-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MeEmQtwP45qCkKM4x6P89+sEPhYaGyif/Y8JKYl45zSC73qadsAny6s8qIbmglox QmYO0UgviJgIedrXovCM5g== 0001125282-00-000999.txt : 20001218 0001125282-00-000999.hdr.sgml : 20001218 ACCESSION NUMBER: 0001125282-00-000999 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20001215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDT CORP CENTRAL INDEX KEY: 0001005731 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 223415036 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27898 FILM NUMBER: 790582 BUSINESS ADDRESS: STREET 1: 190 MAIN ST CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2019281000 MAIL ADDRESS: STREET 1: 294 STATE STREET CITY: HACKENSACK STATE: NJ ZIP: 07601 10-Q 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q |X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended October 31, 2000 or | | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-27898 ---------------------- IDT CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 22-3415036 ------------------------- --------------------- (State or other (I.R.S. Employer jurisdiction of Identification incorporation or Number) organization) 520 Broad Street, Newark, New Jersey 07102 - ------------------------------------------- ------------- (Address of principal executive offices) (Zip Code) (973) 438-1000 ---------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Common Stock, $.01 par value--26,158,172 shares as of December 14, 2000 Class A Common Stock, $.01 par value--9,897,383 shares as of December 14, 2000 (Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date) IDT CORPORATION TABLE OF CONTENTS PART I. FINANCIAL INFORMATION..................................................................... 3 Item 1. Financial Statements (Unaudited)..................................................... 3 Condensed Consolidated Balance Sheets as of October 31, 2000 and July 31, 2000.................................................................. 3 Condensed Consolidated Statements of Income for the three months ended October 31, 2000 and 1999.................................................... 4 Condensed Consolidated Statements of Cash Flows for the three months ended October 31, 2000 and 1999.................................................... 5 Notes to Condensed Consolidated Financial Statements................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 14 PART II. OTHER INFORMATION........................................................................ 16 Item 1. Legal Proceedings.................................................................... 16 Item 2. Changes in Securities................................................................ 16 Item 3. Defaults Upon Senior Securities...................................................... 16 Item 4. Submission of Matters to a Vote of Security Holders.................................. 16 Item 5. Other Information.................................................................... 16 Item 6. Exhibits and Reports on Form 8-K..................................................... 17 SIGNATURES ........................................................................................ 19
PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) IDT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
October 31, 2000 July 31, 2000 ---------------- ------------- Assets (Unaudited) (Note 1) Current assets: Cash and cash equivalents .................................... $ 1,070,596 $ 162,879 Marketable securities ........................................ 124,799 230,160 Accounts receivable, net ..................................... 139,747 160,995 Notes receivable - current portion ........................... 180 3,630 Deposits ..................................................... 1,043 17,761 Inventory .................................................... 11,516 13,121 Other current assets ......................................... 60,795 53,347 ----------- ----------- Total current assets....................................... 1,408,676 641,893 Property, plant and equipment, at cost, net .................. 185,169 225,638 Trademark, net ............................................... -- 10,985 Notes receivable - long-term portion ......................... 7,268 8,001 Intangible assets, net ....................................... 154,915 162,233 Marketable securities ........................................ -- 132,277 Investments .................................................. 119,157 29,319 Other assets ................................................. 322,534 8,709 ----------- ----------- Total assets .............................................. $ 2,197,719 $ 1,219,055 =========== =========== Liabilities and stockholders' equity Current liabilities: Trade accounts payable ....................................... $ 139,688 $ 161,874 Accrued expenses ............................................. 16,472 36,451 Deferred revenue ............................................. 45,901 48,572 Notes payable - current portion .............................. 37,640 22,604 Capital lease obligations - current portion .................. 12,961 13,540 Other current liabilities .................................... 10,821 10,922 ----------- ----------- Total current liabilities.................................. 263,483 293,963 Deferred tax liabilities, net .................................. 568,996 168,772 Notes payable - long-term portion ............................ 7,155 12,174 Capital lease obligation - long-term portion ................. 39,629 43,940 Other liabilities ............................................ 166 709 ----------- ----------- Total liabilities ......................................... 879,429 519,558 Minority interests ............................................. 7,042 231,309 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; authorized shares - 10,000,000; no shares issued ................................ -- -- Common stock, $.01 par value; authorized shares - 100,000,000; 26,097,872 and 25,959,256 shares issued and outstanding at October 31, 2000 and July 31, 2000, respectively ............ 260 260 Class A stock, $.01 par value; authorized shares - 35,000,000; 9,970,233 shares issued and outstanding at October 31, 2000 and July 31, 2000 ........................................... 100 100 Loans to stockholders ........................................ (251) (251) Additional paid-in capital ................................... 375,882 371,005 Treasury stock ............................................... (78,559) -- Accumulated other comprehensive losses ....................... (45,479) (92,653) Retained earnings ............................................ 1,059,295 189,727 ----------- ----------- Total stockholders' equity ................................ 1,311,248 468,188 ----------- ----------- Total liabilities and stockholders' equity ............... $ 2,197,719 $ 1,219,055 =========== ===========
See notes to condensed consolidated financial statements. 3 IDT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
Three Months Ended October 31, ------------------------------ 2000 1999 ---- ---- Revenue ............................................. $ 276,597 $ 283,421 Costs and expenses: Direct cost of revenue ............................ 238,619 230,199 Selling, general and administrative ............... 83,382 48,617 Depreciation and amortization ..................... 14,666 9,926 ------------ ------------ Total costs and expenses ....................... 336,667 288,742 ------------ ------------ Income (loss) from operations ....................... (60,070) (5,321) Interest, net ....................................... 13,415 (411) Gain on sale of subsidiary stock .................... 1,037,726 -- Investment and other income, net .................... 275,878 65,572 ------------ ------------ Income before income taxes and minority interests ... 1,266,949 59,840 Provision for income taxes .......................... 396,458 26,706 Minority interests .................................. 923 (2,597) ------------ ------------ Net income ..................................... $ 869,568 $ 35,731 ============ ============ Income per share: Basic ............................................. $ 24.87 $ 1.05 ============ ============ Diluted ........................................... $ 22.53 $ .98 ============ ============ Weighted average number of shares used in calculation of earnings per share - basic ..................... 34,965,416 34,065,274 ============ ============ Weighted average number of shares used in calculation of earnings per share - diluted ................... 38,592,673 36,602,437 ============ ============
See notes to condensed consolidated financial statements. 4 IDT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended October 31, ------------------------------ 2000 1999 ---- ---- Net cash used in operating activities ............... $ (31,183) $ (17,344) Investing activities Purchases of property, plant and equipment .......... (27,367) (11,270) Net collections of notes receivable ................. 733 18,863 Proceeds from sale of subsidiary, net ............... 1,042,113 -- Purchases of investments, net ....................... (9,172) -- Net sales (purchases) of marketable securities ...... 22,255 (27,628) ----------- ----------- Net cash provided by (used in) investing activities . 1,028,562 (20,035) Financing activities Proceeds from offerings of common stock by Net2Phone -- 85,221 Proceeds from exercise of stock options for Net2Phone -- 1,000 Proceeds from exercise of stock options ............. 1,747 1,160 Net repayments of borrowings ........................ (9,060) (1,294) Net repayments of capital lease obligations ......... (4,890) (1,483) Common stock repurchases ............................ (76,299) Distributions to minority shareholder ............... (1,160) (841) ----------- ----------- Net cash provided by (used in) financing activities . (89,662) 83,763 ----------- ----------- Net increase in cash and cash equivalents ........... 907,717 46,384 Cash and cash equivalents, beginning of period ...... 162,879 52,903 ----------- ----------- Cash and cash equivalents, end of period ............ $ 1,070,596 $ 99,287 =========== =========== Supplemental disclosures of cash flow information Interest paid ....................................... $ 3,315 $ 3,327 Income taxes paid ................................... $ -- $ 1,050
See notes to condensed consolidated financial statements. 5 IDT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements of IDT Corporation and subsidiaries (collectively "the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and month periods ended October 31, 2000 are not necessarily indicative of the results that may be expected for the year ending July 31, 2001. The balance sheet at July 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended July 31, 2000, as filed with the Securities and Exchange Commission. On August 11, 2000, the Company completed the sale of 14.9 million of its holdings of Net2Phone Class A Common Stock, at a price of $75 per share. In addition, AT&T purchased four million newly-issued shares of Class A Stock from Net2Phone at a price of $75 per share. These transactions reduce IDT's voting stake in Net2Phone from approximately 56% to 21% and its economic stake in Net2Phone from approximately 45% to 17%. Accordingly, IDT has deconsolidated Net2Phone effective August 11, 2000 and accounts for its investment in Net2Phone using the equity method. Note 2 - Business Segment Information Operating results and other financial data presented for the principal business segments of the Company are as follows ($ in thousands):
Wholesale Retail ----------------- ----------------- Telecommunications Telecommunications ----------------- ------------------ Internet Internet Services Services Services Telephony Ventures Total ----------------- ------------------ -------- --------- -------- ----- Three months ended October 31, 2000 Total segment revenue..................... $ 110,768 $ 157,042 $ 3,635 $ -- $ 5,152 $ 276,597 Less: revenues between segments........... -- -- -- -- -- -- ---------- ---------- -------- -------- ---------- ----------- Total unaffiliated revenue................ $ 110,768 $ 157,042 $ 3,635 $ -- $ 5,152 $ 276,597 Loss from operations...................... $ (17,815) $ (17,159) $ (2,608) $ -- $ (22,488) $ (60,070) ========== ========== ======== ======== ========== =========== Three months ended October 31, 1999 Total segment revenue...................... $ 141,400 $ 130,700 $ 3,500 $ 13,100 $ -- $ 288,700 Less: revenues between segments........... (3,600) -- -- (1,700) -- (5,300) ---------- ---------- -------- -------- ---------- ----------- Total unaffiliated revenue................ $ 137,800 $ 130,700 $ 3,500 $ 11,400 $ -- $ 283,400 Income (loss) from operations............. $ 3,884 $ 3,695 $ (3,600) $ (9,300) $ -- $ (5,321) ========== ========== ======== ======== ========== ===========
6 IDT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3 - Property, Plant and Equipment Property, plant and equipment consists of the following ($ in thousands):
October 31, 2000 July 31, 2000 ---------------- ------------- Equipment .......................................... $ 219,405 $ 238,767 Computer software .................................. 11,329 32,216 Leasehold improvements ............................. 14,485 11,918 Furniture and fixtures ............................. 9,499 10,625 Land and building .................................. 6,327 6,327 --------- --------- 261,045 299,853 Less: Accumulated depreciation and amortization..... (75,876) (74,215) --------- --------- $ 185,169 $ 225,638 ========= =========
Note 4 - Other Comprehensive Losses Other comprehensive losses for the three month period ended October 31, 2000 consisted primarily of unrealized losses in the fair market value of marketable securities. Note 5 - AT&T Transactions On March 28, 2000, IDT entered into an agreement with AT&T Corporation ("AT&T"), which closed on August 11, 2000, pursuant to which IDT sold AT&T 14.9 million shares of Net2Phone Class A Common Stock, par value $0.01 per share ("Class A Stock"), at a price of $75 per share. In addition, AT&T purchased four million newly-issued shares of Class A Stock from Net2Phone at a price of $75 per share. Following these transactions, AT&T has approximately a 39% voting stake and a 32% economic stake in Net2Phone for a total cash investment of approximately $1.4 billion. In recognition of these transactions, a "Gain on sale of subsidiary stock" of $1,038 billion was recorded in the Condensed Consolidated Statement of Income for the three months ended October 31, 2000. These transactions reduce IDT's voting stake in Net2Phone from approximately 56% to 21% and its economic stake in Net2Phone from approximately 45% to 17%. Accordingly, IDT has deconsolidated Net2Phone effective August 11, 2000 and accounts for its investment in Net2Phone using the equity method. In addition, ATT and IDT have reached an agreement that gives AT&T the right of first refusal to purchase IDT's remaining stake of 10 million shares of Class A Stock. AT&T also received the option to convert IDT's remaining 10 million shares of Class A Stock into shares of Net2Phone Common Stock, par value $0.01 per share ("Common Stock"). Shares of Class A Stock have two votes per share, while shares of Common Stock have one vote per share. Note 6 - Tyco Settlement On October 10, 2000, IDT reached a full and final settlement with Tyco of all pending claims brought against one another and their respective affiliates. The settlement agreement is the subject of a confidentiality agreement among the parties and only the following disclosure by IDT is permitted under the terms of that agreement. Under the terms of the settlement, TyCom Ltd. ("TyCom") granted to IDT Europe B.V.B.A. ("IDT Europe"), free of charge, certain exclusive rights to use capacity on the transatlantic and transpacific segments of TyCom's global undersea fiber optic network (the "TyCom Global Network") which TyCom is currently deploying. The settlement agreement provides for IDT Europe to obtain exclusive indefeasible rights to use two 10 Gb/s wavelengths on the transatlantic segment and two 10 Gb/s wavelengths on the transpacific segment for fifteen years from the applicable Handover Dates (as described below). TyCom previously announced that it expects the TyCom transatlantic network to be ready for service in September, 2001, and the TyCom transpacific network to be ready for service in the second quarter of 2002, the respective "Ready for Service Dates." Under the terms of the settlement 7 IDT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) agreement, the Handover Dates for the wavelengths on the transatlantic segment are six months (for the first wavelength) and 18 months (for the second wavelength), respectively, after the Ready for Service Date of the TyCom transatlantic network; and the Handover Date for the wavelengths on the transpacific segment are six months (for the first wavelength) and 18 months (for the second wavelength), respectively, after the Ready for Service Date of the TyCom transpacific network. Operation, administration and maintenance for the wavelengths used by IDT will be provided by TyCom for a fifteen year period after the relevant Handover Date, free of charge. TyCom has also granted IDT certain rights to resell any unused capacity on the wavelengths through TyCom as its sole and exclusive agent. In addition, IDT will also have the option, exercisable at least annually, to convert the available capacity on its wavelengths to available equivalent capacity on another portion of the TyCom Global Network. In recognition of the settlement, a gain of $313.5 million is included as a component of "Investment and other income, net" in the Condensed Consolidated Statement of Income for the three months ended October 31, 2000. Note 7 - Legal Proceedings and Contingencies In October 1999, Union commenced an action against DigiTEC 2000, Inc. ("DigiTEC") and TecNet, Inc. ("TecNet") in the Supreme Court of the State of New York, County of New York, alleging damages of approximately $725,000 based upon, among other things, non-payment for prepaid calling cards. DigiTEC and TecNet have answered the complaint and DigiTEC has asserted a third-party claim against IDT seeking damages of $2.5 million dollars based upon IDT's alleged breach of a settlement agreement between IDT and DigiTEC which had resolved a prior litigation between those parties. The court adjourned the return date without assigning a specific return date for IDT to answer the Third-Party Complaint, subject to DigiTEC's right to make a written thirty day demand for an Answer. This action is currently in the early stages of discovery. In February 2000, Multi-Tech Systems, Inc. ("Multi-Tech") filed suit against Net2Phone and other companies in the United States Federal District Court in Minneapolis, Minnesota. In its press release, Multi-Tech stated that "the defendant companies are infringing because they are providing the end users with the software necessary to simultaneously transmit voice and data on their computers in the form of making a phone call over the Internet." Net2Phone intends to defend the lawsuit vigorously. Net2Phone believes that the Multi-Tech claims are without merit. However, should a judge issue an injunction against Net2Phone requiring that Net2Phone cease distributing its software or providing its software-based services, such an injunction could have an adverse effect on Net2Phone's business. Net2Phone has filed an answer and this action is currently in the early stages of discovery. The Company is subject to other legal proceedings and claims, which have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurances in this regard, in the opinion of the Company's management, such proceedings, as well as the aforementioned actions, will not have a material adverse effect on results of operations or the financial condition of the Company. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company contained in the Company's Annual Report on Form 10-K for the year ended July 31, 2000, as filed with the Securities and Exchange Commission. Overview General IDT is a leading facilities-based, emerging multinational carrier that provides a broad range of telecommunications services to wholesale and retail customers worldwide. In addition, our IDT Ventures division is developing several innovative telecom and Internet-related businesses. Also, through our wholly-owned IDT Investments subsidiary, we have equity interests in other technology companies, including our former subsidiary, Net2Phone, Inc. (NASDAQ: NTOP), which offers a variety of Internet telephony products and services. IDT's telecommunications services include wholesale carrier services, prepaid calling cards, domestic long distance services and international retail services. IDT delivers its telecommunications services over a high-quality network consisting of over 100 switches in the U.S. and Europe and owned and leased capacity on 16 undersea fiber optic cables, connecting our U.S. facilities with our international facilities and with the facilities of our foreign partners in Europe, Latin America and Asia. In addition, we obtain transmission capacity from other carriers. We deliver our international traffic worldwide pursuant to our agreements with U.S.-based carriers, foreign carriers, and more than 20 of the companies that are primarily responsible for providing telecommunications services in particular countries. In October 2000, we announced plans to reorganize the Company, creating separate divisions designed to reflect our various businesses and their unique strategies. Upon completing this reorganization, which is subject to regulatory approval, receipt of counterparty consents and completion of various administrative requirements, IDT Corporation will be a holding company, consisting primarily of two main subsidiaries: IDT Telecom and IDT Ventures. IDT Telecom will conduct the Company's core telecommunications businesses, including the provision of wholesale international telecommunications services, retail debit card services, domestic long distance services and international retail services. IDT Ventures will consist of the Company's newly-developed telecom and Internet-related businesses, as well as IDT's equity investments in other entities, such as Net2Phone and Terra Networks. Outlook In recent years, we have derived the majority of our revenues from our core telecommunications businesses, consisting primarily of wholesale carrier services and retail prepaid calling cards. These businesses have also accounted for the bulk of our operating expenses as well. Since the fourth quarter of Fiscal 1998, we have conducted wholesale carrier and prepaid calling card operations in Europe. As we build our European telecommunications operations, we expect to experience weaker gross margins and to incur significant sales and marketing expenses, which will have a negative impact on overall profitability over the next two to four quarters. We are also developing various new telecom and Internet related businesses. During the first quarter of Fiscal 2001, we incurred approximately $12.9 million in development and marketing costs for these business ventures, which provided us with revenues of approximately $5.2 million. We anticipate that we will continue to incur significant costs related to these and other new ventures. The timing, and magnitude, of any revenues and/or operating profits to be realized from these new businesses remains uncertain. Within the wholesale carrier and prepaid calling card business segments, we have experienced intense competition, which has served, over time, to reduce our average per-minute price realizations. In addition, this environment has led some of our competitors to de-emphasize their wholesale carrier and/or prepaid calling card operations, in order to focus on higher margin telecommunications businesses. We remain strongly committed to our 9 wholesale carrier and prepaid calling card businesses. However, we have experienced pricing and margin pressure in recent quarters. We anticipate that we will continue to experience pricing and margin pressure in both our wholesale and retail businesses for at least the next few quarters, with gross margins for both businesses generally below the levels experienced prior to the fourth quarter of Fiscal 2000. Accounting Treatment of Net2Phone On August 11, 2000, we completed the sale of 14.9 million of our shares of Net2Phone to AT&T for $75 per share. Upon completing this transaction, our ownership interest in Net2Phone was reduced to approximately 10.0 million shares, representing approximately a 17% ownership interest and a 21% voting interest. Consequently, beginning with the first quarter of Fiscal 2001, we are no longer consolidating Net2Phone's results. We will be using the equity method to account for our ownership interest in Net2Phone. This change in the accounting treatment for our ownership stake in Net2Phone will therefore have an impact upon the comparison of results for the three month periods ended October 31, 2000 and October 31, 1999 described below. Three Months Ended October 31, 2000 Compared to Three Months Ended October 31, 1999 Results of Operations Revenue. Revenue decreased 2.4%, from approximately $283.4 million for the three months ended October 31, 1999 to approximately $276.6 million for the three months ended October 31, 2000. Telecommunications revenue decreased 0.3%, from approximately $268.5 million for the three months ended October 31, 1999 to approximately $267.8 million for the three months ended October 31, 2000. Internet services revenue increased 2.9%, from approximately $3.5 million for the three months ended October 31, 1999 to approximately $3.6 million for the three months ended October 31, 2000. As a result of the change in our accounting for our ownership interest in Net2Phone from the full consolidation method to the equity method, we did not record Internet telephony revenue for the three months ended October 31, 2000. We recorded Internet telephony revenue of approximately $11.4 million for the three months ended October 31, 1999. Revenue from our Ventures businesses amounted to approximately $5.2 million for the three months ended October 31, 2000. No revenue from Ventures activities was recorded for the three months ended October 31, 1999. Excluding sales of non-IDT prepaid calling cards, which decreased from approximately $36.0 million for the three months ended October 31, 1999 to approximately $21.0 million for the three months ended October 31, 2000, our minutes-based telecommunications revenue increased primarily as a result of a 33.8% increase in minutes of use from approximately 1.032 billion for the three months ended October 31, 1999 to approximately 1.381 billion for the three months ended October 31, 2000. The increase in minutes was due to increased marketing of the Company's prepaid calling cards, which outweighed the effects of lower wholesale carrier minutes. The decline in wholesale carrier minutes resulted from a reduction in the number of wholesale carrier services clients, reflecting an ongoing transition of the Company's wholesale customer base, towards a smaller group of larger, more financially stable customers. This resulted in a decrease in wholesale telecommunications revenues of 19.6%, from approximately $137.8 million for the three months ended October 31, 1999 to approximately $110.8 million for the three months ended October 31, 2000. As a percentage of telecommunications revenue, wholesale telecommunications revenue decreased from approximately 51.3% to approximately 41.4% period to period. Revenue from retail telecommunications services increased 20.1%, from approximately $130.7 million for the three months ended October 31, 1999 to approximately $157.0 million for the three months ended October 31, 2000 primarily as a result of increased marketing efforts for the Company's prepaid calling cards. Prepaid calling card sales as a percentage of retail telecommunication services revenue decreased from 95% for the three months ended October 31, 1999 to 93% for the three months ended October 31, 2000. Revenues from domestic long distance services increased 234.6%, from approximately $2.6 million in the three months ended October 31, 1999, to approximately $8.7 million in the three months ended October 31, 2000, as a result of the full introduction of the Company's flat-rate, $0.05 a minute long distance calling plan, which was accompanied by an aggressive marketing campaign. As a percentage of overall telecommunications revenue, retail telecommunications revenue increased from approximately 48.7% for the three months ended October 31, 1999 to approximately 58.6% for the three months ended October 31, 2000. 10 As a percentage of total revenue, Internet services revenue was approximately 1.3% for both the three months ended October 31, 1999 and three months ended October 31, 2000. Internet telephony revenue as a percentage of total revenue amounted to 4.0% for the three months ended October 31, 1999. As mentioned above, no Internet telephony revenue was recorded for the three months ended October 31, 2000, reflecting a change in the accounting treatment of the Company's Net2Phone stake to the equity method beginning in the first quarter of Fiscal 2001. Direct Cost of Revenue. The Company's direct cost of revenue increased by 3.5%, from approximately $230.2 million for the three months ended October 31, 1999 to approximately $238.6 million for the three months ended October 31, 2000. As a percentage of total revenue, these costs increased from 81.2% for the three months ended October 31, 1999 to 86.3% for the three months ended October 31, 2000. The dollar increase is due primarily to increases in underlying carrier and connectivity costs, as the Company's telecommunications minutes of use grew significantly. As a percentage of total revenue, the increase in direct costs reflects the gross margin pressures experienced by both the wholesale and retail telecommunications divisions, reflecting intensified competition in these markets. Partially offsetting this factor was the shift in telecommunications revenue mix towards higher gross margin retail revenues. Selling, General and Administrative. Selling, general and administrative costs increased 71.6%, from approximately $48.6 million for the three months ended October 31, 1999 to approximately $83.4 million for the three months ended October 31, 2000. As a percentage of total revenue, these costs increased from 17.2% for the three months ended October 31, 1999 to 30.1% for the three months ended October 31, 2000. This increase is due to several factors, including increased international debit card distribution costs, increased sales and marketing efforts for retail services, including prepaid calling cards and domestic and international long distance, as well as increased salaries, facilities costs and professional fees related to the expansion of the Company's infrastructure to facilitate its rapid sales growth. Also included in selling, general and administrative costs for the three months ended October 31, 2000 is approximately $12.0 million in selling, general and administrative costs associated with the Company's IDT Ventures division, which has several innovative telecommunications and Internet related businesses in various stages of development. In addition, IDT Ventures incurred expenses of $12.5 million related to management incentive compensation arising from the completion of the sale of the Company's Net2Phone shares to AT&T. Partially offsetting these factors was the exclusion of selling, general and administrative expenses related to Net2Phone in the three months ended October 31, 2000. Included in salaries for the three months ended October 31, 1999, is $2.9 million of non-cash compensation as a result of option grants made by Net2Phone during the period. Depreciation and Amortization. Depreciation and amortization increased 48.5%, from approximately $9.9 million for the three months ended October 31, 1999 to approximately $14.7 million for the three months ended October 31, 2000. As a percentage of revenue, these costs increased from 3.5 % for the three months ended October 31, 1999 to 5.3% for the three months ended October 31, 2000. These costs increased, in both absolute dollars and as a percentage of revenues, primarily as a result of the Company's higher fixed asset base during the three months ended October 31, 2000 as compared with the three months ended October 31, 1999, reflecting the Company's efforts to expand its telecommunications network infrastructure and other facilities. The Company anticipates that depreciation and amortization costs will continue to increase as the Company continues to add to its asset base, allowing it to implement its growth strategy. Loss from Operations. The Company recorded a loss from operations of approximately $60.1 million for the three months ended October 31, 2000, compared to a loss from operations of approximately $5.3 million for the three months ended October 31, 1999. The Company's telecommunications business recorded a loss from operations (after the effect of minority interests) of approximately $35.9 million for the three months ended October 31, 2000, compared to income from the Company's telecommunications operations of approximately $6.6 million for the three months ended October 31, 1999. The recording of a loss from operations in the current period as compared with income from operations in the prior year period reflected decreased gross margins, particularly in the wholesale carrier business, and an increase in sales and marketing costs for retail telecommunications services, while telecommunications revenues were essentially unchanged. 11 Loss from Operations for the Company's Ventures division for the three months ended October 31, 2000 was approximately $22.5 million, which included the $12.4 million of management incentive compensation. The Ventures division had no activity in the three months ended October 31, 1999. Loss from operations for the Company's Internet access business decreased to approximately $2.6 million for the three months ended October 31, 2000 from approximately $3.6 million for the three months ended October 31, 1999. The decreased loss is due to reduced costs, as we continue to scale back the unprofitable segments of our Internet business. Loss from operations of the Net2Phone subsidiary amounted to approximately $9.3 million for the three months ended October 31, 1999, with no corresponding loss from operations recorded during the three months ended October 31, 2000, reflecting the change in accounting for Net2Phone. Other income. Included in other income for the three months ended October 31, 2000 is a realized gain of $999.6 million on the Company's sale of 14.9 million Net2Phone shares to AT&T, $38.1 million in gains recognized by the Company under Staff Accounting Bulletin No. 51 in conjunction with Net2Phone's sale of newly issued shares to AT&T and approximately $313.5 million in gains related to the settlement of the Company's lawsuit with TyCom Ltd. Partially offsetting this income was a recognized loss of approximately $39.0 million related to the sale of some of the Company's Terra Networks shares. Income Taxes. The Company recorded income tax expense of approximately $396.5 million for the three months ended October 31, 2000, compared to approximately $26.7 million for the three months ended October 31, 1999. Income tax benefit of approximately $0.8 million for the three months ended October 31, 2000, and approximately $0.8 million for the three months ended October 31, 1999 related to the tax deduction upon the exercise of stock options was recorded directly into additional paid-in capital. Liquidity and Capital Resources General Historically, the Company has satisfied its cash requirements through a combination of cash flow from operating activities, sales of equity and debt securities and borrowings from third parties. Additionally, the Company received approximately $1.1 million upon the exercise of stock options in the three months ended October 31, 2000. As of October 31, 2000, the Company had cash, cash equivalents and marketable securities of approximately $1,195.4 million and working capital of approximately $1,145.2 million. The Company generated negative cash flow from operating activities of approximately $31.2 million during the three months ended October 31, 2000, compared with negative cash flow from operating activities of approximately $17.3 million during the three months ended October 31, 1999. The Company's cash flow from operations varies significantly from quarter to quarter, depending upon the timing of operating cash receipts and payments, especially accounts receivable and accounts payable. Accounts receivable, accounts payable and accrued expenses have increased from period to period as the Company's businesses have grown. The Company's capital expenditures were approximately $27.4 million for the three months ended October 31, 2000, compared to approximately $11.3 million for the three months ended October 31, 1999, as the Company expanded its international and domestic telecommunications network infrastructure. The Company financed a portion of its capital expenditures through capital leases. We experience intense competition in our telecommunications business. The long distance telecommunications industry has been characterized by declines in both per-minute revenues and per-minute costs. In the past, these factors have tended to generally offset each other. However, since the mid-point of Fiscal 2000, as per-minute pricing continued to erode, gross margins have come under increasing pressure. Our long term strategy involves terminating a larger proportion of minutes on our own network, thereby lowering costs and preserving margins even in a weaker price environment. However, in the short term, the demand for usage has outpaced the rate of deployment of additional network capacity. In fact, it has become commonplace within the industry for companies 12 to experience delays in network build-out programs. As such, there can be no assurance that we will be able to maintain our gross margins at the current level, in the face of lower per-minute revenues. We continued to fund our Ventures division, which incurred significant start-up, development, marketing and promotional costs. As we move our Ventures businesses through their respective development stages, we anticipate that selling, general and administrative for our Ventures division will exceed the revenues generated by this division for the foreseeable future. We will need to make significant capital expenditures in order to expand our network capacity. If we are unable to raise sufficient capital to meet our spending requirements, our network expansion, and the anticipated margin improvement, would be delayed. Changes in Other Assets, Accounts Receivable, Allowance for Doubtful Accounts and Deferred Revenue Other current assets increased from $53.3 million at July 31, 2000 to $60.8 million at October 31, 2000, due to increases in contract deposits, inventories and prepaid expenses. The average age of our accounts receivable, as measured by number of days sales outstanding, has been increasing due to a significant increase in sales to relatively more credit-worthy carriers and distributors of prepaid calling cards. These customers tend to demand, and we are willing to grant, extended payment terms. Due to the wide range of collection terms, future trends with respect to days sales outstanding are generally dependent upon the proportion of total sales made to carriers, who are often offered extended payment terms of up to 90 days, and prepaid calling card distributors, who generally receive terms of up to 30 days. Therefore, the trends in days sales outstanding will depend, in large part, on the mix of wholesale (carrier) versus retail (debit card distributor) customers. In addition, as we are willing to extend longer payment terms to more credit-worthy customers, an increase in customers belonging to the highest credit classes, as a percentage of total customers, could also lead to an increase in days sales outstanding. However, as the foregoing is difficult to predict, it is not possible at this time to determine whether or not the recent upward trend in days sales outstanding will continue. The allowance for doubtful accounts as a percentage of accounts receivable increased from 14.3% at July 31, 2000, to 20.8% at October 31, 2000. The increase in the allowance for doubtful accounts as a percentage of accounts receivable reflects the deteriorating credit quality of a portion of our existing wholesale customer base, as well as the increase in the number of domestic long distance customers, who require a larger reserve than do wholesale and retail debit card customers. Although, as mentioned above, we anticipate that our customer base will continue its transition towards a more credit-worthy group, some of our existing accounts receivable are still related to sales made to less credit-worthy customers. In addition, during the first quarter, we collected large amounts of previously unsettled outstanding wholesale receivables, which had not had allowances for doubtful accounts associated with them. This had the effect of reducing gross receivables, while not having an impact on the allowance for doubtful accounts, resulting in a higher allowance for doubtful accounts when measured as a percentage of accounts receivable. Deferred revenue as a percentage of total revenue varies from period to period dependent upon the mix and the timing of revenue. During the first quarter of Fiscal 2001, we continued to experience a steady increase in the sale of our prepaid calling cards, due to increased marketing efforts and decreased competition in our target markets. This resulted in a continued increase in actual deferred revenue. We reported a reduction of deferred revenue during the first quarter, though, because of the elimination of Net2Phone-related deferred revenue due to the deconsolidation of Net2Phone's results. Significant Transactions In August 2000, we sold 14,900,000 of our Net2Phone shares to AT&T Corp., for a purchase price of $75.00 per share, for total cash consideration of approximately $1.1 billion. In addition, AT&T purchased an additional 4,000,000 newly-issued Net2Phone shares, also at a price of $75.00 per share, paying proceeds of approximately $300 million to Net2Phone. IDT now holds 16.8% of Net2Phone's outstanding stock, and a 20.5% voting interest. 13 In addition, we received the right, at our option, to sell to AT&T 2,040,817 shares of our Class B Common Stock for total consideration of $75.0 million. In August 2000, we announced that we had notified AT&T of our intention to exercise this option. Stock Buyback Program In May 2000, we announced that our Board of Directors had authorized the repurchase of up to five million shares of our common stock. In July 2000, we announced that our Board of Directors had authorized an increase in the share repurchase program to 10 million shares. In October 2000, we announced that our Board of Directors had authorized a further increase in the share repurchase program to 12.5 million shares. Through December 12, 2000, we had repurchased 7,064,905 shares, for an aggregate purchase price of approximately $236.9 million. Other Sources and Uses of Resources The Company intends to, where appropriate, make strategic acquisitions to increase its telecommunications customer base. From time to time, the Company evaluates potential acquisitions of companies, technologies, products and customer accounts that complement its businesses. The Company believes that, based upon its present business plan, the Company's existing cash resources, expected cash flow from operating activities and access to credit facilities will be sufficient to meet its currently anticipated working capital and capital expenditure requirements for at least the next twelve months. If the Company's growth exceeds current expectations or if the Company acquires the business or assets of another company, or if the Company's cash flow from operations after the end of such period is insufficient to meet its working capital and capital expenditure requirements, the Company will need to raise additional capital from equity or debt sources. There can be no assurance that the Company will be able to raise such capital on favorable terms or at all. If the Company is unable to obtain such additional capital, the Company may be required to reduce the scope of its anticipated expansion, which could have a material adverse effect on the Company's business, financial condition or results of operations. European Currency Conversion In January 1999, a new currency called the "euro" was introduced in certain Economic and Monetary Union ("EMU") countries. The EMU countries adopted the euro as their common legal currency, and through January 1, 2002, both the existing national currency of the respective EMU country and the euro will be accepted as legal currency. Beginning in 2002, all EMU countries are expected to operate with the euro as their single currency. Uncertainty exists as to the effect the euro currency will have on the market for international telecommunications services. Additionally, all of the final rules and regulations have not yet been defined and finalized by the European Commission with regard to the euro currency. IDT's management is still evaluating the effect that the introduction of the euro will have on its business, but it does not anticipate, based on information currently available, that the euro will have a material adverse impact on the Company's operations and sales. Item 3. Quantitative and Qualitative Disclosures About Market Risk. None. CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words "believes," "anticipates," "expects," and similar words and phrases. Such forward-looking statements include, among other things, the Company's plans to implement its growth strategy, improve its financial performance, expand its infrastructure, develop new products and services, expand its customer base and enter international markets, and the possible outcome of litigation relating to the Company. Such forward-looking statements also include the Company's expectations concerning factors affecting the markets for its products, such as changes in the U.S. and the international regulatory environment and the demand for long-distance telecommunications, Internet access and Internet telephony services. Actual results could differ from those projected 14 in any forward-looking statements. The forward-looking statements are made as of the date of this Report, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth herein and the other information set forth from time to time in the Company's reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including the Company's Annual Report on Form 10-K, for the year ended July 31, 2000. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings Incorporated by reference from Part I, Item I, Financial Statements, Note 7 captioned "Legal Proceedings and Contingencies." Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None 16 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits:
Exhibit Number Description - ------ ----------- 3.01(1) Restated Certificate of Incorporation of the Registrant. 3.02(1) By-laws of the Registrant. 3.03* Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant. 10.01(2) Employment Agreement between the Registrant and Howard S. Jonas. 10.02(10) 1996 Stock Option and Incentive Plan, as amended and restated, of the Registrant. 10.03(3) Form of Stock Option Agreement under the 1996 Stock Option and Incentive Plan. 10.04(4) Form of Registration Rights Agreement between certain stockholders and the Registrant. 10.05(1) Lease of 294 State Street. 10.06(5) Lease of 190 Main Street. 10.7(6) Form of Registration Rights Agreement between Howard S. Jonas and the Registrant. 10.8(11) Employment Agreement between the Registrant and James Courter. 10.9(7) Agreement between Cliff Sobel and the Registrant. 10.10(11) Employment Agreement between the Registrant and Hal Brecher. 10.11(11) Employment Agreement between the Registrant and Howard S. Jonas. 10.12(8) Agreement and Plan of Merger, dated April 7, 1998, by and among the Registrant, ADM Corp., InterExchange, Inc., David Turock, Eric Hecht, Richard Robbins, Bradley Turock, Wai Nam Tam, Mary Jo Altom and Lisa Mikulynec. 10.13(9) Securities Purchase Agreement between the Registrant, Carlos Gomez and Union Telecard Alliance, LLC. 10.14(11) Credit Agreement, dated as of May 10, 1999, by and among the Registrant, various lenders party thereto, Lehman Commercial Paper Inc., CIBC World Markets Corp. and Bankers Trust Company. 10.15(11) Pledge Agreement, dated as of May 10, 1999, by and among the Registrant, certain subsidiaries of the Registrant and Bankers Trust Company, as Collateral Agent. 10.16(11) Security Agreement, dated as of May 10, 1999, by and among the Registrant, certain subsidiaries of the Registrant and Bankers Trust Company, as Collateral Agent. 10.17(11) Subsidiaries Guaranty, dated as of May 10, 1999, by and among the Registrant, certain subsidiaries of the Registrant and Bankers Trust Company, as Collateral Agent. 10.18(11) Loan Agreement between the Registrant and Stephen Brown. 10.19(12) Internet/Telecommunications Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.20(12) Joint Marketing Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.21(12) IDT Services Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.22(12) Net2Phone Services Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.23(12) Assignment Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.24(12) Tax Sharing and Indemnification Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.25(12) Separation Agreement, dated as of May 7, 1999, by and between Registrant and Net2Phone, Inc. 10.26(12) Co-location and Facilities Management Services Agreement, dated as of May 20, 1999, by and between Registrant and Net2Phone, Inc. 10.27(13) Lease of 520 Broad Street, Newark, New Jersey. 10.28(13) Amendment to Lease of 520 Broad Street, Newark, New Jersey. 10.29(14) Option Agreement, dated as of March 3, 2000, between IDT Corporation and AT&T Corp.
17 10.30(15) Amendment to Option Agreement, dated as of April 5, 2000 between IDT Corporation and AT&T Corp. 10.31(14) Subscription Agreement, dated as of March 24, 2000, between IDT Corporation and Liberty Media Corporation. 10.32(15) Amendment to Subscription Agreement, dated as of May 26, 2000, between IDT Corporation and Liberty Media Corporation. 10.33(14) Letter Agreement, dated as of March 28, 2000, between IDT Corporation, AT&T Corp. and Net2Phone, Inc. 10.34(14) Letter Agreement, dated as of March 30, 2000, between IDT Corporation, AT&T Corp. and Net2Phone, Inc. 10.35(16) Conversion, Termination and Release Agreement, dated as of April 30, 2000, between IDT Corporation, Terra Networks, S.A., Terra Networks USA, Inc., Terra Networks Access Services USA LLC and Terra Networks Interactive Services USA LLC. 27.01* Financial Data Schedule.
- ----------- * Filed herewith. (1) Incorporated by reference to Form S-1 filed February 21, 1996 file no. 333-00204. (2) Incorporated by reference to Form S-1 filed January 9, 1996 file no. 333-00204. (3) Incorporated by reference to Form S-8 filed January 14, 1996 file no. 333-19727. (4) Incorporated by reference to Form S-1 filed March 8, 1996 file no. 333-00204. (5) Incorporated by reference to Form 10-K for the fiscal year ended July 31, 1997, filed October 29, 1997. (6) Incorporated by reference to Form S-1 filed March 14, 1996 file no. 333-00204. (7) Incorporated by reference to Form 10-K/A for the fiscal year ended July 31, 1997, filed February 2, 1998. (8) Incorporated by reference to Form 8-K filed April 22, 1998. (9) Incorporated by reference to Form 10-K/A for the fiscal year ended July 31, 1998, filed December 4, 1998. (10) Incorporated by reference to Form 10-Q for the fiscal quarter ended January 31, 1999, filed March 17, 1999. (11) Incorporated by reference to Form 10-Q for the fiscal quarter ended April 30, 1999, filed June 14, 1999. (12) Incorporated by reference to Form 10-K for the fiscal year ended July 31, 1999, filed November 4, 1999. (13) Incorporated by reference to Form 10-Q for the fiscal quarter ended January 31, 2000, filed March 12, 2000. (14) Incorporated by reference to Form 8-K filed March 31, 2000. (15) Incorporated by reference to Schedule 14C filed June 12, 2000. (16) Incorporated by reference to Form 10-Q for the fiscal quarter ended April 30, 2000, filed June 14, 2000.
(b) Reports on Form 8-K. None. 18 IDT CORPORATION FORM 10-Q OCTOBER 31, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IDT CORPORATION December 14, 2000 By: /s/ Howard S. Jonas - ----------------- --------------------------------------------------------- Date Howard S. Jonas Chairman of the Board and Chief Executive Officer (Principal Executive Officer) December 14, 2000 By: /s/ Stephen R. Brown - ----------------- --------------------------------------------------------- Date Stephen R. Brown Chief Financial Officer (Principal Financial and Accounting Officer)
19 EX-3.03 2 0002.txt CERTIFICATE OF AMENDMENT Exhibit 3.03 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF IDT CORPORATION (pursuant to Section 242 of the Delaware General Corporation Law) IDT Corporation, a Delaware corporation, hereby certifies as follows: 1. The name of the corporation is IDT Corporation (hereinafter the "Corporation"). 2. The Corporation's Certificate of Incorporation was initially filed with the Secretary of State of the State of Delaware on December 22, 1995 and a Restated Certificate of Incorporation was filed on February 7, 1996. 3. The Restated Certificate of Incorporation of the Corporation is hereby amended by deleting the preamble of Article Fourth thereof and replacing it with the following: "FOURTH: The aggregate number of shares of all classes of capital stock which the Corporation shall have the authority to issue is two hundred and forty five million (245,000,000) shares, consisting of (a) 100,000,000 shares of common stock, par value $0.0l per share ("Common Stock"), (b) 35,000,000 shares of Class A Common Stock, par value $0.01 per share (the "Class A Stock"), (c) 100,000,000 shares of Class B Common Stock, par value $0.01 per share (the "Class B Stock", and collectively, such Common Stock, Class A Stock and Class B Stock are referred to herein as the "Common Shares"), and (d) 10,000,000 shares of preferred stock, par value $0.01 per share ("Preferred Stock")." 4. The Restated Certificate of Incorporation of the Corporation is hereby further amended by deleting Sections 1(h), 2(a), 2(b), 2(c), 2(d), 2(e)(6) and 2(f) of Article Fourth and replacing them with the following: "1. Preferred Stock (h) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payments of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock, the Class A Stock, the Class B Stock or shares of stock of any other class or any other series of this class;" Exhibit 3.03 "2. Common Stock, Class A Stock and Class B Stock (a) General. Except as hereinafter expressly set forth in Section 2, and subject to the rights and preferences of the holders of Preferred Stock at any time outstanding, the Class A Stock, Class B Stock and the Common Stock, all of which are classes of common stock, shall have the same rights and privileges and shall rank equally, share ratably and be identical in respects as to all matters, including rights in liquidation. (b) Voting Rights. Except as otherwise provided in this Restated Certificate of Incorporation or as expressly provided by law, and subject to any voting rights provided to holders of Preferred Stock at any time outstanding, the Common Shares have exclusive voting rights on all matters requiring a vote of the Corporation. The holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation. The holders of Class A Stock shall be entitled to three votes per share on all matters to be voted on by the stockholders of the Corporation. The holders of Class B Stock shall entitled to one-tenth (1/10) of a vote per share on all matters to be voted on by the stockholders of the Corporation. Except as otherwise provided in this Restated Certificate of Incorporation or as required by law, and subject to any voting rights provided to holders of Preferred Stock at any time outstanding, the holders of shares of Class A Stock, the holders of shares of Class B Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (c)(1) Dividends and Distributions. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Restated Certificate of Incorporation, as it may be amended from time to time, holders of Class A Stock, holders of Class B Stock and holders of Common Stock shall be entitled to receive such dividends and other distributions in cash, in property or in shares of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor; provided, however, that no cash, property or share dividend or distribution may be declared or paid on the outstanding shares of any of the Class A Stock, the Class B Stock or the Common Stock unless an identical per share dividend or distribution is simultaneously declared and paid on the outstanding shares of the other classes of common stock; provided, Exhibit 3.03 further, however, that a dividend of shares may be declared and paid in Class A Stock to holders of Class A Stock, in Class B Stock to holders of Class B Stock and in Common Stock to holders of Common Stock if the number of shares paid per share to holders of Class A Stock, to holders of Class B Stock and to holders of Common Stock shall be the same. If the Corporation shall in any manner subdivide, combine or reclassify the outstanding shares of Class A Stock, Class B Stock or Common Stock, the outstanding shares of the other classes of common stock shall be subdivided, combined or reclassified proportionately in the same manner and on the same basis as the outstanding shares of Class A Stock, Class B Stock or Common Stock, as the case may be, have been subdivided, combined or reclassified. (2) Consideration in Merger and Similar Transactions. The Corporation shall not be a party to a merger, consolidation, binding share exchange, recapitalization, reclassification or similar transaction (whether or not the Corporation is the surviving or resulting entity) (an "Extraordinary Transaction"), unless the per share consideration, if any, that the holders of Common Stock and Class B Stock receive in connection with such Extraordinary Transaction or are entitled to elect to receive in such Extraordinary Transaction is the same as the per share consideration that the holders of the other of such classes of common stock are entitled to receive or elect to receive in connection with the Extraordinary Transaction. (d) Optional Conversion. (1) The shares of Common Stock and Class B Stock are not convertible into or exchangeable for shares of Class A Stock. (2) Each share of Class A Stock may be converted, at any time and at the option of the holder thereof, into one fully paid and nonassessable share of Common Stock. (3) Each share of Class B Stock may be converted, at any time and at the option of the Corporation, into one fully paid nonassessable share of Common Stock provided that all shares of Class B Stock are so converted." "(e) Mandatory Conversion. (6) This Section 2(e) may not be amended without the affirmative vote of holders of the majority of the shares of the Class A Stock, the affirmative vote of holders of the majority of the shares of the Class B Stock and the affirmative vote of holders Exhibit 3.03 of the majority of the shares of the Common Stock, each voting separately as a class." "(f) Conversion Procedures. (1) Each conversion of shares pursuant to Section 2(d) hereof will be effected by the surrender of the certificate or certificates, duly endorsed, representing the shares to be converted at the principal office of the transfer agent of the Class A Stock, in the case of conversion pursuant to Section 2(d)(2), or of the Class B Stock, in the case of conversion pursuant to Section 2(d)(3), at any time during normal business hours, together with a written notice by the holder stating the number of shares that such holder desires to convert and the names or name in which he wishes the certificate or certificates for the Common Stock to be issued. Such conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered, and at such time, the rights of any such holder with respect to the converted shares of such holder will cease and the person or persons in whose name or names the certificate or certificates for shares are to be issued upon such conversion will be deemed to have become the holder or holders of record of such shares represented thereby. Promptly after such surrender, the Corporation will issue and deliver in accordance with the surrendering holder's instructions the certificate or certificates for the Common Stock issuable upon such conversion and a certificate representing any Class A Stock, in the case of conversion pursuant to Section 2(d)(2) which was represented by the certificate or certificates delivered to the Corporation in connection with such conversion, but which was not converted. (2) The issuance of certificates upon conversion of shares pursuant to Section 2(d) hereto will be made without charge to the holder or holders of such shares for any issuance tax (except stock transfer tax) in respect thereof or other costs incurred by the Corporation in connection therewith. (3) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock or its treasury shares, solely for the purpose of issuance upon the conversion of the Class A Stock and the Class B Stock, such number of shares of Common Stock as may be issued upon conversion of all outstanding Class A Stock and the Class B Stock. Exhibit 3.03 (4) Shares of the Class A Stock and Class B Stock surrendered for conversion as above provided or otherwise acquired by the Corporation shall be canceled according to law and shall not be reissued. (5) All shares of Common Stock which may be issued upon conversion of shares of Class A Stock and Class B Stock will, upon issue, be fully paid and nonassessable." 5. The Restated Certificate of Incorporation of the Corporation is hereby further amended by deleting the first sentence to Article Fifth and replacing it with the following: "FIFTH: The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three (3) and not more than seventeen (17) directors, the exact number of which shall be fixed from time to time by the Board of Directors." IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed on its behalf this 3rd day of July, 2000. IDT CORPORATION By: /s/ Joyce J. Mason --------------------- Name: Joyce J. Mason Title: Secretary and Senior Vice President EX-27 3 0003.txt FDS --
5 3-MOS JUL-31-2001 OCT-31-2000 1,070,596 124,799 176,515 36,768 11,516 1,408,676 261,045 76,876 2,197,719 263,483 0 0 0 260 1,310,988 2,197,719 276,597 276,597 238,619 336,667 0 0 3,273 1,266,026 396,458 869,568 0 0 0 869,568 24.87 22.53
-----END PRIVACY-ENHANCED MESSAGE-----