IDT CORPORATION (NYSE:IDT) Files An 8-K Completion of Acquisition or Disposition of AssetsItem 2.01. Completion of Acquisition or Disposition of Assets.
On March 26, 2018, IDT Corporation (“IDT” or the “Registrant”) completed the spin-off of certain commercial real estate assets and interests in clinical and early stage pharmaceutical companies into Rafael Holdings, Inc. (“Rafael”). The registration statement on Form 10-12G (the “Registration Statement”) filed by Rafael under the Securities Exchange Act of 1934 became effective on December 30, 2017. The Registration Statement includes detailed information about Rafael, the spin-off and related matters. An information statement setting forth the details of the spin-off (the “Information Statement”) is being mailed to stockholders of the Registrant on or about March 27, 2018. The Information Statement can be found on the investors relations page of the Registrant’s website at http://ir.idt.net. Approval of the Spin-Off by the Registrant’s stockholders was not required.
IDT also transferred assets to Rafael such that, at the time of the spin-off, Rafael had approximately $43.8 million in cash, cash equivalents and marketable securities, $1.2 million in current notes receivable, approximately $4.0 million in interests in hedge funds and $2.0 million in securities in another entity that are not liquid. The real estate assets and pharmaceutical interests will be operated as separate lines of business. The commercial real estate holdings consist of IDT’s headquarters building and its associated garage in Newark, New Jersey, an operations facility in Piscataway, New Jersey and a portion of a building in Israel that hosts offices for IDT and its affiliates. The pharmaceutical holdings include debt and equity interests in Rafael Pharmaceuticals, Inc. (“Rafael Pharmaceuticals”), which is a clinical stage, oncology-focused pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells, and an equity interest in Lipomedix Pharmaceuticals Ltd., an early stage, pharmaceutical development company based in Israel. The real estate assets and pharmaceutical holdings were not germane to IDT’s communications and payment services businesses. Following the spin-off, IDT’s business will consist principally of IDT Telecom’s core communications, payment services and related businesses. The Registrant effected the spin-off by distributing one share of Rafael Class A common stock for every two shares of IDT Class A common stock and one share of Rafael Class B common stock for every two shares of IDT Class B common stock held of record as of March 13, 2018, the record date for the spin-off. In connection with the completion of the spin-off, unaudited pro forma consolidated financial information of the Company is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
As of March 27, 2018, there were a total of approximately 1.6 million shares of the Registrant’s Class A common stock and approximately 23.3 million shares of the Registrant’s Class B common stock outstanding.
Rafael’s Class B common stock is listed on the NYSE American under the symbol RFL.
Item 2.01. RegulationFD Disclosure.
On March 27, 2018, the Registrant and Rafael issued a joint press release announcing the consummation of the disposition of Rafael Holdings, Inc. described in Item 2.01 above. The press release is being furnished and shall not be deemed to be “filed” for purposes of Section18 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 2.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
(d) Exhibits
| 99.1 | Joint Press Release issued by Registrant and Rafael, dated March 27, 2018. |
IDT CORPORATION
INDEX TO UNAUDITED PRO FORMA INFORMATION
IDT CORPORATION
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(unaudited)
The pro forma consolidated balance sheet as of January 31, 2018, and the pro forma consolidated statements of operations for the six months ended January 31, 2018 and for the year ended July 31, 2017 are based on the historical financial statements of the Registrant.
The pro forma condensed balance sheet as of January 31, 2018, is presented as if the disposition of Rafael Holdings, Inc., as described in Item 2.01 of this Form 8-K occurred in its entirety on January 31, 2018. As set forth in Item 2.01 of this Form 8-K, as of March 26, 2018 such disposition has been consummated.
The pro forma consolidated statements of operations for the six months ended January 31, 2018 and for the year ended July 31, 2017, are presented as if the disposition of Rafael occurred on August1, 2016. The pro forma 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 year ended July 31, 2017 and Form 10-Q for the six months ended January 31, 2018.
Preparation of the pro forma information was based on assumptions considered appropriate by the Registrant’s management. The pro forma financial information is unaudited and is not necessarily indicative of the results which would have occurred if the disposition described above had been consummated on August1, 2016 for the pro forma consolidated statements of operations and on January 31, 2018 for the pro forma 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 disposition of Rafael have been made.
IDT CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 2018
(in thousands, except per share data)
(unaudited)
| IDT Historical | Rafael Historical (A) | Pro forma adjustments | IDT Pro forma | |||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | $ | 54,055 | $ | (12,008 | ) | $ | (C) | $ | 42,198 | |
| Marketable securities | 46,202 | – | (31,744 | ) | (C) | 14,458 | ||||
| Trade accounts receivable, net | 71,652 | (226 | ) | 71,426 | ||||||
| Prepaid expenses | 15,915 | – | 15,915 | |||||||
| Other current assets | 30,733 | (191 | ) | (1,200 | ) | (C) | 29,342 | |||
| Assets held for sale | 138,700 | – | 138,700 | |||||||
| TOTAL CURRENT ASSETS | 357,257 | (12,425 | ) | 312,039 | ||||||
| Property, plant and equipment, net | 88,621 | (50,967 | ) | 37,654 | ||||||
| Goodwill | 11,447 | – | 11,447 | |||||||
| Investments | 24,350 | (11,700 | ) | (6,000 | ) | (C) | 6,650 | |||
| Deferred income tax assets, net | 8,653 | (22 | ) | 8,631 | ||||||
| Other assets | 8,616 | (2,530 | ) | 6,086 | ||||||
| Assets held for sale | 5,285 | – | 5,285 | |||||||
| TOTAL ASSETS | $ | 504,229 | $ | (77,644 | ) | $ | 387,792 | |||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Trade accounts payable | $ | 37,071 | $ | (89 | ) | $ | $ | 36,982 | ||
| Accrued expenses | 113,154 | (423 | ) | 112,731 | ||||||
| Deferred revenue | 71,789 | – | 71,789 | |||||||
| Other current liabilities | 4,683 | (20 | ) | 4,663 | ||||||
| Liabilities held for sale | 129,423 | – | 129,423 | |||||||
| TOTAL CURRENT LIABILITIES | 356,120 | (532 | ) | 355,588 | ||||||
| Due to IDT Corporation | – | (24,391 | ) | 24,391 | (D) | – | ||||
| Other liabilities | 1,107 | (95 | ) | 1,012 | ||||||
| Liabilities held for sale | – | |||||||||
| TOTAL LIABILITIES | 357,869 | (25,081 | ) | 357,242 | ||||||
| EQUITY: | ||||||||||
| IDT Corporation stockholders’ equity: | ||||||||||
| Preferred stock, $.01 par value; authorized shares—10,000; no shares issued | – | – | – | |||||||
| ClassA common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and outstanding | – | |||||||||
| Class B common stock, $.01 par value; authorized shares—200,000; 25,582 shares issued and 23,280 shares outstanding | – | |||||||||
| Additional paid-in capital/Group Equity | 396,259 | (40,554 | ) | (63,363 | ) | (E) | 292,521 | |||
| Treasury stock, at cost, consisting of 1,698 shares of Class A common stock and 2,302 shares of Class B common stock | (83,365 | ) | – | (83,365 | ) | |||||
| Accumulated other comprehensive loss | (2,531 | ) | (2,394 | ) | (4,925 | ) | ||||
| Accumulated deficit | (173,386 | ) | – | (173,386 | ) | |||||
| Total IDT Corporation stockholders’ equity | 137,266 | (42,948 | ) | 31,134 | ||||||
| Noncontrolling interests | 9,094 | (9,678 | ) | (584 | ) | |||||
| TOTAL EQUITY | 146,360 | (52,626 | ) | 30,550 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 504,229 | $ | (77,644 | ) | $ | 387,792 |
IDT CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2018
(in thousands, except per share data)
(unaudited)
| IDT Historical | Rafael Historical (B) | Pro forma adjustments | IDT Pro forma | |||||||
| REVENUES | $ | 789,438 | $ | (2,063 | ) | $ | (F) | $ | 788,219 | |
| COSTS AND EXPENSES: | ||||||||||
| Direct cost of revenues (exclusive of depreciation and amortization) | 673,738 | – | 673,738 | |||||||
| Selling, general and administrative | 102,429 | (3,079 | ) | (G) | 100,194 | |||||
| Depreciation and amortization | 11,408 | (853 | ) | 10,555 | ||||||
| Severance | – | |||||||||
| TOTAL COSTS AND EXPENSES | 788,210 | (3,932 | ) | 785,122 | ||||||
| Other operating expenses | (1,625 | ) | – | (1,625 | ) | |||||
| (Loss) Income from operations | (397 | ) | 1,869 | 1,472 | ||||||
| Interest income, net | (4 | ) | ||||||||
| Other expense, net | (456 | ) | (257 | ) | (713 | ) | ||||
| (Loss) Income from continuing operations before income taxes | (205 | ) | 1,608 | 1,403 | ||||||
| Benefit from income taxes | 8,443 | (8,437 | ) | (H) | ||||||
| Net loss | (106 | ) | (10,051 | ) | 1,508 | |||||
| Net income attributable to noncontrolling interests | (470 | ) | (294 | ) | ||||||
| NET LOSS ATTRIBUTABLE TO IDT CORPORATION | $ | (576 | ) | $ | (9,875 | ) | $ | 1,214 | ||
| (Loss) Income per share attributable to IDT Corporation common stockholders: | ||||||||||
| Basic | $ | (0.02 | ) | $ | 0.05 | |||||
| Diluted | $ | (0.02 | ) | $ | 0.05 | |||||
| Weighted-average number of shares used in calculation of loss per share: | ||||||||||
| Basic | $ | 24,635 | 24,635 | |||||||
| Diluted | 24,635 | 24,725 | ||||||||
IDT CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2017
(in thousands, except per share data)
(unaudited)
| IDT Historical | Rafael Historical (B) | Pro forma adjustments | IDT Pro forma | |||||||
| REVENUES | $ | 1,501,729 | $ | (5,618 | ) | $ | 3,367 | (F) | $ | 1,499,478 |
| COSTS AND EXPENSES: | ||||||||||
| Direct cost of revenues (exclusive of depreciation and amortization) | 1,275,708 | – | 1,275,708 | |||||||
| Selling, general and administrative | 188,293 | (3,728 | ) | 1,694 | (G) | 186,259 | ||||
| Depreciation and amortization | 21,704 | (1,669 | ) | 20,035 | ||||||
| TOTAL COSTS AND EXPENSES | 1,485,705 | (5,394 | ) | 1,482,002 | ||||||
| Other operating expenses | (10,412 | ) | – | (10,412 | ) | |||||
| Adjustment to gain on sale of member interest in Visa Europe Ltd. | (63 | ) | – | (63 | ) | |||||
| Income from operations | 5,549 | (221 | ) | 7,001 | ||||||
| Interest income, net | 1,254 | (10 | ) | 1,244 | ||||||
| Other income, net | ||||||||||
| Income from continuing operations before income taxes | 7,620 | (204 | ) | 9,089 | ||||||
| Benefit from income taxes | 2,021 | 2,087 | ||||||||
| Net income | 9,641 | (138 | ) | 11,176 | ||||||
| Net Income attributable to noncontrolling interests | (1,464 | ) | – | (1,464 | ) | |||||
| NET INCOME ATTRIBUTABLE TO IDT CORPORATION | $ | 8,177 | $ | (138 | ) | $ | 9,712 | |||
| Earnings per share attributable to IDT Corporation common stockholders: | ||||||||||
| Basic | $ | 0.35 | $ | 0.41 | ||||||
| Diluted | $ | 0.35 | $ | 0.41 | ||||||
| Weighted-average number of shares used in calculation of earnings per share: | ||||||||||
| Basic | $ | 23,182 | 23,182 | |||||||
| Diluted | 23,309 | 23,309 | ||||||||
IDT CORPORATION
NOTES AND MANAGEMENT’S ASSUMPTIONS
TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| The following is a description of the pro forma adjustments to the historical consolidated financial statements: |
| (A) | Reflects the removal of assets, liabilities and total equity of Rafael Holdings, Inc. as if the disposition was consummated on January 31, 2018. |
| (B) |
Reflects the removal of the results of operations of Rafael Holdings, Inc. as if the disposition was consummated on August 1, 2016. |
| (C) |
Reflects the contribution of approximately $31.7 million in marketable securities, less approximately $151,000 of cash and cash equivalents, such that Rafael had approximately $43.6 million in cash and cash equivalents and marketable securities at the time of the spinoff. In addition, reflects the contribution of $1.2 million in current notes receivable, approximately $4.0 million in interests in hedge funds and $2.0 million in securities in another entity that are not liquid. The $43.6 million in cash and cash equivalents and marketable securities, $1.2 million in current notes receivable, $4.0 million in interests in hedge funds, and $2.0 million in securities was made such that the funds contributed by the Registrant aggregated a total of $50.8 million, as if the disposition was consummated on January 31, 2018. |
| (D) |
Reflects the forgiveness of Rafael Holdings’ $24.4 million Due to IDT Corporation balance. |
| (E) |
Reflects the forgiveness of Rafael Holdings’ $24.4 million Due to IDT Corporation balance and IDT Corporation’s $38.8 million contribution ($31.7 million in marketable securities, $1.2 million in current notes receivable, $4.0 million in interests in hedge funds and $2.0 million in securities in another entity that are not liquid, less $151,000 of cash and cash equivalents) as a $63.2 million capital contribution, as if the disposition was consummated on January 31, 2018. |
| (F) | Reflects the adjustment for related party revenue from IDT Corporation included in Rafael Holdings’ historical financials as if the disposition was consummated on August 1, 2016. |
| (G) | Reflects the payment of real estate rental expense from IDT to Rafael, due to the spinoff of the real estate holdings, as if the disposition was consummated on August 1, 2016. |
| (H) | Reflects a deferred tax adjustment for income taxes on a consolidated basis. As of July 31, 2017, due to the projected future profitability of Rafael on a standalone basis, no valuation allowance was recorded against Rafael’s $8.4 million domestic deferred tax asset. As of August 1, 2017, Rafael amended its related party leases to more accurately reflect the space currently being used by IDT and other affiliated companies. As a result, in the six months ended January 31, 2018, Rafael recorded a valuation allowance of $8.4 million to reserve for the entirety of its domestic deferred tax asset.On a consolidated basis, this deferred tax asset had been previously reserved by IDT due to the expected future profitability from Rafael’s real estate being fully offset by losses from non-Rafael entities. |
IDT CORP ExhibitEX-99.1 2 f8k032618ex99-1_idtcorp.htm JOINT PRESS RELEASE ISSUED BY REGISTRANT AND RAFAEL,…To view the full exhibit click here
About IDT CORPORATION (NYSE:IDT)
IDT Corporation is a holding company with operations primarily in the telecommunications and payment industries. The Company’s segments include Telecom Platform Services, Consumer Phone Services and All Other. The Company’s Telecom Platform Services segment provides retail telecommunications and payment offerings, as well as wholesale international long distance traffic termination. The Telecom Platform Services segment markets and distributes multiple communications and payment services across four businesses: Retail Communications, Wholesale Carrier Services, Payment Services and Hosted Platform Solutions. The Company’s Consumer Phone Services segment provides consumer local and long distance services in certain states of the United States. The Telecom Platform Services and Consumer Phone Services segments comprise the Company’s IDT Telecom division. The All Other segment includes its real estate holdings and other smaller businesses.