IDT Reports Results for the Fourth Quarter and Fiscal 2007

IDT Corporation (NYSE: IDT, IDT.C) announces operating results for the fourth quarter, the three months ended July 31st, 2007, and fiscal 2007. Q4 Revenues: $492.6 million, down 11.3% year-over-year. Q4 Net loss: $(112.4) million, versus a net loss of $(86.5) million one year ago. Q4 Net loss per share: $(1.38) versus a net loss per share of $(0.91) one year ago. Fiscal 2007 Revenues: $2,012 million, versus $2,226 million in fiscal 2006. Fiscal 2007 Loss from operations: $(172.7) million, versus $(220.8) million in fiscal 2006. Fiscal 2007 Net income: $58.6 million, versus net loss of $(178.7) million in fiscal 2006. Cash, cash equivalents, marketable securities, and investments totaled $661.0 million as of the end of the fiscal year. The following table summarizes the operating performance of IDT’s continuing businesses: $ millions   Revenues   Income (Loss) from Operations Fiscal '07   Fiscal '06   Q4 '07   Q3 '07   Q4 '06 Fiscal '07   Fiscal '06   Q4 '07   Q3 '07   Q4 '06   Prepaid Products $936.7 $1,194.9 $220.9 $222.5 $292.1 $(81.5) $(35.5) $(60.6) $(11.4) $3.3 Wholesale Telecom 645.1 597.7 173.1 154.3 149.0 (35.2) (54.9) (12.3) (9.5) (12.7) Consumer Phone Services 148.8 262.1 30.0 30.7 64.7 69.9 0.7 10.6 4.9 0.3 IDT Telecom Total 1,730.6 2,054.7 424.1 407.4 505.8 (46.8) (89.7) (62.4) (16.1) (9.1) IDT Capital 91.3 58.9 23.2 20.7 21.6 (53.6) (68.8) (24.6) (15.3) (16.1) IDT Energy 190.8 112.8 45.3 57.3 28.2 11.4 1.1 0.5 2.5 0.1 Corporate - - - - - (83.6) (63.3) (37.1) (19.1) (19.3) Total IDT $2,012.7 $2,226.4 $492.6 $485.4 $555.5 $(172.8) $(220.8) $(123.7) $(48.0) $(44.3) Columns in table may not add due to rounding. RECENT DEVELOPMENTS On August 27th Marc J. Oppenheimer was appointed as Executive Vice President, Chief Financial Officer and Treasurer. Mr. Oppenheimer has had significant operating and financial positions throughout his 28-year career. Mr. Oppenheimer has been a director of IDT since April 2006 and has served on either the Company’s or its subsidiaries’ boards since December 2002. Mr. Oppenheimer replaced Steve Brown as Chief Financial Officer and Treasurer. Mr. Brown will continue serving the Company as chairman of IDT Carmel and in other positions at IDT Capital’s developing businesses. On July 31st we paid our second quarterly cash dividend in the amount of $10.2 million. Our Board of Directors has elected not to pay a dividend in the current quarter and determined that future dividends will depend on our financial and operational situation at the relevant times. As the dividend at the prior quarterly level cost approximately $10 million, this is cash that can be utilized for investment and operational needs. During the fourth quarter, we purchased an aggregate of 1.7 million shares of our Common Stock and Class B Common Stock for $17.5 million under our stock buy back program. We continued our cost reduction program that began in the third quarter of fiscal 2006, and eliminated a total of 880 positions, of which 310 positions were eliminated during the fourth quarter of 2007. As a result, we recorded severance charges of $25 million in fiscal 2007, of which $17 million was recorded in the fourth quarter. We continue to believe that these reductions will result in approximately $45-50 million in reduced costs on an annualized basis. RESULTS FROM OPERATIONS IDT Telecom Line of Business Detail $ millions Q1 06 Q2 06 Q3 06 Q4 06 FY 06 Q1 07 Q2 07 Q3 07 Q4 07 FY 07 REVENUES TOTAL 523.5 521.5 504.0 505.8 2,054.7 461.9 437.3 407.4 424.1 1,730.6 Prepaid Products 300.6 303.4 298.8 292.1 1,194.9 251.4 241.9 222.5 220.9 936.7 CC- United States 257.1 263.9 258.7 252.8 1,032.4 215.8 204.6 179.6 174.7 774.7 CC- Europe 37.3 31.2 30.4 28.4 127.2 25.9 25.9 25.4 27.5 104.7 CC- Rest of World 6.1 7.4 7.7 9.1 30.3 7.2 7.8 10.1 7.5 32.6 Other (1) 0.1 1.0 2.0 1.8 5.0 2.5 3.6 7.3 11.2 24.7 Wholesale 154.7 151.3 142.7 149.0 597.7 156.6 161.1 154.3 173.1 645.1 Consumer Phone Services 68.2 66.8 62.4 64.7 262.1 53.8 34.3 30.7 30.0 148.8 United States 53.7 51.5 44.8 41.3 191.4 35.7 33.4 29.5 28.4 127.1 Europe (2) 14.5 15.3 17.6 23.3 70.7 17.5 0.0 0.0 0.0 17.5 Other 0.0 0.0 0.0 0.0 0.0 0.6 0.8 1.2 1.6 4.2 GROSS PROFIT TOTAL 118.4 112.4 66.2 115.9 413.0 106.1 83.8 78.8 73.7 342.5 Prepaid Products 66.9 61.0 19.6 66.6 214.0 58.8 42.6 45.7 39.6 186.7 Calling Cards 66.9 61.0 19.1 67.9 215.0 59.2 43.1 44.2 37.6 184.1 Other 0.0 (0.1) 0.5 (1.4) (1.0) (0.4) (0.4) 1.4 2.1 2.7 Wholesale 19.8 21.9 20.6 22.4 84.6 26.3 25.8 20.3 18.5 91.0 Consumer Phone Services 31.8 29.6 26.0 26.9 114.3 21.0 15.4 12.8 15.5 64.8 United States 25.2 23.0 19.4 18.4 86.1 14.8 14.8 12.5 15.0 57.2 Europe 6.5 6.6 6.6 8.5 28.2 5.9 0.0 0.0 0.0 5.9 Other 0.0 0.0 0.0 0.0 0.0 0.3 0.6 0.3 0.5 1.7 GROSS MARGIN TOTAL 22.6% 21.6% 13.1% 22.9% 20.1% 23.0% 19.2% 19.4% 17.4% 19.8% Prepaid Products 22.2% 20.1% 6.6% 22.8% 17.9% 23.4% 17.6% 20.5% 17.9% 19.9% Calling Cards 22.3% 20.2% 6.4% 23.4% 18.1% 23.8% 18.1% 20.6% 17.9% 20.2% Other (41.2%) (6.3%) 25.4% (73.9%) (19.3%) (15.1%) (12.2%) 19.5% 18.3% 10.8% Wholesale 12.8% 14.5% 14.4% 15.1% 14.2% 16.8% 16.0% 13.2% 10.7% 14.1% Consumer Phone Services 46.6% 44.3% 41.7% 41.6% 43.6% 39.1% 45.0% 41.9% 51.7% 43.5% United States 47.0% 44.6% 43.3% 44.5% 45.0% 41.4% 44.4% 42.4% 52.8% 45.0% Europe 45.2% 43.0% 37.3% 36.4% 39.9% 33.6% 0.0% 0.0% 0.0% 33.6% Other 0.0% 0.0% 0.0% 0.0% 0.0% 61.4% 67.2% 27.0% 32.2% 41.8% SG&A TOTAL 101.2 108.4 103.2 100.4 413.1 84.1 77.7 75.8 109.8 347.4 Prepaid Products 46.4 50.4 49.3 48.2 194.3 41.7 44.9 45.4 86.0 218.0 Calling Cards 42.1 44.6 41.8 42.0 170.5 35.2 37.6 37.0 76.5 186.3 Other 4.2 5.8 7.6 6.2 23.8 6.5 7.3 8.4 9.5 31.7 Wholesale 25.5 28.7 29.5 27.1 110.8 25.4 24.3 23.0 20.2 93.0 Consumer Phone Services 29.3 29.3 24.3 25.1 108.0 16.9 8.5 7.4 3.6 36.4 United States 18.1 16.3 11.5 12.1 58.0 8.0 7.8 6.7 3.0 25.6 Europe 11.2 12.9 12.8 13.0 50.0 8.8 0.0 0.0 0.0 8.8 Other 0.0 0.0 0.0 0.0 0.0 0.1 0.6 0.7 0.6 2.1 Columns in table may not add due to rounding; CC= calling cards; Wholesale segment now includes, for all periods presented, the Net2Phone Cable Telephony business unit, which was formerly included in the Consumer Phone Services segment. (1) Prepaid Products – Other consists mostly of TuYo Mobile, the U.S. wireless unit of IDT Telecom that operates as a Mobile Virtual Network Operator, or MVNO. (2) Consumer Phone Services – Europe included our U.K.-based Toucan business, which was sold in the first quarter of fiscal 2007. Prepaid Products Prepaid Products revenues in the fourth quarter decreased 0.7% versus the third quarter of fiscal 2007 and decreased 24.4% from the fourth quarter one year ago. In the fourth quarter, the global calling card business carried 2.5 billion minutes, as compared to 2.6 billion minutes in the third quarter of fiscal 2007 and 3.7 billion minutes in 2006’s fourth quarter. As a percentage of IDT Telecom’s overall revenues, Prepaid Products revenues decreased from 58.2% in fiscal 2006 to 54.1% in fiscal 2007. Gross margins in our Prepaid Products segment increased from 17.9% in fiscal 2006 to 19.9% in fiscal 2007. This increase was mainly a result of the $57.0 million regulatory fee accrual included in direct cost of revenues that we recorded in fiscal 2006, partially offset by a decrease in gross margins as a result of continued competitive pressures. As we have mentioned in earlier reports, we believe that our revenues have been negatively affected by the practices of many of our competitors, whose cards do not deliver all of the minutes they sell. In the second quarter of 2007 we initiated legal action, and a lobbying and public relations campaign, in an attempt to level the playing field. We reached a settlement with respect to our previously disclosed litigation with Aerotel with respect to alleged patent infringement. The settlement provides for a payment of $15 million in cash to Aerotel, which we have paid in the first quarter of fiscal 2008, and making available to Aerotel calling cards or PINs over time with potential termination costs of up to $15 million, subject to certain other conditions. In connection with this settlement, we accrued an expense in the fourth quarter of fiscal 2007 that is included in the Prepaid Products selling, general and administrative expenses. Wholesale Telecommunications Services Wholesale Telecommunications revenues increased 12.2% sequentially, and increased 16.2% from the fourth quarter one year ago. In the fourth quarter, Wholesale Telecommunications carried 3.4 billion minutes, compared to 3.0 billion minutes in the third quarter, and 2.5 billion minutes in the fourth quarter one year ago. Wholesale Telecommunications carried 12.1 billion minutes in fiscal 2007 compared to 9.2 billion minutes in fiscal 2006. The sequential revenue increase was driven by higher revenues from internationally originated wholesale minutes. Revenues from internationally originated wholesale minutes continued to account for an increasing proportion of overall Wholesale revenues, amounting to more than 60% of the total in the fourth quarter of fiscal 2007. The increase in revenues in fiscal 2007 compared to fiscal 2006 was a direct result of increased traffic volumes, which was partially offset by lower per-minute price realizations. As a percentage of IDT Telecom’s overall revenues, Wholesale Telecommunications revenues increased from 29.0% in fiscal 2006 to 37.3% in fiscal 2007 as a result of increased Wholesale Telecommunications revenues coupled with a decline in our calling card revenues. Gross margins decreased slightly from 14.2% in fiscal 2006 to 14.1% in fiscal 2007 as a result of declines in average revenue-per-minute that exceeded the decreases in per-minute termination costs. Higher connectivity expenses also affected the gross margins as wholesale minutes continue to account for a growing proportion of our overall network minutes. Consumer Phone Services Consumer Phone Services revenues for the fourth quarter were 2.1% lower than those recorded in the third quarter of fiscal 2007, and 53.6% lower than revenues in last year’s fourth quarter. The customer base for our bundled unlimited local and long distance consumer phone services was approximately 77,900 as of July 31, 2007, compared to 96,400 customers as of April 30, 2007. The customer base for long distance-only services stood at approximately 206,900 at the end of the fourth quarter, as compared to 218,900 at the end of the third quarter. As a percentage of IDT Telecom’s overall revenues, Consumer Phone Services revenues decreased from 12.8% in fiscal 2006 to 8.6% in fiscal 2007. Gross margins for our U.S. Consumer Phone Services business remained flat at 44% in both fiscal 2007 and 2006. The revenue decline in our U.S. business, particularly in our bundled offering, is reflective of our decision to stop marketing these services to new customers following the FCC’s abolishment of the UNE-P pricing regime in 2005. IDT Energy Line of Business Detail $ millions   Q1 06   Q2 06   Q3 06   Q4 06   FY 06   Q1 07   Q2 07   Q3 07   Q4 07   FY 07 REVENUES TOTAL 22.1 33.9 28.6 28.2 112.8 36.2 51.9 57.3 45.3 190.8   GROSS PROFIT TOTAL 1.6 1.5 4.1 2.8 10.1 8.4 7.1 6.4 4.6 26.5   GROSS MARGIN % TOTAL 7.20% 4.50% 14.50% 10.10% 9.00% 23.20% 13.70% 11.20% 10.10% 13.90%   SG&A TOTAL 2.0 1.8 2.4 2.7 9.0 3.5 3.5 4.0 4.0 14.9 IDT Energy For the year over year period, significant growth in the customer base of IDT Energy led to the revenue growth. As of the end of the fourth quarter, IDT Energy serviced approximately 300,000 meters in New York State, compared to approximately 284,000 meters at the end of the third quarter of fiscal 2007 and approximately 200,000 at the end of fiscal 2006. Seasonally lower gas revenues were more than offset by seasonally higher electric revenues in the fourth quarter of 2007. Gross margins in IDT Energy for the quarter were 10.1%. Gross margins remain strong as a result of our managing the direct costs and taking advantage of unique market opportunities during fiscal 2007. We anticipate that gross margins in IDT Energy will range between 6% and 7% in fiscal 2008. IDT Capital Line of Business Detail $ millions   Q1 06   Q2 06   Q3 06   Q4 06   FY 06   Q1 07   Q2 07   Q3 07   Q4 07   FY 07 REVENUES TOTAL $10.9 $11.9 $14.6 $21.6 $58.9 $24.2 $23.2 $20.7 $23.2 $91.3   Local Media 4.9 4.3 4.1 6.3 19.7 5.8 5.2 4.9 6.7 22.6 Ethnic Grocery Brands 0.0 0.0 3.2 8.2 11.5 9.3 9.3 7.8 7.5 33.9 Debt Collection 0.0 0.1 0.1 0.3 0.4 1.9 0.8 1.0 1.8 5.4 IMG 0.0 0.0 0.0 0.0 0.0 0.2 0.3 0.1 1.5 2.1 Capital- Other 6.0 7.5 7.2 6.7 27.3 7.1 7.6 6.9 5.7 27.3   GROSS PROFIT TOTAL 4.4 4.4 6.9 7.7 23.3 8.9 10.2 4.4 5.2 28.6   Local Media 3.6 3.0 2.9 4.3 13.9 4.2 3.8 3.1 4.9 16.0 Ethnic Grocery Brands 0.0 0.0 1.0 1.9 2.9 1.9 1.8 1.5 1.6 6.8 Debt Collection 0.0 0.1 (0.1) (0.3) (0.3) 0.5 (0.9) (2.3) (3.6) (6.4) IMG 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.1 0.6 1.0 Capital- Other 0.7 1.3 3.0 1.8 6.8 2.2 5.3 2.1 1.7 11.2   GROSS MARGIN % TOTAL 40.00% 37.30% 47.10% 35.70% 39.60% 36.90% 43.70% 21.40% 22.30% 31.40%   Local Media, GM % 73.20% 70.10% 70.40% 68.50% 70.40% 73.50% 73.50% 62.60% 73.30% 71.10% Ethnic Grocery Brands, GM % 0.00% 0.00% 31.90% 23.00% 25.50% 20.50% 19.30% 19.00% 21.50% 20.00% Debt Collection, GM % 0.00% 100.00% (105.70)% (111.50)% (71.50)% 26.90% (113.70)% (241.30)% (202.90)% (116.60)% IMG 0.00% 0.00% 0.00% 0.00% 0.00% 50.20% 63.40% 83.50% 37.90% 44.80% Capital- Other, GM % 12.50% 17.80% 42.00% 26.30% 25.10% 30.70% 69.30% 30.20% 29.50% 41.10%   SG&A TOTAL 13.8 28.4 19.1 16.2 77.5 13.0 16.0 17.6 19.4 66.1   Local Media 3.6 4.0 3.7 3.5 14.9 3.5 4.2 4.1 5.0 16.8 Ethnic Grocery Brands 0.0 0.0 0.9 2.0 3.0 2.2 3.1 3.4 2.9 11.6 Debt Collection 0.0 0.9 0.5 0.7 2.0 0.7 1.0 1.0 1.5 4.2 IMG 0.0 0.0 0.0 0.0 0.0 0.4 1.0 0.6 1.5 3.6 Capital Other 10.2 23.5 14.0 9.9 57.6 6.2 6.7 8.5 8.5 29.9 Columns in table may not add due to rounding. IDT Capital IDT Capital is responsible for developing, incubating and in some cases, operating our newer business, as well as overseeing certain existing non-core businesses. IDT Capital consists of IDT Carmel (which operates our management of aged receivables operations); IDT Local Media (which is primarily comprised of CTM Brochure Display, our brochure distribution company, and WMET 1160AM, our Washington, DC-based radio station), Internet Mobile Group, which primarily owns and operates Zedge.net, Zedge.com and IDW Publishing; and other smaller holdings and operations including IDT Spectrum, which holds a significant number of Federal Communications Commission, or FCC, licenses for commercial fixed wireless spectrum in the United States, call center operations, a grocery distribution business and certain real estate investments. In the next 12 months, we expect to see continued growth in certain IDT Capital businesses and particularly in the IDT Carmel business. IDT Capital’s revenues for the fourth quarter of fiscal 2007 increased 11.9% in comparison to the third quarter of fiscal 2007. During the fourth quarter, IDT Carmel purchased approximately $370 million in face value of new receivables inventory, in 13 transactions, for approximately $30 million dollars, compared to the third quarter where IDT Carmel purchased approximately $300 million in face value of new receivables inventory, in 8 transactions, for approximately $30 million. In fiscal 2007, IDT Carmel purchased approximately $1 billion in face value of new receivables inventory, in 37 transactions, for approximately $78 million. The carrying value of the receivables in the portfolio management and collection business as of July 31, 2007 was $51.1 million. IDT CONFERENCE CALL INFORMATION Conference call today, October 11, 2007, at 4:30 PM Eastern Time. From the U.S., please dial (888) 694-4676; Conference ID: 9282070. International callers, please dial (973) 582-2737; Conference ID: 9282070. Replay available for one week at:(877) 519-4471, Conference ID: 9282070 for domestic callers or(973) 341-3080, Conference ID: 9282070 for international callers. Webcast of the conference call will be available at the direct link on www.idt.net. An archived copy of the call will be available at the IDT Website, in the Investor Relations section under the Presentations heading for at least six months after the call. Additional financial and statistical information is available on the Investor Relations portion of IDT’s website, at http://www.idt.net/about/ir/overview.asp. ABOUT IDT CORPORATION IDT Corporation is a multinational holding company with operations that span several industries. Our principal businesses consist of: IDT Telecom, through which we provide telecommunications services and products worldwide to the retail and wholesale customers, including prepaid and rechargeable calling cards, consumer local and long distance service, prepaid wireless phone services and wholesale carrier services; IDT Energy, which operates our Energy Services Company, or ESCO, in New York State; IDT Carmel, our receivables portfolio management and collection businesses; IDT Local Media, which is primarily comprised of CTM Brochure Display, our brochure distribution company, and the WMET-AM radio station in the Washington D.C. metropolitan area; and IDT Internet Mobile Group, under which we operate our Zedge websites and platform geared toward content for mobile devices and Zedge Studios, which is focused on creating and distributing proprietary and licensed content for traditional and internet/mobile distribution. We hold assets and operate other smaller or early-stage initiatives and operations under our IDT Capital subsidiary, including IDT Spectrum, which holds a significant number of Federal Communications Commission, or FCC, licenses for commercial fixed wireless spectrum in the United States, Ethnic Grocery Brands, our grocery distribution business, IDT Global Services, which is primarily comprised of call center operations, and certain real estate investments. IDT Corporation's Class B Common Stock and Common Stock trade on the New York Stock Exchange under the ticker symbols IDT and IDT.C, respectively. In this press release, all statements that are not purely about historical facts, including, but not limited to, those with the words "believe,” "anticipate,” "expect,” "plan,” "intend,” "estimate,” "target” and similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent IDT’s current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to various risks and uncertainties. These risks and uncertainties include, but are certainly not limited to the specific risks and uncertainties discussed in our reports filed with the SEC. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to IDT as of the date thereof, and IDT assumes no obligation to update any forward-looking statements or risk factors. IDT CORPORATION CONSOLIDATED BALANCE SHEETS   July 31(in thousands)   2007   2006 ASSETS     CURRENT ASSETS: Cash and cash equivalents $ 153,845 $ 119,109 Marketable securities 388,140 390,696 Trade accounts receivable, net of allowance for doubtful accounts of $19,654 at July 31, 2007 and $38,421 at July 31, 2006 171,780 185,125 Prepaid expenses 28,920 33,833 Other current assets 60,452 72,486 Assets of discontinued operations     —     436,905 TOTAL CURRENT ASSETS 803,137 1,238,154 Property, plant and equipment, net 251,318 292,152 Goodwill 101,515 105,577 Licenses and other intangibles, net 13,824 27,445 Investments 119,052 51,872 Other assets     78,465     47,639 TOTAL ASSETS   $ 1,367,311   $ 1,762,839 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Trade accounts payable $ 54,445 $ 82,327 Accrued expenses 288,017 260,087 Deferred revenue 112,757 134,286 Capital lease obligations—current portion 21,049 18,940 Notes payable—current portion 8,095 4,160 Other current liabilities 17,598 38,152 Liabilities of discontinued operations     —     141,860 TOTAL CURRENT LIABILITIES 501,961 679,812 Deferred tax liabilities, net 105,049 107,106 Capital lease obligations—long-term portion 23,401 32,122 Notes payable—long-term portion 82,847 90,370 Other liabilities     12,928     6,850 TOTAL LIABILITIES 726,186 916,260 Minority interests 10,963 43,227 Commitments and contingencies STOCKHOLDERS’ EQUITY: Preferred stock, $.01 par value; authorized shares—10,000; no shares issued — — Common stock, $.01 par value; authorized shares—100,000; 25,075 and 25,075 shares issued and 14,996 and 15,178 shares outstanding at July 31, 2007 and 2006, respectively 251 251 Class A common stock, $.01 par value; authorized shares—35,000; 9,817 shares issued and outstanding at July 31, 2007 and 2006 98 98 Class B common stock, $.01 par value; authorized shares—200,000; 63,261 and 76,879 shares issued and 56,043 and 71,402 shares outstanding at July 31, 2007 and 2006, respectively 633 768 Additional paid-in capital 711,103 901,067 Treasury stock, at cost, consisting of 10,079 and 9,897 shares of common stock and 7,218 and 5,477 shares of Class B common stock at July 31, 2007 and 2006, respectively (240,355) (220,169) Accumulated other comprehensive income 10,750 1,496 Retained earnings     147,682     119,841 TOTAL STOCKHOLDERS’ EQUITY     630,162     803,352 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 1,367,311   $ 1,762,839     IDT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS   Year ended July 31(in thousands, except per share data)   2007   2006   2005 REVENUES   $ 2,012,739   $ 2,226,422   $ 2,221,985 COSTS AND EXPENSES: Direct cost of revenues (exclusive of depreciation and amortization) 1,615,047 1,779,980 1,700,866 Selling, general and administrative (i) 501,658 556,161 533,076 Depreciation and amortization 80,011 87,422 93,631 Restructuring and impairment charges     33,404     23,646     34,212 TOTAL COSTS AND EXPENSES 2,230,120 2,447,209 2,361,785 Gain on sale of U.K.-based Toucan business     44,671     —     — Loss from operations (172,710) (220,787) (139,800) Interest income, net 18,069 9,416 20,575 Other income, net     28,980     7,284     71,454 Loss from continuing operations before minority interests and income taxes (125,661) (204,087) (47,771) Minority interests (10,180) (16,177) (2,639) Provision for income taxes     (3,605)     (2,576)     (6,317) Loss from continuing operations (139,446) (222,840) (56,727) Discontinued operations, net of tax: (Loss) income from discontinued operations (7,165) (35,883) 12,913 Gain on sale of discontinued operations     205,235     80,069     — Total discontinued operations     198,070     44,186     12,913 NET INCOME (LOSS)   $ 58,624   $ (178,654)   $ (43,814) Earnings per share: Basic and diluted: Loss from continuing operations $ (1.70) $ (2.32) $ (0.58) Total discontinued operations     2.41     0.46     0.13 Net income (loss)   $ 0.71   $ (1.86)   $ (0.45) Weighted-average number of shares used in calculation of basic and diluted earnings per share:     82,165     96,028     97,049 (i) Stock based compensation included in selling, general and administrative expense   $ 7,726   $ 21,521   $ 30,328     IDT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS   Year ended July 31 (in thousands)   2007   2006   2005 OPERATING ACTIVITIES       Net income (loss) $ 58,624 $ (178,654) $ (43,814) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Net income from discontinued operations (198,070) (44,186) (12,913) Depreciation and amortization 80,011 87,422 93,631 Restructuring and impairment charges 10,933 13,121 19,975 Minority interests 10,180 16,177 2,639 Deferred tax liabilities (1,991) (5,648) 270 Provision for doubtful accounts 13,307 18,544 35,194 Net realized gains from sales of marketable securities and investments (4,909) (845) (24,836) Gain on sale of U.K.-based Toucan business (44,671) — — Interest in the equity of investments (22,416) — — Stock-based compensation 7,726 21,521 30,328 Change in assets and liabilities, net of effects from acquisitions/ dispositions of businesses: Trade accounts receivable 3,090 (47,295) (40,784) Other current assets and other assets 2,487 (2,950) (18,761) Trade accounts payable, accrued expenses, other current liabilities and other liabilities 4,142 17,489 3,459 Deferred revenue     (20,548)     (7,400)     5,409 Net cash (used in) provided by operating activities (102,105) (112,704) 49,797 INVESTING ACTIVITIES Capital expenditures (36,290) (53,523) (91,156) Collection (issuance) of notes receivable, net (64) 836 (14,042) Investments and acquisitions, net of cash acquired (49,159) (103,351) 1,850 Proceeds from sales of discontinued operations, net of cash sold and transaction costs 260,591 129,308 — Proceeds from sale of U.K.-based Toucan business, net of transaction costs 38,379 — — Purchase of debt portfolios (78,443) — — Principal collections and proceeds on resale of debt portfolios 28,070 — — Proceeds from sales and maturities of marketable securities 1,684,344 1,760,705 5,321,080 Purchases of marketable securities     (1,671,510)     (1,446,237)     (5,147,360) Net cash provided by investing activities 175,918 287,738 70,372 FINANCING ACTIVITIES Dividends paid (30,783) — — Distributions to minority shareholders of subsidiaries (11,367) (25,420) (27,865) Proceeds from exercise of stock options 5,761 2,894 3,993 Proceeds from employee stock purchase plan 2,284 2,347 1,976 Proceeds from borrowings — 11,000 12,174 Proceeds from sale lease back transactions on capital leases 13,319 — 30,503 Repayments of capital lease obligations (20,586) (21,580) (16,698) Repayments of borrowings (3,588) (21,751) (707) Repurchase of stock options in tender offer — (15,829) — Cash and marketable securities restricted against letters of credit — — 3,241 Repurchases of common stock and Class B common stock     (22,522)     (73,514)     (14,660) Net cash used in financing activities (67,482) (141,853) (8,043) DISCONTINUED OPERATIONS Net cash used in operating activities (20,261) (130,339) (53,617) Net cash provided by (used in) investing activities 3,847 12,078 (67,897) Net cash provided by financing activities     7,536     59,152     38,961 Net cash used in discontinued operations (8,878) (59,109) (82,553) Effect of exchange rate changes on cash and cash equivalents     5,200     5,161     209 Net increase (decrease) in cash and cash equivalents 2,653 (20,767) 29,782 Cash and cash equivalents (including discontinued operations) at beginning of year     151,192     171,959     142,177 Cash and cash equivalents (including discontinued operations) at end of year 153,845 151,192 171,959 Less cash and cash equivalents of discontinued operations at end of year     —     (32,083)     (8,069) Cash and cash equivalents (excluding discontinued operations) at end of year   $ 153,845   $ 119,109   $ 163,890 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments made for interest   $ 9,512   $ 10,148   $ 3,677 Cash payments made for income taxes   $ 1,507   $ 6,729   $ 4,633 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Receipt of the Company’s Class B common stock and IDT Telecom shares as part of the proceeds from the sale of IDT Entertainment   $ 226,649   $ —   $ — Receipt of marketable securities as part of the proceeds from the sale of Toucan   $ 7,851   $ —   $ — Purchases of property, plant and equipment through capital lease obligations   $ 293   $ 3,856   $ 2,230 Issuance of liabilities for acquisitions   $ 1,300   $ —   $ 3,850 Issuance of Class B common stock for acquisitions and exchanges   $ —   $ —   $ 60,995 Purchase of leasehold interests and property through debt   $ —   $ —   $ 68,334 Repurchases of common stock and Class B common stock through margin   $ —   $ —   $ 3,681     IDT CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA THREE MONTHS ENDED JULY 31, 2007 (Segment data is shown net of effect of inter-segment transactions)   Total IDT   Wholesale   PrepaidProducts   CPS   IDT   IDT   (In thousands) Corporation Telecom Telecom Telecom Energy Capital Corporate   STATEMENT OF OPERATIONS DATA   Revenues $ 492,557 $ 173,136 $ 220,879 $ 30,037 $ 45,336 $ 23,168 $ –   Costs and expenses:   Direct cost of revenues (exclusive of depreciation and amortization) 409,154 154,592 181,253 14,519 40,780 18,009 – Selling, general and administrative 162,200 20,248 85,952 3,642 3,978 19,388 28,995 Depreciation and amortization 19,535 5,884 10,638 478 91 1,858 586 Restructuring and impairment charges   25,322   4,757     3,653     817     31     8,562     7,502 Total costs and expenses   616,211   185,481     281,496     19,456     44,879     47,816     37,083   Income (loss) from operations (123,654) $ (12,345) $ (60,617) $ 10,581 $ 457 $ (24,648) $ (37,083)     Interest income, net 4,551   Other expense, net   (242)   Loss from continuing operations before minority interests and income taxes (119,345)   Minority interests (1,121) Income tax benefit   1,059   Loss from continuing operations (119,407)   Discontinued operations, net of tax: Gain on sale of discontinued operations   7,000 Total discontinued operations   7,000   Net loss $ (112,407)     IDT CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA FISCAL YEAR ENDED JULY 31, 2007 (Segment data is shown net of effect of inter-segment transactions) Total IDT Wholesale PrepaidProducts CPS IDT IDT (In thousands) Corporation Telecom Telecom Telecom Energy Capital Corporate STATEMENT OF OPERATIONS DATA Revenues $ 2,012,739 $ 645,136 $ 936,720 $ 148,773 $ 190,751 $ 91,359 $ – Costs and expenses: Direct cost of revenues (exclusive of depreciation and amortization) 1,615,047 554,146 749,989 83,985 164,254 62,673 – Selling, general and administrative 501,658 92,959 218,018 36,467 14,944 66,054 73,217 Depreciation and amortization 80,011 24,457 44,213 1,987 124 6,936 2,294 Restructuring and impairment charges   33,404   8,725     6,018     1,152     31     9,337     8,141 Total costs and expenses 2,230,120 680,286 1,018,238 123,592 179,353 144,999 83,652   Gain on sale of U.K.-based Toucan business   44,671   -     -     44,671     -     -     -   Income (loss) from operations (172,710) $ (35,150) $ (81,518) $ 69,852 $ 11,398 $ (53,640) $ (83,652)   Interest income, net 18,069 Other income, net   28,980 Loss from continuing operations before minority interests and income taxes (125,661) Minority interests (10,180) Provision for income taxes   (3,605) Loss from continuing operations (139,446) Discontinued operations, net of tax: Loss from discontinued operations (7,165) Gain on sale of discontinued operations   205,235 Total discontinued operations   198,070 Net income $ 58,624