
|
|
Director
|
|
October 14, 2016
|
Eric F. Cosentino
|
|
|
|
|
|
|
|
|
|
/s/ Judah Schorr
|
|
Director
|
|
October 14, 2016
|
Judah Schorr
|
|
|
|
|
REPORT OF MANAGEMENT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
We, the management of IDT Corporation and subsidiaries (the “Company”),
are responsible for establishing and maintaining adequate internal control over financial reporting of the Company.
The Company’s internal control over financial reporting is
defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under
the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s
board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting
principles in the United States and includes those policies and procedures that:
1.
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;
|
2.
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
3.
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
Management has assessed the effectiveness of the Company’s
internal control over financial reporting as of July 31, 2016. In making this assessment, the Company’s management used
the criteria established in the 2013
Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”).
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we conducted an evaluation of our internal control over
financial reporting, as prescribed above, for the period covered by this report. Based on our evaluation, our principal executive
officer and principal financial officer concluded that the Company’s internal control over financial reporting as of July 31,
2016 was effective based on the criteria established in the 2013 COSO Framework.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Grant Thornton LLP has provided an attestation report on the Company’s
internal control over financial reporting as of July 31, 2016.
/s/ Shmuel Jonas
|
|
Shmuel Jonas
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
|
/s/ Marcelo Fischer
|
|
Marcelo Fischer
|
|
Senior Vice President-Finance
|
|
(Principal Financial Officer)
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors and Stockholders
IDT Corporation
We have audited the internal control over financial reporting
of IDT Corporation a Delaware corporation and subsidiaries (the “Company”) as of July 31, 2016, based on criteria established
in the 2013
Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of July 31, 2016 based on criteria established in the 2013
Internal Control—Integrated
Framework
issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended July 31, 2016, and our report dated
October 14, 2016 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
New York, New York
October 14, 2016
IDT Corporation
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
|
Consolidated Balance Sheets as of July 31, 2016 and 2015
|
F-3
|
|
|
Consolidated Statements of Income for the years ended July 31, 2016, 2015 and 2014
|
F-4
|
|
|
Consolidated Statements of Comprehensive Income for the years ended July 31, 2016, 2015 and 2014
|
F-5
|
|
|
Consolidated Statements of Equity for the years ended July 31, 2016, 2015 and 2014
|
F-6
|
|
|
Consolidated Statements of Cash Flows for the years ended July 31, 2016, 2015 and 2014
|
F-9
|
|
|
Notes to Consolidated Financial Statements
|
F-10
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors and Stockholders
IDT Corporation
We have audited the accompanying consolidated balance sheets of
IDT Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of July 31, 2016 and 2015, and the
related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period
ended July 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of IDT Corporation and subsidiaries as of July 31,
2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended July 31,
2016 in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of July 31,
2016, based on criteria established in the 2013
Internal Control–Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated October 14, 2016 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
New York, New York
October 14, 2016
IDT CORPORATION
CONSOLIDATED BALANCE SHEETS
July 31
(in thousands, except per share data)
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
109,537
|
|
|
$
|
110,361
|
|
Restricted cash and cash equivalents
|
|
|
98,822
|
|
|
|
91,035
|
|
Marketable securities
|
|
|
52,949
|
|
|
|
40,287
|
|
Trade accounts receivable, net of allowance for doubtful accounts of $4,818 and $5,645 at July 31, 2016 and 2015, respectively
|
|
|
49,283
|
|
|
|
58,543
|
|
Receivable from sale of interest in Fabrix Systems, Ltd.
|
|
|
—
|
|
|
|
8,471
|
|
Prepaid expenses
|
|
|
15,189
|
|
|
|
17,304
|
|
Other current assets
|
|
|
13,273
|
|
|
|
14,344
|
|
TOTAL CURRENT ASSETS
|
|
|
339,053
|
|
|
|
340,345
|
|
Property, plant and equipment, net
|
|
|
87,374
|
|
|
|
91,316
|
|
Goodwill
|
|
|
11,218
|
|
|
|
14,388
|
|
Other intangibles, net
|
|
|
843
|
|
|
|
1,277
|
|
Investments
|
|
|
14,024
|
|
|
|
12,344
|
|
Deferred income tax assets, net
|
|
|
9,554
|
|
|
|
13,324
|
|
Other assets
|
|
|
7,592
|
|
|
|
12,688
|
|
TOTAL ASSETS
|
|
$
|
469,658
|
|
|
$
|
485,682
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
30,253
|
|
|
$
|
29,140
|
|
Accrued expenses
|
|
|
117,434
|
|
|
|
139,272
|
|
Deferred revenue
|
|
|
86,178
|
|
|
|
86,302
|
|
Customer deposits
|
|
|
95,843
|
|
|
|
84,454
|
|
Income taxes payable
|
|
|
578
|
|
|
|
391
|
|
Note payable—current portion
|
|
|
—
|
|
|
|
6,353
|
|
Other current liabilities
|
|
|
13,534
|
|
|
|
3,000
|
|
TOTAL CURRENT LIABILITIES
|
|
|
343,820
|
|
|
|
348,912
|
|
Other liabilities
|
|
|
1,635
|
|
|
|
1,830
|
|
TOTAL LIABILITIES
|
|
|
345,455
|
|
|
|
350,742
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
IDT Corporation stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; authorized shares—10,000; no shares issued
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and 1,574 shares outstanding at July 31, 2016 and 2015
|
|
|
33
|
|
|
|
33
|
|
Class B common stock, $.01 par value; authorized shares—200,000; 25,383 and 25,276 shares issued and 21,452 and 21,755 shares outstanding at July 31, 2016 and 2015, respectively
|
|
|
254
|
|
|
|
253
|
|
Additional paid-in capital
|
|
|
396,243
|
|
|
|
403,146
|
|
Treasury stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 3,931 and 3,521 shares of Class B common stock at July 31, 2016 and 2015, respectively
|
|
|
(115,316
|
)
|
|
|
(110,543
|
)
|
Accumulated other comprehensive (loss) income
|
|
|
(3,744
|
)
|
|
|
771
|
|
Accumulated deficit
|
|
|
(153,673
|
)
|
|
|
(159,829
|
)
|
Total IDT Corporation stockholders’ equity
|
|
|
123,797
|
|
|
|
133,831
|
|
Noncontrolling interests
|
|
|
406
|
|
|
|
1,109
|
|
TOTAL EQUITY
|
|
|
124,203
|
|
|
|
134,940
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
469,658
|
|
|
$
|
485,682
|
|
See accompanying notes to consolidated financial statements.
IDT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended July 31
(in thousands, except per share data)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
REVENUES
|
|
$
|
1,496,261
|
|
|
$
|
1,596,777
|
|
|
$
|
1,651,541
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of revenues (exclusive of depreciation and amortization)
|
|
|
1,246,594
|
|
|
|
1,328,363
|
|
|
|
1,367,266
|
|
Selling, general and administrative (i)
|
|
|
204,655
|
|
|
|
222,239
|
|
|
|
228,934
|
|
Depreciation and amortization
|
|
|
20,535
|
|
|
|
18,418
|
|
|
|
16,318
|
|
Research and development
|
|
|
—
|
|
|
|
1,656
|
|
|
|
10,018
|
|
Severance
|
|
|
6,510
|
|
|
|
8,363
|
|
|
|
—
|
|
TOTAL COSTS AND EXPENSES
|
|
|
1,478,294
|
|
|
|
1,579,039
|
|
|
|
1,622,536
|
|
Gain on sale of member interest in Visa Europe Ltd.
|
|
|
7,476
|
|
|
|
—
|
|
|
|
—
|
|
Gain on sale of interest in Fabrix Systems, Ltd.
|
|
|
1,086
|
|
|
|
76,864
|
|
|
|
—
|
|
Other operating (losses) gains, net
|
|
|
(326
|
)
|
|
|
(1,552
|
)
|
|
|
835
|
|
Income from operations
|
|
|
26,203
|
|
|
|
93,050
|
|
|
|
29,840
|
|
Interest income (expense), net
|
|
|
1,216
|
|
|
|
(159
|
)
|
|
|
(148
|
)
|
Other income (expense), net
|
|
|
2,049
|
|
|
|
(688
|
)
|
|
|
(4,700
|
)
|
Income before income taxes
|
|
|
29,468
|
|
|
|
92,203
|
|
|
|
24,992
|
|
Provision for income taxes
|
|
|
(4,110
|
)
|
|
|
(6,088
|
)
|
|
|
(3,982
|
)
|
NET INCOME
|
|
|
25,358
|
|
|
|
86,115
|
|
|
|
21,010
|
|
Net income attributable to noncontrolling interests
|
|
|
(1,844
|
)
|
|
|
(1,625
|
)
|
|
|
(2,226
|
)
|
NET INCOME ATTRIBUTABLE TO IDT CORPORATION
|
|
$
|
23,514
|
|
|
$
|
84,490
|
|
|
$
|
18,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to IDT Corporation common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.03
|
|
|
$
|
3.69
|
|
|
$
|
0.85
|
|
Diluted
|
|
$
|
1.03
|
|
|
$
|
3.63
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in calculation of earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,765
|
|
|
|
22,903
|
|
|
|
22,009
|
|
Diluted
|
|
|
22,815
|
|
|
|
23,247
|
|
|
|
22,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Stock-based compensation included in selling, general and administrative expenses
|
|
$
|
2,680
|
|
|
$
|
5,185
|
|
|
$
|
5,382
|
|
See accompanying notes to consolidated financial statements.
IDT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
NET INCOME
|
|
$
|
25,358
|
|
|
$
|
86,115
|
|
|
$
|
21,010
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on available-for-sale securities
|
|
|
583
|
|
|
|
(567
|
)
|
|
|
(8
|
)
|
Foreign currency translation adjustments
|
|
|
(6,127
|
)
|
|
|
(2,432
|
)
|
|
|
1,335
|
|
Other comprehensive (loss) income
|
|
|
(5,544
|
)
|
|
|
(2,999
|
)
|
|
|
1,327
|
|
COMPREHENSIVE INCOME
|
|
|
19,814
|
|
|
|
83,116
|
|
|
|
22,337
|
|
Comprehensive income attributable to noncontrolling interests
|
|
|
(1,844
|
)
|
|
|
(1,625
|
)
|
|
|
(2,226
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO IDT CORPORATION
|
|
$
|
17,970
|
|
|
$
|
81,491
|
|
|
$
|
20,111
|
|
See accompanying notes to consolidated financial statements.
IDT CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (in thousands)
|
|
IDT Corporation
Stockholders
|
|
|
|
|
|
|
|
|
|
Class A
Common
Stock
|
|
|
Class B
Common
Stock
|
|
|
Additional Paid-In
|
|
|
Treasury
|
|
|
Accumulated Other
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Income
|
|
|
Deficit
|
|
|
Interests
|
|
|
Equity
|
|
BALANCE AT JULY 31, 2013
|
|
|
3,272
|
|
|
$
|
33
|
|
|
|
24,275
|
|
|
$
|
243
|
|
|
$
|
388,533
|
|
|
$
|
(98,836
|
)
|
|
$
|
2,341
|
|
|
$
|
(203,711
|
)
|
|
$
|
533
|
|
|
$
|
89,136
|
|
Dividends declared ($0.51 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,798
|
)
|
|
|
—
|
|
|
|
(11,798
|
)
|
Restricted Class B common stock purchased from employees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,005
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,005
|
)
|
Exercise of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
46
|
|
|
|
—
|
|
|
|
606
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
609
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,332
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30
|
|
|
|
5,362
|
|
Restricted stock issued to employees and
directors
|
|
|
—
|
|
|
|
—
|
|
|
|
194
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock issued for matching contributions to the 401(k) Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
72
|
|
|
|
1
|
|
|
|
1,167
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,168
|
|
Purchases of stock of subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,154
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
|
|
(1,133
|
)
|
Distributions to noncontrolling
interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,888
|
)
|
|
|
(1,888
|
)
|
Adjustment to liabilities in connection with the Straight Path Spin-Off
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,624
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,624
|
)
|
Other comprehensive
income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,327
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,327
|
|
Net income for the year ended
July 31, 2014
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,784
|
|
|
|
2,226
|
|
|
|
21,010
|
|
BALANCE AT JULY 31, 2014
|
|
|
3,272
|
|
|
|
33
|
|
|
|
24,587
|
|
|
|
246
|
|
|
|
392,858
|
|
|
|
(99,841
|
)
|
|
|
3,668
|
|
|
|
(196,725
|
)
|
|
|
925
|
|
|
|
101,164
|
|
IDT CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (in thousands)—(Continued)
|
|
IDT Corporation Stockholders
|
|
|
|
|
|
|
|
|
|
Class
A
Common
Stock
|
|
|
Class
B
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Treasury
|
|
|
Accumulated
Other Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Income
|
|
|
Deficit
|
|
|
Interests
|
|
|
Equity
|
|
Dividends declared ($2.03 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(47,594
|
)
|
|
|
—
|
|
|
|
(47,594
|
)
|
Restricted Class B common stock purchased from employees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,777
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,777
|
)
|
Repurchases of Class B common stock through repurchase program
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(425
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(425
|
)
|
Exercise of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
245
|
|
|
|
2
|
|
|
|
3,422
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,424
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,604
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
|
5,666
|
|
Restricted stock issued to employees and directors
|
|
|
—
|
|
|
|
—
|
|
|
|
373
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock issued for matching contributions to the 401(k) Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
71
|
|
|
|
1
|
|
|
|
1,266
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,267
|
|
Purchase of Class B common stock from Howard S. Jonas
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,500
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,500
|
)
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,050
|
)
|
|
|
(2,050
|
)
|
Sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
102
|
|
|
|
—
|
|
|
|
538
|
|
|
|
640
|
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,999
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,999
|
)
|
Net income for the year ended July 31, 2015
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,490
|
|
|
|
1,625
|
|
|
|
86,115
|
|
BALANCE AT JULY 31, 2015
|
|
|
3,272
|
|
|
|
33
|
|
|
|
25,276
|
|
|
|
253
|
|
|
|
403,146
|
|
|
|
(110,543
|
)
|
|
|
771
|
|
|
|
(159,829
|
)
|
|
|
1,109
|
|
|
|
134,940
|
|
IDT CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (in thousands)—(Continued)
|
|
IDT
Corporation Stockholders
|
|
|
|
|
|
|
|
|
|
Class
A
Common
Stock
|
|
|
Class
B
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Treasury
|
|
|
Accumulated
Other Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Income
|
|
|
Deficit
|
|
|
Interests
|
|
|
Equity
|
|
Dividends declared ($0.75 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,358
|
)
|
|
|
—
|
|
|
|
(17,358
|
)
|
Restricted Class B common
stock purchased from employees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(134
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(134
|
)
|
Repurchases of Class
B common stock through repurchase program
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,639
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,639
|
)
|
Exercise of subsidiary stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,680
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,680
|
|
Restricted stock issued
to employees and directors
|
|
|
—
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
Stock issued for matching
contributions to the 401(k) Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
95
|
|
|
|
1
|
|
|
|
1,410
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,411
|
|
Sale of Zedge equity
prior to the spin-off
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
374
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
374
|
|
Distributions to noncontrolling
interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,834
|
)
|
|
|
(1,834
|
)
|
Zedge Spin-Off
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,369
|
)
|
|
|
—
|
|
|
|
1,029
|
|
|
|
—
|
|
|
|
(722
|
)
|
|
|
(11,062
|
)
|
Other comprehensive
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,544
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,544
|
)
|
Net
income for the year ended July 31, 2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,514
|
|
|
|
1,844
|
|
|
|
25,358
|
|
BALANCE
AT JULY 31, 2016
|
|
|
3,272
|
|
|
$
|
33
|
|
|
|
25,383
|
|
|
$
|
254
|
|
|
$
|
396,243
|
|
|
$
|
(115,316
|
)
|
|
$
|
(3,744
|
)
|
|
$
|
(153,673
|
)
|
|
$
|
406
|
|
|
$
|
124,203
|
|
See accompanying notes to consolidated financial statements.
IDT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,358
|
|
|
$
|
86,115
|
|
|
$
|
21,010
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
20,535
|
|
|
|
18,418
|
|
|
|
16,318
|
|
Deferred income taxes
|
|
|
3,809
|
|
|
|
5,877
|
|
|
|
2,487
|
|
Provision for doubtful accounts receivable
|
|
|
1,519
|
|
|
|
97
|
|
|
|
500
|
|
Gain on sale of interest in Fabrix Systems Ltd.
|
|
|
(1,086
|
)
|
|
|
(76,864
|
)
|
|
|
—
|
|
Gain on sale of member interest in Visa Europe
Ltd.
|
|
|
(7,476
|
)
|
|
|
—
|
|
|
|
—
|
|
Net realized (gain) loss from marketable securities
|
|
|
(543
|
)
|
|
|
54
|
|
|
|
—
|
|
Gain on proceeds from insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
(571
|
)
|
Interest in the equity of investments
|
|
|
362
|
|
|
|
(1,699
|
)
|
|
|
(1,282
|
)
|
Stock-based compensation
|
|
|
2,680
|
|
|
|
5,185
|
|
|
|
5,382
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and cash equivalents
|
|
|
(22,548
|
)
|
|
|
(28,286
|
)
|
|
|
(25,292
|
)
|
Trade accounts receivable
|
|
|
616
|
|
|
|
640
|
|
|
|
(1,363
|
)
|
Prepaid expenses, other current assets and other
assets
|
|
|
8,372
|
|
|
|
2,122
|
|
|
|
(4,628
|
)
|
Trade accounts payable,
accrued expenses, other current liabilities and other liabilities
|
|
|
(10,337
|
)
|
|
|
(3,824
|
)
|
|
|
(5,914
|
)
|
Customer deposits
|
|
|
25,344
|
|
|
|
25,939
|
|
|
|
30,186
|
|
Income taxes payable
|
|
|
238
|
|
|
|
(301
|
)
|
|
|
(29
|
)
|
Deferred revenue
|
|
|
2,211
|
|
|
|
(2,939
|
)
|
|
|
8,917
|
|
Net cash provided by operating activities
|
|
|
49,054
|
|
|
|
30,534
|
|
|
|
45,721
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(18,370
|
)
|
|
|
(28,556
|
)
|
|
|
(17,021
|
)
|
Proceeds from sale of interest in Fabrix Systems Ltd., net of cash
and cash equivalents sold
|
|
|
9,557
|
|
|
|
59,678
|
|
|
|
—
|
|
Proceeds from sale of member interest in Visa Europe Ltd
|
|
|
5,597
|
|
|
|
—
|
|
|
|
—
|
|
Cash used for acquisition and purchase of investments
|
|
|
(2,002
|
)
|
|
|
(125
|
)
|
|
|
(175
|
)
|
Proceeds from sales and redemptions of investments
|
|
|
634
|
|
|
|
119
|
|
|
|
1,038
|
|
Purchases of other intangibles
|
|
|
—
|
|
|
|
—
|
|
|
|
(250
|
)
|
Proceeds from sale of building
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
Proceeds from insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
571
|
|
Purchases of marketable securities
|
|
|
(46,909
|
)
|
|
|
(52,360
|
)
|
|
|
(20,658
|
)
|
Proceeds from maturities and sales
of marketable securities
|
|
|
35,011
|
|
|
|
24,126
|
|
|
|
17,323
|
|
Net cash (used in) provided by investing activities
|
|
|
(16,482
|
)
|
|
|
2,882
|
|
|
|
(18,922
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(17,358
|
)
|
|
|
(47,594
|
)
|
|
|
(13,635
|
)
|
Distributions to noncontrolling interests
|
|
|
(1,834
|
)
|
|
|
(2,050
|
)
|
|
|
(1,888
|
)
|
Cash of Zedge deconsolidated as a result of spin-off
|
|
|
(6,381
|
)
|
|
|
—
|
|
|
|
—
|
|
Proceeds from sale of Zedge equity prior to the spin-off
|
|
|
374
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from capital raised by subsidiary
|
|
|
8,750
|
|
|
|
—
|
|
|
|
—
|
|
Purchases of stock of subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,133
|
)
|
Proceeds from exercise of stock options
|
|
|
—
|
|
|
|
3,424
|
|
|
|
609
|
|
Proceeds from revolving credit loan payable
|
|
|
—
|
|
|
|
—
|
|
|
|
56,000
|
|
Repayments of borrowings including revolving credit loan payable
|
|
|
(6,353
|
)
|
|
|
(13,271
|
)
|
|
|
(64,318
|
)
|
Purchase of Class B common stock from Howard S. Jonas
|
|
|
—
|
|
|
|
(7,500
|
)
|
|
|
—
|
|
Repurchases of Class B common
stock
|
|
|
(4,773
|
)
|
|
|
(3,202
|
)
|
|
|
(1,005
|
)
|
Net cash used in financing activities
|
|
|
(27,575
|
)
|
|
|
(70,193
|
)
|
|
|
(25,370
|
)
|
Effect of exchange rate changes
on cash and cash equivalents
|
|
|
(5,821
|
)
|
|
|
(6,685
|
)
|
|
|
794
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(824
|
)
|
|
|
(43,462
|
)
|
|
|
2,223
|
|
Cash and cash equivalents at beginning
of year
|
|
|
110,361
|
|
|
|
153,823
|
|
|
|
151,600
|
|
Cash and cash
equivalents at end of year
|
|
$
|
109,537
|
|
|
$
|
110,361
|
|
|
$
|
153,823
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
made for interest
|
|
$
|
1,205
|
|
|
$
|
745
|
|
|
$
|
743
|
|
Cash payments
made for income taxes
|
|
$
|
779
|
|
|
$
|
320
|
|
|
$
|
1,115
|
|
SUPPLEMENTAL
SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets excluding cash and cash equivalents of Zedge deconsolidated as a result of spin-off
|
|
$
|
(4,681
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Shares
of Visa Inc. Series C preferred stock received from sale of member interest in Visa Europe Ltd.
|
|
$
|
1,580
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net
liabilities excluding cash and cash equivalents of Fabrix Systems Ltd. sold
|
|
$
|
—
|
|
|
$
|
14,333
|
|
|
$
|
—
|
|
Adjustment
to liabilities in connection with the Straight Path Communications, Inc. spin-off
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,624
|
|
See accompanying notes to consolidated financial statements.
IDT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Description of Business and Summary of Significant
Accounting Policies
Description of Business
IDT Corporation (“IDT” or the “Company”) is a multinational holding company with operations
primarily in the telecommunications and payment industries. The Company has two reportable business segments, Telecom Platform
Services and Consumer Phone Services. Telecom Platform Services provides retail telecommunications and payment offerings as well
as wholesale international long distance traffic termination. Consumer Phone Services provides consumer local and long distance
services in certain U.S. states. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division. Operating
segments not reportable individually are included in All Other. All Other includes the Company’s real estate holdings and
other smaller businesses. Until the spin-off of Zedge, Inc. (formerly Zedge Holdings, Inc.) (“Zedge”) in June 2016,
All Other included Zedge, which provides a content platform that enables consumers to personalize their mobile devices with free,
high quality ringtones, wallpapers, home screen app icons and notification sounds. Until the sale of Fabrix Systems Ltd. (“Fabrix”)
in October 2014, All Other also included Fabrix, a software development company offering a cloud-based scale-out storage and computing
platform optimized for big data, virtualization and media storage, processing and delivery.
On June 1, 2016, the Company completed a pro rata distribution of
the common stock that the Company held in the Company’s subsidiary Zedge to the Company’s stockholders of record as
of the close of business on May 26, 2016 (the “Zedge Spin-Off”). The disposition of Zedge did not meet the criteria
to be reported as a discontinued operation and accordingly, its assets, liabilities, results of operations and cash flows have
not been reclassified. In connection with the Zedge Spin-Off, each of the Company’s stockholders received one share of Zedge
Class A common stock for every three shares of the Company’s Class A common stock, and one share of Zedge Class B common
stock for every three shares of the Company’s Class B common stock, held of record as of the close of business on May 26,
2016. The Company received a legal opinion that the Zedge Spin-Off should qualify as a tax-free transaction for U.S. federal income
tax purposes.
Zedge’s income (loss) before income taxes and income before
income taxes attributable to the Company, which is included in the accompanying consolidated statements of income, were as follows:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
$
|
2,518
|
|
|
$
|
(4
|
)
|
|
$
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES ATTRIBUTABLE TO IDT CORPORATION
|
|
$
|
2,221
|
|
|
$
|
23
|
|
|
$
|
278
|
|
In August 2015, the Company’s Board of Directors approved
a plan to reorganize the Company into three separate entities by spinning off two business units to its stockholders, one of which
was Zedge. The remaining components of the reorganization are subject to change as well as both internal and third party contingencies,
and must receive final approval from the Company’s Board of Directors and certain third parties. The Company continues to
advance the effort on the remainder of the reorganization.
On December 7, 2015, the Company approved an investment of
up to $10 million in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”). Cornerstone is a clinical stage, oncology-focused
pharmaceutical company committed to the development and commercialization of therapies targeting cancer metabolism that exploit
the metabolic differences between normal cells and cancer cells. The initial $2 million investment was funded as follows: $500,000
upon signing the Subscription and Loan Agreement on January 21, 2016, $50,000 on March 23, 2016, and $1.45 million on April
14, 2016. The initial $2 million investment was in exchange for Cornerstone’s 3.5% convertible promissory notes due 2018.
The remaining $8 million was funded in August and September 2016. In September 2016, Cornerstone issued to the Company’s
controlled 50%-owned subsidiary, CS Pharma Holdings, LLC (“CS Pharma”), a convertible promissory note with a principal
amount of $10 million (the “Series D Note”) representing the $8 million investment funded on such date plus the conversion
of the $2 million principal amount convertible promissory notes issued in connection with the previous funding. The Cornerstone
Series D Note earns interest at 3.5% per annum, with principal and accrued interest due and payable on September 16, 2018. The
Series D Note is convertible at the holder’s option into shares of Cornerstone’s Series D Preferred Stock. The Series
D Note also includes a mandatory conversion into Cornerstone common stock upon a qualified initial public offering, and conversion
at the holder’s option upon an unqualified financing event. In all cases, the Series D Note conversion price is based on
the applicable financing purchase price. The Company and CS Pharma were issued warrants to purchase shares of capital stock of
Cornerstone representing up to 56% of the then issued and outstanding capital stock of Cornerstone, on an as-converted and fully
diluted basis. The right to exercise warrants as to the first $10 million thereof is held by CS Pharma and the remainder is owned
by the Company. The minimum initial and subsequent exercises of the warrant shall be for such number of shares that will result
in at least $5 million of gross proceeds to Cornerstone, or such lesser amount as represents 5% of the outstanding capital stock
of Cornerstone, or such lesser amount as may then remain unexercised. The warrant will expire upon the earlier of December 31,
2020 or a qualified initial public offering or liquidation event.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At July 31, 2016, the Company’s investment in Cornerstone
was $2.0 million, which was included in “Investments” in the accompanying consolidated balance sheet. At July 31, 2016,
the Company’s maximum exposure to loss as a result of its involvement with Cornerstone was its $2.0 million investment, since
there were no other arrangements, events or circumstances that could expose the Company to additional loss.
In addition to interests issued to the Company, CS Pharma has issued
member interests to third parties in exchange for cash investment in CS Pharma of $10 million. At July 31, 2016, CS Pharma had
received $8.8 million of such investment, which is included in “Other current liabilities” in the accompanying consolidated
balance sheet, and the remaining $1.2 million was received in September 2016. The Company holds a 50% interest in CS Pharma and
is the managing member. It is expected that CS Pharma will use its cash to invest in Cornerstone.
Mr. Howard S. Jonas, the Company’s Chairman of the Board and
former Chief Executive Officer, is a director of Cornerstone and was appointed its Chairman of the Board in April 2016. Howard
and Deborah Jonas jointly own $525,000 of Series C Convertible Notes of Cornerstone, and The Howard S. and Deborah Jonas Foundation
owns an additional $525,000 of Series C Notes.
Basis of Consolidation and Accounting for Investments
The method of accounting applied to long-term investments, whether
consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest
evidence of control or influence over the operations of the investee and also includes the identification of any variable interests
in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled subsidiaries.
In addition, Cornerstone is a variable interest entity, however, the Company has determined that it is not the primary beneficiary
as the Company does not have the power to direct the activities of Cornerstone that most significantly impact Cornerstone’s
economic performance. All significant intercompany accounts and transactions between the consolidated subsidiaries are eliminated.
Investments in businesses that the Company does not control, but
in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for
using the equity method. Investments in which the Company does not have the ability to exercise significant influence over operating
and financial matters are accounted for using the cost method. Investments in hedge funds are accounted for using the equity method
unless the Company’s interest is so minor that it has virtually no influence over operating and financial policies, in which
case these investments are accounted for using the cost method. At July 31, 2016 and 2015, the Company had $8.0 million and $9.0
million, respectively, in investments accounted for using the equity method, and $7.0 million and $3.4 million, respectively, in
investments accounted for using the cost method. Equity and cost method investments are included in “Other current assets”
or “Investments” in the accompanying consolidated balance sheets. The Company periodically evaluates its equity and
cost method investments for impairment due to declines considered to be other than temporary. If the Company determines that a
decline in fair value is other than temporary, then a charge to earnings is recorded in “Other income (expense), net”
in the accompanying consolidated statements of income, and a new basis in the investment is established.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from
those estimates.
Revenue Recognition
Telephone service, which includes domestic and international long
distance, local service, and wholesale carrier telephony services is recognized as revenue when services are provided, primarily
based on usage and/or the assessment of fees. Revenue from Boss Revolution PIN-less international calling service and from sales
of calling cards, net of customer discounts, is deferred until the service or the cards are used or, calling card administrative
fees are imposed, thereby reducing the Company’s outstanding obligation to the customer, at which time revenue is recognized.
Domestic and international airtime top-up revenue is recognized upon redemption. International airtime top-up enables customers
to purchase airtime for a prepaid mobile telephone in another country.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
IDT Telecom enters into reciprocal transactions pursuant to which
IDT Telecom is committed to purchase a specific number of minutes to specific destinations at specified rates, and the counterparty
is committed to purchase from IDT Telecom a specific number of minutes to specific destinations at specified rates. The number
of minutes purchased and sold in a reciprocal transaction is not necessarily equal. The rates in these reciprocal transactions
are generally greater than prevailing market rates. In addition, IDT Telecom enters into transactions in which it swaps minutes
with another carrier. The Company recognizes revenue and the related direct cost of revenue for these reciprocal and swap transactions
based on the fair value of the minutes.
Prior to the Zedge Spin-Off, Zedge generated over 90% of its revenues
from selling its advertising inventory to advertising networks/exchanges, real time bidding platforms, direct advertisers and game
publishers. Zedge advertising revenue was recognized as advertisements were delivered to users through impressions or ad views,
as long as evidence of the arrangement with the payer existed (generally through an executed contract), the price was fixed and
determinable, and collectability was reasonably assured.
Prior to the sale of the Company’s interest in Fabrix, revenue
from Fabrix for software licenses and maintenance support was deferred and recognized on a straight-line basis from the date on
which delivered orders were accepted by the customer over the period that the support was expected to be provided since sufficient
vendor-specific objective evidence of fair value to allocate revenues to the various deliverables did not exist.
Direct Cost of Revenues
Direct cost of revenues for IDT Telecom consists primarily of termination
and origination costs, toll-free costs, and network costs—including customer/carrier interconnect charges and leased fiber
circuit charges. These costs include an estimate of charges for which invoices have not yet been received, and estimated amounts
for pending disputes with other carriers. Direct cost of revenues for IDT Telecom also includes the cost of airtime top-up minutes.
Direct cost of revenues for Zedge consisted primarily of costs associated
with the content distribution platform including hosting, marketing automation and content filtering.
Direct cost of revenues for Fabrix consisted primarily of customer
support expenses.
Direct cost of revenues excludes depreciation and amortization expense.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Restricted Cash and Cash Equivalents
The Company classifies the change in its restricted cash and cash
equivalents as an operating activity in the accompanying consolidated statements of cash flows because the restrictions are directly
related to the operations of IDT Financial Services Ltd., the Company’s Gibraltar-based bank, and IDT Telecom.
Substantially Restricted Cash and Cash Equivalents
The Company treats unrestricted cash and cash equivalents held by
IDT Payment Services, which provides the Company’s international money transfer services in the United States and IDT Financial
Services Ltd. as substantially restricted and unavailable for other purposes. These balances are included in “Cash and cash
equivalents” in the Company’s consolidated balance sheets (see Note 19).
Marketable Securities
The Company’s investments in marketable securities are classified
as “available-for-sale.” Available-for-sale securities are required to be carried at their fair value, with unrealized
gains and losses (net of income taxes) that are considered temporary in nature recorded in “Accumulated other comprehensive
(loss) income” in the accompanying consolidated balance sheets. The Company uses the specific identification method in computing
the gross realized gains and gross realized losses on the sales of marketable securities. The Company periodically evaluates its
investments in marketable securities for impairment due to declines in market value considered to be other than temporary. Such
impairment evaluations include, in addition to persistent, declining market prices, general economic and Company-specific evaluations.
If the Company determines that a decline in market value is other than temporary, then a charge to operations is recorded in “Other
income (expense), net” in the accompanying consolidated statements of income and a new cost basis in the investment is established.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long-Lived Assets
Equipment, buildings, computer software and furniture and fixtures
are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives, which range as follows: equipment—5,
7 or 20 years; buildings—40 years; computer software—2, 3 or 5 years and furniture and fixtures—5, 7 or 10 years.
Leasehold improvements are recorded at cost and are depreciated on a straight-line basis over the term of their lease or their
estimated useful lives, whichever is shorter.
Costs associated with obtaining the right to use trademark and patents
owned by third parties are capitalized and amortized on a straight-line basis over the term of the relevant trademark and patent
licenses. The fair value of technology and domain names, customer lists, and trademark acquired in a business combination accounted
for under the purchase method are amortized over their estimated useful lives as follows: technology and domain names are amortized
on a straight-line basis over the estimated useful lives of 3 or 4 years; customer lists are amortized ratably over the approximately
15 year period of expected cash flows; and trademark is amortized on a straight-line basis over the 5 year period of expected cash
flows.
The Company tests the recoverability of its long-lived assets with
finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected
undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss, if any,
based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair
value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate
discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should
the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such
impairments could be material.
Goodwill
Goodwill is the excess of the acquisition cost of businesses over
the fair value of the identifiable net assets acquired. Goodwill and other indefinite lived intangible assets are not amortized.
These assets are reviewed annually (or more frequently under various conditions) for impairment using a fair value approach. The
goodwill impairment assessment involves estimating the fair value of the reporting unit and comparing it to its carrying amount,
which is known as Step 1. If the carrying value of the reporting unit exceeds its estimated fair value, Step 2 is performed to
determine if an impairment of goodwill is required. The fair value of the reporting units is estimated using discounted cash flow
methodologies, as well as considering third party market value indicators. Goodwill impairment is measured by the excess of the
carrying amount of the reporting unit’s goodwill over its implied fair value. Calculating the fair value of the reporting
units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant
estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove
to be incorrect, the Company may be required to record impairments to its goodwill in future periods and such impairments could
be material.
The Company has the option to perform a qualitative assessment to
determine whether it is necessary to perform the two-step quantitative goodwill impairment test. However, the Company may elect
to perform the two-step quantitative goodwill impairment test even if no indications of a potential impairment exist.
For a reporting unit with zero or negative carrying amount, the
Company performs Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that goodwill impairment exists, the Company considers whether there are any adverse qualitative
factors indicating that impairment may exist.
Derivative Instruments and Hedging Activities
The Company records its derivatives instruments at their respective
fair values. The accounting for changes in the fair value (that is, gains or losses) of a derivative instrument is dependent upon
whether the derivative has been designated and qualifies as part of a hedging relationship and further, on the type of hedging
relationship. The Company does not designate its derivative instruments to qualify for hedge accounting, accordingly the instruments
are recorded at fair value as a current asset or liability and any changes in fair value are recorded in the consolidated statements
of income.
Advertising Expense
Cost of advertising is charged to selling, general and administrative
expenses in the period in which it is incurred. In fiscal 2016, fiscal 2015 and fiscal 2014, advertising expense was $12.9 million,
$16.5 million and $17.2 million, respectively.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Research and Development Costs
Costs for research and development are charged to expense as incurred.
Research and development costs were incurred by Fabrix.
Capitalized Internal Use Software Costs
The Company capitalizes the cost of internal-use software that has
a useful life in excess of one year. These costs consist of payments made to third parties and the salaries of employees working
on such software development. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to
the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs
are expensed in the period in which they are incurred. Capitalized internal use software costs are amortized on a straight-line
basis over their estimated useful lives. Amortization expense related to such capitalized software in fiscal 2016, fiscal 2015
and fiscal 2014 was $12.6 million, $11.4 million and $8.8 million, respectively. Unamortized capitalized internal use software
costs at July 31, 2016 and 2015 were $18.8 million and $18.8 million, respectively.
Repairs and Maintenance
The Company charges the cost of repairs and maintenance, including
the cost of replacing minor items not constituting substantial betterment, to selling, general and administrative expenses as these
costs are incurred.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries denominated in foreign
currencies are translated to U.S. Dollars at end-of-period rates of exchange, and their monthly results of operations are translated
to U.S. Dollars at the average rates of exchange for that month. Gains or losses resulting from such foreign currency translations
are recorded in “Accumulated other comprehensive (loss) income” in the accompanying consolidated balance sheets. Foreign
currency transaction gains and losses are reported in “Other income (expense), net” in the accompanying consolidated
statements of income.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the
future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion
or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation
of future taxable income during the period in which related temporary differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of
a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.
In November 2015, the Financial Accounting Standards Board (“FASB”)
issued an Accounting Standards Update (“ASU”) to simplify the presentation of deferred income taxes, as well as align
the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards (“IFRS”).
The amendments in the ASU require that deferred tax assets and liabilities be classified as noncurrent in a classified balance
sheet instead of separated into current and noncurrent amounts. The Company adopted the ASU on November 1, 2015 and retrospectively
applied the change. As a result, $0.8 million of deferred income tax assets that were included in current assets at July 31, 2015
were reclassified to noncurrent in the accompanying consolidated balance sheet.
The Company uses a two-step approach for recognizing and measuring
tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax
position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the
technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold,
the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant
information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax
benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater
than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and
amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability
for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in
a deferred tax liability.
The Company classifies interest and penalties on income taxes as
a component of income tax expense.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Contingencies
The Company accrues for loss contingencies when both (a) information
available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the
date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies
and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount
within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses
an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred.
Earnings Per Share
Basic earnings per share is computed by dividing net income attributable
to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding
during the applicable period. Diluted earnings per share is determined in the same manner as basic earnings per share, except that
the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially
dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.
The weighted-average number of shares used in the calculation of
basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Basic weighted-average number of shares
|
|
|
22,765
|
|
|
|
22,903
|
|
|
|
22,009
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
6
|
|
|
|
23
|
|
|
|
92
|
|
Non-vested restricted Class B common stock
|
|
|
44
|
|
|
|
321
|
|
|
|
836
|
|
Diluted weighted-average number of shares
|
|
|
22,815
|
|
|
|
23,247
|
|
|
|
22,937
|
|
The following outstanding stock options were excluded from the calculation
of diluted earnings per share because the exercise price of the stock option was greater than the average market price of the Company’s
stock during the period:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Shares excluded from the calculation of diluted earnings per share
|
|
|
209
|
|
|
|
136
|
|
|
|
70
|
|
Stock-Based Compensation
The Company recognizes compensation expense for all of its grants
of stock-based awards based on the estimated fair value on the grant date. Compensation cost for awards is recognized using the
straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense.
Vulnerability Due to Certain Concentrations
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash, cash equivalents, restricted cash and cash equivalents, marketable securities, investments
in hedge funds and trade accounts receivable. The Company holds cash and cash equivalents at several major financial institutions,
which often exceed FDIC insurance limits. Historically, the Company has not experienced any losses due to such concentration of
credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial
institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the
nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material
effect on its results of operations, cash flows or financial condition.
Concentration of credit risk with respect to trade accounts receivable
is limited due to the large number of customers in various geographic regions and industry segments comprising the Company’s
customer base. No single customer accounted for more than 10% of consolidated revenues in fiscal 2016, fiscal 2015 or fiscal 2014.
However, the Company’s five largest customers collectively accounted for 11.2%, 11.2% and 12.0% of its consolidated revenues
from continuing operations in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company’s customers with the five
largest receivables balances collectively accounted for 23.0% and 24.1% of the consolidated gross trade accounts receivable at
July 31, 2016 and 2015, respectively. This concentration of customers increases the Company’s risk associated with nonpayment
by those customers. In an effort to reduce such risk, the Company performs ongoing credit evaluations of its significant retail,
wholesale and cable telephony customers. In addition, the Company attempts to mitigate the credit risk related to specific wholesale
carrier services customers by also buying services from the customer, in order to create an opportunity to offset its payables
and receivables and reduce its net trade receivable exposure risk. When it is practical to do so, the Company will increase its
purchases from wholesale carrier services customers with receivable balances that exceed the Company’s applicable payables
in order to maximize the offset and reduce its credit risk.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects the Company’s
best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled
accounts, historical experience and other currently available evidence. Doubtful accounts are written-off upon final determination
that the trade accounts will not be collected. The change in the allowance for doubtful accounts is as follows:
Year ended July 31
(in thousands)
|
|
Balance at beginning of year
|
|
|
Additions charged to costs and expenses
|
|
|
Deductions (1)
|
|
|
Balance at end of year
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
5,645
|
|
|
$
|
1,519
|
|
|
$
|
(2,346
|
)
|
|
$
|
4,818
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
11,507
|
|
|
$
|
97
|
|
|
$
|
(5,959
|
)
|
|
$
|
5,645
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
13,079
|
|
|
$
|
500
|
|
|
$
|
(2,072
|
)
|
|
$
|
11,507
|
|
(1)
|
Primarily uncollectible accounts written off, net of recoveries.
|
Fair Value Measurements
Fair value of financial and non-financial assets and liabilities
is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value,
which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:
Level 1 –
|
quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
Level 2 –
|
quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
Level 3 –
|
unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.
|
A financial asset or liability’s classification within the
hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets
and liabilities being measured and their placement within the fair value hierarchy.
Recently Issued Accounting Standards Not Yet
Adopted
In May 2014, the FASB and the International Accounting Standards
Board jointly issued a comprehensive new revenue recognition standard that will supersede most of the current revenue recognition
guidance under U.S. GAAP and IFRS. The goals of the revenue recognition project were to clarify and converge the revenue recognition
principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements.
The Company will adopt this standard on August 1, 2018. Entities have the option of using either a full retrospective or modified
retrospective approach for the adoption of the standard. The Company is evaluating the impact that the standard will have on its
consolidated financial statements.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In January 2016, the FASB issued an ASU to provide more information
about recognition, measurement, presentation and disclosure of financial instruments. The amendments in the ASU include, among
other changes, the following: (1) equity investments (except those accounted for under the equity method or that result in consolidation)
will be measured at fair value with changes in fair value recognized in net income, (2) a qualitative assessment each reporting
period to identify impairment of equity investments without readily determinable fair values, (3) financial assets and financial
liabilities will be presented separately by measurement category and form of financial asset on the balance sheet or the notes
to the financial statements, and (4) an entity should evaluate the need for a valuation allowance on a deferred tax asset related
to available-for-sale securities in combination with the entity’s other deferred tax assets. Entities will no longer be able
to recognize unrealized holding gains and losses on equity securities classified as available-for-sale in other comprehensive income.
In addition, a practicability exception will be available for equity investments that do not have readily determinable fair values
and do not qualify for the net asset value practical expedient. These investments may be measured at cost, less any impairment,
plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of
the same issuer. Entities will have to reassess at each reporting period whether an investment qualifies for this practicability
exception. The Company will adopt the amendments in this ASU on August 1, 2018. The Company is evaluating the impact that the ASU
will have on its consolidated financial statements.
In February 2016, the FASB issued an ASU related to the accounting
for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset
and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either
finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will
adopt the new standard on August 1, 2019. A modified retrospective transition approach is required for lessees for capital and
operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial
statements, with certain practical expedients available. The Company is evaluating the impact that the new standard will have on
its consolidated financial statements.
In March 2016, the FASB issued an ASU to improve the accounting
for employee share-based payments. The new standard simplifies several aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement
of cash flows. The Company will adopt the new standard on August 1, 2017. The Company is evaluating the impact that the new standard
will have on its consolidated financial statements.
In June 2016, the FASB issued an ASU that changes the impairment
model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required
to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance
for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar
to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities.
In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past
due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adopt
the new standard on August 1, 2020. The Company is evaluating the impact that the new standard will have on its consolidated financial
statements.
Note 2—Sale of Interest in Fabrix Systems Ltd.
On October 8, 2014, the Company completed the sale of its interest
in Fabrix to Telefonaktiebolget LM Ericsson (publ) (“Ericsson”). The final sale price for 100% of the shares in Fabrix
was $95 million in cash, excluding transaction costs and working capital and other adjustments. The Company owned approximately
78% of Fabrix on a fully diluted basis. The Company’s share of the sale price was $69.2 million, after reflecting the impact
of working capital and other adjustments. The Company and the other shareholders placed $13.0 million of the proceeds in escrow
for the resolution of post-closing claims, of which $6.5 million was released in October 2015 and $6.5 million was released in
April 2016. In fiscal 2016, the Company recorded gain on the sale of its interest in Fabrix of $1.1 million, which represented
adjustments to the Company’s share of Fabrix’ working capital and estimated transaction costs. In fiscal 2015, the
Company recorded gain on the sale of its interest in Fabrix of $76.9 million.
Fabrix’ income (loss) before income taxes and income before
income taxes attributable to the Company, which is included in the accompanying consolidated statements of income, were as follows:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
$
|
—
|
|
|
$
|
917
|
|
|
$
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES ATTRIBUTABLE TO IDT CORPORATION
|
|
$
|
—
|
|
|
$
|
1,325
|
|
|
$
|
3
|
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 3—Marketable Securities
The following is a summary of marketable securities:
(in thousands)
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
July 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit*
|
|
$
|
17,690
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
17,696
|
|
Federal Government Sponsored Enterprise notes
|
|
|
3,457
|
|
|
|
17
|
|
|
|
—
|
|
|
|
3,474
|
|
International agency notes
|
|
|
409
|
|
|
|
5
|
|
|
|
—
|
|
|
|
414
|
|
Mutual funds
|
|
|
5,121
|
|
|
|
—
|
|
|
|
(39
|
)
|
|
|
5,082
|
|
Corporate bonds
|
|
|
3,633
|
|
|
|
40
|
|
|
|
—
|
|
|
|
3,673
|
|
Equity
|
|
|
2,463
|
|
|
|
—
|
|
|
|
(140
|
)
|
|
|
2,323
|
|
U.S. Treasury notes
|
|
|
4,946
|
|
|
|
95
|
|
|
|
(1
|
)
|
|
|
5,040
|
|
Municipal bonds
|
|
|
15,222
|
|
|
|
26
|
|
|
|
(1
|
)
|
|
|
15,247
|
|
TOTAL
|
|
$
|
52,941
|
|
|
$
|
189
|
|
|
$
|
(181
|
)
|
|
$
|
52,949
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit*
|
|
$
|
22,736
|
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
22,737
|
|
Federal Home Loan Bank bonds
|
|
|
795
|
|
|
|
—
|
|
|
|
—
|
|
|
|
795
|
|
International agency notes
|
|
|
1,120
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
1,119
|
|
Mutual funds
|
|
|
5,000
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
4,982
|
|
Straight Path Communications Inc. common stock
|
|
|
2,086
|
|
|
|
—
|
|
|
|
(563
|
)
|
|
|
1,523
|
|
Municipal bonds
|
|
|
9,125
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
9,131
|
|
TOTAL
|
|
$
|
40,862
|
|
|
$
|
12
|
|
|
$
|
(587
|
)
|
|
$
|
40,287
|
|
*
|
Each of the Company’s certificates of deposit has a CUSIP, was purchased
in the secondary market through a broker and may be sold in the secondary market.
|
On July 31, 2013, the Company completed a pro rata distribution
of the common stock of the Company’s subsidiary Straight Path Communications Inc. (“Straight Path”) to the Company’s
stockholders of record as of the close of business on July 25, 2013 (the “Straight Path Spin-Off”). In July 2015, the
Company received 64,624 shares of Straight Path Class B common stock in connection with the lapsing of restrictions on awards of
Straight Path restricted stock to certain of the Company’s employees and the payment of taxes related thereto (see Note 20).
Proceeds from maturities and sales of available-for-sale securities
were $35.0 million, $24.1 million and $17.3 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Realized gains from
sales of available-for-sale securities were $0.5 million, nil and nil in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.
Realized losses from sales of available-for-sale securities were nil, $0.1 million and nil in fiscal 2016, fiscal 2015 and fiscal
2014, respectively. In fiscal 2014, the Company recorded a loss of $0.1 million for the other than temporary decline in market
value of its equity securities.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The contractual maturities of the Company’s available-for-sale
debt securities at July 31, 2016 were as follows:
(in thousands)
|
|
Fair Value
|
|
Within one year
|
|
$
|
22,701
|
|
After one year through five years
|
|
|
19,081
|
|
After five years through ten years
|
|
|
3,049
|
|
After ten years
|
|
|
713
|
|
TOTAL
|
|
$
|
45,544
|
|
The following available-for-sale securities were in an unrealized
loss position for which other-than-temporary impairments have not been recognized:
(in thousands)
|
|
Unrealized Losses
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
July 31, 2016
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
39
|
|
|
$
|
5,082
|
|
Equity
|
|
|
140
|
|
|
|
2,323
|
|
U.S. Treasury notes
|
|
|
1
|
|
|
|
199
|
|
Municipal bonds
|
|
|
1
|
|
|
|
3,112
|
|
TOTAL
|
|
$
|
181
|
|
|
$
|
10,716
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
2
|
|
|
$
|
2,194
|
|
International agency notes
|
|
|
1
|
|
|
|
1,119
|
|
Mutual funds
|
|
|
18
|
|
|
|
4,982
|
|
Straight Path Communications Inc. common stock
|
|
|
563
|
|
|
|
1,523
|
|
Municipal bonds
|
|
|
3
|
|
|
|
3,466
|
|
TOTAL
|
|
$
|
587
|
|
|
$
|
13,284
|
|
At July 31, 2016 and 2015, there were no securities in a continuous
unrealized loss position for 12 months or longer.
Note 4—Fair Value Measurements
The following table presents the balance of assets and liabilities
measured at fair value on a recurring basis:
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
July 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
12,445
|
|
|
$
|
40,504
|
|
|
$
|
—
|
|
|
$
|
52,949
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
6,505
|
|
|
$
|
33,782
|
|
|
$
|
—
|
|
|
$
|
40,287
|
|
Foreign exchange forwards
|
|
|
—
|
|
|
|
38
|
|
|
|
—
|
|
|
|
38
|
|
Total
|
|
$
|
6,505
|
|
|
$
|
33,820
|
|
|
$
|
—
|
|
|
$
|
40,325
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forwards
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
39
|
|
At July 31, 2016, the Company did not have any liabilities measured
at fair value on a recurring basis.
At July 31, 2016 and 2015, the Company had $8.1 million and $9.1
million, respectively, in investments in hedge funds, which were included in “Investments” in the accompanying consolidated
balance sheets. The Company’s investments in hedge funds are accounted for using the equity method or the cost method, therefore
investments in hedge funds are not measured at fair value.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value of Other Financial Instruments
The estimated fair value of the Company’s other financial
instruments was determined using available market information or other appropriate valuation methodologies. However, considerable
judgment is required in interpreting these data to develop estimates of fair value. Consequently, the estimates are not necessarily
indicative of the amounts that could be realized or would be paid in a current market exchange.
Cash and cash equivalents, restricted cash and cash equivalents,
other current assets, customer deposits, note payable—current portion and other current liabilities.
At July 31, 2016
and 2015, the carrying amount of these assets and liabilities approximated fair value because of the short period of time to maturity.
The fair value estimates for cash, cash equivalents and restricted cash and cash equivalents were classified as Level 1 and other
current assets, customer deposits, note payable—current portion and other current liabilities were classified as Level 2
of the fair value hierarchy.
Other assets and other liabilities.
At July 31, 2016 and
2015, the carrying amount of these assets and liabilities approximated fair value. The fair values were estimated based on the
Company’s assumptions, which were classified as Level 3 of the fair value hierarchy.
The Company’s investments at July 31, 2016 and 2015 included
investments in the equity of certain privately held entities and other investments that are accounted for at cost. It is not practicable
to estimate the fair value of these investments because of the lack of a quoted market price for the shares of these entities,
and the inability to estimate their fair value without incurring excessive cost. The carrying value of these investments was $7.0
million and $3.4 million at July 31, 2016 and 2015, respectively, which the Company believes was not impaired.
Note 5—Derivative Instruments
Prior to the Zedge Spin-Off, the primary risk managed by the Company
using derivative instruments was foreign exchange risk. Foreign exchange forward contracts were entered into as hedges against
unfavorable fluctuations in the U.S. dollar – Norwegian krone (“NOK”) exchange rate. Zedge is based in Norway
and much of its operations are located in Norway. Subsequent to the Zedge Spin-Off, the Company provides hedging services to Zedge
pursuant to the Transition Services Agreement (see Note 20) until Zedge establishes a credit facility and is able to enter into
foreign exchange contracts. The Company did not apply hedge accounting to these contracts, therefore the changes in fair value
were recorded in earnings. By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company
was exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The Company minimized
the credit or repayment risk by entering into transactions with high-quality counterparties.
The fair value of outstanding derivative instruments recorded as
assets in the accompanying consolidated balance sheets were as follows:
July 31
(in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Asset Derivatives
|
|
Balance Sheet Location
|
|
|
|
|
|
|
Derivatives not designated or not qualifying as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign exchange forwards
|
|
Other current assets
|
|
$
|
—
|
|
|
$
|
38
|
|
The fair value of outstanding derivative instruments recorded as
liabilities in the accompanying consolidated balance sheets were as follows:
July 31
(in thousands)
|
|
|
|
2016
|
|
|
2015
|
|
Liability Derivatives
|
|
Balance Sheet Location
|
|
|
|
|
|
|
Derivatives not designated or not qualifying as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign exchange forwards
|
|
Other current liabilities
|
|
$
|
—
|
|
|
$
|
39
|
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The effects of derivative instruments on the consolidated statements
of operations were as follows:
|
|
|
|
Amount of Gain (Loss) Recognized on Derivatives
|
|
|
|
|
|
Year ended July 31,
|
|
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Derivatives not designated or not qualifying as hedging instruments
|
|
Location of Gain (Loss) Recognized on Derivatives
|
|
|
|
|
|
|
|
|
|
Foreign exchange forwards
|
|
Other income (expense), net
|
|
$
|
(145
|
)
|
|
$
|
(58
|
)
|
|
$
|
—
|
|
Note 6—Property, Plant and Equipment
Property, plant and equipment consist of the following:
July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
Equipment
|
|
$
|
74,030
|
|
|
$
|
77,126
|
|
Land and buildings
|
|
|
61,407
|
|
|
|
60,703
|
|
Computer software
|
|
|
67,651
|
|
|
|
59,839
|
|
Leasehold improvements
|
|
|
1,745
|
|
|
|
1,739
|
|
Furniture and fixtures
|
|
|
1,473
|
|
|
|
3,869
|
|
|
|
|
206,306
|
|
|
|
203,276
|
|
Less accumulated depreciation and amortization
|
|
|
(118,932
|
)
|
|
|
(111,960
|
)
|
Property, plant and equipment, net
|
|
$
|
87,374
|
|
|
$
|
91,316
|
|
In fiscal 2016, the Company reduced gross property, plant and equipment
and accumulated depreciation and amortization by $476.4 million for property, plant and equipment that was fully depreciated and
no longer in service at or prior to July 31, 2015. The gross property, plant and equipment and accumulated depreciation and amortization
balances at July 31, 2015 were restated to conform to the current year’s presentation, since the restatement was deemed immaterial.
The Company owns its headquarters building located at 520 Broad
Street, Newark, New Jersey and a related parking garage. In fiscal 2014, the Company began renovations of the first four floors
of its 520 Broad Street building in order to move its personnel and offices located at 550 Broad Street, Newark, New Jersey to
520 Broad Street. In April and May 2015, the Company moved its Newark operations back into its building at 520 Broad Street and
vacated its leased office space at 550 Broad Street. In April 2016, the Company entered into two leases for space in the building.
The first lease is for a portion of the sixth floor for an eleven year term, of which the first six years are non-cancellable.
The second lease is for a portion of the ground floor and basement for a term of ten years, seven months. The tenant under this
lease has the right to extend the term for three consecutive periods of five years each. The leases will commence after the completion
of the Company’s work to prepare the space for the tenant’s possession. At July 31, 2016 and 2015, the carrying value
of the land, building and improvements at 520 Broad Street was $45.6 million and $44.4 million, respectively.
Depreciation and amortization expense of property, plant and equipment
was $20.1 million, $18.0 million and $15.7 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 7—Goodwill and Other Intangibles
The table below reconciles the change in the carrying amount of
goodwill by operating segment for the period from July 31, 2014 to July 31, 2016:
(in thousands)
|
|
Telecom
Platform
Services
|
|
|
Zedge
|
|
|
Total
|
|
Balance as of July 31, 2014
|
|
$
|
11,623
|
|
|
$
|
3,207
|
|
|
$
|
14,830
|
|
Foreign currency translation adjustments
|
|
|
(442
|
)
|
|
|
—
|
|
|
|
(442
|
)
|
Balance as of July 31, 2015
|
|
|
11,181
|
|
|
|
3,207
|
|
|
|
14,388
|
|
Foreign currency translation adjustments
|
|
|
37
|
|
|
|
(823
|
)
|
|
|
(786
|
)
|
Zedge Spin-Off
|
|
|
—
|
|
|
|
(2,384
|
)
|
|
|
(2,384
|
)
|
Balance as of July 31, 2016
|
|
$
|
11,218
|
|
|
$
|
—
|
|
|
$
|
11,218
|
|
The table below presents information on the Company’s other
intangible assets:
(in thousands)
|
|
Weighted
Average
Amortization
Period
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Balance
|
|
July 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and patents
|
|
|
4.9 years
|
|
|
$
|
328
|
|
|
$
|
(120
|
)
|
|
$
|
208
|
|
Technology and domain names
|
|
|
3.1 years
|
|
|
|
789
|
|
|
|
(615
|
)
|
|
|
174
|
|
Customer lists
|
|
|
5.8 years
|
|
|
|
3,154
|
|
|
|
(2,693
|
)
|
|
|
461
|
|
TOTAL
|
|
|
5.2 years
|
|
|
$
|
4,271
|
|
|
$
|
(3,428
|
)
|
|
$
|
843
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and patents
|
|
|
4.8 years
|
|
|
$
|
414
|
|
|
$
|
(144
|
)
|
|
$
|
270
|
|
Technology and domain names
|
|
|
3.1 years
|
|
|
|
789
|
|
|
|
(378
|
)
|
|
|
411
|
|
Customer lists
|
|
|
6.2 years
|
|
|
|
3,154
|
|
|
|
(2,558
|
)
|
|
|
596
|
|
TOTAL
|
|
|
5.5 years
|
|
|
$
|
4,357
|
|
|
$
|
(3,080
|
)
|
|
$
|
1,277
|
|
Amortization expense of intangible assets was $0.4 million, $0.4
million and $0.6 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. The Company estimates that amortization expense
of intangible assets with finite lives will be $0.3 million, $0.1 million, $0.1 million, $0.1 million and $0.1 million in fiscal
2017, fiscal 2018, fiscal 2019, fiscal 2020 and fiscal 2021, respectively.
Note 8—IDT Financial Services Ltd. Transactions
In December 2015, MasterCard Europe released a security deposit
in the amount of $4.7 million made by IDT Financial Services Ltd. At July 31, 2015, this security deposit was included in “Other
assets” in the accompanying consolidated balance sheet.
In June 2016, Visa Inc. acquired Visa Europe Limited
for cash, shares of Visa Inc. Series C preferred stock and a deferred cash payment. IDT Financial Services Ltd. was a member of
Visa Europe and received cash of €5.0 million ($5.6 million on the acquisition date), 1,830 shares of Series C preferred
stock and deferred payment receivable of €0.4 million ($0.5 million on the acquisition date). The Visa Inc. Series C preferred
stock is accounted for using the cost method. At July 31, 2016, the carrying value of these shares was $1.6 million. The 1,830
shares of Visa Inc. Series C preferred stock are convertible into 25,532 shares of Visa Inc. Class A common stock. The shares
of preferred stock become fully convertible in 2028. Beginning in 2020, Visa Inc. will assess whether it is appropriate to effect
a partial conversion. The preferred stock shares may only be transferred to other former Visa Europe members, or to existing qualifying
holders of Visa Inc.’s Class B common stock. In addition, the preferred stock will not be registered under the U.S. Securities
Act of 1933 and therefore is not transferable unless such transfer is registered or an exemption from registration is available.
The deferred payment receivable plus 4% compounded annual interest is due in June 2019. In fiscal 2016, the Company recorded a
gain of $7.5 million from the sale of its member interest in Visa Europe.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note
9—Other Operating (Losses) Gains, Net
The
following table summarizes the other operating (losses) gains, net by business segment:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Telecom Platform Services—loss on disposal of property, plant and equipment
|
|
$
|
(326
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Telecom Platform Services—gains related to legal matters, net
|
|
|
—
|
|
|
|
—
|
|
|
|
650
|
|
Corporate—losses related to legal matters
|
|
|
—
|
|
|
|
(1,552
|
)
|
|
|
(79
|
)
|
Corporate—other
|
|
|
—
|
|
|
|
—
|
|
|
|
(374
|
)
|
All Other—gain on insurance claim (a)
|
|
|
—
|
|
|
|
—
|
|
|
|
571
|
|
All Other—other
|
|
|
—
|
|
|
|
—
|
|
|
|
67
|
|
TOTAL
|
|
$
|
(326
|
)
|
|
$
|
(1,552
|
)
|
|
$
|
835
|
|
|
(a)
|
In
fiscal 2014, the Company received proceeds from insurance of $0.6 million related to
water damage to portions of the Company’s building and improvements at 520 Broad
Street, Newark, New Jersey. The damage occurred in a prior period. The Company recorded
a gain of $0.6 million from this insurance claim.
|
Note
10—Revolving Credit Loan Payable
The
Company’s subsidiary, IDT Telecom, Inc., entered into a credit agreement, dated July 12, 2012, with TD Bank, N.A. for a
line of credit facility for up to a maximum principal amount of $25.0 million. IDT Telecom may use the proceeds to finance working
capital requirements, acquisitions and for other general corporate purposes. The line of credit facility is secured by primarily
all of IDT Telecom’s assets. The principal outstanding bears interest per annum, at the option of IDT Telecom, at either
(a) the U.S. Prime Rate less 125 basis points, or (b) the LIBOR rate adjusted by the Regulation D maximum reserve requirement
plus 150 basis points. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on
the maturity date. In January 2016, the maturity date was extended to January 31, 2018. At July 31, 2016 and 2015, there were
no amounts outstanding under the facility. The Company intends to borrow under the facility from time to time. IDT Telecom pays
a quarterly unused commitment fee of 0.375% per annum on the average daily balance of the unused portion of the $25.0 million
commitment. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain financial
targets and ratios during the term of the line of credit, including IDT Telecom may not pay any dividend on its capital stock
and IDT Telecom’s aggregate loans and advances to affiliates or subsidiaries may not exceed $110.0 million. At July 31,
2016 and 2015, there were no amounts utilized for letters of credit under the line of credit, IDT Telecom was in compliance with
all of the covenants, and IDT Telecom’s aggregate loans and advances to affiliates and subsidiaries was $91.1 million and
$90.1 million, respectively.
Note
11—Note Payable
The
Company’s note payable consisted of the following:
July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
$11.0 million secured term loan due September 2015
|
|
$
|
—
|
|
|
$
|
6,353
|
|
Less current portion
|
|
|
—
|
|
|
|
(6,353
|
)
|
Notes payable—long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest
on the loan was 5.6% per annum. The outstanding principal of $6.4 million was paid on the maturity date of September 1, 2015.
The loan was secured by a mortgage on a building in Piscataway, New Jersey.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note
12—Accrued Expenses
Accrued
expenses consist of the following:
July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
Carrier minutes termination
|
|
$
|
34,719
|
|
|
$
|
47,317
|
|
Carrier network connectivity, toll-free and 800 services
|
|
|
3,046
|
|
|
|
7,071
|
|
Regulatory fees and taxes
|
|
|
48,369
|
|
|
|
50,797
|
|
Legal settlements
|
|
|
2,069
|
|
|
|
2,059
|
|
Compensation costs
|
|
|
14,471
|
|
|
|
14,138
|
|
Legal and professional fees
|
|
|
4,315
|
|
|
|
4,938
|
|
Other
|
|
|
10,445
|
|
|
|
12,952
|
|
TOTAL
|
|
$
|
117,434
|
|
|
$
|
139,272
|
|
Note
13—Severance Expense
In
July 2016, the Company completed a reduction of its workforce and incurred severance expense of $6.3 million in fiscal 2016. Severance
expense in fiscal 2016 also included $0.2 million unrelated to the July 2016 workforce reduction. At July 31, 2016, there was
accrued severance of $5.7 million included in “Accrued expenses” in the accompanying consolidated balance sheets for
the July 2016 workforce reduction.
In
February and March 2015, the Company completed a reduction of its workforce and incurred severance expense of $6.2 million in
fiscal 2015. Severance expense in fiscal 2015 also included $1.9 million due to a downsizing of certain IDT Telecom sales and
administrative functions in Europe and the U.S in the first quarter of fiscal 2015, and an additional $0.2 million in the fourth
quarter of fiscal 2015. At July 31, 2016 and 2015, there was accrued severance of $0.1 million and $3.7 million, respectively,
included in “Accrued expenses” in the accompanying consolidated balance sheets for the February and March 2015 headcount
reductions.
Note
14—Other Income (Expense), Net
Other
income (expense), net consists of the following:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Foreign currency transaction gains (losses)
|
|
$
|
980
|
|
|
$
|
(1,704
|
)
|
|
$
|
(5,883
|
)
|
Gain (loss) on marketable securities
|
|
|
543
|
|
|
|
(54
|
)
|
|
|
(65
|
)
|
(Loss) gain on investments
|
|
|
(405
|
)
|
|
|
1,500
|
|
|
|
1,283
|
|
Other
|
|
|
931
|
|
|
|
(430
|
)
|
|
|
(35
|
)
|
TOTAL
|
|
$
|
2,049
|
|
|
$
|
(688
|
)
|
|
$
|
(4,700
|
)
|
Note
15—Income Taxes
The
components of income before income taxes are as follows:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Domestic
|
|
$
|
11,278
|
|
|
$
|
7,538
|
|
|
$
|
21,624
|
|
Foreign
|
|
|
18,190
|
|
|
|
84,665
|
|
|
|
3,368
|
|
INCOME
BEFORE INCOME TAXES
|
|
$
|
29,468
|
|
|
$
|
92,203
|
|
|
$
|
24,992
|
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant
components of the Company’s deferred income tax assets consist of the following:
July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Bad debt reserve
|
|
$
|
575
|
|
|
$
|
550
|
|
Accrued expenses
|
|
|
5,327
|
|
|
|
4,629
|
|
Stock options and restricted stock
|
|
|
1,802
|
|
|
|
1,030
|
|
Charitable contributions
|
|
|
1,527
|
|
|
|
1,277
|
|
Impairment
|
|
|
25,746
|
|
|
|
25,746
|
|
Depreciation
|
|
|
6,785
|
|
|
|
7,232
|
|
Unrealized gain
|
|
|
193
|
|
|
|
138
|
|
Net operating loss
|
|
|
122,849
|
|
|
|
125,223
|
|
Credits
|
|
|
3,192
|
|
|
|
2,892
|
|
Total deferred income tax assets
|
|
|
167,996
|
|
|
|
168,717
|
|
Valuation allowance
|
|
|
(158,442
|
)
|
|
|
(155,393
|
)
|
Deferred tax assets, net of valuation allowance
|
|
|
9,554
|
|
|
|
13,324
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized loss
|
|
|
42
|
|
|
|
—
|
|
NET DEFERRED INCOME TAX ASSETS
|
|
$
|
9,512
|
|
|
$
|
13,324
|
|
The
provision for income taxes consists of the following:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(83
|
)
|
|
$
|
—
|
|
|
$
|
(279
|
)
|
State and local
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
—
|
|
Foreign
|
|
|
(185
|
)
|
|
|
(311
|
)
|
|
|
(1,177
|
)
|
|
|
|
(298
|
)
|
|
|
(311
|
)
|
|
|
(1,456
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(3,148
|
)
|
|
|
(1,967
|
)
|
|
|
(6,461
|
)
|
State and local
|
|
|
(51
|
)
|
|
|
(245
|
)
|
|
|
(175
|
)
|
Foreign
|
|
|
(613
|
)
|
|
|
(3,565
|
)
|
|
|
4,110
|
|
|
|
|
(3,812
|
)
|
|
|
(5,777
|
)
|
|
|
(2,526
|
)
|
PROVISION FOR INCOME TAXES
|
|
$
|
(4,110
|
)
|
|
$
|
(6,088
|
)
|
|
$
|
(3,982
|
)
|
In
fiscal 2014, the Company determined that its valuation allowance on the losses of IDT Global, a U.K. subsidiary, were no longer
required due to an internal reorganization that generated income and a projection that the income would continue. The Company
recorded a benefit from income taxes of $4.1 million in fiscal 2014 from the full recognition of the IDT Global deferred tax assets.
The
differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as follows:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
U.S. federal income tax at statutory rate
|
|
$
|
(10,314
|
)
|
|
$
|
(32,271
|
)
|
|
$
|
(8,747
|
)
|
Valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
4,110
|
|
Foreign tax rate differential
|
|
|
6,035
|
|
|
|
25,757
|
|
|
|
961
|
|
Nondeductible expenses
|
|
|
487
|
|
|
|
659
|
|
|
|
761
|
|
Other
|
|
|
(67
|
)
|
|
|
(73
|
)
|
|
|
7
|
|
Prior year tax (expense) benefit
|
|
|
(231
|
)
|
|
|
—
|
|
|
|
(960
|
)
|
State and local income tax, net of federal benefit
|
|
|
(20
|
)
|
|
|
(160
|
)
|
|
|
(114
|
)
|
PROVISION FOR INCOME TAXES
|
|
$
|
(4,110
|
)
|
|
$
|
(6,088
|
)
|
|
$
|
(3,982
|
)
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At July 31, 2016, the Company had federal and state net operating
loss carryforwards of approximately $175 million. This carry-forward loss is available to offset future U.S. federal and state
taxable income. The net operating loss carryforwards will start to expire in fiscal 2017, with fiscal 2016’s loss expiring
in fiscal 2037. The Company has foreign net operating losses of approximately $183 million, of which approximately $114 million
does not expire and approximately $69 million expires in two to nine years. These foreign net operating losses are available to
offset future taxable income in the countries in which the losses were incurred. The Company’s subsidiary, Net2Phone, which
provides voice over Internet protocol communications services, has additional federal net operating losses of approximately $77
million, which will expire through fiscal 2027. With the reacquisition of Net2Phone by the Company in March 2006, its losses were
limited under Internal Revenue Code Section 382 to approximately $7 million per year. The net operating losses do not include
any excess benefits related to stock options or restricted stock.
The
Company has not recorded U.S. income tax expense for foreign earnings, since such earnings are permanently reinvested outside
the United States. The cumulative undistributed foreign earnings are included in accumulated deficit in the Company’s consolidated
balance sheets, and consisted of approximately $324 million at July 31, 2016. Upon distribution of these foreign earnings to the
Company’s domestic entities, the Company may be subject to U.S. income taxes and withholding of foreign taxes, however,
it is not practicable to determine the amount, if any, which would be paid.
The
change in the valuation allowance is as follows:
Year ended July 31
(in thousands)
|
|
Balance at
beginning of
year
|
|
|
Additions
charged to
costs and
expenses
|
|
|
Deductions
|
|
|
Balance at
end of year
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from deferred income taxes, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
$
|
155,393
|
|
|
$
|
3,049
|
|
|
$
|
—
|
|
|
$
|
158,442
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from deferred income taxes, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
$
|
151,975
|
|
|
$
|
3,418
|
|
|
$
|
—
|
|
|
$
|
155,393
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from deferred income taxes, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
$
|
167,328
|
|
|
$
|
—
|
|
|
$
|
(15,353
|
)
|
|
$
|
151,975
|
|
The
table below summarizes the change in the balance of unrecognized income tax benefits:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Balance at beginning of year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
356
|
|
Additions based on tax positions related to the current year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Additions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Settlements
|
|
|
—
|
|
|
|
—
|
|
|
|
(356
|
)
|
Lapses of statutes of limitations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at end of year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
At
July 31, 2016, the Company did not have any unrecognized income tax benefits and did not expect any changes in the next twelve
months. If the Company recognized any unrecognized income tax benefits, it would affect the effective tax rate. In fiscal 2016,
fiscal 2015 and fiscal 2014, the Company did not record any interest and penalties on income taxes. As of July 31, 2016 and 2015,
there was no accrued interest included in current income taxes payable.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In
August 2016, the Company and the New Jersey Economic Development Authority entered into an incentive agreement pursuant to which
the Company may receive corporation business tax credits in exchange for investment in a qualified business facility and employment
of the required number of full-time employees. The corporation business tax credits to be received are a maximum of $24.3 million.
The Company is required to invest $5.3 million in its building located at 520 Broad Street, Newark, New Jersey, as well as retain
528 full-time jobs and create 40 new full-time jobs in New Jersey. The Company may claim a tax credit each tax year for ten years
beginning when the Economic Development Authority accepts the Company’s project completion certification. The Company must
submit the project completion certification on or before December 9, 2016. The tax credit can be applied to 100% of the Company’s
New Jersey tax liability each year, and the unused amount of the annual credit can be carried forward. In addition, the Company
may apply for a tax credit transfer certificate to sell unused tax credits to another business. The tax credits must be sold for
no less than 75% of the value of the tax credits. The tax credits are subject to reduction, forfeiture and recapture if, among
other things, the number of full-time employees declines below the program or statewide minimum.
The
Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2013 to fiscal
2016, state and local tax returns generally for fiscal 2012 to fiscal 2016 and foreign tax returns generally for fiscal 2012 to
fiscal 2016.
Note
16—Equity
Class
A Common Stock and Class B Common Stock
The
rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights
and restrictions on transferability. The holders of Class A common stock and Class B common stock receive identical dividends
per share when and if declared by the Company’s Board of Directors. In addition, the holders of Class A common stock and
Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common
stock do not have any other contractual participation rights. The holders of Class A common stock are entitled to three votes
per share and the holders of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common
stock may be converted into one share of Class B common stock, at any time, at the option of the holder. Shares of Class A common
stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock.
Dividend
Payments
In fiscal 2016, the Company paid aggregate cash dividends
of $0.75 per share on its Class A common stock and Class B common stock, or $17.4 million in total. In fiscal 2015, the Company
paid aggregate cash dividends of $2.03 per share on its Class A common stock and Class B common stock, or $47.6 million in total.
The aggregate cash dividends included special dividends of $0.68 per share and $0.64 per share paid in November 2014 and January
2015, respectively. In fiscal 2014, the Company paid aggregate cash dividends of $0.59 per share on its Class A common stock and
Class B common stock, or $13.6 million in total.
In
September 2016, the Company’s Board of Directors declared a dividend of $0.19 per share for the fourth quarter of fiscal
2016 to holders of the Company’s Class A common stock and Class B common stock. The dividend will be paid on or about October
20, 2016 to stockholders of record as of the close of business on October 11, 2016.
Purchase
of Shares from Howard S. Jonas
On June 25, 2015, the Company purchased 404,967 shares
of its Class B common stock from Howard Jonas. The purchase price was $18.52 per share, the share price at the close of business
on June 23, 2015. The aggregate purchase price was $7.5 million.
Stock
Repurchases
The
Company had a stock repurchase program for the repurchase of up to an aggregate of 8.3 million shares of the Company’s Class
B common stock. On January 22, 2016, the Company’s Board of Directors approved a stock repurchase program to purchase up
to 8.0 million shares of the Company’s Class B common stock and cancelled the previous stock repurchase program, which
had 4.6 million shares remaining available for repurchase. In fiscal 2016, the Company repurchased 398,376 shares of Class B common
stock for an aggregate purchase price of $4.6 million. In fiscal 2015, the Company repurchased 29,675 shares of Class B common
stock for an aggregate purchase price of $0.4 million. There were no repurchases under the program in fiscal 2014. At July 31,
2016, 8.0 million shares remained available for repurchase under the stock repurchase program.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In
fiscal 2016, fiscal 2015 and fiscal 2014, the Company paid $0.1 million, $2.8 million and $1.0 million, respectively, to repurchase
shares of Class B common stock that were tendered by employees of the Company to satisfy the employees’ tax withholding
obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares are repurchased by the Company
based on their fair market value on the trading day immediately prior to the vesting date. In fiscal 2016, fiscal 2015 and fiscal
2014, the Company repurchased 11,250; 152,856 and 34,206 shares of Class B common stock, respectively, from employees.
Equity
Sale Prior to the Zedge Spin-Off
In
connection with the Zedge Spin-Off, in May 2016, Zedge sold shares of its Class B common stock representing approximately 10.0%
of its capital stock to certain of its equity holders, including the Company, for $3 million. The other purchasers paid $0.4 million
of the total and the Company paid $2.6 million.
Purchases
of Stock of Subsidiary
In
August 2013, Fabrix and another wholly-owned subsidiary of the Company purchased shares of Fabrix for aggregate cash of $1.1 million.
The shares were purchased from holders of noncontrolling interests in Fabrix representing 2.8% of the equity in Fabrix, which
increased the Company’s ownership in Fabrix to 88.4%.
Adjustment
to Liabilities in connection with the Straight Path Spin-Off
The
Company’s Separation and Distribution Agreement with Straight Path included, among other things, that the Company is obligated
to reimburse Straight Path for the payment of liabilities of Straight Path arising or related to the period prior to the Straight
Path Spin-Off (see Note 20). In fiscal 2014, the Company increased its estimated liability for this obligation by $1.9 million,
of which $1.6 million was recorded as a reduction of additional paid-in capital.
Note
17—Stock-Based Compensation
Stock-Based
Compensation Plans
On
December 15, 2014, the Company’s stockholders ratified the 2015 Stock Option and Incentive Plan, which became effective
on January 1, 2015. The 2015 Stock Option and Incentive Plan is intended to provide incentives to officers, employees, directors
and consultants of the Company, including stock options, stock appreciation rights, limited rights, deferred stock units, and
restricted stock. On December 14, 2015, the Company’s stockholders approved an amendment to the 2015 Stock Option and Incentive
Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder
by an additional 0.1 million shares. At July 31, 2016, the Company had 0.6 million shares of Class B common stock reserved for
award under its 2015 Stock Option and Incentive Plan and 0.2 million shares were available for future grants.
On October 13, 2016, the Company’s Board of Directors amended
the 2015 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available
for the grant of awards thereunder by an additional 0.1 million shares. The amendment is subject to ratification by the Company’s
stockholders.
In
fiscal 2016, fiscal 2015 and fiscal 2014, there was no income tax benefit resulting from tax deductions in excess of the compensation
cost recognized for the Company’s stock-based compensation.
Stock
Options
Option
awards are generally granted with an exercise price equal to the market price of the Company’s stock on the date of grant.
Option awards generally vest on a graded basis over three years of service and have ten-year contractual terms. The fair value
of stock options was estimated on the date of the grant using a Black-Scholes valuation model and the assumptions in the following
table. No option awards were granted in fiscal 2016 and fiscal 2014. Expected volatility is based on historical volatility of
the Company’s Class B common stock and other factors. The Company uses historical data on exercise of stock options, post
vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted. The risk free rate is
based on the U.S. Treasury yield curve in effect at the time of grant.
Year ended July 31
|
|
2015
|
|
ASSUMPTIONS
|
|
|
|
|
Average risk-free interest rate
|
|
|
1.63
|
%
|
Expected dividend yield
|
|
|
—
|
|
Expected volatility
|
|
|
51.4
|
%
|
Expected term
|
|
|
6.0 years
|
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A
summary of stock option activity for the Company is as follows:
|
|
Number of
Options
(in thousands)
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|
Outstanding at July 31, 2015
|
|
|
424
|
|
|
$
|
14.58
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Cancelled / Forfeited
|
|
|
(64
|
)
|
|
|
14.59
|
|
|
|
|
|
|
|
|
|
OUTSTANDING AT JULY 31, 2016
|
|
|
360
|
|
|
$
|
11.98
|
|
|
|
6.3
|
|
|
$
|
1,267
|
|
EXERCISABLE AT JULY 31, 2016
|
|
|
193
|
|
|
$
|
13.55
|
|
|
|
4.7
|
|
|
$
|
415
|
|
The
weighted-average grant date fair value of options granted by the Company during fiscal 2015 was $7.94. The total intrinsic value
of options exercised during fiscal 2016, fiscal 2015 and fiscal 2014 was nil, $1.3 million and $0.2 million, respectively. At
July 31, 2016, there was $0.6 million of total unrecognized compensation cost related to non-vested stock options, which is expected
to be recognized over a weighted-average period of 1.4 years.
On
June 7, 2016, in connection with the Zedge Spin-Off, the Compensation Committee of the Company’s Board of Directors approved
a $2.25 reduction in the per share exercise price of all outstanding options to purchase the Company’s Class B common stock.
The Company accounted for the reduction in the exercise price of the Company’s outstanding stock options as a modification.
The Company determined that there was no incremental value from the modification, and therefore, the Company did not record a
stock-based compensation charge.
In
August 2013, in connection with the Straight Path Spin-Off, the per share exercise price of each outstanding option to purchase
the Company’s Class B common stock was reduced by 15.29%. The adjustment was based on the change in the trading price of
the Company’s Class B common stock following the Straight Path Spin-Off. Further, each holder of options to purchase the
Company’s Class B common stock shared ratably in a pool of options to purchase 32,155 shares of Straight Path Class B common
stock. The Company accounted for the August 2013 reduction in the exercise price of the Company’s outstanding stock options
and the grant of new options in Straight Path as a modification. The Company determined that there was no incremental value from
the modification, and therefore, the Company did not record a stock-based compensation charge.
Restricted
Stock
The
fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s
Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.
A
summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:
(in thousands)
|
|
Number of
Non-vested
Shares
|
|
|
Weighted-
Average
Grant-
Date Fair
Value
|
|
Non-vested shares at July 31, 2015
|
|
|
420
|
|
|
$
|
17.50
|
|
Granted
|
|
|
18
|
|
|
|
12.97
|
|
Vested
|
|
|
(73
|
)
|
|
|
18.41
|
|
Forfeited
|
|
|
(6
|
)
|
|
|
17.61
|
|
NON-VESTED SHARES AT JULY 31, 2016
|
|
|
359
|
|
|
$
|
17.10
|
|
At
July 31, 2016, there was $3.5 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements,
which is expected to be recognized over a weighted-average period of 1.0 years. The total grant date fair value of shares vested
in fiscal 2016, fiscal 2015 and fiscal 2014 was $1.3 million, $5.6 million and $8.7 million, respectively.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note
18—Accumulated Other Comprehensive Income (Loss)
The
accumulated balances for each classification of other comprehensive income (loss) were as follows:
(in thousands)
|
|
Unrealized
gain (loss) on
available-for-
sale securities
|
|
|
Foreign
currency
translation
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
Location of (Gain) Loss Recognized
|
Balance at July 31, 2013
|
|
$
|
—
|
|
|
$
|
2,341
|
|
|
$
|
2,341
|
|
|
|
Other comprehensive income attributable to IDT Corporation
|
|
|
(8
|
)
|
|
|
1,335
|
|
|
|
1,327
|
|
|
|
Balance at July 31, 2014
|
|
|
(8
|
)
|
|
|
3,676
|
|
|
|
3,668
|
|
|
|
Sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
102
|
|
|
|
102
|
|
|
|
Other comprehensive loss attributable to IDT Corporation
|
|
|
(567
|
)
|
|
|
(2,432
|
)
|
|
|
(2,999
|
)
|
|
|
Balance at July 31, 2015
|
|
|
(575
|
)
|
|
|
1,346
|
|
|
|
771
|
|
|
|
Zedge Spin-Off
|
|
|
—
|
|
|
|
1,029
|
|
|
|
1,029
|
|
|
|
Other comprehensive income (loss) attributable to IDT Corporation before reclassification
|
|
|
1,126
|
|
|
|
(6,127
|
)
|
|
|
(5,001
|
)
|
|
|
Less: reclassification for gain included in net income
|
|
|
(543
|
)
|
|
|
—
|
|
|
|
(543
|
)
|
|
Other income (expense), net
|
Net other comprehensive income (loss) attributable to IDT Corporation
|
|
|
583
|
|
|
|
(6,127
|
)
|
|
|
(5,544
|
)
|
|
|
BALANCE AT JULY 31, 2016
|
|
$
|
8
|
|
|
$
|
(3,752
|
)
|
|
$
|
(3,744
|
)
|
|
|
Note
19— Commitments and Contingencies
Legal
Proceedings
On
May 5, 2004, the Company filed a complaint in the Supreme Court of the State of New York, County of New York, seeking injunctive
relief and damages against Tyco Group, S.A.R.L., Tyco Telecommunications (US) Inc. (f/k/a TyCom (US) Inc.), Tyco International,
Ltd., Tyco International (US) Inc., and TyCom Ltd. (collectively “Tyco”). The Company alleged that Tyco breached a
settlement agreement that it had entered into with the Company to resolve certain disputes and civil actions among the parties.
The Company alleged that Tyco did not provide the Company, as required under the settlement agreement, free of charge and for
the Company’s exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the
settlement agreement) on a global undersea fiber optic network that Tyco was deploying at that time. After extensive proceedings,
including several decisions and appeals, the New York Court of Appeals affirmed a lower court decision to dismiss the Company’s
claim and denied the Company’s motion for re-argument of that decision. On June 23, 2015, the Company filed a new summons
and complaint against Tyco in the Supreme Court of the State of New York, County of New York alleging that Tyco breached the settlement
agreement. In September 2015, Tyco filed a motion to dismiss the complaint, which the Company opposed. Oral arguments were held
on March 9, 2016. The parties are awaiting a decision from the Court.
In
addition to the foregoing, the Company is subject to other legal proceedings that have arisen in the ordinary course of business
and have not been finally adjudicated. Although there can be no assurance in this regard, the Company believes that none of the
other legal proceedings to which the Company is a party will have a material adverse effect on the Company’s results of
operations, cash flows or financial condition.
Purchase
Commitments
The
Company had purchase commitments of $1.6 million as of July 31, 2016.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Lease
Commitments
The
future minimum payments for operating leases as of July 31, 2016 are as follows:
(in thousands)
|
|
|
|
Year ending July 31:
|
|
|
|
|
2017
|
|
$
|
2,711
|
|
2018
|
|
|
1,373
|
|
2019
|
|
|
849
|
|
2020
|
|
|
613
|
|
2021
|
|
|
616
|
|
Thereafter
|
|
|
18
|
|
Total payments
|
|
$
|
6,180
|
|
Rental
expense under operating leases was $3.2 million, $6.1 million and $6.4 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.
In addition, connectivity charges under operating leases were $7.5 million, $8.4 million and $10.4 million in fiscal 2016, fiscal
2015 and fiscal 2014, respectively.
Letters
of Credit
At
July 31, 2016, the Company had letters of credit outstanding totaling $0.1 million for IDT Telecom’s business. The letters
of credit outstanding at July 31, 2016 expire in the fiscal year ending July 31, 2017.
Performance
Bonds
IDT
Payment Services and IDT Telecom have performance bonds issued through third parties for the benefit of various states in order
to comply with the states’ financial requirements for money remittance licenses and telecommunications resellers, respectively.
At July 31, 2016, the Company had aggregate performance bonds of $13.4 million outstanding.
Customer
Deposits
At
July 31, 2016 and 2015, “Customer deposits” in the Company’s consolidated balance sheets included refundable
customer deposits of $95.8 million and $84.5 million, respectively, related to IDT Financial Services Ltd., the Company’s
Gibraltar-based bank.
Substantially
Restricted Cash and Cash Equivalents
The
Company treats unrestricted cash and cash equivalents held by IDT Payment Services and IDT Financial Services Ltd. as substantially
restricted and unavailable for other purposes. At July 31, 2016 and 2015, “Cash and cash equivalents” in the Company’s
consolidated balance sheets included an aggregate of $16.0 million and $7.5 million, respectively, held by IDT Payment Services
and IDT Financial Services Ltd. that was unavailable for other purposes.
Restricted
Cash and Cash Equivalents
Restricted
cash and cash equivalents consist of the following:
July 31
|
|
|
|
|
|
|
(in thousands)
|
|
2016
|
|
|
2015
|
|
IDT Financial Services Ltd. customer deposits
|
|
$
|
98,500
|
|
|
$
|
87,613
|
|
Related to letters of credit
|
|
|
122
|
|
|
|
3,163
|
|
Other
|
|
|
200
|
|
|
|
259
|
|
Total restricted cash and cash equivalents
|
|
$
|
98,822
|
|
|
$
|
91,035
|
|
Other
Contingencies
On
September 20, 2016, the Company received a letter of inquiry from the Enforcement Bureau of the Federal Communications Commission
(“FCC”) requesting certain information and materials related to an investigation of potential violations by Straight
Path Spectrum LLC (formerly a subsidiary of the Company and currently a subsidiary of Straight Path) in connection with licenses
to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services. The Company intends to cooperate with the FCC in this
matter and the Company is in the process of responding to the letter of inquiry. The FCC could seek to fine or impose regulatory
penalties or civil liability on the Company related to activities during the period of ownership by the Company. Further, should
the FCC impose liability on Straight Path, the Company could be the subject of a claim from Straight Path related to that liability.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note
20—Related Party Transactions
The
Company entered into various agreements with Zedge prior to the Zedge Spin-Off including a Separation and Distribution Agreement
to effect the separation and provide a framework for our relationship with Zedge after the Zedge Spin-Off, and a Tax Separation
Agreement, which sets forth the responsibilities of the Company and Zedge with respect to, among other things, liabilities for
federal, state, local and foreign taxes for periods before and including the Zedge Spin-Off, the preparation and filing of tax
returns for such periods and disputes with taxing authorities regarding taxes for such periods. Pursuant to the Separation and
Distribution Agreement, among other things, the Company indemnifies Zedge and Zedge indemnifies the Company for losses related
to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement.
Pursuant to the Tax Separation Agreement, among other things, Zedge indemnifies the Company from all liability for taxes of Zedge
and any of Zedge’s subsidiaries or relating to Zedge’s business accruing after the Zedge Spin-Off, and the Company
indemnifies Zedge from all liability for taxes of Zedge and any of Zedge’s subsidiaries or relating to Zedge’s business
with respect to taxable periods ending on or before the Zedge Spin-Off.
In
connection with the Zedge Spin-Off, the Company and Zedge entered into a Transition Services Agreement pursuant to which the Company
provides to Zedge certain administrative and other services, including services relating to human resources, payroll, investor
relations, legal, accounting, tax, financial systems, management consulting and foreign exchange risk management. The Company
charged Zedge $0.6 million in fiscal 2016 for services provided pursuant to the Transition Services Agreement. At July 31, 2016,
other current assets reported in the Company’s consolidated balance sheet included receivables from Zedge of $0.3 million.
The
Company entered into various agreements with Straight Path prior to the Straight Path Spin-Off including (1) a Separation and
Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with Straight Path
after the spin-off, (2) a Tax Separation Agreement, which sets forth the responsibilities of the Company and Straight Path with
respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the spin-off,
the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods,
and (3) a Transition Services Agreement, which provides for certain services to be performed by the Company to facilitate Straight
Path’s transition into a separate publicly-traded company. These agreements provide for, among other things, the allocation
between the Company and Straight Path of employee benefits, taxes and other liabilities and obligations attributable to periods
prior to the spin-off, and provision of certain services by the Company to Straight Path following the spin-off, including services
relating to human resources and employee benefits administration, treasury, accounting, tax, external reporting, and legal. Straight
Path transitioned accounting and external reporting services from the Company to a third party in the first quarter of fiscal
2015. In addition, the Company and Straight Path have entered into a license agreement whereby each of the Company, Straight Path
and their subsidiaries granted and will grant a license to the other to utilize patents held by each entity.
The
Separation and Distribution Agreement also includes that the Company is obligated to reimburse Straight Path for the payment of
liabilities of Straight Path arising or related to the period prior to the Straight Path Spin-Off. The following table summarizes
the change in the balance of the Company’s estimated liability to Straight Path, which is included in “Other current
liabilities” in the accompanying consolidated balance sheet:
Year ended July 31
|
|
|
|
|
|
|
(in thousands)
|
|
2016
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
286
|
|
|
$
|
1,860
|
|
Additional liability
|
|
|
59
|
|
|
|
1,793
|
|
Adjustments
|
|
|
(136
|
)
|
|
|
(556
|
)
|
Payments
|
|
|
(76
|
)
|
|
|
(2,811
|
)
|
Balance at end of year
|
|
$
|
133
|
|
|
$
|
286
|
|
Pursuant
to the Separation and Distribution Agreement, the Company indemnifies Straight Path and Straight Path indemnifies the Company
for losses related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations
set forth in the agreement. Pursuant to the Tax Separation Agreement, the Company indemnifies Straight Path from all liability
for taxes of Straight Path or any of its subsidiaries or relating to the Straight Path business with respect to taxable periods
ending on or before the Straight Path Spin-Off, from all liability for taxes of the Company, other than Straight Path and its
subsidiaries, for any taxable period, and from all liability for taxes due to the Straight Path Spin-Off.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The
Company charged Straight Path nil, $1.1 million and $0.8 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively, for
services provided pursuant to the Transition Services Agreement and other items. At July 31, 2016 and 2015, the Company’s
receivable from Straight Path was nil and nil, respectively.
In
July 2015, the Company received 64,624 shares of Straight Path Class B common stock in connection with the lapsing of restrictions
on awards of Straight Path restricted stock to certain of the Company’s employees and the payment of taxes related thereto
(see Note 3). As part of the Straight Path Spin-Off, holders of the Company’s restricted Class B common stock received,
in respect of those restricted shares, one share of Straight Path’s Class B common stock for every two restricted shares
of the Company that they held as of the record date for the Straight Path Spin-Off. The Company received the Straight Path shares
in exchange for the payment of an aggregate of $2.1 million for the employees’ tax withholding obligations upon the vesting
event. The number of shares was determined based on their fair market value on the trading day immediately prior to the vesting
date. In September and October 2015, the Company sold all of the shares for $2.6 million and recorded a gain on the sale of $0.5
million.
On
October 28, 2011, the Company completed a pro rata distribution of the common stock of the Company’s subsidiary, Genie Energy
Ltd. (“Genie”), to the Company’s stockholders of record as of the close of business on October 21, 2011 (the
“Genie Spin-Off”). The Company entered into various agreements with Genie prior to the Genie Spin-Off including a
Separation and Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with
Genie after the spin-off, and a Transition Services Agreement, which provides for certain services to be performed by the Company
and Genie to facilitate Genie’s transition into a separate publicly-traded company. These agreements provide for, among
other things, (1) the allocation between the Company and Genie of employee benefits, taxes and other liabilities and obligations
attributable to periods prior to the spin-off, (2) transitional services to be provided by the Company relating to human resources
and employee benefits administration, (3) the allocation of responsibilities relating to employee compensation and benefit plans
and programs and other related matters, (4) finance, accounting, tax, internal audit, facilities, external reporting, investor
relations and legal services to be provided by the Company to Genie following the spin-off and (5) specified administrative services
to be provided by Genie to certain of the Company’s foreign subsidiaries. In addition, the Company entered into a Tax Separation
Agreement with Genie, which sets forth the responsibilities of the Company and Genie with respect to, among other things, liabilities
for federal, state, local and foreign taxes for periods before and including the spin-off, the preparation and filing of tax returns
for such periods and disputes with taxing authorities regarding taxes for such periods.
Pursuant
to the Separation and Distribution Agreement, the Company indemnifies Genie and Genie indemnifies the Company for losses related
to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement.
Pursuant to the Tax Separation Agreement, the Company indemnifies Genie from all liability for the Company’s taxes with
respect to any taxable period, and Genie indemnifies the Company from all liability for taxes of Genie and its subsidiaries with
respect to any taxable period, including, without limitation, the ongoing tax audits related to Genie’s business.
The
Company’s Chairman of the Board and former Chief Executive Officer, Howard S. Jonas, is the controlling stockholder and
Chairman of the Board of Genie. The Company charged Genie $2.2 million, $3.6 million and $3.1 million in fiscal 2016, fiscal 2015
and fiscal 2014, respectively, for services provided pursuant to the Transition Services Agreement and other items, net of the
amounts charged by Genie to the Company. At July 31, 2016 and 2015, other current assets reported in the Company’s consolidated
balance sheet included receivables from Genie of $0.3 million and $0.5 million, respectively.
IDT
Energy, Inc., a subsidiary of Genie, supplied electricity to the Company’s facilities in Piscataway, New Jersey, and Newark,
New Jersey through January 2013. IDT Energy also supplied natural gas to the Company’s Newark, New Jersey building until
April 2013, and IDT Energy supplies natural gas to the Company’s facility in Piscataway, New Jersey. In fiscal 2014, IDT
Energy, Inc. billed the Company $16,000.
The
Company provides office space, certain connectivity and other services to Jonas Media Group, a publishing firm owned by Howard
Jonas. Billings for such services were $22,000, $21,000 and $18,000 in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.
The balance owed to the Company by Jonas Media Group was $6,000 and $7,000 as of July 31, 2016 and 2015, respectively.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The
Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM
was, until his death in October 2009, owned by Irwin Jonas, father of Howard Jonas, and the Company’s General Counsel, Joyce
J. Mason. IGM is currently owned by Irwin Jonas’ widow—the mother of Howard Jonas and Joyce Mason. Jonathan Mason,
husband of Joyce Mason and brother-in-law of Howard Jonas, provides insurance brokerage services via IGM. Based on information
the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company to
third party brokers in the aggregate amounts of $22,000 in fiscal 2016, $20,000 in fiscal 2015 and $20,000 in fiscal 2014, which
fees and commissions inured to the benefit of Mr. Mason. Neither Howard Jonas nor Joyce Mason has any ownership or other interest
in IGM or the commissions paid to IGM other than via the familial relationships with their mother and Jonathan Mason.
Mason
and Company Consulting, LLC (“Mason and Co.”), a company owned solely by Jonathan Mason, receives an annual fee for
the insurance brokerage referral and placement of the Company’s health benefit plan with Brown & Brown Metro, Inc. Based
on information the Company received from Jonathan Mason, the Company believes that Mason and Co. received from Brown & Brown
Metro, Inc. commissions and fees from payments made by the Company in the amount of $24,000 in fiscal 2016, $18,000 in fiscal
2015 and $18,000 in fiscal 2014. Neither Howard Jonas nor Joyce Mason has any ownership or other interest in Mason and Co. or
the commissions paid to Mason and Co., other than via the familial relationships with Jonathan Mason.
Since
August 2009, IDT Domestic Telecom, Inc., a subsidiary of the Company, has leased space in a building in the Bronx, New York. Howard
Jonas and Shmuel Jonas, the Company’s Chief Executive Officer, and the son of Howard Jonas, are members of the limited liability
company that owns the building. The latest lease, which became effective November 1, 2012, had a one-year term with a one-year
renewal option for IDT Domestic Telecom with the same terms. Aggregate annual rent under the lease was $69,025. The parties have
continued IDT Domestic Telecom’s occupancy of the space on the same terms.
The
Company had net loans receivable outstanding from employees aggregating $0.2 million and $0.3 million at July 31, 2016 and 2015,
respectively, which are included in “Other current assets” in the accompanying consolidated balance sheets.
At
July 31, 2016, the Company had a payable of $92,400 to Howard Jonas.
Note
21—Defined Contribution Plans
The
Company maintains a 401(k) Plan available to all employees meeting certain eligibility criteria. The Plan permits participants
to contribute up to 20% of their salary, not to exceed the limits established by the Internal Revenue Code. The Plan provides
for discretionary matching contributions of 50%, up to the first 6% of compensation. The discretionary matching contributions
vest over the first five years of employment. The Plan permits the discretionary matching contributions to be granted as of December
31 of each year. All contributions made by participants vest immediately into the participant’s account. In fiscal 2016,
fiscal 2015 and fiscal 2014, the Company’s cost for contributions to the Plan was $1.4 million, $1.3 million and $1.1 million,
respectively. In fiscal 2016, fiscal 2015 and fiscal 2014, the Company contributed 94,712 shares, 70,843 shares and 72,281 shares,
respectively, of the Company’s Class B common stock to the Plan for matching contributions. The Company’s Class A
common stock and Class B common stock are not investment options for the Plan’s participants.
Note
22—Business Segment Information
The
Company has two reportable business segments, Telecom Platform Services and Consumer Phone Services. Operating segments that are
not reportable individually are included in All Other. The Company’s reportable segments are distinguished by types of service,
customers and methods used to provide their services. The operating results of these business segments are regularly reviewed
by the Company’s chief operating decision maker.
The Telecom Platform Services segment provides retail telecommunications
and payment offerings as well as wholesale international long distance traffic termination. The Consumer Phone Services segment
provides consumer local and long distance services in certain U.S. states. Telecom Platform Services and Consumer Phone Services
comprise the IDT Telecom division. All Other includes the Company’s real estate holdings and other smaller businesses. Prior
to the Zedge Spin-Off, All Other included Zedge, which provides a content platform that enables consumers to personalize their
mobile devices with free, high quality ringtones, wallpapers, home screen app icons and notification sounds. Until the sale of
Fabrix in October 2014, All Other also included Fabrix, a software development company offering a cloud-based scale-out storage
and computing platform optimized for big data, virtualization and media storage, processing and delivery. Corporate costs include
certain services, such as compensation, consulting fees, treasury and accounts payable, tax and accounting services, human resources
and payroll, corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit,
investor relations, corporate insurance, corporate legal, business development, and other corporate-related general and administrative
expenses including, among others, facilities costs, charitable contributions and travel, as well as depreciation expense on corporate
assets. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The
accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the
performance of its business segments based primarily on income (loss) from operations. IDT Telecom depreciation and amortization
are allocated to Telecom Platform Services and Consumer Phone Services because the related assets are not tracked separately by
segment. There are no other significant asymmetrical allocations to segments.
Operating
results for the business segments of the Company were as follows:
(in thousands)
|
|
Telecom
Platform
Services
|
|
|
Consumer
Phone
Services
|
|
|
All Other
|
|
|
Corporate
|
|
|
Total
|
|
Year ended July 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,477,906
|
|
|
$
|
6,874
|
|
|
$
|
11,481
|
|
|
$
|
—
|
|
|
$
|
1,496,261
|
|
Income (loss) from operations
|
|
|
31,214
|
|
|
|
1,218
|
|
|
|
4,165
|
|
|
|
(10,394
|
)
|
|
|
26,203
|
|
Depreciation and amortization
|
|
|
18,547
|
|
|
|
—
|
|
|
|
1,987
|
|
|
|
1
|
|
|
|
20,535
|
|
Severance
|
|
|
6,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
310
|
|
|
|
6,510
|
|
Gain on sale of member interest in Visa Europe Ltd.
|
|
|
7,476
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,476
|
|
Gain on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
1,086
|
|
|
|
—
|
|
|
|
1,086
|
|
Other operating loss
|
|
|
(326
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(326
|
)
|
Year ended July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,572,744
|
|
|
$
|
8,629
|
|
|
$
|
15,404
|
|
|
$
|
—
|
|
|
$
|
1,596,777
|
|
Income (loss) from operations
|
|
|
26,951
|
|
|
|
1,259
|
|
|
|
77,969
|
|
|
|
(13,129
|
)
|
|
|
93,050
|
|
Depreciation and amortization
|
|
|
16,169
|
|
|
|
—
|
|
|
|
2,243
|
|
|
|
6
|
|
|
|
18,418
|
|
Severance
|
|
|
7,696
|
|
|
|
—
|
|
|
|
35
|
|
|
|
632
|
|
|
|
8,363
|
|
Gain on sale of interest in Fabrix Systems Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
76,864
|
|
|
|
—
|
|
|
|
76,864
|
|
Other operating loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,552
|
)
|
|
|
(1,552
|
)
|
Year ended July 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,615,570
|
|
|
$
|
11,023
|
|
|
$
|
24,948
|
|
|
$
|
—
|
|
|
$
|
1,651,541
|
|
Income (loss) from operations
|
|
|
45,062
|
|
|
|
1,797
|
|
|
|
(1,735
|
)
|
|
|
(15,284
|
)
|
|
|
29,840
|
|
Depreciation and amortization
|
|
|
13,776
|
|
|
|
—
|
|
|
|
2,512
|
|
|
|
30
|
|
|
|
16,318
|
|
Other operating gains (losses), net
|
|
|
650
|
|
|
|
—
|
|
|
|
638
|
|
|
|
(453
|
)
|
|
|
835
|
|
Total
assets for the reportable segments are not provided because a significant portion of the Company’s assets are servicing
multiple segments and the Company does not track such assets separately by segment.
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The
Company’s revenue from external customers for each service was as follows:
Year ended July 31
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Retail Communications
|
|
$
|
672,192
|
|
|
$
|
735,046
|
|
|
$
|
695,783
|
|
Wholesale Carrier Services
|
|
|
555,133
|
|
|
|
590,902
|
|
|
|
672,276
|
|
Payment Services
|
|
|
219,221
|
|
|
|
208,343
|
|
|
|
202,324
|
|
Hosted Platform Solutions
|
|
|
31,360
|
|
|
|
38,453
|
|
|
|
45,187
|
|
Consumer Phone Services
|
|
|
6,874
|
|
|
|
8,629
|
|
|
|
11,023
|
|
Fabrix
|
|
|
—
|
|
|
|
4,170
|
|
|
|
16,627
|
|
Zedge
|
|
|
9,474
|
|
|
|
9,054
|
|
|
|
6,535
|
|
Real estate
|
|
|
2,007
|
|
|
|
2,180
|
|
|
|
1,786
|
|
TOTAL REVENUES
|
|
$
|
1,496,261
|
|
|
$
|
1,596,777
|
|
|
$
|
1,651,541
|
|
Geographic
Information
Revenue
from customers located outside of the United States as a percentage of total revenues from continuing operations and revenue from
customers located in the United Kingdom as a percentage of total revenues from continuing operations were as follows. Revenues
by country are determined based on selling location.
Year ended July 31
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Revenue from customers located outside of the United States
|
|
|
29
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
Revenue from customers located in the United Kingdom
|
|
|
23
|
%
|
|
|
20
|
%
|
|
|
19
|
%
|
Net
long-lived assets and total assets held outside of the United States, which are located primarily in Western Europe, were as follows:
(in thousands)
|
|
United
States
|
|
|
Foreign
Countries
|
|
|
Total
|
|
July 31, 2016
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net
|
|
$
|
83,401
|
|
|
$
|
3,973
|
|
|
$
|
87,374
|
|
Total assets
|
|
|
258,896
|
|
|
|
210,762
|
|
|
|
469,658
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net
|
|
$
|
87,497
|
|
|
$
|
3,819
|
|
|
$
|
91,316
|
|
Total assets
|
|
|
278,676
|
|
|
|
207,006
|
|
|
|
485,682
|
|
July 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, net
|
|
$
|
77,173
|
|
|
$
|
4,587
|
|
|
$
|
81,760
|
|
Total assets
|
|
|
281,510
|
|
|
|
199,421
|
|
|
|
480,931
|
|
IDT CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note
23—Selected Quarterly Financial Data (Unaudited)
The
table below presents selected quarterly financial data of the Company for its fiscal quarters in fiscal 2016 and fiscal 2015:
Quarter Ended
(in thousands,
except per share data)
|
|
Revenues
|
|
|
Direct cost
of revenues
|
|
|
Income
from
operations
|
|
|
Net income
|
|
|
Net income
attributable
to IDT
Corporation
|
|
|
Net income
per share –basic
|
|
|
Net income
per share – diluted
|
|
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
|
$
|
390,578
|
|
|
$
|
324,511
|
|
|
$
|
7,925
|
|
|
$
|
4,575
|
|
|
$
|
4,193
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
January 31
|
|
|
382,454
|
|
|
|
319,724
|
|
|
|
6,377
|
|
|
|
4,663
|
|
|
|
4,065
|
|
|
|
0.18
|
|
|
|
0.18
|
|
April 30 (a)
|
|
|
355,154
|
|
|
|
293,220
|
|
|
|
5,676
|
|
|
|
4,701
|
|
|
|
4,237
|
|
|
|
0.19
|
|
|
|
0.19
|
|
July 31 (b)
|
|
|
368,075
|
|
|
|
309,139
|
|
|
|
6,225
|
|
|
|
11,419
|
|
|
|
11,019
|
|
|
|
0.49
|
|
|
|
0.48
|
|
TOTAL
|
|
$
|
1,496,261
|
|
|
$
|
1,246,594
|
|
|
$
|
26,203
|
|
|
$
|
25,358
|
|
|
$
|
23,514
|
|
|
$
|
1.03
|
|
|
$
|
1.03
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31(c)
|
|
$
|
412,878
|
|
|
$
|
343,807
|
|
|
$
|
79,607
|
|
|
$
|
80,354
|
|
|
$
|
80,155
|
|
|
$
|
3.52
|
|
|
$
|
3.47
|
|
January 31
|
|
|
394,173
|
|
|
|
328,737
|
|
|
|
3,735
|
|
|
|
2,757
|
|
|
|
2,510
|
|
|
|
0.11
|
|
|
|
0.11
|
|
April 30 (d)
|
|
|
383,930
|
|
|
|
316,508
|
|
|
|
2,470
|
|
|
|
1,123
|
|
|
|
565
|
|
|
|
0.02
|
|
|
|
0.02
|
|
July 31
|
|
|
405,796
|
|
|
|
339,311
|
|
|
|
7,238
|
|
|
|
1,881
|
|
|
|
1,260
|
|
|
|
0.05
|
|
|
|
0.05
|
|
TOTAL
|
|
$
|
1,596,777
|
|
|
$
|
1,328,363
|
|
|
$
|
93,050
|
|
|
$
|
86,115
|
|
|
$
|
84,490
|
|
|
$
|
3.69
|
|
|
$
|
3.63
|
|
|
(a)
|
Included
in income from operations was gain on sale of interest in Fabrix Systems Ltd. of $1.1
million.
|
|
(b)
|
Included
in income from operations was severance expense of $6.3 million and gain on sale of member
interest in Visa Europe Ltd. of $7.5 million.
|
|
(c)
|
Included
in income from operations was gain on sale of interest in Fabrix Systems Ltd. of $75.1
million.
|
|
(d)
|
Included
in income from operations was severance expense of $6.2 million, gain on sale of interest
in Fabrix Systems Ltd. of $1.2 million and other operating losses of $1.6 million.
|
F-37
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