Unassociated Document
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 11, 2006
 
 
IDT CORPORATION
(Exact name of registrant as specified in its charter)
 
 
         
Delaware
 
1-16371
 
22-3415036
(State or other jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
     
520 Broad Street
Newark, New Jersey
 
07102
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (973) 438-1000
 
Not Applicable
(Former name or former address, if changed since last report.)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 


Item 2.01. Completion of Acquisition or Disposition of Assets.
 
On September 7, 2006, IDT Corporation (the “Registrant) and its subsidiary IDT Dutch Holdings BV (“Dutch Holdings”) entered into a conditional Share Sale and Purchase Agreement (the “Agreement”) for the sale of the Registrant’s U.K.-based Toucan consumer phone services business (“Toucan business”) to Pipex Communications plc (“Pipex”). Pursuant to the terms of the Agreement, Pipex is assuming Toucan’s existing customer base and those employees supporting Toucan’s operations. The parties subsequently amended the Agreement to provide that the consideration is to consist of £4 million in Pipex ordinary shares and the repayment in cash of £20 million of obligations due by the Toucan business to the Registrant and certain of its affiliates. A copy of the amendment is annexed hereto as Exhibit 2.2. Consummation of the sale of the majority of the Toucan business occurred on October 11, 2006. The sale of the remainder of the Toucan business, a call center in Sligo, Ireland that supports the U.K. business, is expected to take place following receipt of applicable regulatory approvals and satisfying certain customary closing conditions. On October 12, 2006, the Registrant issued a press release regarding the consummation of the sale of the majority of the Toucan business, a copy of which is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
 
Item 7.01. Regulation FD Disclosure.
 
On October 12, 2006, the Registrant issued a press release announcing the consummation of the sale of the majority of the Toucan business described in Item 2.01 above. The press release is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such section, nor shall such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01. Financial Statements and Exhibits.
 
(b) Proforma Financial Information
 
 
(d) Exhibits

 
2.1
Share Sale and Purchase Agreement by and among the Registrant, Dutch Holdings and Pipex dated September 7, 2006. (Incorporated by reference to the Form 8-K, filed September 13, 2006)
 
2.2
Amendment Agreement, dated October 11, 2006, related to Share Sale and Purchase Agreement, dated September 7, 2006
 
 
99.1
Press Release issued by the Registrant, dated October 12, 2006.
 
  


 

 
 

 
IDT CORPORATION
 
 
INDEX TO UNAUDITED PROFORMA INFORMATION
 

 
 
  
Page
Proforma Condensed Consolidated Financial Statements - Basis of Presentation
  
F-2
     
Proforma Condensed Consolidated Balance Sheet as of July 31, 2006
  
F-3
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2006
  
F-4
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2005
  
F-5
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2004
  
F-6
   
Notes and Management’s Assumptions to Proforma Condensed Consolidated Financial Information
  
F-7
 









F-1



IDT CORPORATION
 
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
BASIS OF PRESENTATION
(unaudited)
 
The proforma condensed consolidated balance sheet as of July 31, 2006, and the proforma condensed consolidated statements of operations for the three years in the period ended July 31, 2006, are based on the historical financial statements of the Registrant.
 
The proforma condensed consolidated balance sheet as of July 31, 2006, is presented as if the disposition of the Toucan business and receipt of the proceeds by the Registrant as described in item 2.01 of this Form 8-K occurred in its entirety on July 31, 2006. As set forth in Item 2.01 of this Form 8-K, as of October 11, 2006, the first stage of such disposition has been consummated.
 
The proforma condensed consolidated statements of operations for the three years in the period ended July 31, 2006, are presented as if the disposition of the Toucan business and receipt of the proceeds by the Registrant as described in Item 2.01 of this Form 8-K occurred on November 1, 2003, on which date the Registrant launched the Toucan business. The proforma condensed consolidated financial statements should be read in conjunction with the historical financial statements and notes related thereto appearing in the Registrant’s Annual Reports on Form 10-K for the fiscal years ended July 31, 2006, 2005 and 2004.
 
Preparation of the proforma information was based on assumptions considered appropriate by the Registrant’s management. The proforma financial information is unaudited and is not necessarily indicative of the results which would have occurred if the transactions described above had been consummated on November 1, 2003 for the proforma condensed consolidated statements of operations and on July 31, 2006 for the proforma condensed consolidated balance sheet, nor does it purport to represent the future financial position and the results of operations for future periods. In management’s opinion, all adjustments necessary to reflect the effects of the transactions listed above have been made.
 



F-2


IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of July 31, 2006
(in thousands, except share data)
(unaudited)
  
 
  
Historical
  
Adjustments
      
Proforma
  
Assets
  
 
              
Current assets:
  
 
              
Cash and cash equivalents
  
$
119,109
  
$
37,362
    
(A
)
$
156,471
  
Marketable securities
    
395,713
    
8,069
    
(A
)
  
403,782
  
Trade accounts receivable, net
    
185,125
    
(5,428
)
  
(B
)
  
179,697
  
Other current assets
    
106,319
    
(6,897
)
  
(B
)
  
99,422
  
Assets of discontinued operations
    
436,905
                
436,905
  
 
                      
Total current assets
    
1,243,171
                
1,276,277
  
Property, plant and equipment, net
    
292,152
    
(1,654
)
  
(B
)
  
290,498
  
Goodwill
    
105,577
                
105,577
  
Licenses and other intangibles, net
    
27,445
                
27,445
  
Investments
    
46,855
                
46,855
  
Other assets
    
47,639
                
47,639
  
 
                      
Total assets
  
$
1,762,839
              
$
1,794,291
  
 
                      
Liabilities and stockholders’ equity
                        
Current liabilities:
                        
Trade accounts payable
  
$
82,327
    
(7,257
)
  
(B
)
  
75,070
  
Accrued expenses
    
260,087
    
(3,866
)
  
(B
)
  
256,221
  
Deferred revenue
    
134,286
    
(1,216
)
  
(B
)
  
133,070
  
Capital lease obligations—current portion
    
18,940
                
18,940
  
Other current liabilities
    
42,312
    
(2,224
)
  
(B
)
  
40,088
  
Liabilities of discontinued operations
    
141,860
                
141,860
  
 
                      
Total current liabilities
    
679,812
                
665,249
  
Deferred tax liabilities, net
    
107,106
                
107,106
  
Capital lease obligations—long-term portion
    
32,122
                
32,122
  
Notes payable—long-term portion
    
90,370
                
90,370
  
Other liabilities
    
6,850
                
6,850
  
 
                      
Total liabilities
    
916,260
                
901,697
  




Minority interests
    
43,227
                
43,227
  
Commitments and contingencies
                        
Stockholders’ equity:
                        
Preferred stock, $.01 par value; authorized shares—10,000,000; no shares issued 
    
—
                
—
  
Common stock, $.01 par value; authorized shares— 100,000,000; 25,074,860 shares issued; 15,178,173 shares outstanding
   
251
                
251
  
Class A common stock, $.01 par value; authorized shares—35,000,000; 9,816,988 shares issued and outstanding
    
98
                
98
  
Class B common stock, $.01 par value; authorized shares—100,000,000; 76,879,179 shares issued; 71,402,204 shares outstanding
    
768
                
768
  
Additional paid-in capital
    
901,067
                
901,067
  
Treasury stock, at cost, consisting of 9,896,687 shares of common stock, and of 5,476,975 shares of Class B common stock
    
(220,169
)
              
(220,169
)
Accumulated other comprehensive income
    
1,496
                
1,496
  
Retained earnings
    
119,841
    
46,015
    
(C
)
  
165,856
  
 
                      
Total stockholders’ equity
    
803,352
                
849,367
  
 
                      
Total liabilities and stockholders’ equity
  
$
1,762,839
              
$
1,794,291
  
 
                        


F-3


 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2006
(in thousands, except per share data)
(unaudited)
 
 
  
Historical
  
Adjustments
      
Proforma
  
                   
Revenues
  
$
2,226,422
    
(68,225
)
  
(D
)
$
2,158,197
  
Costs and expenses:
                          
Direct cost of revenues (exclusive of depreciation and amortization)
    
1,779,980
    
(41,490
)
  
(D
)
  
1,738,490
 
Selling, general and administrative
    
556,161
    
(44,388
)
  
(D
)
  
511,773
 
Depreciation and amortization
    
87,422
    
(625
)
  
(D
)
  
86,797
 
Restructuring and impairment charges
    
23,646
                
23,646
 
 
                      
Total costs and expenses
    
2,447,209
                
2,360,706
 
 
                      
Loss from operations
    
(220,787
)
              
(202,509
)
Interest income, net
    
9,416
   
565
    
(D
)
  
9,981
 
Investment and other income, net
    
7,284
               
7,284
 
 
                      
Loss from continuing operations before minority interests and income taxes
    
(204,087
)
              
(185,244
)
Minority interests
    
(16,177
)
              
(16,177
)
Provision for income taxes
    
(2,576
)
  
(3,946
)
  
(D
)
  
(6,522
)
 
                      
Loss from continuing operations
  
$
(222,840
)
            
$
(207,943
)
 
                        
                         
Basic and diluted loss per share from continuing operations
  
$
 (2.32
)
            
$
(2.17
)
 
                      
Weighted-average number of shares used in calculation of basic and diluted loss per share from continuing operations
    
96,028
                
96,028
  
 
                      






F-4


 
IDT CORPORATION
 
 
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2005
(in thousands, except per share data)
(unaudited)
 
 
  
Historical
  
Adjustments
      
Proforma
  
                   
Revenues
  
$
2,221,985
  
$
(43,129
)
  
(D
)
$
2,178,856
  
Costs and expenses:
                    
Direct cost of revenues (exclusive of depreciation and amortization)
    
1,700,866
    
(25,064
)
  
(D
)
  
1,675,802
  
Selling, general and administrative
    
533,076
    
(41,278
)
  
(D
)
  
491,798
  
Depreciation and amortization
    
93,631
    
(418
)
  
(D
)
  
93,213
  
Restructuring and impairment charges
    
34,212
                
34,212
  
 
                    
Total costs and expenses
    
2,361,785
                
2,295,025
  
 
                    
Loss from operations
    
(139,800
)
              
(116,169
)
Interest income, net
    
20,575
    
436
    
(D
)
  
21,011
  
Investment and other income, net
    
71,454
                
71,454
  
 
                    
Loss from continuing operations before minority interests and income taxes
    
(47,771
)
              
(23,704
)
Minority interests
    
(2,639
)
              
(2,639
)
Provision for income taxes
    
(6,317
)
              
(6,317
)
 
                    
Loss from continuing operations
  
$
(56,727
)
            
$
(32,660
)
 
                    
                     
Basic and diluted loss per share from continuing operations
  
$
(0.58
)
            
$
(0.34
)
 
                    
Weighted-average number of shares used in calculation of basic and diluted loss per share from continuing operations
    
97,049
                
97,049
  
 
                    




 
F-5


 
IDT CORPORATION
 
 
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2004
(in thousands, except per share data)
(unaudited)
 
 
  
Historical
  
Adjustments
      
Proforma
  
                   
Revenues
  
$
2,066,815
  
$
(2,342
)
  
(D
)
$
2,064,473
  
Costs and expenses:
                    
Direct cost of revenues (exclusive of depreciation and amortization)
    
1,586,343
    
(2,070
)
  
(D
)
  
1,584,273
  
Selling, general and administrative
    
464,363
    
(4,573
)
  
(D
)
  
459,790
  
Depreciation and amortization
    
93,795
    
(32
)
  
(D
)
  
93,763
  
Restructuring and impairment charges
    
58,220
                
58,220
  
 
                    
Total costs and expenses
    
2,202,721
                
2,196,046
  
 
                    
Loss from operations
    
(135,906
)
              
(131,573
)
Interest income, net
    
23,512
    
(14
)
  
(D
)
  
23,498
  
Gain on sale of subsidiary stock
    
9,418
                
9,418
  
Investment and other income, net
    
37,145
                
37,145
  
 
                      
Loss from continuing operations before minority interests and income taxes
    
(65,831
)
              
(61,512
)
Minority interests
    
(33,728
)
              
(33,728
)
Benefit from income taxes
    
30,798
                
30,798
  
 
                    
Loss from continuing operations
  
$
(68,761
)
            
$
(64,442
)
 
                    
                     
Basic and diluted loss per share from continuing operations
  
$
(0.78
)
            
$
(0.73
)
 
                    
Weighted-average number of shares used in calculation of basic and diluted loss per share from continuing operations
    
87,920
                
87,920
  
 
                    


F-6


 
IDT CORPORATION
 
 
NOTES AND MANAGEMENT’S ASSUMPTIONS
TO THE PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 
The following is a description of the proforma adjustments to the historical condensed consolidated financial statements:
  
 
(A)
The increase in cash and cash equivalents and marketable securities represent the proceeds from the sale of the Toucan business. Cash of the Toucan business on July 31, 2006, in the amount of $7.7 million was retained by the Registrant and was not included in the disposition.
 

 
(B)
Reflects the removal of assets and liabilities of the Toucan business as if the sale was consummated on July 31, 2006.
 
 
(C)
Retained earnings has been adjusted for an estimated increase of $46.0 million from the sale of the Toucan business as if the sale occurred on July 31, 2006.

 
(D)
Reflects the removal of the results of operations of the Toucan business as if the sale was consummated on November 1, 2003.


 





F-7


 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
       
 
IDT CORPORATION
     
 
By:
 
/s/ Marcelo Fischer
   
 
Name: Marcelo Fischer
   
 
Title: Chief Financial Officer and Treasurer
 
Dated: October 16, 2006
 



 
EXHIBITS INDEX
 

Exhibit
Number
 
Description
2.1
  
Share Sale and Purchase Agreement among the Registrant, Dutch Holdings and Pipex dated September 7, 2006. (Incorporated by reference to the Form 8-K, filed September 13, 2006) 
2.2
  
Amendment Agreement, dated October 11, 2006, related to Share Sale and Purchase Agreement, dated September 7, 2006
     
99.1
  
Press Release issued by the Registrant, dated October 12, 2006.