IDT (IDT) 8-K IDT Corporation Completes Sale of U.K.-Based Toucan Consumer Phone Services Business to Pipex Communications plc

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.