f8k020509_idt.htm
 
 
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): January 30, 2009
 
 
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 1.01 Entry into a Material Definitive Agreement
 
Item 2.01 below, is hereby incorporated by reference into this Item 1.01.
 
 Item 2.01. Completion of Acquisition or Disposition of Assets.
 
On January 30, 2009, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC (“Carmel Portfolio Management”), and FFPM Carmel Holdings I LLC (all subsidiaries of IDT Corporation (the “Registrant”)) and their predecessors (collectively, the “Seller”) and Sherman Originator III LLC (the “Buyer”) consummated the sale, pursuant to a Purchase and Sale Contract (the “Agreement”), of substantially all of the consumer debt portfolio held by the Registrant’s IDT Carmel division for a purchase price of $20.8 million less the Buyer's 50% share of the estimated collections between and including December 9, 2008 and January 30, 2009, subject to the Seller’s obligation to repurchase certain assets meeting the criteria set forth in the Agreement, within 90 days from the closing of the transaction.  On closing of the transaction, the Buyer paid $18.35 million.  IDT Carmel will continue to service the portfolios until either Seller or Buyer elects to terminate such service in accordance with the agreements on the subject between the Seller and Buyer.  The foregoing summary of the Agreement is not complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit 2.1 to this report and is incorporated herein by reference.
 
Item 7.01. Regulation FD Disclosure.
 
On February 5, 2009, the Registrant issued a press release announcing the consummation of the sale of its active debt portfolio 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
Purchase and Sale Contract among the Registrant, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I LLC, and its predecessors and Sherman Originator III LLC dated January 30, 2009.

99.1
Press Release issued by Registrant, dated February 5, 2009.
   

This Current Report on Form 8-K, contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently.  While these forward-looking statements represent our 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, including, but not limited to, those described in our most recent report on SEC Form 10-K (under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"), which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K.  We are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements in this Current Report on Form 8-K, whether as a result of new information, future events or otherwise.


 
 
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 October 31, 2008
  
F-3
   
Proforma Condensed Consolidated Statement of Operations for the three months ended October 31, 2008
  
F-4
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2008
  
F-5
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2007
  
F-6
   
Proforma Condensed Consolidated Statement of Operations for the year ended July 31, 2006
  
F-7
   
Notes and Management’s Assumptions to Proforma Condensed Consolidated Financial Information
  
F-8
 

 
F - 1
 
IDT CORPORATION
 
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
BASIS OF PRESENTATION
(unaudited)
 
The proforma condensed consolidated balance sheet as of October 31, 2008, and the unaudited proforma condensed consolidated statements of operations for the three months ended October 31, 2008, and for the fiscal years ended July 31, 2008, 2007 and 2006, are based on the historical financial statements of the Registrant.
 
The proforma condensed consolidated balance sheet as of October 31, 2008, is presented as if the disposition of the assets sold, the receipt of the $18.4 million proceeds by the Registrant, the write off of fixed assets and other intangibles and the accrual for restructuring charges occurred in its entirety on October 31, 2008.
 
The proforma condensed consolidated statements of operations for the three months ended October 31, 2008, and for the fiscal years ended July 31, 2008, 2007 and 2006, are presented as if the disposition of the assets sold and the receipt of the proceeds by the Registrant occurred in the second fiscal quarter of 2006 (when the Registrant commenced its debt collection operations).
 
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 Form 10-K for the years ended July 31, 2008, 2007 and 2006 and its Form 10-Q for the quarter ended October 31, 2008.
 
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 in the second fiscal quarter of 2006 for the proforma condensed consolidated statements of operations and on October 31, 2008 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 transaction listed above have been made.
 
 
 
F - 2
 
 
 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 2008
(in thousands)
(unaudited)
 
   
Historical
    
Proforma
adjustments
          
Proforma
  
Assets
                        
Current assets:
                        
Cash and cash equivalents
   $ 122,401     $ 18,354    
(A)
     $ 140,755  
Restricted cash and cash equivalents
     22,110                       22,110  
Marketable securities
     73,414                       73,414  
Trade accounts receivable, net
     145,722                       145,722  
Prepaid expenses
     22,801                       22,801  
Investments short-term
     16,974                       16,974  
Other current assets
     68,291       (14,310 )  
(B)
       53,981  
Total current assets
     471,713                       475,757  
Property, plant and equipment, net
     218,261       (1,980 )  
(B)
       216,281  
Goodwill
     73,982                       73,982  
Licenses and other intangibles, net
     8,353       (33 )  
(B)
       8,320  
Investments long-term
     27,514                       27,514  
Deferred income tax assets, net
     2,106                       2,106  
Other assets
     66,066       (45,162 )  
(B)
       20,904  
Total assets
   $ 867,995                     $ 824,864  
                                 
Liabilities and stockholders’ equity
                                
Current liabilities:
                                
Trade accounts payable
   $ 54,088                     $ 54,088  
Accrued expenses
     179,989       (2,376 )  
(B)
       182,365  
Deferred revenue
     76,567                       76,567  
Income taxes payable
     106,340                       106,340  
Capital lease obligations—current portion
     8,327                       8,327  
Notes payable—current portion
     2,206                       2,206  
Other current liabilities
     12,789                       12,789  
Total current liabilities
     440,306                       442,682  
Capital lease obligations—long-term portion
     9,940                       9,940  
Notes payable—long-term portion
     99,629                       99,629  
Other liabilities
     17,863                       17,863  
Total liabilities
     567,738                       570,114  
Minority interests
     5,456                       5,456  
Commitments and contingencies
                                
Stockholders’ equity:
                                
Preferred stock, $.01 par value; authorized shares—10,000; no shares issued
     —                       —  
Common stock, $.01 par value; authorized shares— 100,000; 27,725 shares issued; 16,184 shares outstanding
     277                       277  
Class A common stock, $.01 par value; authorized shares—35,000; 9,817 shares issued and outstanding
     98                       98  
Class B common stock, $.01 par value; authorized shares—200,000; 67,481 shares issued; 51,225 shares outstanding
     675                       675  
Additional paid-in capital
     717,873                       717,873  
Treasury stock, at cost, consisting of 11,541 shares of common stock, and 16,256 shares of Class B common stock
     (288,430 )                     (288,430 )
Accumulated other comprehensive income
     (1,967 )                     (1,967 )
Accumulated deficit
     (133,725 )     (45,507 )  
(C)
       (179,232 )
Total stockholders’ equity
     294,801                       249,294  
Total liabilities and stockholders’ equity
   $ 867,995                     $ 824,864  

 
F - 3
 
 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2008
(in thousands, except per share data)
(unaudited)
 
   
Historical
  
Proforma
adjustments
      
Proforma
  
                   
Revenues
   $ 441,354   $ 8,858  
 (D)
   $ 432,496  
Costs and expenses:
                        
Direct cost of revenues (exclusive of depreciation and amortization)
     339,340     6,984  
(D)
     332,356  
Selling, general and administrative
     94,944     1,799  
(D)
     93,145  
Depreciation and amortization
     14,029     152  
(D)
     13,877  
Bad debt
     1,900     243  
(D)
     1,657  
Research and development
     1,644               1,644  
Restructuring and severance charges
     2,017     389  
(D)
     1,628  
Total costs and expenses
     453,874               444,307  
                         
Loss from operations
     (12,520 )             (11,811 )
Interest expense, net
     (932 )   (1 )
(D)
     (931 )
Other expense, net
     (21,202 )             (21,202 )
                         
Loss from continuing operations before minority interests and income taxes
     (34,654 )             (33,944 )
Minority interests
     364     (131 )
(D)
     495  
Provision for income taxes
     (2,968 )             (2,968 )
Loss from continuing operations
   $ (37,258 )           $ (36,417  
                         
Loss per share from continuing operations:
                        
Basic and diluted:
   $ (0.51 )           $ (0.50 )
Weighted-average number of shares used in calculation of loss per share from continuing operations:
                        
Basic and diluted
     72,960               72,960  

 
F - 4
 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2008
(in thousands, except per share data)
(unaudited)
 
   
Historical
    
Proforma adjustments
      
Proforma
  
                     
Revenues
   $ 1,877,990     $ 45,691  
(D)
   $ 1,832,299  
Costs and expenses:
                
 
       
Direct cost of revenues (exclusive of depreciation and amortization)
     1,468,784       29,987  
(D)
     1,438,797  
Selling, general and administrative
     445,979       6,196  
(D)
     439,783  
Depreciation and amortization
     68,747       452  
(D)
     68,295  
Bad debt
     45,503       31,652  
(D)
     13,851  
Research and development
     11,567                 11,567  
Restructuring and impairment charges
     66,187       2,661  
(D)
     63,526  
Total costs and expenses
     2,106,767                 2,035,819  
Arbitration award income
     40,000                 40,000  
Loss on sale/disposal of businesses
     (9,569 )               (9,569 )
Loss from operations
     (198,346 )               (173,089 )
Interest income, net
     4,766       (7 )
(D)
     4,773  
Other expense, net
     (17,309 )               (17,309 )
Loss from continuing operations before minority interests and income taxes
     (210,889 )               (185,625 )
Minority interests
     1,370       (33 )
(D)
     1,403  
Provision for income taxes
     (9,923 )     (50 )
(D)
     (9,873 )
Loss from continuing operations
     (219,442 )               (194,095 )
                           
Loss per share from continuing operations:
                          
Basic and diluted:
   $ (2.88 )             $ (2.55 )
                           
Weighted-average number of shares used in calculation of loss per share from continuing operations:
                          
Basic and diluted
     76,171                 76,171  

F - 5
 
 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2007
(in thousands, except per share data)
(unaudited)
 
   
Historical
    
Proforma adjustments
      
Proforma
  
                     
Revenues
   $ 2,012,739     $ 5,604  
(D)
   $ 2,007,135  
Costs and expenses:
                          
Direct cost of revenues (exclusive of depreciation and amortization)
     1,615,047       11,774  
(D)
     1,603,273  
Selling, general and administrative
     483,483       4,413  
(D)
     479,070  
Depreciation and amortization
     80,011       161  
(D)
     79,850  
Bad debt
     12,943                 12,943  
Research and development
     5,232                 5,232  
Restructuring and impairment charges
     33,404                 33,404  
Total costs and expenses
     2,230,120                 2,213,772  
Gain on sale of business
     44,671                 44,671  
Loss from operations
     (172,710 )               (161,966 )
Interest income, net
     18,069       (5 )
(D)
     18,074  
Other income, net
     28,980                 28,980  
Loss from continuing operations before minority interests and income taxes
     (125,661 )               (114,912 )
Minority interests
     (10,180 )     35  
(D)
     (10,215 )
Provision for income taxes
     (3,605 )     (16 )
(D)
     (3,589 )
Loss from continuing operations
     (139,446 )             $ (128,716 )
                           
Loss per share from continuing operations:
                          
Basic and diluted:
   $ (1.70 )             $ (1.57 )
                           
Weighted-average number of shares used in calculation of loss per share from continuing operations:
                          
Basic and diluted
     82,165                 82,165  

F - 6
 
 
IDT CORPORATION
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2006
(in thousands, except per share data)
(unaudited)
 
   
Historical
    
Proforma adjustments
      
Proforma
  
                     
Revenues
   $ 2,226,422     $ 417  
(D)
   $ 2,226,005  
Costs and expenses:
                          
Direct cost of revenues (exclusive of depreciation and amortization)
     1,779,980       716  
(D)
     1,779,264  
Selling, general and administrative
     525,823       2,014  
(D)
     523,809  
Depreciation and amortization
     87,422       8  
(D)
     87,414  
Bad debt
     18,521                 18,521  
Research and development
     11,817                 11,817  
Restructuring and impairment charges
     23,646                 23,646  
                           
Total costs and expenses
     2,447,209                 2,444,471  
                           
Loss from operations
     (220,787 )               (218,466 )
Interest income, net
     9,416       (4 )
(D)
     9,420  
Other income, net
     7,284                 7,284  
                           
Loss from continuing operations before minority interests and income taxes
     (204,087 )               (201,762 )
Minority interests
     (16,177 )               (16,177 )
Provision for income taxes
     (2,576 )     (7 )
(D)
     (2,569 )
                           
Loss from continuing operations
     (222,840 )             $ (220,508 )
                           
Loss per share from continuing operations:
                          
Basic and diluted:
   $ (2.32 )             $ (2.30 )
                           
Weighted-average number of shares used in calculation of loss per share from continuing operations:
                          
Basic and diluted
     96,028                 96,028  
 

 
F - 7
 
IDT CORPORATION
NOTES AND MANAGEMENT’S ASSUMPTIONS
TO THE PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 
1.
The following is a description of the proforma adjustments to the historical condensed consolidated financial statements:

 
(A)
The net increase in cash and cash equivalents consists of the estimated net cash proceeds from the disposition of the entire active debt portfolio of $18.4 million (which excludes 50% of proceeds received by Registrant during the period between and including December 9, 2008 and January 30, 2009 of $2.5 million, and assumes that there will be no additional repurchase amounts within 90 days from closing of the transaction, as set forth in the Agreement).

 
(B)
Reflects the removal of the entire active debt portfolio of IDT Carmel of $59.5 million ($14.3 million of current and $45.2 million of long term) as well as the write-off of the remaining fixed assets and other intangibles of $2.0 million and the accrual of estimated restructuring and severance costs on exiting the business of $2.4 million, as if the sale was consummated on October 31, 2008.

 
(C)
Accumulated deficit has been adjusted for an estimated loss of $45.5 million from the sale of the entire active debt portfolio, write-off of fixed assets and other intangibles, and accrual of estimated restructuring and severance costs as if the sale occurred on October 31, 2008.

 
(D)
Reflects the removal of the results of operations of IDT Carmel as if the sale was consummated in the second fiscal quarter of 2006 (when the Registrant commenced its debt collection operations).
 
 
 
F - 8
 
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/ James A. Courter
   
Name: James A. Courter
   
Title: Chief Executive Officer
 
Dated: February 5, 2009
 
 
 
 
 
 
EXHIBITS INDEX
 
 

Exhibit
Number
  
Description
2.1
  
Purchase and Sale Contract among the Registrant, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I LLC, and its predecessors and Sherman Originator III LLC dated January 30, 2009.
     
99.1
  
Press Release issued by Registrant, dated February 5, 2009.