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NEWARK, NJ — March 8, 2006 — IDT Corporation (NYSE: IDT, IDT.C) announces operating results for the second quarter of fiscal 2006, the three months ended January 31, 2006.
- Revenues increased 3.7% to $615.7 million from $593.5 million in the second quarter of fiscal 2005.
- The net loss from continuing operations for the second quarter of fiscal 2006 was $58.7 million, or ($0.61) per share, compared to a net loss of $20.7 million, or ($0.22) per share, in the second quarter of fiscal 2005.
· As of January 31, 2006, cash, cash equivalents, and restricted cash and marketable securities stood at $700.0 million.
· Our financial results for fiscal years 2005 and 2006 now reflect a reclassification of Corbina Telecom as a discontinued operation.
The following table summarizes the operating performance of IDT’s business segments1:
|
|
|
Revenues |
|
|
Income (Loss) from Operations |
||
|
$ millions |
Q2 ’06 |
Q1 ’06 |
Q2 ’05 |
|
Q2 ’06 |
Q1 ’06 |
Q2 ’05 |
|
IDT Retail Telecom |
$368.2 |
$363.9 |
$397.3 |
|
($4.1) |
$7.7 |
$12.8 |
|
IDT Wholesale Telecom |
128.8 |
138.1 |
128.3 |
|
(7.3) |
(6.1) |
(3.7) |
|
IDT Telecom Total |
497.0 |
502.0 |
525.6 |
|
(11.4) |
1.6 |
9.1 |
|
IDT Entertainment |
48.4 |
48.1 |
41.1 |
|
0.2 |
0.7 |
2.0 |
|
Voice over IP |
25.1 |
21.6 |
18.1 |
|
(9.4) |
(8.1) |
(8.7) |
|
IDT Capital |
43.4 |
31.4 |
7.2 |
|
(3.8) |
(3.6) |
(3.5) |
|
IDT Solutions |
1.7 |
1.4 |
1.5 |
|
(18.4) |
(6.2) |
(14.9) |
|
Corporate |
– |
– |
|
|
(14.3) |
(16.8) |
(12.6) |
|
Total IDT |
$615.7 |
$604.6 |
$593.5 |
|
($57.1) |
($32.4) |
($28.6) |
“This was a challenging quarter for our telecom operations, which have faced unrelenting competitive pressures for some time,” said Jim Courter, CEO. “In addition, while shedding our unprofitable Winstar operations, and disposing of our Russian telecom operations at a significant gain, we continued to invest in a mix of businesses, both within telecom, using our core competencies and infrastructure, and also in highly promising new areas, particularly in entertainment. We believe this is the right course for the long term.”
DEVELOPMENTS
· The sale of Corbina, our Russian telecom business, for $145.7 million in cash, which we announced last quarter, closed on March 2.
· On January 26, we announced that GVC Networks, of Detroit, Michigan, acquired the remaining operations and assets of our Winstar business, except for our nationwide spectrum assets. The operations sold consisted mostly of existing contracts to provide telecommunications services to governmental customers. In connection with the transaction, IDT paid Lucent $10 million in settlement of outstanding litigation.
· In the second quarter of fiscal 2006, we repurchased 3.1 million shares of IDT stock for $37.1 million. Beginning with the fourth quarter of fiscal 2005 through January 31, 2006, we have repurchased a cumulative 6.4 million shares for $79.3 million. We have Board authorization to acquire an additional 13.6 million shares.
· On January 27, our tender offer for Net2Phone closed, and we acquired 33.2 million shares of Net2Phone for $68.3 million. On February 17, we executed a merger agreement with Net2Phone. Following the consummation of the merger, Net2Phone will be a privately held, wholly-owned subsidiary of IDT, and shares of Net2Phone common stock will cease to be quoted on the NASDAQ National Market and will be deregistered with the SEC. The estimated additional consideration payable as a result of the merger will be approximately $28.1 million.
RESULTS OF OPERATIONS
IDT Telecom Line of Business Detail1
|
|
|
Revenues |
|
|
Gross Profit Margin |
|||
|
$ millions |
Q2 ’06 |
Q1 ’06 |
Q2 ’05 |
|
Q2 ’06 |
Q1 ’06 |
Q2 ’05 |
|
|
Calling Cards |
$301.6 |
$295.9 |
$306.5 |
|
20.4% |
21.9% |
22.4% |
|
|
Consumer Phone Services |
66.7 |
68.0 |
90.8 |
|
44.3% |
46.7% |
49.5% |
|
|
Total Retail |
368.2 |
363.9 |
397.3 |
|
24.7% |
26.6% |
28.6% |
|
|
Wholesale |
128.8 |
138.1 |
128.3 |
|
8.6% |
9.0% |
9.3% |
|
|
Total Telecom |
$497.0 |
$502.0 |
$525.6 |
|
20.5% |
21.7% |
23.9% |
|
Retail Telecom
- Calling card revenues increased 1.9% versus the first quarter of fiscal 2006, and were 1.6% lower when compared to last year’s second quarter. Both on a sequential basis as well as year-over-year, U.S. calling card revenues increased, while European calling card revenues declined, reflecting intensifying competition in some of our major European markets.
- Consumer phone services revenues in the second quarter of fiscal 2006 were 26.6% lower than those recorded in the year-ago period and down 2.1% from the first quarter of fiscal 2006, with continuing declines in the United States outweighing the growth achieved in Europe. The customer base for bundled unlimited local and long distance calling within the United States was approximately 188,000 as of January 31, 2006, compared to 202,000 customers as of October 31, 2005 and 300,000 customers as of January 31, 2005. The declines in revenues and subscribers is a direct result of our decision to stop marketing our bundled service early in calendar 2005 in response to the FCC’s ruling that incumbent carriers are no longer required to lease elements of their local networks to competing carriers, such as IDT.
· Through Toucan, the brand name under which we provide our consumer phone and data services in the U.K. and the Netherlands, we provided service to approximately 165,000 customers subscribing to more than 191,000 services (which include various residential phone services in addition to Internet and wireless phone services) as of January 31, 2006.
· Retail Telecom gross margins narrowed to 24.7%, compared to 26.6% in the first quarter, and 28.6% in last year’s second quarter. This quarter witnessed gross margin declines across all of our major retail lines of business. Gross margins for calling cards in both the United States and Europe were affected by intensified price competition as well as cost increases to several key destinations. Our U.S. consumer phone services business was affected by the higher cost structure called for in our wholesale services agreement with Verizon, which replaced the UNE-P regime, which was in place during the second quarter of last year.
· Operating profits for our Retail Telecom business declined $16.9 million as compared to the year-ago period, pushing the division into its first quarterly operating loss since the fourth quarter of fiscal 2001.
Wholesale Telecom
· Wholesale Telecom revenues decreased 6.7% sequentially, and were essentially unchanged from those of a year ago.
· Both on a sequential basis as well as year-over-year, increases in minute volumes were offset by declines in per-minute price realizations, resulting in gross margin declines.
· Internationally originated traffic represented 56% of total wholesale revenues during the second quarter, compared to 50% in the first quarter, and 45% in last year’s second quarter, as our wholesale carrier business becomes increasingly global.
IDT Entertainment
- IDT Entertainment’s revenues increased both on a sequential basis as well as year-over-year, led by the growth in our sales of proprietary productions.
- Proprietary production revenues during the quarter were driven by television and foreign pre-sales of The Happy Elf, Masters of Horror and other direct to TV/DVD productions.
- Our first feature film has been formally named “Everyone’s Hero, The Story of Yankee Irving.” We have also obtained what we believe will be a more favorable movie release date – the weekend of September 15, 2006.
- On February 2, we announced the appointment of Amorette Jones as EVP of Marketing. Ms. Jones is an award-winning marketing veteran and former head of Worldwide Marketing for Artisan Pictures. She oversaw unique marketing strategies, which have influenced the way the entire industry markets movies, for films such as The Blair Witch Project.
- On February 23, we announced that the ABC Television Network picked up IDT Entertainment’s drama series Masters of Science Fiction. The series will feature works from some of the most well known authors of science fiction.
IDT CONFERENCE CALL INFORMATION
Conference call today, March 8, 2006, at 5:15 PM Eastern Time.
- From the U.S., 1-866-594-2183 passcode #7098806.
- International callers, 1-973-935-8583 passcode #7098806
- Replay available for one week at
- 1-877-519-4471, passcode #7098806 for domestic callers,
- or 1-973-341-3080, passcode #7098806 for international callers.
- Webcast of the conference call at www.idt.net. A direct link to the call on the website. An archived copy of the call will be available at the IDT Website in the Investor Relations section’s Presentations for at least six months after the call.
- Financial and statistical information available on IDT’s website at www.idt.net in the “About IDT” Press Releases, and “About IDT” Investor Relations Presentations and Financial sections.
ABOUT IDT CORPORATION
IDT Corporation is a multinational telecommunications, entertainment and technology company. IDT conducts its business primarily through the following operating divisions: IDT Telecom, our largest division, offers retail and wholesale telecommunications services including calling cards, consumer local, long distance, and wireless services; IDT Entertainment operates our animation and home video entertainment businesses; IDT Capital develops and operates new business ventures; and Voice over IP consists primarily of Net2Phone, a provider of VoIP PacketCable, SIP and wireless solutions around the world.
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 numerous important factors. 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 the Company as of the date thereof, and the Company assumes no obligation to update any forward-looking statements or risk factors.
Footnotes
1 Columns in tables may not add due to rounding.
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Investor Contact: Jonathan Levy 973-438-4496
Media Contact: Gil Neilsen 973-438-3553
