Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 14—Commitments and Contingencies

Legal Proceedings

On March 13, 2014, named plaintiff Anthony Ferrare commenced a putative class-action lawsuit against IDT Energy in the Court of Common Pleas of Philadelphia County, Pennsylvania.  The plaintiff filed the suit on behalf of himself and other former and current customers of IDT Energy in Pennsylvania, whom he contends were injured as a result of IDT Energy’s allegedly unlawful sales and marketing practices.  IDT Energy denies that there is any basis for the suit and any alleged wrongdoing, and intends to vigorously defend the claim.

In addition to the above, the Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Purchase and Other Commitments

The Company had purchase commitments of $2.2 million as of December 31, 2013.

In October 2013, the Company entered into a contract related to Afek’s exploration drilling program pursuant to which the Company’s purchase commitment at December 31, 2013 was $0.5 million.

Tax Audits

In July 2013, IDT Energy negotiated a settlement of an audit of its New York State sales and use tax for the period from June 2003 through August 2009. As a result, IDT Energy paid $0.9 million in July 2013, all of which was previously accrued.

The Company is subject to audits in various jurisdictions for various taxes. At December 31, 2013, the Company accrued $0.3 million for the estimated loss from these audits for which it is probable that a liability has been incurred. Amounts asserted by taxing authorities or the amount ultimately assessed against the Company could be greater than the accrued amount. Accordingly, additional provisions may be recorded in the future as revised estimates are made or underlying matters are settled or resolved. Imposition of assessments as a result of tax audits could have an adverse effect on the Company’s results of operations, cash flows and financial condition.

Letter of Credit

As of December 31, 2013, the Company had letters of credit outstanding totaling $5.7 million primarily for the benefit of regional transmission organizations that coordinate the movement of wholesale electricity and for certain utility companies. The letters of credit outstanding as of December 31, 2013 expire in the year ending December 31, 2014.

Performance Bonds

IDT Energy has performance bonds issued through a third party for the benefit of various states in order to comply with the states’ financial requirements for retail energy providers. At December 31, 2013, IDT Energy had aggregate performance bonds of $3.2 million outstanding.

Lease Commitments

The future minimum payments for operating leases as of December 31, 2013 are as follows:

(in thousands)
Year ending December 31:
2014	$	302
2015		236
2016		13
2017		—
2018		—
Thereafter		—
Total payments	$	551

Rental expense under operating leases was $0.6 million, $0.8 million, $0.2 million, $0.3 million and $42,000 in the years ended December 31, 2013 and 2012, the year ended July 31, 2011, and the five months ended December 31, 2011 and 2010, respectively.

Other Contingencies

Since 2009, IDT Energy has been party to a Preferred Supplier Agreement with BP Energy Company (“BP”), pursuant to which BP is IDT Energy’s preferred provider of electricity and natural gas. The agreement’s termination date is June 30, 2015. Under the arrangement, IDT Energy purchases electricity and natural gas at market rate plus a fee. IDT Energy’s obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of IDT Energy’s customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. IDT Energy’s ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At December 31, 2013, the Company was in compliance with such covenants. As of December 31, 2013, restricted cash of $4.4 million and trade accounts receivable of $42.3 million were pledged to BP as collateral for the payment of IDT Energy’s trade accounts payable to BP of $18.7 million as of December 31, 2013.