Commitments and Contingencies

6 Months Ended

Jan. 31, 2017

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 13—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 argument was held on March 9, 2016. On October 17, 2016, the judge granted Tyco’s motion and dismissed the complaint. On November 17, 2016, the Company filed a Notice of Appeal.

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 $1.7 million at January 31, 2017.

Letters of Credit

At January 31, 2017, the Company had letters of credit outstanding totaling $0.1 million for IDT Telecom’s business. The letters of credit outstanding at January 31, 2017 expire in the twelve-month period ending January 31, 2018.

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 January 31, 2017, the Company had aggregate performance bonds of $13.8 million outstanding.

Customer Deposits

At January 31, 2017 and July 31, 2016, “Customer deposits” in the Company’s consolidated balance sheets included refundable customer deposits of $87.5 million and $95.8 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 January 31, 2017 and July 31, 2016, “Cash and cash equivalents” in the Company’s consolidated balance sheets included an aggregate of $10.7 million and $16.0 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:

	January 31, 2017		July 31, 2016
	(in thousands)
IDT Financial Services customer deposits	$	89,134	$	98,500
Related to letters of credit		97		122
Other		189		200
Total restricted cash and cash equivalents	$	89,420	$	98,822

Other Contingencies

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. 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 has been cooperating with the FCC in this matter and has responded to the letter of inquiry. In the three and six months ended January 31, 2017, the Company incurred legal fees of $0.9 million and $1.1 million, respectively, related to this inquiry, which is included in “Other operating expense” in the accompanying consolidated statements of income. As disclosed in Straight Path’s filings with the SEC, Straight Path has entered into a consent decree with the FCC that terminates the FCC’s related investigation against Straight Path.

If the FCC were to pursue separate action against the Company, 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, the Company could be the subject of a claim from Straight Path for indemnification related to its liability related to the consent decree. The Company would vigorously defend against any such claims or actions.