Dec 10, 2007
Executives
Jim Courter - CEO and Vice Chairman Marc Oppenheimer - Executive Vice President and CFO Steve Brown - COO
Analysts
Donna Jakers - Janco Partners Clay Moran - Stanford Group
Operator
At this time I would like to welcome everyone to the IDT Corporation first quarter 2008 earnings conference call. (Operator Instructions) It is now with great pleasure that I turn the floor over to your host, Mr.
Jim Courter, Chief Executive Officer and Vice Chairman of IDT Corporation. Sir, you may begin your conference.
Jim Courter
Thank you very much. Thank you for joining me, it’s Jim Courter.
This is being recorded live. I’m being recorded live in the studios at520 Broad Street inNewark.
Welcome to our conference call which is obviously reporting on the first quarter of our earnings, first quarter fiscal year 2008, which of course ended October 31st for this calendar year 2007. Before we begin I must caution all those listening today regarding any forward looking statements that you may hear during the course of the conference call during both the prepared remarks and the Q&A period that follows we may make forward-looking statements either general or specific in nature.
These statements are subject to risk and uncertainties that may cause actual results to differ materially from those which we anticipate. These risks and uncertainties include but are not limited to specific risks, uncertainties discussed and reports that we file with the SEC.
We assume no obligation to update any forward looking statements that we’ve made or may make or to update you on the factors that may cause actual results to differ materially from those that we forecast. First of all, let me start out with an apology about last quarter’s call.
I apologize for the technical difficulties we had during that call. We recorded, and prerecorded, I thought it was well and we started to launch into the Q&A session and we were abruptly terminated by the conference call provider without any warning to IDT or any warning to our callers.
And we will take every precaution; take every opportunity to ensure that something like that does not happen again. It was a personal embarrassment to me and obviously an embarrassment to the company.
On the call with me this afternoon are our Executive Vice President and CFO, Marc Oppenheimer, and Steve Brown who’s the newly appointed COO, Chief Operating Officer. As you know, he previously served as our CFO for many years.
And then he went over to IDT Entertainment overseeing its growth and subsequent successful sale to Liberty Media. It is very comforting to both Howard Jonas and myself to know that Steve is back in the executive suite at IDT Corporation.
We have as you know been reporting on a regular basis about the difficulties with our pre-paid calling card products and the fact that our sales, our margin; our profits have been very negatively affected because of the rampant spread of disclosure fraud in the pre-paid calling card industry. Many of our competitors have been distorting the number of minutes consumers receive both in the cards, in the advertisements at points of sale and actually on the voice prompts as well.
Consumers started to buy the cards that advertised the most number of minutes as consumers would, although they would find out later that the minutes delivered were anywhere between 50 and 65% of what was advertised. Our campaign to clean up the industry and to allow us to compete on an even playing field continues.
Additional defendants have settled and promised honest disclosures. Attorney generals and many states are investigating the fraud and taking action.
The Federal Trade Commission in Washington, DC has a task force in conjunction with various states’ attorney general to investigate and enforce existing consumer protection laws and standards. As noted, that independent Hispanic organizations have had numerous press conferences throughout the United States to sensitize the public, resulting in important news stories covering the fraud.
Progress is being made slowly but surely. I am confident that our actions will manifest themselves in improvement of results in the industry for IDT.
Some tangible progress has already been made, but much more must be done. I have every confidence that it will be done.
Within telecom our carrier wholesale division is still improving. It continues to grow.
We now have a relationship with over 650 customers. On a broader note I’ve addressed our restructuring efforts inthe past nine months focusing on SG&A reductions and more specifically head-count reductions.
We have terminated, not happily, but we had to dothe right thing, we terminated over 900 employees during the past year, some form IDT Corp., some form IDT Capital, and many of course, from IDT Telecom. But efficiencies and operations and reductions in force is only part of our plan.
Another is taking advantage of our acquisition of NetCom by streamlining our global network through the hybridization of the neptaphone and IDT networks, expanding out self-switching capacity and expanding our VoIP traffic. Another part of the plan is the effort by UGA to develop its own direct to retail distribution network.
This is in its very early stages. Currently and what we believe will be the most important part of this plan was making telecom more operationally independent in trading incentives, in management, to focus our profitability.
We did this by guaranteeing telecom management that a percentage of free-cash-flow and a percentage of profits above investments by IDT, if there’s a monetizing event. In exchange compensation in telecom was cut across the board.
In the future telecom management will be rewarded for what they bring to the table not by additional options or equity in the parent company. This will dramatically reduce dilution of our stock as we go forward and should have a positive impact in shareholder value.
Over the next 12 months this new model in the way operational managers are rewarded will be expanded into all our operating divisions or portfolio companies as some would prefer to call them. Options or shares in IDT Corp will be used fairly in the future, and will be almost exclusively for the management of the parent corporation.
Within our capital division, Carmel, our debt collection portfolio company, IDT Energy, New York Esco, and our Internet mobile group deserve mentioning. This year they’re going to invest approximately $8 million in our Internet Mobile group, ING which is headed by Morris Berger, the former CEO of IDT Entertainment.
ING continues to add approximately 13,000 new members a day and is not the 351st largest Internet site by traffic. And our content for mobiles devices is growing each and every week.
We are also investing millions in IDT Carmel. We feel that this will be a very large part of IDT in the future.
IDT energy is profitable, and we’re looking to expand to other states besides New York, We are one of the largest Escos in New York and serve over 300,000 meters. As you know, we’ve suspended out quarterly cash dividends.
We felt that we could deploy our cash in a more effective way. First, continuing our stock buyback program.
We have purchased a total of 5.3 million shares for about $32 million since August 1st of this year; second, exploiting our intellectual property which is about a $15 million investment for the year; third, investing in ING. AS I mentioned before, we’ve invested approximately $8 million recently; fourth buying debt portfolio for Carmel for which we have spent $115 million gross to date, or 80 million net of collections giving us a charge base amount of debt to collect of approximately $1.4 million; and finally continuing to pursue our debit card efforts, our legal legislative, regulatory and public relations campaigns.
I would like to mention that our expenses for litigation although costly have already reaped a dividend. We received an award from the arbitration panel hearing our claim against Altese One to the amount of $40 million in cash, which we should receive on the early part of calendar 2008.
We believe in our legal efforts and will continue to invest in them across the board. I would like now to turn the call over to Marc Oppenheimer, Executive Vice President and CFO of IDT Corp.
Marc.
Marc Oppenheimer
Thanks, Jim. For the next few minutes I would like to update you on IDT’s financial performance for the first quarter if our fiscal 2008, discuss some of the trends we continue to witness in our business and provide some insight into our plans for the future.
I’d like to first walk you through some changes that we’ve reflected in our earnings release this quarter resulting mainly form the way we now view the operations of our telecom position business segment. The purpose of the changes we’ve made is to better track our business’ performance in order to align them with economic realities and shareholder expectations.
We placed some of our more experienced managers at the helm of telecom in order to drive the turnaround. The goal of the reorganization plans is to ensure that telecom maximizes cash-flow generation so that the company has the opportunity to deploy it in the future growth opportunities.
Those managers and much of their staff are now directly incentivized to create cash flow. They have accepted substantial salary reductions in return for a share in the value creation and cash flow that they generate.
As a result of these changes the segment reporting information has been modified to form to current managerial business views. Although still a telecom business segment, now it reflects revenue not only from selling termination minutes of use to third party telecom carriers, but also inter-segment revenue generated from selling minutes to IDT telecom’s internal retail businesses on the basis of termination costs upon markup.
In turn full network operating costs for terminating traffic, such as connectivity and network SG&A which historically had been proportionally allocated amongst all telecom business that use minutes, are now fully absorbed by the wholesale telecom segment. This effort now helps the management team better understand how each business is performing in a stand-alone basis.
For purposes of reporting consolidated telecom results inter-segment activity has been eliminated. To provide meaningful comparisons fiscal 2007 results have been reformatted to conform to the current segment presentation.
Additionally we have disclosed our wholesale segment results, showing inter-segment and third party revenue as well as quarter results for the first segment. This approach has helped and I believe will continue to help our management remain flexible and focused in the ever-changing competitive tele-communication industry.
We will be able to more accurately and promptly detect problem areas in the businesses as well as ensuring that each business is accountable for their own performance. We expect to follow through on our promise of delivering a more focused and performance driven telecom division.
We also made a change in the accounting for our aged receivables within IDT Carmel. This is something we mentioned in our last earnings call.
We’ve adopted the effective yield method of accounting for revenues, changing from the cost recovery method employed in fiscal 2007. The effective yield method allows us to record some revenue from each collection we make giving what we believe to be a fairer reflection of performance.
As a result of this change in accounting method, IDT Carmel ahs reported its first ever operating profit. Revenues were $9.7 million; gross profit was $3.4 million.
And adjust EBIDAT which we define as our gross profit left SG&A expenses before restructuring, severance and impairment charges were $2.1 million. On a consolidated basis, our income from operations was $4.3 million for the quarter which includes an arbitration award against L.T.
Swan consisting of 23 million Euros plus interest which will accrue on the amount awarded until we receive it. We expect that to be in the first calendar quarter of 2008.
And the total should be approximately 40 million US dollars. Excluding this award we had a loss from operations of $35.7 million for the quarter and adjusted EBIDAT of -$16.1 million.
The year ago figure was +$9.6 million of adjusted EBIDAT so that clearly shows that we have a lot more to do. At this point in time and on a going forward basis, expense control is particularly important for us.
I therefore want to discuss SG&A expenses a bit more. On a consolidated basis they improved 27.4% sequentially as they grew 3.4% year-over-year.
If we remove the SG&A expenses associated with our Japan business which was subsequently sold from the period a year ago, the consolidated increase comes to 12%. This increase is something that we must address.
The major factor is roughly equal weightings with pre-paid telephone product, predominately wireless, IDT Capital and IDT Corporate. IDT Energy’s SG&A increased only $250, 000 while wholesale telecom and the remaining portion of consumer phone service each decreased SG&A expenses by a couple of million dollars.
Here is our thinking in more detail. Pre-paid wireless as part of telecom will be thoroughly scrutinized to ensure that each expense is warranted and builds value.
This process is already ongoing at telecom. There is a constant search for savings across all telecom business, even though the cost structure has already been rationalized.
IDT Capital’s SG&A expenses include year-over-year in all its business lines. Some of the increase, but not all, relates to the growth of new businesses.
In an effort to cut costs we’ve decided to close our Puerto Rico call center which should result in annual savings of approximately $2 million a year. SG&A also continues to be above our expectation due to special one-time payments and increased legal expenses.
As you know, we have ongoing matter under litigation that we believe will be positive contributors to IDT’s overall growth and profitability. One small example is the recent success I mentioned a moment ago.
In the arbitration suit related to termination of cable license agreements. While these legal expenses are expected, their timing can be difficult to predict.
Another step that corporate has committed to is the purchase of our headquarters building which will give us significant savings over our escalating lease payment. Turning to the results for our operating division, our telecom revenues for the first quarter were $403 million representing decreases of 6.8% sequentially and 14.6% in comparison to the year ago period.
Calling cards were predominately responsible for the revenue decline. The market for calling cards continues to price sensitive with little to no pricing power.
However in the first quarter our pre-paid products gross profit margin improved to 18.4% with an average of only 15.1% in the prior three quarters. This result was still 140 basis points lower than the 19.8% gross profit margin of last year’s first quarter.
Our cost per minute declined at a faster rate than our revenue per minute declined partly as a result of the continuous reduction in connectivity costs achieved in wholesale, as well as to a shift in our product mix. Our prepaid products business generated 2.3 billion minutes in the first quarter as compared to 2.5 billion minutes in the fourth quarter and 3.2 billion minutes carried in the first quarter one year ago.
At the per minute level, gross profit of 1.22 cents per minute in the first quarter was higher than the .89 cents per minute that we 4experienced during the fourth quarter, but still fell slightly short of last year’s 1.31 cents per minute. The more significant problem was that SG&A increased 14.5% for prepaid products year over year in the face of a gross profit decline of more than 25%.
The largest component of the SG&A increase relates to TO Mobile which is growing but which still operates at a loss. The question of reducing fixed costs for this business is high on the priority list for management.
While every aspect of our telecom business faces intense competition our wholesale business is fairing much better than retail. With our least-cost routing system, progressive purchasing strategies and extensive relationships, we’ve been able to provide major carriers, and niche carriers alike with rates that we believe are often lower internationally than our competitors.
We’re also able to offer guaranteed high-quality connections suitable for the most quality sense of traffic of our customers. Our wholesale business ahs been the beneficiary of several key initiatives and is already showing improved results.
Faced with excess capacity specifically during last year’s third and fourth quarter, wholesale carried very low price traffic. The network has been right-sized and gross profits per minute increased 44% in the first quarter versus the immediately prior quarter.
Connectivity expenses, compensation, including capitalized labor and the capital spending budget have been cut. We’ve identified cost savings amounting to more than $33 million on an annual basis for telecom overall with much of this occurring to the wholesale business.
Our consumer phone service continues to be in harvest mode. We haven’t actively marketed since the year-ending T-rules changed in 2005.
IN harvest mode, it is still contributing. As of the end of the first quarter we had approximately 67,500 bundled and 195,500 long distance only customers.
Operating profit was $5.2 million for the quarter. Shifting from telecom, IDT Energy is one of the largest Escos in New York State.
However at the end of the first quarter, the company serviced approximately 312,000 meters all in New York State compared to approximately 300,000 meters at the end of the fourth quarter of fiscal 2007. This business is on track in its management and performance.
First quarter revenues rose 16.2% versus last years quarter, so that the prime 7.2% sequentially is expected. Although operating profits fell, the company was still profitable.
Gross margins were 12.9% in the quarter versus 23/2% in the year ago period, and 10.1% in the fourth quarter. At IDT Capital revenues for the first quarter were $23 million representing an increase of 52.5% on a sequential basis, and 56.7 percent year over year.
Both increases are predominately due to our IDT Carmel debt collection business. I previously discussed the accounting changes IDT Carmel with you, and this change is the main reason for the gains in IDT Carmel’s revenues, gross profit and operating profit.
During the first quarter IDT Carmel purchased receivables portfolios with a total face value of approximately $412.2 million for a total cost of approximately $37 million. Compared to the fourth quarter where we purchased $370 million in face value for approximately $30 million.
Turning to our balance sheet and cash flows we entered the quarter with approximately $542 million in cash, cash equivalents, marketed securities and investments for $7.14 per share. Walking through some of the larger cash flow movements during the first quarter, cash used for operations was approximately $55 million during this quarter.
We decreased the accounts payable and accrued expenses by about $38 million. IDT Carmel invested approximately $37 million to purchase receivable portfolios and collected approximately $7 million during the quarter.
FX which approximated $9 million was spread across our various business units with the largest amount being inIDT Telecom, $11 million was also used for additional investments. Additionally we repurchased approximately 4.9 million shares during this quarter for $38.2 million.
And form November 1st to date we purchased an additional 448,300 shares for $3.6 million. Although there’s still a great deal to do we’re starting to see results form the hard work and efforts of our employees.
I’m encouraged by the new sense of awareness and urgency you can feel when you visit with our management teams. We believe that the proper incentives have been implemented and the proper accounting methods have now been put in place to create a more limber, more focused and more aggressive company.
Thank you for spending the time with us this afternoon. We look forward to answering any questions you may have.
Operator, if you’d please open up the line for questions.
Operator
Thank you. [Operator instructions] We’ll pause for just a moment to compile the Q&A roster.
Thank you, your first question is coming from Donna Jakers from Janco Partners, please go ahead.
Donna Jakers – Janco Partners
My question – just a few quick ones, I guess. There’s a sharp increase on the income taxes payable on the balance sheet.
Can you address that?
Marc Oppenheimer
Yes, Donna, Marc here. There’s a new accounting pronouncement called FIN 48, where instead of putting a net figure, we actually put in the balance sheet deferred tax assets whereas previously it was just deferred tax liabilities as well as income tax liabilities.
If you look at the number previously we had $105 million, after you show all the detail that number now is actually $127 million, it went up 22 million in the period but because of visibility we actually show that $345 million as a potential tax liability against which you have the credit of the $218 million. So the net number actually only went from $105 million to $127 million.
Donna Jakers – Janco Partners
Okay, there’s been no change in the audit from the IRS?
Marc Oppenheimer
No, this is purely the accounting pronouncement that went into effect August 1st for us.
Donna Jakers– Janco Partners
Okay, and then the share reversals that you mentioned that you guys had bought back 4.9 million shares in the quarter, I'm assuming this was late in the quarter since that doesn’t show up in the weighted average number of shares?
Marc Oppenheimer
Yes, actually there were purchases under the 10B51 program that is a current program, and then others that were late in the quarter.
Donna Jakers– Janco Partners
So was there also no new shares granted that offset some of that or should we be looking for a sharp drop in number of shares outstanding then next quarter.
Marc Oppenheimer
No, you’re actually going to look a number that's now below 76 million.
Donna Jakers– Janco Partners
Okay, great and finally on the plans on further debt purchases for Carmel, I know when I talked to you guys last quarter you were evaluating several foothold purchases, has nay decision been made there?
Marc Oppenheimer
Yes, on Carmel we’re actually watching the environment very, very carefully as you know there’s been deterioration in the credit markets and that's impacted pricing. We see portfolio pricing in the stock market coming down and we still have contractual obligations of approximately $20 million on the forward flow programs.
But we’re evaluating opportunities on a regular basis now in the stock market because those prices have definitely come down.
Donna Jakers– Janco Partners
Okay and I guess just one last question. You mentioned moving the infrastructure of the wholesale operation as far as the cost-cutting on connectivity charges to more of a white platform.
Can you talk about any sort of goal there that you have as far as reducing that connectivity cost?
Marc Oppenheimer
Sure, Donna, if you look at the, as an example, the start rate. If you go to the beginning of fiscal ’07 which would be August 1st of 2006, our run rate for connectivity globally on our platform was approximately $47 million.
If you look at the current run rate because of the change over to VoIP as well as shutting down some of the antiquated switches that run rate is currently $38 million. And if we look to the end of our fiscal year, look forward say another seven months from now, we are expecting that number to drop down to the $32 to $33 million level.
So we’ve had a $15 million drop from that steady state run rate.
Donna Jakers– Janco Partners
And that $32 million would be on sort of an equivalent number of minutes?
Marc Oppenheimer
That’s correct.
Donna Jakers– Janco Partners
Okay great, I’ll get back in the queue, let some other people ask questions.
Operator
The next question is coming from Clay Moran from Stanford Group. Please go ahead.
Clay Moran – Stanford Group
Questions – I have a few. On the IRS audit, do you have any sense of the timing of when that could be resolved?
And since there’s no accrual for any potential settlement does that mean you don’t expect any significant expense out of that?
Marc Oppenheimer
We actually have an accrual in those numbers, Clay. As I mentioned to you before we had a variety of items that we showed as deferred tax liabilities, so it was in there.
As far as planning is concerned, it’s difficult. We still hold to our position, it’s an ongoing audit.
If we’re able to put this behind us as I said to you before we’ll be happy to do it. But it’s something that is still ongoing so I’m not able to report at this time any concrete additional information.
Obviously if we can make this go away, it’s in everybody’s interest.
Clay Moran – Stanford Group
Okay, how much for the net to phone issue is included in the current accrual?
Marc Oppenheimer
We have in the current accrual approximately $70 million. And then there are additional monies accrued for some interest.
But that is the amount that had been accrued and as I said that’s covered in the $105 million that previously showed up as part of the deferred tax liabilities.
Clay Moran – Stanford Group
Okay, when you were talking about the cash uses during the quarter I think you mentioned $55 million used for operations? Then you gave a bunch of other numbers, were those other numbers included in that as well or what is in that $55 million from operations since I think EBIDAT loss was about $15 million?
Mark Oppenheimer
Yes, if you look at EBIDAT that was about $15 million there was about $1.5 million of non-cash compensation. You had depreciation and amortization of approximately $18 million.
Offsetting that – clearly we didn’t collect the cash yet, but you have the arbitration award for $40 million. You also have some minority interest payments, some restructuring and impairment charges.
Also some residual severance drag from the reduction in workforce that we’d previously done, where we’ve had some of those. And then the largest part was obviously the reduction in accruals and payables.
Clay Moran – Stanford Group
Okay, so some of those numbers that you gave after wards were in that $55 million.
Marc Oppenheimer
That's correct. I just had to give some color to it, Clay.
The accounts payable went down about $38 million. So I think that's the biggest portion between EBIDAT and cash flow.
Clay Moran – Stanford Group
Okay, on your balance sheet there’s an item for investments, it’s about 20% of your market value today. Can you give us more color in what’s included in those investments?
Marc Oppenheimer
Sure some of the investments are actually strategic investments that we’ve made where we are interested in as Howard mentioned in the last call, migrating form some commodity margin types of business to areas that will allow us to be an enabler of technology versus servicing, those are some of them. Others are part of a blended portfolio.
You’ll see that number is pretty consistent though, Clay, quarter to quarter. It’s reached an area where I wouldn’t anticipate there’d be a significant change in that.
Obviously from a P&L perspective with the deteriorated and treaded environment and the FOMC action to lower interest rates the interest income on the treasuries and other investments - at least safe investments – will go down. But as far as mix is concerned, pretty much it’s going to be consistent as you see it.
Clay Moran – Stanford Group
Its investments within your IDT Capital?
Marc Oppenheimer
Its investments – some of them are telecom, some of them are in Capital. And some of them are part of a treasury portfolio while we’re waiting to deploy the funds in our businesses.
We are taking advantage of certain opportunities to supplement the P&L.
Clay Moran – Stanford Group
Okay, one more question just on the Cap-ex. I guess I was thinking you could see some change4 there seeing some of the asset sales, changing the run rate that is, the asset sales and the pull back on expenditures and general – is the 9 million about right for a quarterly run rate and can you give us any idea what the telecom investments are these days?
Marc Oppenheimer
I think that if you look a run rate on an annualized basis as an example for the fourth quarter we will be running at about $17.8 million in TP and Cap-ex. If you look at the estimate for 2008, it’s going to be closer to $12.5 million.
We also have as we previously discussed, we’re going to be purchasing the building that we’re in. That will save us significant amounts of cash over time as the escalating lease payments are avoided.
But if you look at the mix of Cap-ex, part of it is going to be to allow us to have better margins; part of it is actually going to be in some of the various businesses, the IDT Capital as well as some of the telecom and proprietary technology that we’re looking at.
Clay Moran – Stanford Group
Are you saying $12.5 million in telecom Cap-ex annually? Is that what you’re referring to when you say PPE of property, switches and such?
Marc Oppenheimer
Yes, yes, that’s correct.
Clay Moran – Stanford Group
Okay, thank you.
Operator
Thank you, your next question is coming form Donna Jakers of Janco Partners with a follow-up question. Please go ahead.
Donna Jakers – Janco Partners
The key business is not broken up any more, so is that still an IDT Capital, is that part of the other?
Marc Oppenheimer
The EGB is part of at this point in time telecom because it’s handled through our ethnic distribution which is the UTA Venture. At this point in time it’s not material as far as the segment is concerned.
And we’re looking at whether it really should take management time and focus. And under the new capital asset allocation model that we’ve created, Donna, the return that we’re going to get form that business is a commodity return.
So it’s not something we’re not going to supply any significant funds into.
Donna Jakers – Janco Partners
It was running around $4 or $5 million – wait; sales in ethnic gross were around $6 million a quarter. Is that still where is its and what part of telecom is it in, the prepaid?
Marc Oppenheimer
It is in prepaid. The number that you’re quoting is an accurate number.
It’s basically an autopilot asset that is not going to create a tremendous amount of value for us at this point in time. We’re looking at losses of approximately $2 million for the year.
And based on the fact that it’s going to be losing and not contributing I would have thought that we can do better things with our time and our money, Donna.
Donna Jakers – Janco Partners
Any chance of monetizing it?
Marc Oppenheimer
We’re actually looking at that, there are a variety of avenues that we’re looking at. And certainly over the next few months we want to have some clarity on that particular asset.
Jim Courter
Donna, it’s Jim. We’re going to try to monetize it otherwise we’re going to close it down.
Donna Jakers – Janco Partners
Okay, thanks, Jim. Then on corporate expenses, obviously we saw it tick up in this quarter, any sort of color on what’s causing the up tick and where the plan is for the year?
Marc Oppenheimer
Yes, actually on the corporate SG&A, we’re actually looking for it to come down. We had some residual one-time items in it.
If you look at the average for the 2006, we were at 14 million; we got that down marginally to 13.5. We’re looking to get that down to 11 million but, again, I have to say that there are periodically things that percolate that can have an impact in any one given time.
But that’s a fair expectation, Donna.
Donna Jakers – Janco Partners
Eleven million per quarter?
Marc Oppenheimer
That's correct.
Donna Jakers – Janco Partners
Okay and then just one last question on the price versus the face value of the debt you purchased this quarter. It ticked up from somewhere inthe eights to looking like 9.1 cents per dollar of debt purchased.
Is that because of the agreement that you’re had that you’re locked into those higher rates; because otherwise I would have thought the market would be more opportunistic than that
Marc Oppenheimer
Actually it’s because of the forward flow, as I said the stock market’s come down and if you look at the dollar waiting, the bulk of what was purchased were the forward commitments versus stock market.
Jim Courter
Again typically for the mix of different stock market purchases compared to the forward flow that we have over purchasing every month at the committed price, the difference in pricing is there were less other purchases during the quarter. There was less mix of other portfolio purchases.
Donna Jakers – Janco Partners
Thanks.
Operator
There appear to be no further questions and this does conclude today’s IDT Corporation First Quarter 2007 earnings conference call. You may now disconnect your lines at this time and have a wonderful afternoon.