IDT (IDT) Q4 2001 earnings summary

Executive summary

• FY2001 revenue grew 12.5% to $1.231B, while reported net income reached $532.4M; operating loss widened to $432.7M amid competitive pressure and major impairments.

• Telecom operations shifted toward retail calling cards and domestic long distance; retail rose to 67.8% of telecom revenue as wholesale volume was reduced.

• Cash and marketable securities reached about $1.1B after the Net2Phone share sale, supporting expansion, acquisitions, and a high-cash stance.

Financial highlights

• FY2001 revenue was $1,230.9M, up 12.5% YoY; telecom revenue was $1,204.5M, up 17.7%.

• Reported net income was $532.4M, or $7.79 basic EPS and $7.12 diluted EPS, versus $230.9M in FY2000.

• Operating loss widened to $432.7M from $216.6M; total costs included $199.4M of impairment charges.

• Interest and other income included a $1,037.7M gain on subsidiary stock sales and a $313.5M TyCom settlement gain; partially offset by investment losses.

• Operating cash flow was positive $26.2M versus negative $77.1M in FY2000; capital expenditures were $106.5M.

Outlook and guidance

• Management anticipated overall operational profitability in the coming year and expected to maintain a high cash balance for at least FY2002.

• FY2002 plans included significant network investment, especially to support calling-card traffic, and upgrades in New Jersey and London.

• Telecom aimed to grow retail services, expand calling-card distribution in Latin America, and develop Russian operations through ventures or acquisitions.

• Management expected near-term industry pricing pressure and elevated Ventures SG&A; preliminary tests indicated a significant goodwill impairment in Q1 FY2002.