Other Operating Expense, Net

12 Months Ended

Jul. 31, 2019

Other Operating (Losses) Gains, Net [Abstract]

Other Operating Expense, Net

Note 13—Other Operating Expense, Net

The following table summarizes the other operating expense, net by business segment:

Year ended July 31 (in thousands)	2019			2018			2017
Corporate — gain (losses) related to Straight Path Communications Inc.	$	326		$	(1,655	)	$	(10,436	)
Corporate—gain (losses) related to other legal matters		—			(628	)		24
net2phone—indemnification claim and other, net		(267	)		(115	)		—
Telecom & Payment Services—accrual for non-income related taxes related to a foreign subsidiary		(8,000	)		—			—
Telecom & Payment Services—gain on sale of calling card business in Asia		215			—			—
Telecom & Payment Services—adjustment to gain on sale of member interest in Visa Europe Ltd.		—			—			(63	)
TOTAL	$	(7,726	)	$	(2,398	)	$	(10,475	)

Straight Path Communications Inc. Class Action

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"). As discussed in Note 21, a putative class action on behalf of Straight Path's stockholders and derivative complaint was filed naming the Company, among others. In fiscal 2019 and fiscal 2018, the Company incurred legal fees of $2.0 million and $1.7 million, respectively, related to this action. Also, in fiscal 2019, the Company recorded insurance proceeds for this matter of $2.3 million.

Indemnification Claim

In June 2019, as part of a commercial resolution, the Company indemnified a net2phone cable telephony customer related to patent infringement claims brought against the customer. The Company recorded expense of $0.3 million in fiscal 2019 for this indemnification.

Accrual for Non-Income Related Taxes

In fiscal 2019, the Company recorded an $8.0 million accrual for non-income related taxes related to one of its foreign subsidiaries. A portion of the accrual related to each of the fiscal quarters in fiscal 2019 as follows:

Quarter Ended (in thousands)	Other operating expense		Accrued expense		Deferred income tax assets		Provision for income taxes
Increase (Decrease)
2019:
October 31	$	1,100	$	1,100	$	250	$	(250	)
January 31		2,000		2,000		500		(500	)
April 30		2,300		2,300		600		(600	)
July 31		2,600		2,600		650		(650	)
TOTAL	$	8,000	$	8,000	$	2,000	$	(2,000	)

Accordingly, the Company corrected its consolidated financial statements for its fiscal quarters ended October 31, 2018, January 31, 2019, and April 30, 2019 to include the accrued expense and the related income tax benefit. The Company has determined that the adjustments were not material to its previously issued quarterly financial statements. The impact of the correction on the Company's previously issued consolidated financial statements was as follows:

Quarter Ended October 31, 2018 (in thousands, except per share data)	Previously Reported			Error Correction			As Adjusted
Consolidated Statement of Income:
Other operating expense	$	(195	)	$	(1,100	)	$	(1,295	)
Provision for income taxes	$	(1,189	)	$	250		$	(939	)
Net loss	$	(1,148	)	$	(850	)	$	(1,998	)
Net loss attributable to IDT Corporation	$	(1,449	)	$	(850	)	$	(2,299	)
Loss per share attributable to IDT Corporation common stockholders:
Basic	$	(0.06	)	$	(0.04	)	$	(0.10	)
Diluted	$	(0.06	)	$	(0.04	)	$	(0.10	)

Quarter Ended January 31, 2019 (in thousands, except per share data)	Previously Reported			Error Correction			As Adjusted
Consolidated Statement of Income:
Other operating expense	$	(90	)	$	(2,000	)	$	(2,090	)
Provision for income taxes	$	(1,736	)	$	500		$	(1,236	)
Net income (loss)	$	489		$	(1,500	)	$	(1,011	)
Net income (loss) attributable to IDT Corporation	$	189		$	(1,500	)	$	(1,311	)
Earnings (loss) per share attributable to IDT Corporation common stockholders:
Basic	$	0.01		$	(0.06	)	$	(0.05	)
Diluted	$	0.01		$	(0.06	)	$	(0.05	)

Quarter Ended April 30, 2019 (in thousands, except per share data)	Previously Reported			Error Correction			As Adjusted
Consolidated Statement of Income:
Other operating expense	$	(120	)	$	(2,300	)	$	(2,420	)
Benefit from income taxes	$	871		$	600		$	1,471
Net income	$	4,157		$	(1,700	)	$	2,457
Net income attributable to IDT Corporation	$	3,870		$	(1,700	)	$	2,170
Earnings per share attributable to IDT Corporation common stockholders:
Basic	$	0.15		$	(0.07	)	$	0.08
Diluted	$	0.15		$	(0.07	)	$	0.08

Straight Path Communications Inc. Settlement Agreement and Mutual Release

The Company entered into various agreements with Straight Path prior to the Straight Path Spin-Off including a Separation and Distribution Agreement to affect the separation and provide a framework for the Company's relationship with Straight Path after the spin-off. 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 Straight Path) in connection with licenses to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services. The Company has cooperated with the FCC in this matter and has responded to the letter of inquiry. 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.

The Separation and Distribution Agreement provides for the Company and Straight Path to indemnify each other for certain liabilities. The Company and Straight Path each communicated that it was entitled to indemnification from the other in connection with the inquiry described above and related matters. On October 24, 2017, the Company, Straight Path, Straight Path IP Group, Inc. ("SPIP") and PR-SP IP Holdings LLC ("PR-SP"), an entity owned by Howard S. Jonas, entered into a Settlement Agreement and Release that provides for, among other things, the settlement and mutual release of potential liabilities and claims that may exist or arise under the Separation and Distribution Agreement between the Company and Straight Path. In exchange for the mutual release, in October 2017, the Company paid Straight Path an aggregate of $16 million in cash, Straight Path transferred to the Company its majority ownership interest in Straight Path IP Group Holding, Inc. ("New SPIP"), which holds the equity of SPIP, the entity that holds intellectual property primarily related to communications over computer networks, subject to the right to receive 22% of the net proceeds, if any, received by SPIP from licenses, settlements, awards or judgments involving any of the patent rights and certain transfers of the patents or related rights, that will be retained by Straight Path's stockholders (such equity interest, subject to the retained interest right, the "IP Interest"), and the Company undertook certain funding and other obligations related to SPIP. The Settlement Agreement and Release allocates (i) $10 million of the payment and the retained interest right to the settlement of claims and the mutual release and (ii) $6 million to the transfer of the IP Interest. In fiscal 2017, the Company recorded a liability of $10.0 million related to this settlement and mutual release. In addition, in fiscal 2017, the Company incurred legal fees of $0.9 million related to the FCC investigation and the settlement and mutual release, and the Company received insurance proceeds related to the FCC investigation of $0.5 million.

On October 24, 2017, the Company sold its entire majority interests in New SPIP to PR-SP in exchange for $6 million and the assumption by PR-SP of the funding and other obligations undertaken by the Company.