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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): MAY 6, 1998
IDT CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 0-27898 22-3415036
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
190 MAIN STREET, HACKENSACK, NEW JERSEY 07601
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(Address of Principal Executive Offices) (Zip Code)
(201) 928-1000
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(Registrant's Telephone Number, Including Area Code)
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ITEM 2.
On April 7, 1998, IDT Corporation (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which the
parties thereto agreed that a wholly owned subsidiary of the Company would be
merged with and into InterExchange, Inc., a Delaware corporation ("IX"), and
that IX would become a wholly owned subsidiary of the Company. The closing of
this transaction took place on May 6, 1998
Pursuant to the Merger Agreement, all of the outstanding shares of
the common stock of IX (the "IX Common Stock") were exchanged for an
aggregate of 3,242,323 newly issued shares (the "IDT Shares") of common
stock, par value $.01 per share, of the Company (the "IDT Common Stock"), and
$20 million in cash (the "Cash Consideration"), which was funded out of the
Company's working capital. A portion of the IDT Shares will remain in escrow
until October 2002 in order to satisfy certain indemnification obligations
that the former stockholders of IX may have under the Merger Agreement. This
transaction will be treated as a purchase for accounting purposes and is
intended to qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended.
IX provides satellite frame relay networking and carrier-grade
Internet telephony to over 20 international destinations and also operates
one of the nation's largest international debit card platform.
Mr. David Turock, the Company's Director of Technology, owned
approximately 50% of the outstanding shares of IX, and served as IX's
Chairman prior to the transactions contemplated by the Merger Agreement.
The information set forth above is qualified in its entirety by
reference to the Merger Agreement, which is incorporated herein by reference.
The Company hereby agrees to furnish a supplementary copy of any omitted
exhibit to the Merger Agreement to the Securities and Commission upon request.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
(i) The Combined Financial Statements of InterExchange, Inc. and
Combined Affiliates as of December 31, 1997, 1996 and 1995 and
for the three years ended December 31, 1997 are filed herewith
as Exhibit 99.1.
(ii) The Unaudited Combined Financial Statements of InterExchange,
Inc. and Combined Affiliates as of March 31, 1998 and March
31, 1997 and for the three months ended March 31, 1998 and
March 31, 1997 are filed herewith as Exhibit 99.2.
(b) PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated balance sheet of the Company at
January 31, 1998 gives effect to (i) the transactions contemplated by the
Merger Agreement (the "InterExchange Acquisition"), (ii) the Company's
offering of 5,293,750 shares of its common stock, the closing of which
occurred on February 3, 1998 (the "Equity Offering"), and (iii) the Company's
offering of $100,000,000 aggregate principal amount of 8 3/4% Senior Notes
due 2006, the closing of which occurred on February 18, 1998 (the "Debt
Offering, and together with the InterExchange Acquisition and the Equity
Offering, the "Transactions"). The following pro forma consolidated
statements of operations of the Company for the six months ended January 31,
1998 and the year ended July 31, 1997 give effect to the Transactions as if
they occurred at the beginning of such periods. The pro forma consolidated
financial statements should be read in conjunction with (1) the historical
financial statements of the Company, including the notes thereto, which are
contained in the Company's quarterly report on Form 10-Q, as amended, for the
quarter ended January 31, 1998 and the Company's Annual Report on Form 10-K,
as amended, for the year ended July 31, 1997, and (2) the historical
financial statements of IX as of and for the three months ended March 31,
1998 and for the year ended December 31, 1997, which have been filed as
exhibits to this Report.
The pro forma consolidated financial statements are included for
informational purposes only and are not necessarily indicative of the
financial position or operating results that would have occurred if the
Transactions had been consummated as of the dates indicated, nor are they
necessarily indicative of the Company's future financial condition or
operating results.
Pro forma adjustments for the InterExchange Acquisition reflect the
Company's issuance of 3,242,323 shares of common stock and $20,000,000 of
cash. The InterExchange Acquisition will be accounted for by the purchase
method of accounting for business combinations and, accordingly, the
estimated cost to acquire such assets will be allocated to the underlying net
assets in proportion to their respective fair values. The valuations and
other studies which will provide the basis for such allocations have not been
completed. As more fully described in the notes to the pro forma consolidated
financial statements, the allocation of the excess of the cost
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over the book value of the net assets acquired has been made preliminarily
for pro forma purposes to goodwill.
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IDT CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
JANUARY 31, 1998
(UNAUDITED)
IDT CORP. IDT CORP. INTEREXCHANGE PRO FORMA IDT
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL (A) ADJUSTMENTS PRO FORMA
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ASSETS
Current assets
Cash and cash equivalents $ 8,641,358 $216,280,000(b) $224,921,358 $ 523,056 (20,000,000)(c) $205,444,414
Accounts receivable, net 31,794,759 31,794,759 818,308 32,613,067
Notes receivable 479,660 479,660 - 479,660
Other current assets 4,975,009 4,975,009 - 4,975,009
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Total current assets 45,890,786 216,280,000 262,170,786 1,341,364 (20,000,000) 243,512,150
Property and equipment, net 34,843,057 34,843,057 5,326,352 40,169,409
Goodwill, net 6,369,685 6,369,685 - 127,546,896 (c) 133,916,581
Other assets 3,240,506 3,500,000(b) 6,740,506 36,154 6,776,660
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Total assets $90,344,034 $219,780,000 $310,124,034 $6,703,870 107,546,896 $424,374,800
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable $23,320,563 23,320,563 2,610,091 25,930,654
Accrued expenses 599,789 599,789 945,282 1,545,071
Deferred revenue 2,504,047 2,504,047 - 2,504,047
Notes payable-current portion 1,730,138 1,730,138 502,839 2,232,977
Capital lease obligations
- current portion 2,936,760 2,936,760 - 2,936,760
Taxes Payable - - 1,033,498 1,033,498
Other current liabilities 142,000 142,000 - 142,000
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Total current liabilities 31,233,297 31,233,297 5,091,710 36,325,007
Notes Payable-long term portion 5,580,823 5,580,823 430,006 6,010,829
Capital Lease Obligation -
long term portion 5,554,632 5,554,632 - 5,554,632
Convertible Debentures 7,500,000 7,500,000 - 7,500,000
Deferred income taxes - - 112,000 112,000
Senior Notes Payable - $100,000,000(b) 100,000,000 - 100,000,000
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Total liabilities 49,868,752 100,000,000 149,868,752 5,633,716 155,502,468
Minority Interest 100,000 100,000 - 100,000
Stockholders' equity
Preferred stock - - - -
Common stock 135,025 52,938(b) 187,963 600 32,423 (c) 220,386
(600)(c)
Class A stock 102,558 102,558 - 102,558
Retained earnings - - 1,069,554 (1,069,554)(c) -
Additional paid in capital 56,970,472 119,727,062(b) 176,697,534 - 108,584,627 (c) 285,282,161
Accumulated deficit (16,832,773) (16,832,773) - (16,832,773)
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Total stockholders' equity 40,375,282 119,780,000 160,155,282 1,070,154 107,546,896 268,772,332
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Total liabilities and
stockholders'equity $90,344,034 $219,780,000 $310,124,034 $6,703,870 $107,546,896 $424,374,800
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IDT CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
IDT CORP. IDT CORP. INTEREXCHANGE PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL (D) ADJUSTMENTS PRO FORMA
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Revenues $125,703,766 $125,703,766 $7,466,138 $133,169,904
Costs and expenses: -
Direct cost of revenues 92,309,811 92,309,811 1,840,905 94,150,716
Selling, general and
administrative 23,706,415 23,706,415 4,126,542 27,832,957
Depreciation and amortization 3,787,573 3,787,573 1,097,459 $3,188,672 (f) 8,073,704
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TOTAL COSTS AND EXPENSES 119,803,799 119,803,799 7,064,906 3,188,672 130,057,377
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Earnings (loss) from operations 5,899,967 401,232 (3,188,672) 3,112,527
Interest and other, net (783,393) $(4,375,000)(e) (5,377,143) 275,622 (5,101,521)
(218,750)(e)
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Earnings before income taxes 5,116,574 (4,593,750) (5,377,143) 676,854 (3,188,672) (1,988,994)
Income taxes - - 226,400 226,400
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NET INCOME (LOSS) $ 5,116,574 $(4,593,750) $(5,377,143) $450,454 $(3,188,672) $(2,215,394)
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Net income (loss) per share-basic $ 0.23 $ (0.19) $ (0.07)
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Weighted average number of shares
used in calculation of earnings
per share - basic 22,638,022 27,931,822 31,174,145
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Net Income (loss) per share-diluted $ 0.20 $ (0.19) $ (0.07)
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Weighted average number of shares
used in calculation of earnings
per share - diluted 26,087,362 27,931,822 31,174,145
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IDT CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997
(UNAUDITED)
IDT CORP. IDT CORP. INTEREXCHANGE PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL (D) ADJUSTMENTS PRO FORMA
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Revenues $135,187,227 $135,187,227 $ 9,749,467 $144,936,694
Costs and expenses -
Direct cost of revenues 92,214,223 92,214,223 4,705,566 96,919,789
Selling, general and
administrative 41,544,987 41,544,987 1,472,017 43,017,004
Depreciation and amortization 4,873,142 4,873,142 2,700,070 $ 6,377,344 (f) 13,950,556
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Total costs and expenses 138,632,352 138,632,352 8,877,653 6,377,344 153,887,349
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Earnings (loss) from operations (3,445,125) (3,445,125) 871,814 (6,377,344) (8,950,655)
Interest and other, net (391,645) $(8,750,000)(e) (9,579,145) 95,355 (9,483,790)
(437,500)(e)
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Earnings (loss) before income taxes (3,836,770) (9,187,500) (13,024,270) 967,169 (6,377,344) (18,434,445)
Income taxes - - 427,443 427,443
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Net income (loss) $ (3,836,770) $ (3,836,770) $ 539,726 $(6,377,344) $(18,861,888)
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Net income (loss) per share-basic $ (0.18) $ (0.15) $ (0.64)
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Weighted average number of shares
used in calculation of earnings
per share - basic 21,152,927 26,446,727 29,689,050
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Net income (loss) per share-diluted $ (0.18) $ (0.15) $ (0.64)
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Weighted average number of shares
used in calculation of earnings
per share - diluted 21,152,927 26,446,727 29,689,050
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IDT Corporation
Notes to Pro Forma Consolidated Financial Statements
a) Reflects the historical assets and liabilities of IX as of
December 31, 1997, as IX's year end is different than the Company's.
b) Adjustments to record the Debt Offering and the Equity Offering,
respectively, reflect (1) the issuance of $100,000,000 aggregate
principal amount of 8 3/4% Senior Notes and the receipt of net proceeds
therefrom of $96,500,000 after deducting $3,500,000 of debt issuance
costs, and (2) the issuance of 5,293,750 shares of common stock and the
receipt of net proceeds therefrom of $119,780,000.
c) Pro forma adjustments to record the InterExchange Acquisition reflect
(1) the Company's issuance of 3,242,323 shares of common stock and
$20,000,000 of cash, (2) the allocation of the excess of the purchase
price over the book value of the net assets acquired of $127,546,896 to
goodwill based on a common stock price of $33.50 per share, and (3) the
elimination of IX's historical stockholders' equity.
d) Reflects the historical operating results of IX for the six months
ended March 31, 1998 and the year ended September 30, 1997, as IX's
year end is different than IDT's.
e) Adjustments to record the Debt Offering for the six months ended
January 31, 1998 and the year ended July 31, 1997 reflect an increase
in interest expense of $4,593,750 and $9,187,500, respectively,
resulting from (1) interest on the $100,000,000 aggregate principal
amount of the 8 3/4% Senior Notes and (2) amortization of deferred debt
issuance costs on a straight-line basis over an eight-year period.
f) Pro forma adjustments to record the InterExchange Acquisition for the
six months ended January 31, 1998 and the year ended July 31, 1997
reflect an increase of $3,188,672 and $6,377,344, respectively, in
depreciation and amortization with respect to the excess cost to
acquire IX that has been allocated to goodwill and amortized on a
straight-line basis over a twenty-year period.
(C) EXHIBITS:
EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger, dated April 7, 1998, by and
among the Company, ADM Corp., a wholly owned subsidiary of the
Company, IX, David Turock, Eric Hecht, Richard Robbins,
Bradley Turock, Wai Nam Tam, Mary Jo Altom and Lisa Mikulynec.
(incorporated by reference from Exhibit 2.1 of IDT's Current
Report on Form 8-K, as filed with the Securities and Exchange
Commission on April 22, 1998).
23.1 Consent of Amper, Politziner & Mattia P.A.
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99.1 The Combined Financial Statements of InterExchange, Inc. and
Combined Affiliates as of December 31, 1997, 1996 and 1995 and
for the three years ended December 31, 1997.
99.2 The Unaudited Combined Financial Statements of InterExchange,
Inc. and Combined Affiliates as of March 31, 1998 and March
31, 1997 and for the three months ended March 31, 1998 and
March 31, 1997.
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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/ Joyce J. Mason
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Joyce J. Mason
Secretary and General Counsel
Date: May 21, 1998
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