ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Canada | 98-0364441 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
745 Fifth Avenue New York, New York | 10151 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated Filer x | Accelerated filer ¨ |
Non-accelerated Filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Emerging growth company ¨ |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue: | |||||||||||||||
Services | $ | 375,800 | $ | 349,254 | $ | 1,111,032 | $ | 995,343 | |||||||
Operating expenses: | |||||||||||||||
Cost of services sold | 249,418 | 235,659 | 754,803 | 675,940 | |||||||||||
Office and general expenses | 77,910 | 83,303 | 251,313 | 233,840 | |||||||||||
Depreciation and amortization | 11,252 | 11,412 | 32,916 | 34,068 | |||||||||||
Goodwill impairment | — | 29,631 | — | 29,631 | |||||||||||
338,580 | 360,005 | 1,039,032 | 973,479 | ||||||||||||
Operating profit (loss) | 37,220 | (10,751 | ) | 72,000 | 21,864 | ||||||||||
Other income (expense): | |||||||||||||||
Other, net | 8,649 | (6,008 | ) | 17,812 | 9,530 | ||||||||||
Interest expense and finance charges | (16,403 | ) | (16,540 | ) | (48,859 | ) | (49,289 | ) | |||||||
Loss on redemption of notes | — | — | — | (33,298 | ) | ||||||||||
Interest income | 145 | 218 | 550 | 599 | |||||||||||
(7,609 | ) | (22,330 | ) | (30,497 | ) | (72,458 | ) | ||||||||
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 29,611 | (33,081 | ) | 41,503 | (50,594 | ) | |||||||||
Income tax expense (benefit) | 9,049 | (1,930 | ) | 17,659 | 1,180 | ||||||||||
Income (loss) before equity in earnings of non-consolidated affiliates | 20,562 | (31,151 | ) | 23,844 | (51,774 | ) | |||||||||
Equity in earnings of non-consolidated affiliates | 1,422 | 70 | 1,924 | 9 | |||||||||||
Net income (loss) | 21,984 | (31,081 | ) | 25,768 | (51,765 | ) | |||||||||
Net income attributable to noncontrolling interests | (3,491 | ) | (1,059 | ) | (6,588 | ) | (3,172 | ) | |||||||
Net income (loss) attributable to MDC Partners Inc. | 18,493 | (32,140 | ) | 19,180 | (54,937 | ) | |||||||||
Accretion on convertible preference shares | (1,948 | ) | — | (4,365 | ) | — | |||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 16,545 | $ | (32,140 | ) | $ | 14,815 | $ | (54,937 | ) | |||||
Income (loss) per common share: | |||||||||||||||
Basic | |||||||||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 0.25 | $ | (0.62 | ) | $ | 0.24 | $ | (1.08 | ) | |||||
Diluted | |||||||||||||||
Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 0.24 | $ | (0.62 | ) | $ | 0.24 | $ | (1.08 | ) | |||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 57,566,707 | 52,244,819 | 53,915,536 | 50,861,890 | |||||||||||
Diluted | 57,943,080 | 52,244,819 | 54,228,208 | 50,861,890 | |||||||||||
Stock-based compensation expense is included in the following line items above: | |||||||||||||||
Cost of services sold | $ | 5,310 | $ | 3,026 | $ | 12,558 | $ | 10,393 | |||||||
Office and general expenses | 1,070 | 2,202 | 4,312 | 5,050 | |||||||||||
Total | $ | 6,380 | $ | 5,228 | $ | 16,870 | $ | 15,443 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Comprehensive income (loss) | |||||||||||||||
Net income (loss) | $ | 21,984 | $ | (31,081 | ) | $ | 25,768 | $ | (51,765 | ) | |||||
Other comprehensive (loss) income, net of applicable tax: | |||||||||||||||
Foreign currency translation adjustment | (1,912 | ) | 2,331 | (1,294 | ) | (8,354 | ) | ||||||||
Other comprehensive income (loss) | (1,912 | ) | 2,331 | (1,294 | ) | (8,354 | ) | ||||||||
Comprehensive income (loss) for the period | 20,072 | (28,750 | ) | 24,474 | (60,119 | ) | |||||||||
Comprehensive income attributable to the noncontrolling interests | (4,695 | ) | (569 | ) | (9,063 | ) | (4,481 | ) | |||||||
Comprehensive income (loss) attributable to MDC Partners Inc. | $ | 15,377 | $ | (29,319 | ) | $ | 15,411 | $ | (64,600 | ) |
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 18,861 | $ | 27,921 | |||
Cash held in trusts | 5,182 | 5,341 | |||||
Accounts receivable, less allowance for doubtful accounts of $2,800 and $1,523 | 438,765 | 388,340 | |||||
Expenditures billable to clients | 42,332 | 33,118 | |||||
Other current assets | 27,647 | 34,862 | |||||
Total current assets | 532,787 | 489,582 | |||||
Fixed assets, at cost, less accumulated depreciation of $118,241 and $105,134 | 91,153 | 78,377 | |||||
Investments in non-consolidated affiliates | 5,655 | 4,745 | |||||
Goodwill | 839,361 | 844,759 | |||||
Other intangible assets, net | 74,685 | 85,071 | |||||
Deferred tax assets | 39,598 | 41,793 | |||||
Other assets | 34,592 | 33,051 | |||||
Total assets | $ | 1,617,831 | $ | 1,577,378 | |||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 232,704 | $ | 251,456 | |||
Trust liability | 5,182 | 5,341 | |||||
Accruals and other liabilities | 289,471 | 303,581 | |||||
Advance billings | 165,600 | 133,925 | |||||
Current portion of long-term debt | 300 | 228 | |||||
Current portion of deferred acquisition consideration | 59,849 | 108,290 | |||||
Total current liabilities | 753,106 | 802,821 | |||||
Long-term debt, less current portion | 930,889 | 936,208 | |||||
Long-term portion of deferred acquisition consideration | 88,419 | 121,274 | |||||
Other liabilities | 54,657 | 56,012 | |||||
Deferred tax liabilities | 119,602 | 110,359 | |||||
Total liabilities | 1,946,673 | 2,026,674 | |||||
Redeemable noncontrolling interests (Note 2) | 60,092 | 60,180 | |||||
Commitments, contingencies, and guarantees (Note 12) | |||||||
Shareholders’ deficit: | |||||||
Convertible preference shares (liquidation preference $99,365) | 90,220 | — | |||||
Common shares | 351,075 | 317,784 | |||||
Shares to be issued, 100,000 shares in 2016 | — | 2,360 | |||||
Charges in excess of capital | (307,454 | ) | (311,581 | ) | |||
Accumulated deficit | (562,668 | ) | (581,848 | ) | |||
Accumulated other comprehensive loss | (5,593 | ) | (1,824 | ) | |||
MDC Partners Inc. shareholders’ deficit | (434,420 | ) | (575,109 | ) | |||
Noncontrolling interests | 45,486 | 65,633 | |||||
Total shareholders’ deficit | (388,934 | ) | (509,476 | ) | |||
Total liabilities, redeemable noncontrolling interests, and shareholders’ deficit | $ | 1,617,831 | $ | 1,577,378 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 25,768 | $ | (51,765 | ) | ||
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: | |||||||
Stock-based compensation | 16,870 | 15,443 | |||||
Depreciation | 18,000 | 16,853 | |||||
Amortization of intangibles | 14,916 | 17,215 | |||||
Amortization of deferred finance charges | 2,018 | 8,736 | |||||
Goodwill impairment | — | 29,631 | |||||
Loss on redemption of notes | — | 26,873 | |||||
Adjustment to deferred acquisition consideration | 13,354 | 17,363 | |||||
Deferred income tax | 8,125 | (553 | ) | ||||
Loss on sale of assets | 1,245 | 377 | |||||
Earnings of non-consolidated affiliates | (1,924 | ) | (9 | ) | |||
Other non-current assets and liabilities | (4,388 | ) | 1,853 | ||||
Foreign exchange | (15,113 | ) | (12,806 | ) | |||
Changes in working capital: | |||||||
Accounts receivable | (54,723 | ) | (47,767 | ) | |||
Expenditures billable to clients | (9,294 | ) | 5,551 | ||||
Prepaid expenses and other current assets | 6,400 | (16,851 | ) | ||||
Accounts payable, accruals and other liabilities | (31,149 | ) | (77,355 | ) | |||
Advance billings | 32,015 | 25,824 | |||||
Net cash provided by (used in) operating activities | 22,120 | (41,387 | ) | ||||
Cash flows used in investing activities: | |||||||
Capital expenditures | (28,305 | ) | (19,723 | ) | |||
Deposits | (1,461 | ) | — | ||||
Acquisitions, net of cash acquired | — | 2,531 | |||||
Proceeds from sale of assets | 11,120 | 215 | |||||
Distributions from non-consolidated affiliates | 673 | 4,885 | |||||
Other investments | (1,530 | ) | (2,571 | ) | |||
Net cash used in investing activities | (19,503 | ) | (14,663 | ) | |||
Cash flows (used in) provided by financing activities: | |||||||
Proceeds from issuance of 6.50% Notes | — | 900,000 | |||||
Repayment of 6.75% Notes | — | (735,000 | ) | ||||
Repayments of revolving credit agreement | (1,093,508 | ) | (1,255,608 | ) | |||
Proceeds from revolving credit agreement | 1,087,688 | 1,326,105 | |||||
Proceeds from issuance of convertible preference shares | 95,000 | — | |||||
Convertible preference shares issuance costs | (4,632 | ) | — | ||||
Acquisition related payments | (89,126 | ) | (129,616 | ) | |||
Repayment of long-term debt | (310 | ) | (381 | ) | |||
Purchase of shares | (1,239 | ) | (2,798 | ) | |||
Premium paid on redemption of notes | — | (26,873 | ) | ||||
Deferred financing costs | — | (21,569 | ) | ||||
Distributions to noncontrolling interests | (5,272 | ) | (6,549 | ) | |||
Payment of dividends | (284 | ) | (32,580 | ) | |||
Net cash (used in) provided by financing activities | (11,683 | ) | 15,131 | ||||
Effect of exchange rate changes on cash and cash equivalents | 6 | 1,196 | |||||
Decrease in cash and cash equivalents | (9,060 | ) | (39,723 | ) | |||
Cash and cash equivalents at beginning of period | 27,921 | 61,458 | |||||
Cash and cash equivalents at end of period | $ | 18,861 | $ | 21,735 | |||
Supplemental disclosures: | |||||||
Cash income taxes paid | $ | 6,909 | $ | 2,798 | |||
Cash interest paid | $ | 32,324 | $ | 27,979 | |||
Change in cash held in trusts | $ | (159 | ) | $ | 147 | ||
Non-cash transactions: | |||||||
Capital leases | $ | 621 | $ | — | |||
Dividends payable | $ | 453 | $ | 1,077 | |||
Deferred acquisition consideration settled through issuance of shares | $ | 28,727 | $ | 10,458 | |||
Value of shares issued for acquisition | $ | — | $ | 34,219 | |||
Leasehold improvements paid for directly by landlord | $ | — | $ | 7,250 |
Convertible Preference Shares | Common Shares | Share Capital to Be Issued | Additional Paid-in Capital | Charges in Excess of Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | MDC Partners Inc. Shareholders’ Deficit | Noncontrolling Interests | Total Shareholders’ Deficit | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2016 | — | $ | — | 52,802,058 | $ | 317,784 | 100,000 | $ | 2,360 | $ | — | $ | (311,581 | ) | $ | (581,848 | ) | $ | (1,824 | ) | $ | (575,109 | ) | $ | 65,633 | $ | (509,476 | ) | ||||||||||||||||||||
Net income attributable to MDC Partners Inc. | — | — | — | — | — | — | — | — | 19,180 | — | 19,180 | — | 19,180 | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | — | — | (3,769 | ) | (3,769 | ) | 2,475 | (1,294 | ) | ||||||||||||||||||||||||||||||||
Issuance of Series 4 convertible preference shares in private placement | 95,000 | 90,220 | — | — | — | — | — | — | — | — | 90,220 | — | 90,220 | |||||||||||||||||||||||||||||||||||
Issuance of restricted stock | — | — | 273,169 | 5,803 | — | — | (5,803 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares acquired and canceled | — | — | (114,822 | ) | (1,239 | ) | — | — | — | — | — | — | (1,239 | ) | — | (1,239 | ) | |||||||||||||||||||||||||||||||
Deferred acquisition consideration settled through issuance of shares | — | — | 3,353,939 | 28,727 | (100,000 | ) | (2,360 | ) | 1,485 | — | — | — | 27,852 | — | 27,852 | |||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 6,082 | — | — | — | 6,082 | — | 6,082 | |||||||||||||||||||||||||||||||||||
Changes in redemption value of redeemable noncontrolling interests | — | — | — | — | — | — | (300 | ) | — | — | — | (300 | ) | (300 | ) | |||||||||||||||||||||||||||||||||
Decrease in noncontrolling interests and redeemable noncontrolling interests from business acquisitions and step-up transactions | — | — | — | — | — | — | 2,315 | — | — | — | 2,315 | (11,965 | ) | (9,650 | ) | |||||||||||||||||||||||||||||||||
Dispositions | — | — | — | — | — | — | — | — | — | — | — | (10,657 | ) | (10,657 | ) | |||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | 348 | — | — | — | 348 | 348 | ||||||||||||||||||||||||||||||||||||
Transfer to charges in excess of capital | — | — | — | — | — | — | (4,127 | ) | 4,127 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2017 | 95,000 | $ | 90,220 | 56,314,344 | $ | 351,075 | — | $ | — | $ | — | $ | (307,454 | ) | $ | (562,668 | ) | $ | (5,593 | ) | $ | (434,420 | ) | $ | 45,486 | $ | (388,934 | ) |
• | Level 1 - Quoted prices for identical instruments in active markets. |
• | Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable. |
• | Level 3 - Instruments where significant value drivers are unobservable to third parties. |
Nine Months Ended September 30, 2017 | Year Ended December 31, 2016 | ||||||
Beginning Balance | $ | 60,180 | $ | 69,471 | |||
Redemptions | (816 | ) | (1,708 | ) | |||
Additions (1) | — | 2,274 | |||||
Changes in redemption value | 299 | (9,604 | ) | ||||
Currency translation adjustments | 429 | (253 | ) | ||||
Ending Balance | $ | 60,092 | $ | 60,180 |
(1) | Additions consist of transfers from noncontrolling interests related to step-up transactions and new acquisitions. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator | |||||||||||||||
Net income (loss) attributable to MDC Partners Inc. | $ | 18,493 | $ | (32,140 | ) | $ | 19,180 | $ | (54,937 | ) | |||||
Accretion on convertible preference shares | (1,948 | ) | — | (4,365 | ) | — | |||||||||
Net income allocated to convertible preference shares | (2,408 | ) | — | (1,782 | ) | — | |||||||||
Numerator for basic loss per common share - Net income (loss) attributable to MDC Partners Inc. common shareholders | 14,137 | (32,140 | ) | 13,033 | (54,937 | ) | |||||||||
Effect of dilutive securities: | |||||||||||||||
Adjustment to net income allocated to convertible preference shares | 13 | — | 9 | — | |||||||||||
Numerator for diluted income (loss) per common share- Net income (loss) attributable to MDC Partners Inc. common shareholders | $ | 14,150 | $ | (32,140 | ) | $ | 13,042 | $ | (54,937 | ) | |||||
Denominator | |||||||||||||||
Denominator for basic income (loss) per common share - weighted average common shares | 57,566,707 | 52,244,819 | 53,915,536 | 50,861,890 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Impact of stock options and non-vested stock under employee stock incentive plans | 376,373 | — | 312,672 | — | |||||||||||
Denominator for diluted income (loss) per common share - adjusted weighted shares and assumed conversions | 57,943,080 | 52,244,819 | 54,228,208 | 50,861,890 | |||||||||||
Basic income (loss) per common share | $ | 0.25 | $ | (0.62 | ) | $ | 0.24 | $ | (1.08 | ) | |||||
Diluted income (loss) per common share | $ | 0.24 | $ | (0.62 | ) | $ | 0.24 | $ | (1.08 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) attributable to MDC Partners Inc. | $ | 18,493 | $ | (32,140 | ) | $ | 19,180 | $ | (54,937 | ) | |||||
Transfers from the noncontrolling interest: | |||||||||||||||
(Decrease) increase in MDC Partners Inc. paid-in capital for purchase of equity interests in excess of Redeemable Noncontrolling Interests and Noncontrolling Interests | (337 | ) | (520 | ) | 2,315 | 22,498 | |||||||||
Net transfers from noncontrolling interests | $ | (337 | ) | $ | (520 | ) | $ | 2,315 | $ | 22,498 | |||||
Change from net income (loss) attributable to MDC Partners Inc. and transfers to noncontrolling interests | $ | 18,156 | $ | (32,660 | ) | $ | 21,495 | $ | (32,439 | ) |
Noncontrolling Interests | |||
Balance, December 31, 2015 | $ | 5,473 | |
Income attributable to noncontrolling interests | 5,218 | ||
Distributions made | (7,772 | ) | |
Other (1) | 1,235 | ||
Balance, December 31, 2016 | $ | 4,154 | |
Income attributable to noncontrolling interests | 6,588 | ||
Distributions made | (5,272 | ) | |
Other (1) | 332 | ||
Balance, September 30, 2017 | $ | 5,802 |
(1) | Other consists primarily of business acquisitions, sale of a business, step-up transactions, and cumulative translation adjustments. |
September 30, 2017 | December 31, 2016 | ||||||
Revolving credit agreement | $ | 48,607 | $ | 54,425 | |||
6.50% Notes due 2024 | 900,000 | 900,000 | |||||
Debt issuance costs | (18,161 | ) | (18,420 | ) | |||
930,446 | 936,005 | ||||||
Obligations under capital leases | 743 | 431 | |||||
931,189 | 936,436 | ||||||
Less: Current portion of long-term debt | 300 | 228 | |||||
$ | 930,889 | $ | 936,208 |
• | Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
• | Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. |
• | Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
Level 1 | Level 1 | ||||||||||||||
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Liabilities: | |||||||||||||||
6.50% Notes due 2024 | $ | 900,000 | $ | 909,000 | $ | 900,000 | $ | 812,250 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | |||||||
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
Beginning balance of contingent payments | $ | 224,754 | $ | 306,734 | |||
Payments (1) | (73,358 | ) | (105,169 | ) | |||
Additions (2) | — | 16,132 | |||||
Redemption value adjustments (3) | 19,233 | 13,930 | |||||
Other (4) | (27,118 | ) | (6,412 | ) | |||
Foreign translation adjustment | 1,336 | (461 | ) | ||||
Ending balance of contingent payments | $ | 144,847 | $ | 224,754 |
(1) | For the nine months ended September 30, 2017 and the year ended December 31, 2016, payments include $28,727 and $10,458, respectively, of deferred acquisition consideration settled through the issuance of 3,353,939 and 691,559 MDC Class A subordinate voting shares, respectively, in lieu of cash. |
(2) | Additions are the initial estimated deferred acquisition payments of new acquisitions and step-up transactions completed within that fiscal period. |
(3) | Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments, including the accretion of present value and stock-based compensation charges relating to acquisition payments that are tied to continued employment. |
(4) | For the year ended December 31, 2016, other is comprised of (i) $2,360 transferred to shares to be issued related to |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Other income (expense) | $ | (7 | ) | $ | 26 | $ | 271 | $ | (220 | ) | |||||
Loss on sale of business (1) | (1,424 | ) | (800 | ) | (1,424 | ) | (800 | ) | |||||||
Gain on sale of investments (2) | 168 | 682 | 168 | 682 | |||||||||||
Foreign currency transaction gain (loss) | 9,912 | (5,916 | ) | 18,797 | 9,868 | ||||||||||
$ | 8,649 | $ | (6,008 | ) | $ | 17,812 | $ | 9,530 |
• | The Global Integrated Agencies reportable segment is comprised of the Company’s six global, integrated operating segments with broad marketing communication capabilities, including advertising, branding, digital, social media, design and production services, serving multinational clients around the world. The Global Integrated Agencies reportable segment includes 72andSunny, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors, and kbs+. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of global clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Global Integrated Agencies reportable segment. |
• | The Domestic Creative Agencies reportable segment is comprised of four operating segments that are national advertising agencies leveraging creative capabilities at their core. The Domestic Creative Agencies reportable segment includes Colle + McVoy, Laird+Partners, Mono Advertising and Union. These operating segments share similar characteristics related to (i) the nature of their creative advertising services; (ii) the type of domestic client accounts and the methods used to provide services; and (iii) the extent to which they may be impacted by domestic economic and policy factors within North America. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Domestic Creative Agencies reportable segment. |
• | The Specialist Communications reportable segment is comprised of seven operating segments that are each communications agencies with core service offerings in public relations and related communications services. The Specialist Communications reportable segment includes Allison & Partners, Hunter PR, HL Group Partners, Kwittken, Luntz Global, Sloane & Company and Veritas. These operating segments share similar characteristics related to (i) the nature of their public relations and communication services, including content creation, social media and influencer marketing; (ii) the type of client accounts and the methods used to provide services; (iii) the extent to which they may be impacted by domestic economic and policy factors within North America; and (iv) the regulatory environment regarding public relations and social media. In addition, these operating segments compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the operating segments aggregated in the Specialist Communications reportable segment. |
• | The Media Services reportable segment is comprised of a unique single operating segment known as MDC Media Partners. MDC Media Partners is comprised of the Company’s network of stand-alone agencies with media buying and planning as their core competency, including the integrated platform Assembly. The agencies within this single operating segment share a Chief Executive Officer and Chief Financial Officer, who have operational oversight of these agencies. These agencies provide other services, including influencer marketing, content, insights & analytics, out-of-home, paid search, social media, lead generation, programmatic, artificial intelligence, and corporate barter. MDC Media Partners operates primarily in North America. |
• | All Other consists of the Company’s remaining operating segments that provide a range of diverse marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. The All Other category includes 6Degrees, Bruce Mau Design, Concentric Partners, Civilian, Gale Partners, Hello Design, Kenna, Kingsdale, Northstar Research Partners, Redscout, Relevent, Source Marketing, Team, Vitro, Yamamoto and Y Media Labs. The nature of the specialist services provided by these operating segments vary among each other and from those operating segments aggregated into the reportable segments. This results |
• | Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue: | |||||||||||||||
Global Integrated Agencies | $ | 193,979 | $ | 177,262 | $ | 576,935 | $ | 489,880 | |||||||
Domestic Creative Agencies | 24,173 | 22,181 | 67,473 | 66,274 | |||||||||||
Specialist Communications | 40,670 | 40,309 | 125,470 | 123,006 | |||||||||||
Media Services | 33,027 | 34,481 | 103,966 | 96,681 | |||||||||||
All Other | 83,951 | 75,021 | 237,188 | 219,502 | |||||||||||
Total | $ | 375,800 | $ | 349,254 | $ | 1,111,032 | $ | 995,343 | |||||||
Segment operating income (loss): | |||||||||||||||
Global Integrated Agencies | $ | 19,819 | $ | 2,873 | $ | 33,765 | $ | 24,316 | |||||||
Domestic Creative Agencies | 5,716 | 4,688 | 13,563 | 14,779 | |||||||||||
Specialist Communications | 4,775 | 11,101 | 13,410 | 17,860 | |||||||||||
Media Services | 2,421 | 466 | 8,618 | 3,510 | |||||||||||
All Other | 15,213 | (22,828 | ) | 31,626 | (5,619 | ) | |||||||||
Corporate | (10,724 | ) | (7,051 | ) | (28,982 | ) | (32,982 | ) | |||||||
Total | $ | 37,220 | $ | (10,751 | ) | $ | 72,000 | $ | 21,864 | ||||||
Other Income (Expense): | |||||||||||||||
Other income (expense), net | 8,649 | (6,008 | ) | 17,812 | 9,530 | ||||||||||
Interest expense and finance charges, net | (16,258 | ) | (16,322 | ) | (48,309 | ) | (48,690 | ) | |||||||
Loss on redemption of notes | — | — | — | (33,298 | ) | ||||||||||
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 29,611 | (33,081 | ) | 41,503 | (50,594 | ) | |||||||||
Income tax expense (benefit) | 9,049 | (1,930 | ) | 17,659 | 1,180 | ||||||||||
Income (loss) before equity in earnings of non-consolidated affiliates | 20,562 | (31,151 | ) | 23,844 | (51,774 | ) | |||||||||
Equity in earnings of non-consolidated affiliates | 1,422 | 70 | 1,924 | 9 | |||||||||||
Net income (loss) | 21,984 | (31,081 | ) | 25,768 | (51,765 | ) | |||||||||
Net income attributable to the noncontrolling interest | (3,491 | ) | (1,059 | ) | (6,588 | ) | (3,172 | ) | |||||||
Net income (loss) attributable to MDC Partners Inc. | $ | 18,493 | $ | (32,140 | ) | $ | 19,180 | $ | (54,937 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Depreciation and amortization: | |||||||||||||||
Global Integrated Agencies | $ | 6,359 | $ | 6,111 | $ | 17,889 | $ | 14,986 | |||||||
Domestic Creative Agencies | $ | 336 | $ | 353 | $ | 1,062 | $ | 1,263 | |||||||
Specialist Communications | $ | 1,220 | $ | 189 | $ | 3,657 | $ | 5,123 | |||||||
Media Services | $ | 917 | $ | 2,338 | $ | 2,933 | $ | 4,437 | |||||||
All Other (1) | $ | 2,165 | $ | 31,693 | $ | 6,511 | $ | 36,624 | |||||||
Corporate | $ | 255 | $ | 359 | $ | 864 | $ | 1,266 | |||||||
Total | $ | 11,252 | $ | 41,043 | $ | 32,916 | $ | 63,699 | |||||||
(1) Includes impairment of goodwill charge of $29,631 for the three and nine months ended September 30, 2016. | |||||||||||||||
Stock-based compensation: | |||||||||||||||
Global Integrated Agencies | $ | 3,840 | $ | 2,890 | $ | 9,892 | $ | 9,030 | |||||||
Domestic Creative Agencies | $ | 177 | $ | 150 | $ | 502 | $ | 487 | |||||||
Specialist Communications | $ | 659 | $ | 564 | $ | 2,264 | $ | 1,556 | |||||||
Media Services | $ | 150 | $ | 70 | $ | 464 | $ | 187 | |||||||
All Other | $ | 1,077 | $ | 949 | $ | 2,149 | $ | 2,124 | |||||||
Corporate | $ | 477 | $ | 605 | $ | 1,599 | $ | 2,059 | |||||||
Total | $ | 6,380 | $ | 5,228 | $ | 16,870 | $ | 15,443 | |||||||
Capital expenditures: | |||||||||||||||
Global Integrated Agencies | $ | 1,950 | $ | 3,003 | $ | 17,639 | $ | 10,703 | |||||||
Domestic Creative Agencies | $ | 324 | $ | 222 | $ | 874 | $ | 920 | |||||||
Specialist Communications | $ | 206 | $ | 56 | $ | 673 | $ | 2,183 | |||||||
Media Services | $ | 2,171 | $ | 2,008 | $ | 3,455 | $ | 2,634 | |||||||
All Other | $ | 2,497 | $ | 985 | $ | 5,660 | $ | 3,251 | |||||||
Corporate | $ | 1 | $ | — | $ | 4 | $ | 32 | |||||||
Total | $ | 7,149 | $ | 6,274 | $ | 28,305 | $ | 19,723 |
United States | Canada | Other | Total | ||||||||||||
Revenue | |||||||||||||||
Three Months Ended September 30, | |||||||||||||||
2017 | $ | 289,702 | $ | 31,418 | $ | 54,680 | $ | 375,800 | |||||||
2016 | $ | 274,506 | $ | 30,233 | $ | 44,515 | $ | 349,254 | |||||||
Nine Months Ended September 30, | |||||||||||||||
2017 | $ | 868,847 | $ | 88,471 | $ | 153,714 | $ | 1,111,032 | |||||||
2016 | $ | 799,696 | $ | 92,253 | $ | 103,394 | $ | 995,343 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue: | |||||||||||||||
Global Integrated Agencies | $ | 193,979 | $ | 177,262 | $ | 576,935 | $ | 489,880 | |||||||
Domestic Creative Agencies | 24,173 | 22,181 | 67,473 | 66,274 | |||||||||||
Specialist Communications | 40,670 | 40,309 | 125,470 | 123,006 | |||||||||||
Media Services | 33,027 | 34,481 | 103,966 | 96,681 | |||||||||||
All Other | 83,951 | 75,021 | 237,188 | 219,502 | |||||||||||
Total | $ | 375,800 | $ | 349,254 | $ | 1,111,032 | $ | 995,343 | |||||||
Segment operating income (loss): | |||||||||||||||
Global Integrated Agencies | $ | 19,819 | $ | 2,873 | $ | 33,765 | $ | 24,316 | |||||||
Domestic Creative Agencies | 5,716 | 4,688 | 13,563 | 14,779 | |||||||||||
Specialist Communications | 4,775 | 11,101 | 13,410 | 17,860 | |||||||||||
Media Services | 2,421 | 466 | 8,618 | 3,510 | |||||||||||
All Other | 15,213 | (22,828 | ) | 31,626 | (5,619 | ) | |||||||||
Corporate | (10,724 | ) | (7,051 | ) | (28,982 | ) | (32,982 | ) | |||||||
Total | $ | 37,220 | $ | (10,751 | ) | $ | 72,000 | $ | 21,864 | ||||||
Other Income (Expense): | |||||||||||||||
Other income (expense), net | 8,649 | (6,008 | ) | 17,812 | 9,530 | ||||||||||
Interest expense and finance charges, net | (16,258 | ) | (16,322 | ) | (48,309 | ) | (48,690 | ) | |||||||
Loss on redemption of notes | — | — | — | (33,298 | ) | ||||||||||
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 29,611 | (33,081 | ) | 41,503 | (50,594 | ) | |||||||||
Income tax expense (benefit) | 9,049 | (1,930 | ) | 17,659 | 1,180 | ||||||||||
Income (loss) before equity in earnings of non-consolidated affiliates | 20,562 | (31,151 | ) | 23,844 | (51,774 | ) | |||||||||
Equity in earnings of non-consolidated affiliates | 1,422 | 70 | 1,924 | 9 | |||||||||||
Net income (loss) | 21,984 | (31,081 | ) | 25,768 | (51,765 | ) | |||||||||
Net income attributable to the noncontrolling interest | (3,491 | ) | (1,059 | ) | (6,588 | ) | (3,172 | ) | |||||||
Net income (loss) attributable to MDC Partners Inc. | $ | 18,493 | (32,140 | ) | 19,180 | (54,937 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Depreciation and amortization: | |||||||||||||||
Global Integrated Agencies | $ | 6,359 | $ | 6,111 | $ | 17,889 | $ | 14,986 | |||||||
Domestic Creative Agencies | 336 | 353 | 1,062 | 1,263 | |||||||||||
Specialist Communications | 1,220 | 189 | 3,657 | 5,123 | |||||||||||
Media Services | 917 | 2,338 | 2,933 | 4,437 | |||||||||||
All Other (1) | 2,165 | 31,693 | 6,511 | 36,624 | |||||||||||
Corporate | 255 | 359 | 864 | 1,266 | |||||||||||
Total | $ | 11,252 | $ | 41,043 | $ | 32,916 | $ | 63,699 | |||||||
(1) Includes impairment of goodwill charge of $29,631 for the three and nine months ended September 30, 2016. | |||||||||||||||
Stock-based compensation: | |||||||||||||||
Global Integrated Agencies | $ | 3,840 | $ | 2,890 | $ | 9,892 | $ | 9,030 | |||||||
Domestic Creative Agencies | 177 | 150 | 502 | 487 | |||||||||||
Specialist Communications | 659 | 564 | 2,264 | 1,556 | |||||||||||
Media Services | 150 | 70 | 464 | 187 | |||||||||||
All Other | 1,077 | 949 | 2,149 | 2,124 | |||||||||||
Corporate | 477 | 605 | 1,599 | 2,059 | |||||||||||
Total | $ | 6,380 | $ | 5,228 | $ | 16,870 | $ | 15,443 | |||||||
Capital expenditures: | |||||||||||||||
Global Integrated Agencies | $ | 1,950 | $ | 3,003 | $ | 17,639 | $ | 10,703 | |||||||
Domestic Creative Agencies | 324 | 222 | 874 | 920 | |||||||||||
Specialist Communications | 206 | 56 | 673 | 2,183 | |||||||||||
Media Services | 2,171 | 2,008 | 3,455 | 2,634 | |||||||||||
All Other | 2,497 | 985 | 5,660 | 3,251 | |||||||||||
Corporate | 1 | — | 4 | 32 | |||||||||||
Total | $ | 7,149 | $ | 6,274 | $ | 28,305 | $ | 19,723 |
2017 Non-GAAP Activity | Change | |||||||||||||||||||||||||||||||
Advertising and Communications Group | 2016 Revenue | Foreign Exchange | Non-GAAP Acquisitions (Dispositions), net | Organic Revenue Growth (Decline) | 2017 Revenue | Foreign Exchange | Non-GAAP Acquisitions (Dispositions), net | Organic Revenue Growth (Decline) | Total Revenue | |||||||||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||||||||||||||
United States | $ | 274.5 | $ | — | $ | (1.2 | ) | $ | 16.4 | $ | 289.7 | — | % | (0.5 | )% | 6.0 | % | 5.5 | % | |||||||||||||
Canada | 30.2 | 1.3 | (0.1 | ) | — | 31.4 | 4.2 | % | (0.5 | )% | 0.2 | % | 3.9 | % | ||||||||||||||||||
Other | 44.5 | 1.3 | (1.8 | ) | 10.6 | 54.7 | 3.0 | % | (3.9 | )% | 23.8 | % | 22.8 | % | ||||||||||||||||||
Total | $ | 349.3 | $ | 2.6 | $ | (3.2 | ) | $ | 27.1 | $ | 375.8 | 0.8 | % | (0.9 | )% | 7.8 | % | 7.6 | % |
Global Integrated Agencies | Media Services | All Other | Total | ||||||||||||
(Dollars in Millions) | |||||||||||||||
GAAP revenue from 2016 acquisitions (1) | $ | — | $ | — | $ | — | $ | — | |||||||
Foreign exchange impact | — | — | — | — | |||||||||||
Contribution to non-GAAP organic revenue (growth) decline (2) | — | — | — | — | |||||||||||
Prior year revenue from dispositions | (1.8 | ) | (1.2 | ) | (0.1 | ) | (3.2 | ) | |||||||
Non-GAAP acquisitions (dispositions), net | $ | (1.8 | ) | $ | (1.2 | ) | $ | (0.1 | ) | $ | (3.2 | ) |
(1) | Operating segments not impacted by revenue from acquired Partner Firms in the current and prior period were excluded. In addition, no acquisitions were completed during 2017. Refer to Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included herein for further information pertaining to the current year dispositions. |
(2) | Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company’s organic revenue growth (decline) calculation. |
2017 | 2016 | ||||
United States | 77.1 | % | 78.6 | % | |
Canada | 8.4 | % | 8.7 | % | |
Other | 14.5 | % | 12.7 | % |
2017 | 2016 | Change | |||||||||||||||||||
Advertising and Communications Group | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 375.8 | $ | 349.3 | $ | 26.5 | 7.6 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 249.4 | 66.4 | % | 235.7 | 67.5 | % | 13.8 | 5.8 | % | ||||||||||||
Office and general expenses | 67.4 | 17.9 | % | 76.6 | 21.9 | % | (9.2 | ) | (12.0 | )% | |||||||||||
Depreciation and amortization | 11.0 | 2.9 | % | 11.1 | 3.2 | % | (0.1 | ) | (0.5 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 8.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
$ | 327.9 | 87.2 | % | $ | 353.0 | 101.1 | % | $ | (25.1 | ) | (7.1 | )% | |||||||||
Operating profit (loss) | $ | 47.9 | 12.8 | % | $ | (3.7 | ) | (1.1 | )% | $ | 51.6 | (1,395.1 | )% |
2017 | 2016 | Change | |||||||||||||||||||
Advertising and Communications Group | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 62.9 | 16.7 | % | $ | 53.4 | 15.3 | % | $ | 9.5 | 17.8 | % | |||||||||
Staff costs (2) | 204.2 | 54.3 | % | 198.0 | 56.7 | % | 6.2 | 3.1 | % | ||||||||||||
Administrative | 46.3 | 12.3 | % | 45.1 | 12.9 | % | 1.2 | 2.7 | % | ||||||||||||
Deferred acquisition consideration | (2.5 | ) | (0.7 | )% | 11.2 | 3.2 | % | (13.6 | ) | (122.1 | )% | ||||||||||
Stock-based compensation | 5.9 | 1.6 | % | 4.6 | 1.3 | % | 1.3 | 27.7 | % | ||||||||||||
Depreciation and amortization | 11.0 | 2.9 | % | 11.1 | 3.2 | % | (0.1 | ) | (0.5 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 8.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
Total operating expenses | $ | 327.9 | 87.2 | % | $ | 353.0 | 101.1 | % | $ | (25.1 | ) | (7.1 | )% |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Global Integrated Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||
Revenue | $ | 194.0 | $ | 177.3 | $ | 16.7 | 9.4 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 128.8 | 66.4 | % | 119.0 | 67.1 | % | 9.8 | 8.2 | % | ||||||||||||
Office and general expenses | 39.0 | 20.1 | % | 49.3 | 27.8 | % | (10.3 | ) | (20.9 | )% | |||||||||||
Depreciation and amortization | 6.4 | 3.3 | % | 6.1 | 3.4 | % | 0.2 | 4.0 | % | ||||||||||||
$ | 174.2 | 89.8 | % | $ | 174.4 | 98.4 | % | $ | (0.2 | ) | (0.1 | )% | |||||||||
Operating profit | $ | 19.8 | 10.2 | % | $ | 2.9 | 1.6 | % | $ | 17.0 | 591.8 | % |
2017 | 2016 | Change | |||||||||||||||||||
Global Integrated Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 24.5 | 12.7 | % | $ | 15.6 | 8.8 | % | $ | 9.0 | 57.8 | % | |||||||||
Staff costs (2) | 111.3 | 57.4 | % | 111.6 | 63.0 | % | (0.3 | ) | (0.3 | )% | |||||||||||
Administrative | 26.2 | 13.5 | % | 22.4 | 12.6 | % | 3.8 | 17.1 | % | ||||||||||||
Deferred acquisition consideration | 1.9 | 1.0 | % | 15.9 | 8.9 | % | (14.0 | ) | (88.0 | )% | |||||||||||
Stock-based compensation | 3.8 | 2.0 | % | 2.9 | 1.6 | % | 1.0 | 32.9 | % | ||||||||||||
Depreciation and amortization | 6.4 | 3.3 | % | 6.1 | 3.4 | % | 0.2 | 4.0 | % | ||||||||||||
Total operating expenses | $ | 174.2 | 89.8 | % | $ | 174.4 | 98.4 | % | $ | (0.2 | ) | (0.1 | )% |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Domestic Creative Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 24.2 | $ | 22.2 | $ | 2.0 | 9.0 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 13.4 | 55.4 | % | 12.5 | 56.2 | % | 0.9 | 7.4 | % | ||||||||||||
Office and general expenses | 4.7 | 19.5 | % | 4.7 | 21.0 | % | 0.1 | 1.2 | % | ||||||||||||
Depreciation and amortization | 0.3 | 1.4 | % | 0.4 | 1.6 | % | — | (4.3 | )% | ||||||||||||
$ | 18.5 | 76.4 | % | $ | 17.5 | 78.9 | % | $ | 1.0 | 5.5 | % | ||||||||||
Operating profit | $ | 5.7 | 23.6 | % | $ | 4.7 | 21.1 | % | $ | 1.0 | 21.9 | % |
2017 | 2016 | Change | |||||||||||||||||||
Domestic Creative Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 0.6 | 2.4 | % | $ | 0.5 | 2.4 | % | $ | — | 7.7 | % | |||||||||
Staff costs (2) | 14.7 | 60.7 | % | 13.7 | 61.9 | % | 0.9 | 6.8 | % | ||||||||||||
Administrative | 2.7 | 11.1 | % | 3.0 | 13.4 | % | (0.3 | ) | (9.5 | )% | |||||||||||
Deferred acquisition consideration | — | — | % | (0.3 | ) | (1.2 | )% | 0.3 | (100.0 | )% | |||||||||||
Stock-based compensation | 0.2 | 0.7 | % | 0.2 | 0.7 | % | — | 18.0 | % | ||||||||||||
Depreciation and amortization | 0.3 | 1.4 | % | 0.4 | 1.6 | % | — | (4.3 | )% | ||||||||||||
Total operating expenses | $ | 18.5 | 76.4 | % | $ | 17.5 | 78.9 | % | $ | 1.0 | 5.5 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Specialist Communications | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 40.7 | $ | 40.3 | $ | 0.4 | 0.9 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 26.6 | 65.4 | % | 27.6 | 68.4 | % | (1.0 | ) | (3.6 | )% | |||||||||||
Office and general expenses | 8.1 | 19.9 | % | 1.4 | 3.6 | % | 6.7 | 464.7 | % | ||||||||||||
Depreciation and amortization | 1.2 | 3.0 | % | 0.2 | 0.5 | % | 1.0 | 549.5 | % | ||||||||||||
$ | 35.9 | 88.3 | % | $ | 29.2 | 72.5 | % | $ | 6.7 | 22.9 | % | ||||||||||
Operating profit | $ | 4.8 | 11.7 | % | $ | 11.1 | 27.5 | % | $ | (6.3 | ) | (57.0 | )% |
2017 | 2016 | Change | |||||||||||||||||||
Specialist Communications | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 8.9 | 21.9 | % | $ | 9.5 | 23.6 | % | $ | (0.6 | ) | (6.1 | )% | ||||||||
Staff costs (2) | 19.7 | 48.3 | % | 19.3 | 47.9 | % | 0.4 | 1.9 | % | ||||||||||||
Administrative | 5.3 | 13.0 | % | 5.5 | 13.8 | % | (0.3 | ) | (4.6 | )% | |||||||||||
Deferred acquisition consideration | 0.1 | 0.3 | % | (5.9 | ) | (14.6 | )% | 6.0 | (102.3 | )% | |||||||||||
Stock-based compensation | 0.7 | 1.6 | % | 0.6 | 1.4 | % | 0.1 | 16.6 | % | ||||||||||||
Depreciation and amortization | 1.2 | 3.0 | % | 0.2 | 0.5 | % | 1.0 | 549.5 | % | ||||||||||||
Total operating expenses | $ | 35.9 | 88.3 | % | $ | 29.2 | 72.5 | % | $ | 6.7 | 22.9 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Media Services | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 33.0 | $ | 34.5 | $ | (1.5 | ) | (4.2 | )% | ||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 21.7 | 65.6 | % | 24.8 | 72.0 | % | (3.2 | ) | (12.7 | )% | |||||||||||
Office and general expenses | 8.0 | 24.3 | % | 6.9 | 19.9 | % | 1.2 | 17.0 | % | ||||||||||||
Depreciation and amortization | 0.9 | 2.8 | % | 2.3 | 6.8 | % | (1.4 | ) | (60.8 | )% | |||||||||||
$ | 30.6 | 92.7 | % | $ | 34.0 | 98.6 | % | $ | (3.4 | ) | (10.0 | )% | |||||||||
Operating profit | $ | 2.4 | 7.3 | % | $ | 0.5 | 1.4 | % | $ | 2.0 | 418.6 | % |
2017 | 2016 | Change | |||||||||||||||||||
Media Services | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 8.3 | 25.1 | % | $ | 7.9 | 22.9 | % | $ | 0.4 | 5.1 | % | |||||||||
Staff costs (2) | 16.8 | 50.9 | % | 17.2 | 50.0 | % | (0.4 | ) | (2.4 | )% | |||||||||||
Administrative | 4.3 | 13.0 | % | 6.3 | 18.3 | % | (2.0 | ) | (31.8 | )% | |||||||||||
Deferred acquisition consideration | 0.1 | 0.3 | % | 0.2 | 0.5 | % | (0.1 | ) | (31.5 | )% | |||||||||||
Stock-based compensation | 0.2 | 0.5 | % | 0.1 | 0.2 | % | 0.1 | 111.3 | % | ||||||||||||
Depreciation and amortization | 0.9 | 2.8 | % | 2.3 | 6.8 | % | (1.4 | ) | (60.8 | )% | |||||||||||
Total operating expenses | $ | 30.6 | 92.7 | % | $ | 34.0 | 98.6 | % | $ | (3.4 | ) | (10.0 | )% |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
All Other | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 84.0 | $ | 75.0 | $ | 8.9 | 11.9 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
Cost of services sold | 59.0 | 70.2 | % | 51.8 | 69.0 | % | 7.2 | 13.8 | % | ||||||||||||
Office and general expenses | 7.6 | 9.1 | % | 14.4 | 19.1 | % | (6.8 | ) | (47.0 | )% | |||||||||||
Depreciation and amortization | 2.2 | 2.6 | % | 2.1 | 2.7 | % | 0.1 | 5.1 | % | ||||||||||||
Goodwill impairment | — | — | % | 29.6 | 39.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
$ | 68.7 | 81.9 | % | $ | 97.8 | 130.4 | % | $ | (29.1 | ) | (29.7 | )% | |||||||||
Operating profit (loss) | $ | 15.2 | 18.1 | % | $ | (22.8 | ) | (30.4 | )% | $ | 38.0 | (166.6 | )% |
2017 | 2016 | Change | |||||||||||||||||||
All Other | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Thousands) | |||||||||||||||||||||
Direct costs (1) | $ | 20.5 | 24.5 | % | $ | 19.9 | 26.5 | % | $ | 0.7 | 3.4 | % | |||||||||
Staff costs (2) | 41.7 | 49.7 | % | 36.1 | 48.2 | % | 5.6 | 15.4 | % | ||||||||||||
Administrative | 7.9 | 9.4 | % | 7.9 | 10.5 | % | (0.1 | ) | (0.7 | )% | |||||||||||
Deferred acquisition consideration | (4.6 | ) | (5.5 | )% | 1.3 | 1.7 | % | (5.9 | ) | (459.1 | )% | ||||||||||
Stock-based compensation | 1.1 | 1.3 | % | 1.0 | 1.3 | % | 0.1 | 13.5 | % | ||||||||||||
Depreciation and amortization | 2.2 | 2.6 | % | 2.1 | 2.7 | % | 0.1 | 5.1 | % | ||||||||||||
Goodwill impairment | — | — | % | 29.6 | 39.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
Total operating expenses | $ | 68.7 | 81.9 | % | $ | 97.8 | 130.4 | % | $ | (29.1 | ) | (29.7 | )% |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Variance | |||||||||||||
Corporate | $ | $ | $ | % | |||||||||||
(Dollars in Millions) | |||||||||||||||
Staff costs (1) | $ | 5.4 | $ | 6.0 | $ | (0.6 | ) | (9.2 | )% | ||||||
Administrative | 4.6 | 0.1 | 4.5 | 4,016.2 | % | ||||||||||
Stock-based compensation | 0.5 | 0.6 | (0.1 | ) | (21.0 | )% | |||||||||
Depreciation and amortization | 0.3 | 0.4 | (0.1 | ) | (29.0 | )% | |||||||||
Total operating expenses | $ | 10.7 | $ | 7.1 | $ | 3.7 | 52.1 | % |
(1) | Excludes stock-based compensation. |
2017 Non-GAAP Activity | Change | |||||||||||||||||||||||||||||||
Advertising and Communications Group | 2016 Revenue | Foreign Exchange | Non-GAAP Acquisitions (Dispositions), net | Organic Revenue Growth (Decline) | 2017 Revenue | Foreign Exchange | Non-GAAP Acquisitions (Dispositions), net | Organic Revenue Growth (Decline) | Total Revenue | |||||||||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||||||||||||||
United States | $ | 799.7 | $ | — | $ | (1.2 | ) | $ | 70.4 | $ | 868.8 | — | % | (0.2 | )% | 8.8 | % | 8.6 | % | |||||||||||||
Canada | 92.3 | 0.7 | (1.5 | ) | (2.9 | ) | 88.5 | 0.7 | % | (1.6 | )% | (3.2 | )% | (4.1 | )% | |||||||||||||||||
Other | 103.4 | (5.0 | ) | 39.2 | 16.1 | 153.7 | (4.9 | )% | 37.9 | % | 15.6 | % | 48.7 | % | ||||||||||||||||||
Total | $ | 995.3 | $ | (4.4 | ) | $ | 36.5 | $ | 83.6 | $ | 1,111.0 | (0.4 | )% | 3.7 | % | 8.4 | % | 11.6 | % |
Global Integrated Agencies | Media Services | All Other | Total | ||||||||||||
(Dollars in Millions) | |||||||||||||||
GAAP revenue from 2016 acquisitions (1) | $ | 43.5 | $ | — | $ | — | $ | 43.5 | |||||||
Foreign exchange impact | 2.4 | — | — | 2.4 | |||||||||||
Contribution to organic revenue (growth) decline (2) | (4.9 | ) | — | — | (4.9 | ) | |||||||||
Prior year revenue from dispositions | (1.8 | ) | (1.2 | ) | (1.5 | ) | (4.5 | ) | |||||||
Non-GAAP acquisitions (dispositions), net | $ | 39.2 | $ | (1.2 | ) | $ | (1.5 | ) | $ | 36.5 |
(1) | Operating segments not impacted by revenue from acquired Partner Firms in the current and prior period were excluded. In addition, no acquisitions were completed during 2017. Refer to Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included herein for further information pertaining to the current year dispositions. |
(2) | Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company’s organic revenue growth (decline) calculation. |
2017 | 2016 | ||||
United States | 78.2 | % | 80.3 | % | |
Canada | 8.0 | % | 9.3 | % | |
Other | 13.8 | % | 10.4 | % |
2017 | 2016 | Change | |||||||||||||||||||
Advertising and Communications Group | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 1,111.0 | $ | 995.3 | $ | 115.7 | 11.6 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 754.8 | 67.9 | % | 675.9 | 67.9 | % | 78.9 | 11.7 | % | ||||||||||||
Office and general expenses | 223.2 | 20.1 | % | 202.1 | 20.3 | % | 21.1 | 10.4 | % | ||||||||||||
Depreciation and amortization | 32.1 | 2.9 | % | 32.8 | 3.3 | % | (0.8 | ) | (2.3 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 3.0 | % | (29.6 | ) | (100.0 | )% | |||||||||||
$ | 1,010.0 | 90.9 | % | $ | 940.5 | 94.5 | % | $ | 69.6 | 7.4 | % | ||||||||||
Operating profit | $ | 101.0 | 9.1 | % | $ | 54.8 | 5.5 | % | $ | 46.1 | 84.1 | % |
2017 | 2016 | Change | |||||||||||||||||||
Advertising and Communications Group | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 192.8 | 17.3 | % | $ | 146.2 | 14.7 | % | $ | 46.5 | 31.8 | % | |||||||||
Staff costs (2) | 615.8 | 55.4 | % | 572.0 | 57.5 | % | 43.8 | 7.7 | % | ||||||||||||
Administrative | 140.9 | 12.7 | % | 129.3 | 13.0 | % | 11.6 | 9.0 | % | ||||||||||||
Deferred acquisition consideration | 13.3 | 1.2 | % | 17.2 | 1.7 | % | (3.9 | ) | (22.7 | )% | |||||||||||
Stock-based compensation | 15.3 | 1.4 | % | 13.4 | 1.3 | % | 1.9 | 14.1 | % | ||||||||||||
Depreciation and amortization | 32.1 | 2.9 | % | 32.8 | 3.3 | % | (0.8 | ) | (2.3 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 3.0 | % | (29.6 | ) | (100.0 | )% | |||||||||||
Total operating expenses | $ | 1,010.0 | 90.9 | % | $ | 940.5 | 94.5 | % | $ | 69.6 | 7.4 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Global Integrated Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 576.9 | $ | 489.9 | $ | 87.1 | 17.8 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 403.2 | 69.9 | % | 335.8 | 68.5 | % | 67.4 | 20.1 | % | ||||||||||||
Office and general expenses | 122.1 | 21.2 | % | 114.8 | 23.4 | % | 7.3 | 6.4 | % | ||||||||||||
Depreciation and amortization | 17.9 | 3.1 | % | 15.0 | 3.1 | % | 2.9 | 19.4 | % | ||||||||||||
$ | 543.2 | 94.1 | % | $ | 465.6 | 95.0 | % | $ | 77.6 | 16.7 | % | ||||||||||
Operating profit | $ | 33.8 | 5.9 | % | $ | 24.3 | 5.0 | % | $ | 9.4 | 38.9 | % |
2017 | 2016 | Change | |||||||||||||||||||
Global Integrated Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 82.9 | 14.4 | % | $ | 39.9 | 8.1 | % | $ | 43.0 | 107.9 | % | |||||||||
Staff costs (2) | 342.3 | 59.3 | % | 315.6 | 64.4 | % | 26.7 | 8.5 | % | ||||||||||||
Administrative | 77.8 | 13.5 | % | 65.9 | 13.5 | % | 11.8 | 18.0 | % | ||||||||||||
Deferred acquisition consideration | 12.4 | 2.1 | % | 20.1 | 4.1 | % | (7.7 | ) | (38.5 | )% | |||||||||||
Stock-based compensation | 9.9 | 1.7 | % | 9.0 | 1.8 | % | 0.9 | 9.6 | % | ||||||||||||
Depreciation and amortization | 17.9 | 3.1 | % | 15.0 | 3.1 | % | 2.9 | 19.4 | % | ||||||||||||
Total operating expenses | $ | 543.2 | 94.1 | % | $ | 465.6 | 95.0 | % | $ | 77.6 | 16.7 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Domestic Creative Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 67.5 | $ | 66.3 | $ | 1.2 | 1.8 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 38.0 | 56.3 | % | 36.3 | 54.7 | % | 1.7 | 4.7 | % | ||||||||||||
Office and general expenses | 14.9 | 22.0 | % | 14.0 | 21.1 | % | 0.9 | 6.5 | % | ||||||||||||
Depreciation and amortization | 1.1 | 1.6 | % | 1.3 | 1.9 | % | (0.2 | ) | (15.9 | )% | |||||||||||
$ | 53.9 | 79.9 | % | $ | 51.5 | 77.7 | % | $ | 2.4 | 4.7 | % | ||||||||||
Operating profit | $ | 13.6 | 20.1 | % | $ | 14.8 | 22.3 | % | $ | (1.2 | ) | (8.2 | )% |
2017 | 2016 | Change | |||||||||||||||||||
Domestic Creative Agencies | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 1.6 | 2.4 | % | $ | 1.5 | 2.3 | % | $ | 0.1 | 7.1 | % | |||||||||
Staff costs (2) | 42.2 | 62.6 | % | 40.2 | 60.7 | % | 2.0 | 5.1 | % | ||||||||||||
Administrative | 8.1 | 12.0 | % | 8.2 | 12.4 | % | (0.1 | ) | (1.4 | )% | |||||||||||
Deferred acquisition consideration | 0.4 | 0.5 | % | (0.2 | ) | (0.3 | )% | 0.6 | (275.1 | )% | |||||||||||
Stock-based compensation | 0.5 | 0.7 | % | 0.5 | 0.7 | % | — | 3.1 | % | ||||||||||||
Depreciation and amortization | 1.1 | 1.6 | % | 1.3 | 1.9 | % | (0.2 | ) | (15.9 | )% | |||||||||||
Total operating expenses | $ | 53.9 | 79.9 | % | $ | 51.5 | 77.7 | % | $ | 2.4 | 4.7 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Specialist Communications | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 125.5 | $ | 123.0 | $ | 2.5 | 2.0 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 85.4 | 68.0 | % | 84.2 | 68.5 | % | 1.1 | 1.3 | % | ||||||||||||
Office and general expenses | 23.0 | 18.4 | % | 15.8 | 12.8 | % | 7.3 | 46.1 | % | ||||||||||||
Depreciation and amortization | 3.7 | 2.9 | % | 5.1 | 4.2 | % | (1.5 | ) | (28.6 | )% | |||||||||||
$ | 112.1 | 89.3 | % | $ | 105.1 | 85.5 | % | $ | 6.9 | 6.6 | % | ||||||||||
Operating profit | $ | 13.4 | 10.7 | % | $ | 17.9 | 14.5 | % | $ | (4.5 | ) | (24.9 | )% |
2017 | 2016 | Change | |||||||||||||||||||
Specialist Communications | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 29.7 | 23.7 | % | $ | 28.7 | 23.4 | % | $ | 1.0 | 3.3 | % | |||||||||
Staff costs (2) | 59.8 | 47.7 | % | 59.6 | 48.5 | % | 0.1 | 0.2 | % | ||||||||||||
Administrative | 16.0 | 12.8 | % | 16.0 | 13.0 | % | — | 0.2 | % | ||||||||||||
Deferred acquisition consideration | 0.6 | 0.5 | % | (5.9 | ) | (4.8 | )% | 6.5 | (110.2 | )% | |||||||||||
Stock-based compensation | 2.3 | 1.8 | % | 1.6 | 1.3 | % | 0.7 | 45.5 | % | ||||||||||||
Depreciation and amortization | 3.7 | 2.9 | % | 5.1 | 4.2 | % | (1.5 | ) | (28.6 | )% | |||||||||||
Total operating expenses | $ | 112.1 | 89.3 | % | $ | 105.1 | 85.5 | % | $ | 6.9 | 6.6 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
Media Services | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 104.0 | $ | 96.7 | $ | 7.3 | 7.5 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 66.0 | 63.5 | % | 70.9 | 73.4 | % | (4.9 | ) | (7.0 | )% | |||||||||||
Office and general expenses | 26.4 | 25.4 | % | 17.8 | 18.4 | % | 8.6 | 48.3 | % | ||||||||||||
Depreciation and amortization | 2.9 | 2.8 | % | 4.4 | 4.6 | % | (1.5 | ) | (33.9 | )% | |||||||||||
$ | 95.3 | 91.7 | % | $ | 93.2 | 96.4 | % | $ | 2.2 | 2.3 | % | ||||||||||
Operating profit | $ | 8.6 | 8.3 | % | $ | 3.5 | 3.6 | % | $ | 5.1 | 145.5 | % |
2017 | 2016 | Change | |||||||||||||||||||
Media Services | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 24.2 | 23.3 | % | $ | 23.7 | 24.5 | % | $ | 0.5 | 2.2 | % | |||||||||
Staff costs (2) | 52.3 | 50.3 | % | 48.1 | 49.7 | % | 4.2 | 8.8 | % | ||||||||||||
Administrative | 15.0 | 14.5 | % | 15.9 | 16.4 | % | (0.9 | ) | (5.4 | )% | |||||||||||
Deferred acquisition consideration | 0.4 | 0.4 | % | 0.9 | 0.9 | % | (0.5 | ) | (52.3 | )% | |||||||||||
Stock-based compensation | 0.5 | 0.4 | % | 0.2 | 0.2 | % | 0.3 | 148.1 | % | ||||||||||||
Depreciation and amortization | 2.9 | 2.8 | % | 4.4 | 4.6 | % | (1.5 | ) | (33.9 | )% | |||||||||||
Total operating expenses | $ | 95.3 | 91.7 | % | $ | 93.2 | 96.4 | % | $ | 2.2 | 2.3 | % |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Change | |||||||||||||||||||
All Other | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Revenue | $ | 237.2 | $ | 219.5 | $ | 17.7 | 8.1 | % | |||||||||||||
Operating Expenses | |||||||||||||||||||||
Cost of services sold | 162.3 | 68.4 | % | 148.7 | 67.7 | % | 13.6 | 9.1 | % | ||||||||||||
Office and general expenses | 36.8 | 15.5 | % | 39.8 | 18.1 | % | (3.0 | ) | (7.6 | )% | |||||||||||
Depreciation and amortization | 6.5 | 2.7 | % | 7.0 | 3.2 | % | (0.5 | ) | (6.9 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 13.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
$ | 205.6 | 86.7 | % | $ | 225.1 | 102.6 | % | $ | (19.6 | ) | (8.7 | )% | |||||||||
Operating profit | $ | 31.6 | 13.3 | % | $ | (5.6 | ) | (2.6 | )% | $ | 37.2 | (662.8 | )% |
2017 | 2016 | Change | |||||||||||||||||||
All Other | $ | % of Revenue | $ | % of Revenue | $ | % | |||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||
Direct costs (1) | $ | 54.3 | 22.9 | % | $ | 52.4 | 23.9 | % | $ | 1.9 | 3.6 | % | |||||||||
Staff costs (2) | 119.2 | 50.2 | % | 108.4 | 49.4 | % | 10.7 | 9.9 | % | ||||||||||||
Administrative | 23.9 | 10.1 | % | 23.2 | 10.6 | % | 0.7 | 3.1 | % | ||||||||||||
Deferred acquisition consideration | (0.5 | ) | (0.2 | )% | 2.3 | 1.1 | % | (2.8 | ) | (121.1 | )% | ||||||||||
Stock-based compensation | 2.1 | 0.9 | % | 2.1 | 1.0 | % | — | 1.2 | % | ||||||||||||
Depreciation and amortization | 6.5 | 2.7 | % | 7.0 | 3.2 | % | (0.5 | ) | (6.9 | )% | |||||||||||
Goodwill impairment | — | — | % | 29.6 | 13.5 | % | (29.6 | ) | (100.0 | )% | |||||||||||
Total operating expenses | $ | 205.6 | 86.7 | % | $ | 225.1 | 102.6 | % | $ | (19.6 | ) | (8.7 | )% |
(1) | Excludes staff costs. |
(2) | Excludes stock-based compensation and is comprised of amounts reported in both cost of services and office and general expenses. |
2017 | 2016 | Variance | |||||||||||||
Corporate | $ | $ | $ | % | |||||||||||
(Dollars in Millions) | |||||||||||||||
Staff costs (1) | $ | 15.0 | $ | 20.9 | $ | (5.9 | ) | (28.3 | )% | ||||||
Administrative | 11.6 | 8.8 | 2.8 | 31.6 | % | ||||||||||
Stock-based compensation | 1.6 | 2.1 | (0.5 | ) | (22.3 | )% | |||||||||
Depreciation and amortization | 0.9 | 1.3 | (0.4 | ) | (31.8 | )% | |||||||||
Total operating expenses | $ | 29.0 | $ | 33.0 | $ | (4.0 | ) | (12.1 | )% |
(1) | Excludes stock-based compensation. |
(amounts in $ millions) | As of and for the nine months ended September 30, 2017 | As of and for the nine months ended September 30, 2016 | As of and for the year ended December 31, 2016 | ||||||||
Cash and cash equivalents | $ | 18.9 | $ | 21.7 | $ | 27.9 | |||||
Working capital deficit | $ | (220.3 | ) | $ | (319.2 | ) | $ | (313.2 | ) | ||
Cash provided by (used in) operating activities | $ | 22.1 | $ | (41.4 | ) | $ | 5.4 | ||||
Cash used in investing activities | $ | (19.5 | ) | $ | (14.7 | ) | $ | (25.2 | ) | ||
Cash provided by (used in) financing activities | $ | (11.7 | ) | $ | 15.1 | $ | (15.9 | ) | |||
Long-term debt to total equity ratio | (2.39 | ) | (1.83 | ) | (1.84 | ) | |||||
Ratio of earnings to fixed charges | 1.65 | N/A | N/A | ||||||||
Fixed charge deficiency | N/A | $ | 50.5 | $ | 49.6 |
September 30, 2017 | |||
Total Senior Leverage Ratio | 0.2 | ||
Maximum per covenant | 2.0 | ||
Total Leverage Ratio | 4.8 | ||
Maximum per covenant | 5.5 | ||
Fixed Charges Ratio | 2.2 | ||
Minimum per covenant | 1.0 | ||
Earnings before interest, taxes, depreciation and amortization | $ | 197,686 | |
Minimum per covenant | $ | 105,000 |
September 30, 2017 | |||||||||||||||||||||||
(amounts in $ millions) | Global Integrated Agencies | Domestic Creative Agencies | Specialist Communication Agencies | Media Services | All Other | Total | |||||||||||||||||
Beginning Balance of contingent payments | $ | 148.8 | $ | 0.8 | $ | 15.0 | $ | 7.1 | $ | 53.1 | $ | 224.8 | |||||||||||
Payments (1) | (72.3 | ) | (1.1 | ) | (9.1 | ) | (2.6 | ) | (15.4 | ) | (100.5 | ) | |||||||||||
Additions (2) | — | — | — | — | — | — | |||||||||||||||||
Redemption value adjustments (3) | 16.3 | 0.4 | 1.3 | 0.4 | 0.8 | 19.2 | |||||||||||||||||
Foreign translation adjustment | 0.7 | — | — | — | 0.7 | 1.3 | |||||||||||||||||
Ending Balance of contingent payments | 93.4 | — | 7.3 | 5.0 | 39.2 | 144.8 | |||||||||||||||||
Fixed payments | 2.3 | — | 0.3 | — | 0.8 | 3.4 | |||||||||||||||||
$ | 95.7 | $ | — | $ | 7.6 | $ | 5.0 | $ | 40.0 | $ | 148.3 |
December 31, 2016 | |||||||||||||||||||||||
(amounts in $ millions) | Global Integrated Agencies | Domestic Creative Agencies | Specialist Communication Agencies | Media Services | All Other | Total | |||||||||||||||||
Beginning Balance of contingent payments | $ | 157.4 | $ | 4.2 | $ | 42.5 | $ | 7.9 | $ | 94.6 | $ | 306.7 | |||||||||||
Payments (1) | (36.3 | ) | (3.2 | ) | (20.5 | ) | (1.4 | ) | (43.8 | ) | (105.2 | ) | |||||||||||
Additions (2) | 15.6 | — | 0.5 | — | — | 16.1 | |||||||||||||||||
Redemption value adjustments (3) | 16.2 | (0.3 | ) | (3.5 | ) | 0.6 | 0.9 | 13.9 | |||||||||||||||
Other (4) | (2.4 | ) | — | (4.1 | ) | — | — | (6.4 | ) | ||||||||||||||
Foreign translation adjustment | (1.9 | ) | — | — | — | 1.4 | (0.5 | ) | |||||||||||||||
Ending Balance of contingent payments | 148.8 | 0.8 | 15.0 | 7.1 | 53.1 | 224.8 | |||||||||||||||||
Fixed payments | 2.9 | — | 0.6 | 0.3 | 1.0 | 4.8 | |||||||||||||||||
$ | 151.7 | $ | 0.8 | $ | 15.5 | $ | 7.5 | $ | 54.1 | $ | 229.6 |
(1) | For the nine months ended September 30, 2017 and the year ended December 31, 2016, payments include $28.7 million and $10.5 million, respectively, of deferred acquisition consideration settled through the issuance of 3,353,939 and 691,559, respectively, MDC Class A subordinate voting shares in lieu of cash. |
(2) | Additions are the initial estimated deferred acquisition payments of new acquisitions and step-up transactions completed within that fiscal period. |
(3) | Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments, including the accretion of present value and stock-based compensation charges relating to acquisition payments that are tied to continued employment. |
(4) | For the year ended December 31, 2016, other is comprised of (i) $2.4 million transfered to shares to be issued related to 100,000 MDC Class A subordinate voting shares to be issued contingent on specific thresholds of future earnings that management expects to be attained; and (ii) $4.1 million of contingent payments eliminated through the acquisition of incremental ownership interests. |
Consideration (4) | 2017 | 2018 | 2019 | 2020 | 2021 & Thereafter | Total | |||||||||||||||||||
(Dollars in Millions) | |||||||||||||||||||||||||
Cash | $ | 3.3 | $ | 2.8 | $ | 2.6 | $ | 3.5 | $ | 3.1 | $ | 15.3 | |||||||||||||
Shares | — | — | 0.1 | 0.1 | — | 0.2 | |||||||||||||||||||
$ | 3.3 | $ | 2.8 | $ | 2.7 | $ | 3.6 | $ | 3.1 | $ | 15.5 | (1) | |||||||||||||
Operating income before depreciation and amortization to be received (2) | $ | 2.7 | $ | 0.9 | $ | — | $ | 0.5 | $ | — | $ | 4.1 | |||||||||||||
Cumulative operating income before depreciation and amortization (3) | $ | 2.7 | $ | 3.6 | $ | 3.6 | $ | 4.1 | $ | 4.1 | (5) |
(1) | This amount is in addition to (i) the $42.3 million of options to purchase only exercisable upon termination not within the control of the Company, or death, and (ii) the $2.3 million excess of the initial redemption value recorded in redeemable noncontrolling interests over the amount the Company would be required to pay to the holders should the Company acquire the remaining ownership interests. |
(2) | This financial measure is presented because it is the basis of the calculation used in the underlying agreements relating to the put rights and is based on actual operating results. This amount represents additional amounts to be attributable to MDC Partners Inc., commencing in the year the put is exercised. |
(3) | Cumulative operating income before depreciation and amortization represents the cumulative amounts to be received by the Company. |
(4) | The timing of consideration to be paid varies by contract and does not necessarily correspond to the date of the exercise of the put. |
(5) | Amounts are not presented as they would not be meaningful due to multiple periods included. |
• | risks associated with severe effects of international, national and regional economic conditions; |
• | the Company’s ability to attract new clients and retain existing clients; |
• | the spending patterns and financial success of the Company’s clients; |
• | the Company’s ability to retain and attract key employees; |
• | the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to redeemable noncontrolling interests and deferred acquisition consideration; |
• | the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; |
• | foreign currency fluctuations; and |
• | risks associated with the ongoing Canadian class litigation claim. |
MDC PARTNERS INC. | |
/s/ David Doft | |
David Doft | |
Chief Financial Officer and Authorized Signatory | |
November 1, 2017 |
Exhibit No. | Description | |
Statement of computation of ratio of earnings to fixed charges.* | ||
Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||
Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||
Schedule of Advertising and Communications Companies.* | ||
101 | Interactive data file.* |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(000’s) | (000’s) | ||||||
Earnings: | |||||||
Income (loss) from continuing operations attributable to MDC Partners Inc. | $ | 19,180 | $ | (54,937 | ) | ||
Additions: | |||||||
Income tax expense | 17,659 | 1,180 | |||||
Net income attributable to the noncontrolling interests | 6,588 | 3,172 | |||||
Fixed charges, as shown below | 64,161 | 95,444 | |||||
Distributions received from equity-method investments | — | 123 | |||||
88,408 | 99,796 | ||||||
Subtractions: | |||||||
Equity in earnings of non-consolidated affiliates | 1,924 | 9 | |||||
Earnings as adjusted | $ | 105,664 | $ | 44,850 | |||
Fixed charges: | |||||||
Interest on indebtedness, expensed or capitalized | 46,841 | 73,851 | |||||
Amortization of debt discount and expense and premium on indebtedness, expensed or capitalized | 2,018 | 8,736 | |||||
Interest within rent expense | 15,302 | 12,857 | |||||
Total fixed charges | $ | 64,161 | $ | 95,444 | |||
Ratio of earnings to fixed charges | 1.65 | N/A | |||||
Fixed charge deficiency | N/A | $ | 50,471 |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2017 of MDC Partners Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 1, 2017 | /s/ SCOTT L. KAUFFMAN | |
By: | Scott L. Kauffman | |
Title: | Chairman and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2017 of MDC Partners Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 1, 2017 | /s/ DAVID B. DOFT | |
By: | David B. Doft | |
Title: | Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 1, 2017 | ||
/s/ SCOTT L. KAUFFMAN | ||
By: | Scott L. Kauffman | |
Title: | Chairman and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 1, 2017 | ||
/s/ DAVID B. DOFT | ||
By: | David B. Doft | |
Title: | Chief Financial Officer |
Year of Initial | ||||
Company | Investment | Locations | ||
Consolidated: | ||||
Global Integrated Agencies: | ||||
72andSunny | 2010 | Los Angeles, New York, Netherlands, UK, Australia, Singapore | ||
Anomaly | 2011 | New York, Los Angeles, Netherlands, Canada, UK, China, Germany | ||
Crispin Porter + Bogusky | 2001 | Miami, Boulder, Los Angeles, UK, Denmark, Brazil, China | ||
Doner | 2012 | Detroit, Cleveland, Los Angeles, UK | ||
Forsman & Bodenfors | 2016 | Sweden | ||
kbs+ | 2004 | New York, Canada, China, UK, Los Angeles | ||
Albion | 2014 | UK | ||
Attention | 2009 | New York, Los Angeles | ||
The Media Kitchen | 2010 | New York, Canada, UK | ||
Domestic Creative Agencies: | ||||
Colle + McVoy | 1999 | Minneapolis | ||
Laird + Partners | 2011 | New York | ||
Mono Advertising | 2004 | Minneapolis, San Francisco | ||
Union | 2013 | Canada | ||
Specialist Communications: | ||||
Allison & Partners | 2010 | San Francisco, Los Angeles, New York and other US Locations, China, France, Singapore, UK, Japan, Germany | ||
HL Group Partners | 2007 | New York, Los Angeles, China | ||
Hunter PR | 2014 | New York, UK | ||
Kwittken | 2010 | New York, UK, Canada | ||
Luntz Global | 2014 | Washington, D.C. | ||
Sloane & Company | 2010 | New York | ||
Veritas | 1993 | Canada | ||
Media Services: | ||||
MDC Media Partners | 2010 | |||
Assembly | 2010 | New York, Detroit, Atlanta, Los Angeles | ||
EnPlay | 2015 | New York | ||
Trade X | 2011 | New York | ||
Unique Influence | 2015 | Austin | ||
Varick Media Management | 2010 | New York | ||
All Other: | ||||
6degrees Communications | 1993 | Canada | ||
Boom Marketing | 2005 | Canada | ||
Bruce Mau Design | 2004 | Canada | ||
Civilian | 2000 | Chicago | ||
Concentric Partners | 2011 | New York, UK | ||
Gale Partners | 2014 | Canada, New York, India | ||
Hello Design | 2004 | Los Angeles | ||
Kenna | 2010 | Canada | ||
Kingsdale | 2014 | Canada, New York | ||
Northstar Research Partners | 1998 | Canada, New York, UK, Indonesia | ||
Redscout | 2007 | New York, San Francisco, UK | ||
Relevent | 2010 | New York | ||
Source Marketing | 1998 | Norwalk, Pittsburgh | ||
TEAM | 2010 | Ft. Lauderdale | ||
Vitro | 2004 | San Diego, Austin | ||
Yamamoto | 2000 | Minneapolis | ||
Y Media Labs | 2015 | Redwood City, New York, India |
Document And Entity Information - shares |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Oct. 27, 2017 |
Dec. 31, 2016 |
|
Document Information [Line Items] | |||
Entity Registrant Name | MDC PARTNERS INC | ||
Entity Central Index Key | 0000876883 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Trading Symbol | MDCA | ||
Document Type | 10-Q | ||
Document Fiscal Year Focus | 2017 | ||
Document Period End Date | Sep. 30, 2017 | ||
Document Fiscal Period Focus | Q3 | ||
Amendment Flag | false | ||
Common Class A | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 58,357,062 | ||
Common Class B | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 3,755 | ||
Convertible Preferred Stock [Member] | Series 4 Convertible Preferred Stock [Domain] | |||
Document Information [Line Items] | |||
Stock Issued During Period, Shares, Convertible Preferred Shares | 95,000 | 95,000 | 0 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Earnings Per Share, Basic | $ 0.25 | $ (0.62) | $ 0.24 | $ (1.08) |
Earnings Per Share, Diluted | $ 0.24 | $ (0.62) | $ 0.24 | $ (1.08) |
Revenue: | ||||
Services | $ 375,800,000 | $ 349,254,000 | $ 1,111,032,000 | $ 995,343,000 |
Operating expenses: | ||||
Cost of services sold | 249,418,000 | 235,659,000 | 754,803,000 | 675,940,000 |
Office and general expenses | 77,910,000 | 83,303,000 | 251,313,000 | 233,840,000 |
Depreciation and amortization | 11,252,000 | 11,412,000 | 32,916,000 | 34,068,000 |
Goodwill, Impairment Loss | 0 | 29,631,000 | 0 | 29,631,000 |
Costs and Expenses, Total | 338,580,000 | 360,005,000 | 1,039,032,000 | 973,479,000 |
Operating profit | 37,220,000 | (10,751,000) | 72,000,000 | 21,864,000 |
Other income (expense): | ||||
Other, net | 8,649,000 | (6,008,000) | 17,812,000 | 9,530,000 |
Interest and Debt Expense | 16,403,000 | 16,540,000 | 48,859,000 | 49,289,000 |
Loss on redemption of notes | 0 | 0 | 0 | (33,298,000) |
Interest income | 145,000 | 218,000 | 550,000 | 599,000 |
Nonoperating Income (Expense), Total | (7,609,000) | (22,330,000) | (30,497,000) | (72,458,000) |
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 29,611,000 | (33,081,000) | 41,503,000 | (50,594,000) |
Income tax expense | 9,049,000 | (1,930,000) | 17,659,000 | 1,180,000 |
Income (loss) before equity in earnings of non-consolidated affiliates | 20,562,000 | (31,151,000) | 23,844,000 | (51,774,000) |
Equity in earnings (loss) of non-consolidated affiliates | 1,422,000 | 70,000 | 1,924,000 | 9,000 |
Net income (loss) | 21,984,000 | (31,081,000) | 25,768,000 | (51,765,000) |
Net income attributable to noncontrolling interests | (3,491,000) | (1,059,000) | (6,588,000) | (3,172,000) |
Net income (loss) attributable to MDC Partners Inc. | $ 18,493,000 | $ (32,140,000) | $ 19,180,000 | $ (54,937,000) |
Weighted average number of common shares outstanding: | ||||
Weighted Average Number of Shares Outstanding, Basic and Diluted | 57,566,707 | 52,244,819 | 53,915,536 | 50,861,890 |
Share-based Compensation | $ 6,380,000 | $ 5,228,000 | $ 16,870,000 | $ 15,443,000 |
Net Income (Loss) Available to Common Stockholders, Basic | 16,545,000 | (32,140,000) | 14,815,000 | (54,937,000) |
Cost of Sales [Member] | ||||
Weighted average number of common shares outstanding: | ||||
Share-based Compensation | 5,310,000 | 3,026,000 | 12,558,000 | 10,393,000 |
General and Administrative Expense [Member] | ||||
Weighted average number of common shares outstanding: | ||||
Share-based Compensation | 1,070,000 | 2,202,000 | 4,312,000 | 5,050,000 |
Series 4 Convertible Preferred Stock [Domain] | Convertible Preferred Stock [Member] | ||||
Other income (expense): | ||||
Accretion on convertible preferred shares | $ (1,948,000) | $ 0 | $ (4,365,000) | $ 0 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Comprehensive income (loss) | ||||
Net income (loss) | $ 21,984 | $ (31,081) | $ 25,768 | $ (51,765) |
Other comprehensive income (loss), net of applicable tax: | ||||
Foreign currency translation adjustment | 1,912 | (2,331) | 1,294 | 8,354 |
Other comprehensive income (loss) | (1,912) | 2,331 | (1,294) | (8,354) |
Comprehensive income (loss) for the period | 20,072 | (28,750) | 24,474 | (60,119) |
Comprehensive income attributable to the noncontrolling interests | (4,695) | (569) | (9,063) | (4,481) |
Comprehensive income (loss) attributable to MDC Partners Inc. | $ 15,377 | $ (29,319) | $ 15,411 | $ (64,600) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 2,800 | $ 1,523 |
Accumulated depreciation (in dollars) | $ 118,241 | $ 105,134 |
Stock Issued During Period, Shares, Convertible Preferred Shares | 90,220,000 | |
Common stock, shares issued | 56,314,344 | 52,802,058 |
Convertible Preferred Stock [Member] | Series 4 Convertible Preferred Stock [Domain] | ||
Preferred Stock, Liquidation Preference, Value | $ 99,365 | $ 0 |
Stock Issued During Period, Shares, Convertible Preferred Shares | 95,000 | 0 |
Shares, Outstanding | 95,000 | 0 |
Common Stock [Member] | ||
Shares, Outstanding | 56,314,344 | 52,802,058 |
Common stock, shares outstanding | 56,314,344 | 52,802,058 |
Common Stock [Member] | Common Class A | ||
Shares, Outstanding | 56,310,589 | 52,798,303 |
Common Stock [Member] | Common Class B | ||
Shares, Outstanding | 3,755 | |
Share Capital To Be Issued [Member] | ||
Shares to be issued, shares | 0 | 100,000 |
Acquisitions |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Valuations of acquired companies are based on a number of factors, including specialized know-how, reputation, competitive position and service offerings. The Company’s acquisition strategy has been focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of its various strategic business platforms to better serve the Company’s clients. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry. The Company’s model of “Perpetual Partnership” often involves acquiring a majority interest rather than a 100% interest and leaving management owners with a significant financial interest in the performance of the acquired entity for a minimum period of time, typically not less than five years. The Company’s acquisition model in this scenario typically provides for (i) an initial payment at the time of closing, (ii) additional contingent purchase price obligations based on the future performance of the acquired entity, and (iii) an option by the Company to purchase (and in some instances a requirement to so purchase) the remaining interest of the acquired entity under a predetermined formula. Contingent purchase price obligations. The Company’s contingent purchase price obligations are generally payable within a five year period following the acquisition date, and are based on (i) the achievement of specific thresholds of future earnings, and (ii) in certain cases, the growth rate of those earnings. Contingent purchase price obligations are recorded as deferred acquisition consideration on the balance sheet at the acquisition date fair value and adjusted at each reporting period through operating income or net interest expense, depending on the nature of the arrangement. On occasion, the Company may initiate a renegotiation of previously acquired ownership interests and any resulting change in the estimated amount of consideration to be paid is adjusted in the reporting period through operating income or net interest expense, depending on the nature of the arrangement. See Notes 2, 9, and 12 for additional information on the deferred acquisition consideration. Options to purchase. When acquiring less than 100% ownership, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as noncontrolling interests in the equity section of the Company’s balance sheet. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through additional paid-in capital (but not less than their initial redemption value), except for foreign currency translation adjustments. On occasion, the Company may initiate a renegotiation to acquire an incremental ownership interest and the amount of consideration paid may differ materially from the balance sheet amounts. See Note 12 for additional information on redeemable noncontrolling interests. Employment conditions. From time to time, specifically when the projected success of an acquisition is deemed to be dependent on retention of specific personnel, such acquisition may include deferred payments that are contingent upon employment terms as well as financial performance. The Company accounts for those payments through operating income as stock-based compensation over the required retention period. For the three and nine months ended September 30, 2017 and 2016, stock-based compensation included $4,064 and $9,792, respectively, and $2,259 and $7,184, respectively, of expense relating to those payments. Distributions to noncontrolling shareholders. If noncontrolling shareholders have the right to receive distributions based on the profitability of an acquired entity, the amount is recorded as income attributable to noncontrolling interests. However, there are circumstances when the Company acquires a majority interest and the selling shareholders waive their right to receive distributions with respect to their retained interest for a period of time, typically not less than five years. Under this model, the right to receive such distributions typically begins concurrently with the purchase option period and, therefore, if such option is exercised at the first available date, the Company may not record any noncontrolling interest over the entire period from the initial acquisition date through the acquisition date of the remaining interests. 2017 Acquisitions In 2017, the Company entered into various non-material transactions in connection with certain of its majority-owned entities. As a result of the foregoing, the Company made total cash closing payments of $3,858, increased fixed deferred consideration liability by $7,208, reduced redeemable noncontrolling interests by $816, reduced noncontrolling interests equity by $11,965, reduced noncontrolling interest payable by $397, and increased additional paid-in capital by $2,316. In addition, a stock-based compensation charge of $996 has been recognized representing the consideration paid in excess of the fair value of the interest acquired. 2017 Dispositions During the three months ended September 30, 2017, the Company sold all of its ownership interests in three subsidiaries resulting in recognition of a net loss on sale of business of $1,424. The net assets reflected in the calculation of the net loss on sale was inclusive of goodwill of $17,593. Goodwill was allocated to the subsidiaries based on the relative fair value of the sold subsidiaries compared to the fair value of the respective reporting units. See Note 1 for details. Additionally, the Company recorded a reduction in noncontrolling interests of $10,657. 2016 Acquisitions Effective July 1, 2016, the Company acquired 100% of the equity interests of Forsman & Bodenfors AB (“F&B”), an advertising agency based in Sweden, for an estimated aggregate purchase price at acquisition date of $49,837, consisting of a closing payment of 1,900,000 MDC Class A subordinate voting shares with an acquisition date fair value of $34,219, plus additional deferred acquisition payments with an estimated present value at acquisition date of $15,618. The amount of additional payments are based on the financial results of the acquired business for 2015 and 2016 as well as for the value of the Company’s shares from July 1, 2016 up to and including the close of business on November 2, 2016. During the three months ended June 30, 2017, the Company paid cash of $3,055 and issued an additional 2,450,000 MDC Class A subordinate voting shares with a fair value of $20,800 as a settlement of deferred acquisition consideration. An allocation of excess purchase price consideration of this acquisition to the fair value of the net assets acquired resulted in identifiable intangibles of $36,698, consisting primarily of customer lists, trade names and covenants not to compete, and goodwill of $24,778, including the value of the assembled workforce. The identified assets have a weighted average useful life of approximately 10.8 years and will be amortized in a manner represented by the pattern in which the economic benefits of such assets are expected to be realized. In addition, the Company has recorded $2,275 as the present value of redeemable noncontrolling interests and $5,514 as the present value of noncontrolling interests both relating to the noncontrolling interest of F&B’s subsidiaries. None of the intangibles and goodwill are tax deductible and the Company recorded a deferred tax liability of $8,074 related to the intangibles. F&B’s results are included in the Global Integrated Agencies segment. During the six months ended June 30, 2017, F&B earned revenue of $43,535 and incurred a net loss of $4,460, which is included in our consolidated results for the nine months ended September 30, 2017. The net loss was attributable to an increase in the deferred acquisition payment liability related to such acquisition, driven by the decrease in t he future market performance of the Company’s stock price and the amortization of the intangibles identified in the allocation of the purchase price consideration. Effective April 1, 2016, the Company acquired the remaining 40% ownership interests of Luntz Global Partners LLC. In 2016, the Company also entered into various non-material transactions in connection with other majority-owned entities. As a result of the foregoing, the Company made total cash closing payments of $1,581, eliminated the contingent deferred acquisition payments of $4,052 and fixed deferred acquisition payments of $467 related to certain initial acquisition of the equity interests, reduced other assets by $428, reduced redeemable noncontrolling interests by $1,005, reduced noncontrolling interests by $19,354, increased accruals and other liabilities by $94, and increased additional paid-in capital by $22,775. Additional deferred payments with an estimated present value at acquisition date of $2,393 that are contingent upon service conditions have been excluded from deferred acquisition consideration and will be expensed as stock-based compensation over the required service period. 2016 Dispositions Effective September 30, 2016, the Company sold all of its ownership interests in Bryan Mills to the noncontrolling shareholders and recognized a loss of $800. The net assets reflected in the calculation of the loss on sale was inclusive of goodwill of $764. Noncontrolling Interests Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the three and nine months ended September 30, 2017 and 2016 were as follows: Net Income (Loss) Attributable to MDC Partners Inc. and Transfers (to) from the Noncontrolling Interests
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Accruals and Other Liabilities |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued and Other Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Accruals and Other Liabilities | At September 30, 2017 and December 31, 2016, accruals and other liabilities included accrued media of $169,460 and $201,872, respectively; and included amounts due to noncontrolling interest holders for their share of profits, which will be distributed within the next twelve months of $5,802 and $4,154, respectively. Changes in amounts due to noncontrolling interest holders included in accrued and other liabilities for the year ended December 31, 2016 and nine months ended September 30, 2017 were as follows:
At September 30, 2017 and December 31, 2016, accounts payable included $47,430 and $80,193 of outstanding checks, respectively. |
Debt |
9 Months Ended |
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Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | 6.50% Notes On March 23, 2016, MDC entered into an indenture (the “Indenture”) among MDC, its existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure, the Credit Agreement, as guarantors (the “Guarantors”) and The Bank of New York Mellon, as trustee, relating to the issuance by MDC of $900,000 aggregate principal amount of the 6.50% Notes. The 6.50% Notes were sold in a private placement in reliance on exceptions from registration under the Securities Act of 1933. The 6.50% Notes bear interest at a rate of 6.50% per annum, accruing from March 23, 2016. Interest is payable semiannually in arrears on May 1 and November 1 of each year, beginning November 1, 2016. The 6.50% Notes mature on May 1, 2024, unless earlier redeemed or repurchased. The Company received net proceeds from the offering of the 6.50% Notes equal to approximately $880,000. The Company used the net proceeds to redeem all of its existing 6.75% Notes, together with accrued interest, related premiums, fees and expenses and recorded a charge for the loss on redemption of such notes of $33,298, including write offs of unamortized original issue premium and debt issuance costs. Remaining proceeds were used for general corporate purposes, including funding of deferred acquisition consideration. The 6.50% Notes are guaranteed on a senior unsecured basis by all of MDC’s existing and future restricted subsidiaries that guarantee, or are co-borrowers under or grant liens to secure, the Credit Agreement. The 6.50% Notes are unsecured and unsubordinated obligations of MDC and rank (i) equally in right of payment with all of MDC’s or any Guarantor’s existing and future senior indebtedness, (ii) senior in right of payment to MDC’s or any Guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to all of MDC’s or any Guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of MDC’s subsidiaries that are not Guarantors. MDC may, at its option, redeem the 6.50% Notes in whole at any time or in part from time to time, on and after May 1, 2019 (i) at a redemption price of 104.875% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2019, (ii) at a redemption price of 103.250% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2020, (iii) at a redemption price of 101.625% of the principal amount thereof if redeemed during the twelve-month period beginning on May 1, 2021, and (iv) at a redemption price of 100% of the principal amount thereof if redeemed on May 1, 2022 and thereafter. Prior to May 1, 2019, MDC may, at its option, redeem some or all of the 6.50% Notes at a price equal to 100% of the principal amount of the 6.50% Notes plus a “make whole” premium and accrued and unpaid interest. MDC may also redeem, at its option, prior to May 1, 2019, up to 35% of the 6.50% Notes with the proceeds from one or more equity offerings at a redemption price of 106.50% of the principal amount thereof. If MDC experiences certain kinds of changes of control (as defined in the Indenture), holders of the 6.50% Notes may require MDC to repurchase any 6.50% Notes held by them at a price equal to 101% of the principal amount of the 6.50% Notes plus accrued and unpaid interest. In addition, if MDC sells assets under certain circumstances, it must apply the proceeds from such sale and offer to repurchase the 6.50% Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest. The Indenture includes covenants that, among other things, restrict MDC’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; create restrictions on the payment of dividends or other amounts from MDC’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of MDC’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 6.50% Notes are also subject to customary events of default, including a cross-payment default and cross-acceleration provision. Redemption of 6.75% Notes On March 23, 2016, the Company redeemed the 6.75% Notes in whole at a redemption price of 103.375% of the principal amount thereof with the proceeds from the issuance of the 6.50% Notes. Credit Agreement On March 20, 2013, MDC, Maxxcom Inc. (a subsidiary of MDC) and each of their subsidiaries party thereto entered into an amended and restated, $225,000 senior secured revolving credit agreement due 2018 (the “Credit Agreement”) with Wells Fargo Capital Finance, LLC, as agent, and the lenders from time to time party thereto. Advances under the Credit Agreement are to be used for working capital and general corporate purposes, in each case pursuant to the terms of the Credit Agreement. Capitalized terms used in this section and not otherwise defined have the meanings set forth in the Credit Agreement. Effective October 23, 2014, MDC and its subsidiaries entered into an amendment to its Credit Agreement. The amendment: (i) expanded the commitments under the facility by $100,000, from $225,000 to $325,000; (ii) extended the date by an additional eighteen months to September 30, 2019; (iii) reduced the base borrowing interest rate by 25 basis points (the applicable margin for borrowing is 1.00% in the case of Base Rate Loans and 1.75% in the case of LIBOR Rate Loans); and (iv) modified certain covenants to provide the Company with increased flexibility to fund its continued growth and other general corporate purposes. Effective May 3, 2016, MDC and its subsidiaries entered into an additional amendment to its Credit Agreement. The amendment: (i) extends the date by an additional nineteen months to May 3, 2021; (ii) reduces the base borrowing interest rate by 25 basis points; (iii) provides the Company the ability to borrow in foreign currencies; and (iv) certain other modifications to provide additional flexibility in operating the Company’s business. Advances under the Credit Agreement bear interest as follows: (a)(i) LIBOR Rate Loans bear interest at the LIBOR Rate and (ii) Base Rate Loans bear interest at the Base Rate, plus (b) an applicable margin. The initial applicable margin for borrowing is 1.50% in the case of Base Rate Loans and 1.75% in the case of LIBOR Rate Loans. In addition to paying interest on outstanding principal under the Credit Agreement, MDC is required to pay an unused revolver fee to lenders under the Credit Agreement in respect of unused commitments thereunder. The Credit Agreement is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions. The Credit Agreement includes covenants that, among other things, restrict MDC’s ability and the ability of its subsidiaries to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; impose limitations on dividends or other amounts from MDC’s subsidiaries; incur certain liens, sell or otherwise dispose of certain assets; enter into transactions with affiliates; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of MDC’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The Credit Agreement also contains financial covenants, including a total leverage ratio, a senior leverage ratio, a fixed charge coverage ratio and a minimum earnings level (each as more fully described in the Credit Agreement). The Credit Agreement is also subject to customary events of default. The Company is currently in compliance with all of the terms and conditions of its Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with the covenants over the next twelve months. At September 30, 2017, there were $48,607 borrowings under the Credit Agreement. At September 30, 2017, the Company had issued $5,009 of undrawn outstanding letters of credit. |
Convertible Preference Shares (Notes) |
9 Months Ended |
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Sep. 30, 2017 | |
Convertible Preference Shares [Abstract] | |
Convertible Preference Shares | On March 7, 2017 (the “Issue Date”), the Company issued 95,000 newly created Preference Shares to affiliates of The Goldman Sachs Group, Inc. (collectively, the “Purchaser”) pursuant to a $95,000 private placement. The Company received proceeds of approximately $90,220, net of fees and estimated expenses, which were primarily used to pay down existing debt under the Company’s credit facility and for general corporate purposes. In connection with the closing of the transaction, effective March 7, 2017, the Company increased the size of its Board of Directors (the “Board”) to seven members and appointed one nominee designated by the Purchaser. Except as required by law, the Preference Shares do not have voting rights, and are not redeemable at the option of the Purchaser. The holders of the Preference Shares have the right to convert their Preference Shares in whole at any time and from time to time, and in part at any time and from time to time after the ninetieth day following the original issuance date of the Preference Shares, into a number of Class A Shares equal to the then-applicable liquidation preference divided by the applicable conversion price at such time (the “Conversion Price”). The initial liquidation per share preference of each Preference Share is $1,000. The initial Conversion Price will be $10.00 per Preference Share, subject to customary adjustments for share splits and combinations, dividends, recapitalizations and other matters, including weighted average anti-dilution protection for certain issuances of equity or equity-linked securities. The Preference Shares’ liquidation preference accretes at 8.0% per annum, compounded quarterly until the five-year anniversary of the Issue Date. During the nine months ended September 30, 2017, the Preference Shares accreted at a monthly rate of approximately $6.84 per Preference Share, for total accretion of $4,365, bringing the aggregate liquidation preference to $99,365 as of September 30, 2017. The accretion is considered in the calculation of net income (loss) attributable to MDC Partners Inc. common shareholders. See Notes 2 and 3. Holders of the Preference Shares are entitled to dividends in an amount equal to any dividends that would otherwise have been payable on the Class A Shares issued upon conversion of the Preference Shares. The Preference Shares are convertible at the Company’s option (i) on and after the two-year anniversary of the Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least 125% of the Conversion Price or (ii) after the fifth anniversary of the Issue Date, if the closing trading price of the Class A Shares over a specified period prior to conversion is at least equal to the Conversion Price. Following certain change in control transactions of the Company in which holders of Preference Shares are not entitled to receive cash or qualifying listed securities with a value at least equal to the liquidation preference plus accrued and unpaid dividends, (i) holders will be entitled to cash dividends on the liquidation preference at an increasing rate (beginning at 7%), and (ii) the Company will have a right to redeem the Preference Shares for cash at the greater of their liquidation preference plus accrued and unpaid dividends or their as-converted value. |
Other Income |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Nonoperating Income and Expense [Text Block] |
(1) During the three months ended September 30, 2017, the Company sold all of its ownership interests in three subsidiaries resulting in recognition of a net loss on sale of business of $1,424. See Note 4 for further information. Effective September 30, 2016, the Company sold all of its ownership interests in Bryan Mills to the noncontrolling shareholders and recognized a loss of $800. |
Commitments, Contingencies and Guarantees |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies and Guarantees | Deferred Acquisition Consideration. In addition to the consideration paid by the Company in respect of certain of its acquisitions at closing, additional consideration may be payable, or may be potentially payable based on the achievement of certain threshold levels of earnings. See Notes 2, 4, and 9. Options to purchase. Noncontrolling shareholders in certain subsidiaries have the right in certain circumstances to require the Company to acquire the remaining ownership interests held by them. The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during the remainder of 2017 to 2023. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights. The amount payable by the Company in the event such rights are exercised is dependent on various valuation formulas and on future events, such as the average earnings of the relevant subsidiary through the date of exercise, the growth rate of the earnings of the relevant subsidiary during that period and, in some cases, the currency exchange rate at the date of payment. Management estimates, assuming that the subsidiaries owned by the Company at September 30, 2017, perform over the relevant future periods at their trailing twelve-months earnings levels, that these rights, if all exercised, could require the Company, in future periods, to pay an aggregate amount of approximately $15,493 to the owners of such rights to acquire such ownership interests in the relevant subsidiaries. Of this amount, the Company is entitled, at its option, to fund approximately $202 by the issuance of share capital. In addition, the Company is obligated under similar contractual rights to pay an aggregate amount of approximately $42,268 only upon termination of such owner’s employment with the applicable subsidiary or death. The amount the Company would be required to pay to the noncontrolling interest holders should the Company acquire the remaining ownership interests is $2,330 less than the initial redemption value recorded in redeemable noncontrolling interests. Included in redeemable noncontrolling interests at September 30, 2017 was $60,092 of these options to purchase because they are not within the control of the Company. The ultimate amount payable relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised. Natural Disasters. Certain of the Company’s operations are located in regions of the United States which typically are subject to hurricanes. During the nine months ended September 30, 2017 and 2016, these operations did not incur any costs related to damages resulting from hurricanes. Guarantees. Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable. Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company. In addition, the Company is involved in class action suits as described below. Class Action Litigation in Canada. On August 7, 2015, Roberto Paniccia issued a Statement of Claim in the Ontario Superior Court of Justice in the City of Brantford, Ontario seeking to certify a class action suit naming the following as defendants: MDC, former CEO Miles S. Nadal, former CAO Michael C. Sabatino, CFO David Doft and BDO U.S.A. LLP. The Plaintiff alleges violations of section 138.1 of the Ontario Securities Act (and equivalent legislation in other Canadian provinces and territories) as well as common law misrepresentation based on allegedly materially false and misleading statements in the Company’s public statements, as well as omitting to disclose material facts with respect to the SEC investigation. The Company intends to continue to vigorously defend this Canadian suit on the same basis as which the U.S. class action was previously dismissed. A first case management meeting has been held. The plaintiff has served his material for leave to proceed under the Securities Act. MDC and the other defendants have served a motion to limit the scope of the proposed class definition to Canadian residents who purchased and sold shares of MDC stock on the Toronto Stock Exchange. Those motions are returnable in the fourth quarter of 2017. Antitrust Subpoena. One of the Company’s subsidiaries received a subpoena from the U.S. Department of Justice Antitrust Division concerning the Division’s ongoing investigation of production practices in the advertising industry. The Company and its subsidiary are fully cooperating with this confidential investigation. Commitments. At September 30, 2017, the Company had issued $5,009 of undrawn outstanding letters of credit. In addition, the Company has commitments to fund investments in an aggregate amount of $198. |
New Accounting Pronouncements |
9 Months Ended |
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Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. Amendments in this ASU will be applied prospectively to any award modified on or after the adoption date. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, which requires the presentation of the service cost component of the net periodic pension and postretirement benefits costs in the same line item in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of the net periodic pension and postretirement benefits costs are required to be presented as non-operating expenses in the statement of operations. This guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates step two from the two-step goodwill impairment test. Under the new guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. The Company will early adopt this guidance for our impairment test performed during 2017, and does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is intended to reduce diversity in practice regarding the classification of certain transactions in the statement of cash flows. This guidance is effective January 1, 2018 and requires a retrospective transition method. Early adoption is permitted. The Company currently classifies all cash outflows for contingent consideration as a financing activity. Upon adoption the Company is required to classify only the original estimated liability as a financing activity and any changes as an operating activity. In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases. Topic 842 will require lessees to recognize right-to-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018 and early adoption is permitted. While not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on its total assets and liabilities with a minimal impact on equity. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which will require equity investments, except equity method investments, to be measured at fair value and any changes in fair value will be recognized in results of operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is not permitted. Additionally, this guidance provides for the recognition of the cumulative effect of retrospective application of the new standard in the period of initial application. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace all existing revenue guidance under U.S GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to all annual and interim periods beginning after December 15, 2017. ASU 2014-09 provides for one of two methods of transition: (i) retrospective application to each prior period presented (Full Retrospective); or (ii) recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application (Modified Retrospective). The Company plans to apply ASU 2014-09 on the effective date of January 1, 2018, and intends to apply the Modified Retrospective method. Based on the Company’s assessment, the application of the new standard will result in a change in the timing of our revenue recognition within certain of the Company’s arrangements. Performance incentives are currently recognized in revenue when specific quantitative goals are achieved, or when the Company’s performance against qualitative goals is determined by the client. Under the new standard, the Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and recognize such incentive over the term of the contract. While performance incentives are not material to the Company’s revenue, this will result in an acceleration of revenue recognition for certain contract incentives compared to the current method. Further, based on the Company’s initial assessment, it is expected that an input measure such as cost to cost or labor hours would be an appropriate measure of progress in the majority of situations for which over time revenue recognition is applied. Furthermore, in certain businesses, the Company records revenue as a principal and includes certain third-party-pass-through and out-of-pocket costs, which are billed to clients in connection with the services provided. In March 2016, the FASB issued further guidance on principal versus agent considerations; however, our initial assessments indicate that such change is not expected to have a material effect on the Company’s results of operations. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition, and the related disclosure requirements. |
New Accounting Pronouncements, Policy [Policy Text Block] | In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. Amendments in this ASU will be applied prospectively to any award modified on or after the adoption date. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, which requires the presentation of the service cost component of the net periodic pension and postretirement benefits costs in the same line item in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of the net periodic pension and postretirement benefits costs are required to be presented as non-operating expenses in the statement of operations. This guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates step two from the two-step goodwill impairment test. Under the new guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. The Company will early adopt this guidance for our impairment test performed during 2017, and does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is intended to reduce diversity in practice regarding the classification of certain transactions in the statement of cash flows. This guidance is effective January 1, 2018 and requires a retrospective transition method. Early adoption is permitted. The Company currently classifies all cash outflows for contingent consideration as a financing activity. Upon adoption the Company is required to classify only the original estimated liability as a financing activity and any changes as an operating activity. In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases. Topic 842 will require lessees to recognize right-to-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018 and early adoption is permitted. While not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on its total assets and liabilities with a minimal impact on equity. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which will require equity investments, except equity method investments, to be measured at fair value and any changes in fair value will be recognized in results of operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is not permitted. Additionally, this guidance provides for the recognition of the cumulative effect of retrospective application of the new standard in the period of initial application. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace all existing revenue guidance under U.S GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to all annual and interim periods beginning after December 15, 2017. ASU 2014-09 provides for one of two methods of transition: (i) retrospective application to each prior period presented (Full Retrospective); or (ii) recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application (Modified Retrospective). The Company plans to apply ASU 2014-09 on the effective date of January 1, 2018, and intends to apply the Modified Retrospective method. Based on the Company’s assessment, the application of the new standard will result in a change in the timing of our revenue recognition within certain of the Company’s arrangements. Performance incentives are currently recognized in revenue when specific quantitative goals are achieved, or when the Company’s performance against qualitative goals is determined by the client. Under the new standard, the Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and recognize such incentive over the term of the contract. While performance incentives are not material to the Company’s revenue, this will result in an acceleration of revenue recognition for certain contract incentives compared to the current method. Further, based on the Company’s initial assessment, it is expected that an input measure such as cost to cost or labor hours would be an appropriate measure of progress in the majority of situations for which over time revenue recognition is applied. Furthermore, in certain businesses, the Company records revenue as a principal and includes certain third-party-pass-through and out-of-pocket costs, which are billed to clients in connection with the services provided. In March 2016, the FASB issued further guidance on principal versus agent considerations; however, our initial assessments indicate that such change is not expected to have a material effect on the Company’s results of operations. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition, and the related disclosure requirements. |
Significant Accounting Policies (Policies) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsidiary and Equity Investment Stock Transaction, Policy [Policy Text Block] | Subsidiary and Equity Investment Stock Transactions. Transactions involving the purchase, sale or issuance of stock of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price and noncontrolling interest are recorded to additional paid-in capital. In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in results of operations. |
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Earnings Per Share, Policy [Policy Text Block] | Income (Loss) per Common Share. Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Share capital to be issued, as reflected in shareholders’ deficit on the balance sheet, are also included if there is no circumstance under which those shares would not be issued. Diluted income (loss) per common share is based on the above, in addition, if dilutive, it also includes common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive. During the first quarter of 2017, the Company issued and sold 95,000 newly authorized Series 4 Convertible Preference Shares (the “Preference Shares”) in a private placement. The two-class method is applied to calculate basic net income (loss) attributable to MDC Partners, Inc. per common share in periods in which shares of convertible preference shares were outstanding, as shares of convertible preference shares are participating securities due to their dividend rights. See Notes 7 and 8. The two-class method is an earnings allocation method under which earnings per share is calculated for common stock considering a participating security’s rights to undistributed earnings as if all such earnings had been distributed during the period. Either the two-class method or the if-converted method is applied to calculate diluted net income per common share, depending on which method results in more dilution. The Company’s participating securities are not included in the computation of net loss per common share in periods of net loss because the convertible preference shareholders have no contractual obligation to participate in losses. As of September 30, 2017, options and other rights to purchase 1,118,085 shares of common stock were outstanding, of which 741,712 and 805,413 shares of non-vested restricted stock and restricted stock units were anti-dilutive during the three and nine months ended September 30, 2017, respectively, and therefore excluded from the computation of diluted income per common share. Additionally, 1,443,921 shares of non-vested restricted stock and restricted stock unit awards, which are contingent upon the Company meeting an undefined cumulative three year earnings target and continued employment, are excluded from the computation of diluted income per common share as the contingency has not been satisfied at September 30, 2017. Lastly, there were 95,000 shares of Preference Shares outstanding which were convertible into 9,936,514 Class A common shares at September 30, 2017. These Preference Shares were anti-dilutive for the three and nine months ended September 30, 2017, and are therefore excluded from the diluted loss per common share calculation for the period. As of September 30, 2016, options and other rights to purchase 918,260 shares of common stock were outstanding, of which 880,760 shares of non-vested restricted stock and restricted stock units were anti-dilutive during the three and nine months ended September 30, 2016 and therefore excluded from the computation of diluted income per common share. Additionally, 523,321 shares of non-vested restricted stock and restricted stock unit awards, which are contingent upon the Company meeting an undefined cumulative three year earnings target and continued employment, are excluded from the computation of diluted income per common share as the contingency had not been satisfied as of September 30, 2016. |
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Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign Currency Translation. The Company’s financial statements were prepared in accordance with the requirements of FASB ASC Topic 830, Foreign Currency Matters. The functional currency of the Company is the Canadian dollar and it has decided to use U.S. dollars as its reporting currency for consolidated reporting purposes. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly, the currency impacts of the translation of the balance sheets of the Company’s non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulative translation adjustments in accumulated other comprehensive income. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation adjustments are not included in net earnings unless they are actually realized through a sale or upon complete or substantially complete liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in net earnings. The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The income statements of non-U.S. dollar based subsidiaries are translated at average exchange rates for the period. Gains and losses arising from the Company’s foreign currency transactions are reflected in net earnings. Unrealized gains or losses arising on the translation of certain intercompany foreign currency transactions that are of a long-term nature (that is settlement is not planned or anticipated in the future) are included as cumulative translation adjustments in accumulated other comprehensive loss. |
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Guarantees, Indemnifications and Warranties Policies [Policy Text Block] | Guarantees. Guarantees issued or modified by the Company to third parties after January 1, 2003 are generally recognized at the inception or modification of the guarantee as a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The initial measurement of that liability is the fair value of the guarantee. The recognition of a liability is required even if it is not probable that payments will be required under a guarantee. The Company’s liability associated with guarantees is not significant. See Note 12. |
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Premiums Receivable, Allowance for Doubtful Accounts, Estimation Methodology, Policy [Policy Text Block] | Allowance for Doubtful Accounts. Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions. |
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Expenditures Billable To Clients, Policy [Policy Text Block] | Expenditures Billable to Clients. Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the production process. |
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Property, Plant and Equipment, Policy [Policy Text Block] | Fixed Assets. Fixed assets are stated at cost, net of accumulated depreciation. Computers, furniture and fixtures are depreciated on a straight-line basis over periods of three to seven years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. |
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Equity Method Investments [Policy Text Block] | Equity Method Investments. The equity method is used to account for investments in entities in which the Company has an ownership interest of less than 50% and has significant influence, or joint control by contractual arrangement, (i) over the operating and financial policies of the affiliate or (ii) has an ownership interest greater than 50%; however, the substantive participating rights of the noncontrolling interest shareholders preclude the Company from exercising unilateral control over the operating and financial policies of the affiliate. The Company’s investments that were accounted for using the equity method include a 30% undivided interest in a real estate joint venture and various interests in investment funds. The Company’s management periodically evaluates these investments to determine if there has been a decline in value that is other than temporary. These investments are included in investments in non-consolidated affiliates on the balance sheet. |
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Principles of Consolidation | Principles of Consolidation. The accompanying condensed consolidated financial statements include the accounts of MDC Partners Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. |
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Reclassification, Policy [Policy Text Block] | Reclassifications. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. During the nine months ended September 30, 2017, the Company changed the presentation of book overdrafts on its statement of cash flows to classify the associated cash flows as operating activities. Book overdrafts were previously presented within financing activities. This resulted in cash inflows of $17,532 being reclassified from financing activities to operating activities for the nine months ended September 30, 2016. There was no impact on the Company’s consolidated statements of operations, comprehensive income (loss), or balance sheets. |
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Use of Estimates, Policy | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, valuation allowances for receivables, deferred tax assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates. |
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Fair Value | Fair Value. The Company applies the fair value measurement guidance of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (the “ASC”) Topic 820, Fair Value Measurements, for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill and other identifiable intangible assets. The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The inputs create the following fair value hierarchy:
When available, the Company uses quoted market prices to determine the fair value of its financial instruments and classifies such items in Level 1. In some cases, quoted market prices are used for similar instruments in active markets and the Company classifies such items in Level 2. |
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Concentration of Credit Risk | Concentration of Credit Risk. The Company provides marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit risk. No client accounted for more than 10% of the Company’s consolidated accounts receivable at September 30, 2017 and December 31, 2016. No client accounted for 10% of the Company’s revenue for the three and nine months ended September 30, 2017 or the three and nine months ended September 30, 2016. |
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Cash and Cash Equivalents | Cash and Cash Equivalents. The Company’s cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, commercial paper and money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts. |
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Cash in Trust, Policy [Policy Text Block] | Cash in Trust. A subsidiary of the Company holds restricted cash in trust accounts related to funds received on behalf of clients. Such amounts are held in escrow under depositary service agreements and distributed at the direction of the clients. The funds are presented as a corresponding liability on the balance sheet. |
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Cost Method Investments, Policy | Cost Method Investments. From time to time, the Company makes non-material cost based investments in start-up advertising technology companies and innovative consumer product companies where the Company does not exercise significant influence over the operating and financial policies of the investee. The total net cost basis of these investments, which is included in other assets on the balance sheet as of September 30, 2017 and December 31, 2016, was $10,350 and $10,132, respectively. These investments are periodically evaluated to determine whether a significant event or change in circumstances has occurred that may impact the fair value of each investment other than temporary declines below book value. A variety of factors are considered when determining if a decline is other than temporary, including, among others, the financial condition and prospects of the investee, as well as the Company’s investment intent. In addition, the Company’s partner agencies may receive minority equity interests from start-up companies in lieu of fees. |
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Business Combinations | Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values. The Company’s acquisition model typically provides for an initial payment at closing and for future additional contingent purchase price obligations. Contingent purchase price obligations are recorded as deferred acquisition consideration on the balance sheet at the acquisition date fair value and are remeasured at each reporting period. Changes in such estimated values are recorded in the results of operations. For further information see Notes 4 and 9. For the three and nine months ended September 30, 2017 and 2016, $2,462 of income and $12,152 of expense, respectively, and $11,152 and $17,180 of expense, respectively, related to changes in such estimated values and was recorded in results of operations. The Company expenses acquisition related costs as incurred. For the three and nine months ended September 30, 2017 and 2016, $216 and $693 respectively, and $806 and $2,266, respectively, of acquisition related costs were charged to operations. For each acquisition, the Company undertakes a detailed review to identify intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. Like most service businesses, a substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. In executing the Company’s overall acquisition strategy, one of the primary drivers in identifying and executing a specific transaction is the existence of, or the ability to expand the existing, client relationships. The expected benefits of the Company’s acquisitions are typically shared across multiple agencies and regions. |
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Redeemable Noncontrolling Interest | Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase, such noncontrolling shareholders’ incremental ownership interests under certain circumstances and the Company has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas as described in Note 12. In the event that an incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the balance sheet at their acquisition date fair value and adjusted for changes to their estimated redemption value through additional paid-in capital (but not less than their initial redemption value), except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. For the three and nine months ended September 30, 2017 and 2016, there was no related impact on the Company’s earnings (loss) per share calculation. Changes in the estimated redemption amounts of the redeemable noncontrolling interests are adjusted at each reporting period with a corresponding adjustment to equity. These adjustments will not impact the calculation of earnings (loss) per share. The following table presents changes in redeemable noncontrolling interests:
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Variable Interest Entity | Variable Interest Entity. Effective March 28, 2012, the Company invested in Doner Partners LLC (“Doner”). The Company acquired a 30% voting interest and convertible preferred interests that allow the Company to increase ordinary voting ownership to 70% at the Company’s option. Effective April 1, 2017, the Company acquired an additional 15% voting and convertible preferred interest that allowed the Company to increase ordinary voting ownership to 85% at the Company’s option. The Company now has a 45% voting interest. The Company has determined that (i) this entity is a variable interest entity, and (ii) the Company is the primary beneficiary because it receives a disproportionate share of profits and losses as compared to its ownership percentage. As such, Doner is consolidated for all periods subsequent to the date of investment. Doner is a full service integrated creative agency that is included as part of the Company’s portfolio in the Global Integrated Agencies segment. The Company’s Credit Agreement (see Note 6) is guaranteed and secured by all of Doner’s assets. Total assets and total liabilities of Doner included in the Company’s consolidated balance sheet at September 30, 2017 were $100,229 and $53,508, respectively, and at December 31, 2016 were $102,456 and $57,622, respectively. |
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Revenue Recognition | Revenue Recognition. The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topics of the FASB ASC, and accordingly, revenue is recognized when all of the following criteria are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the selling price is fixed or determinable; (iii) services have been performed or upon delivery of the products when ownership and risk of loss has transferred to the client; and (iv) collection of the resulting receivable is reasonably assured. The Company follows the Multiple-Element Arrangement topic of the FASB ASC, which addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities and how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The Company follows the Principal Agent Consideration topic of the FASB ASC which addresses (i) whether revenue should be recorded at the gross amount billed because it has earned revenue from the sale of goods or services, or recorded at the net amount retained because it has earned a fee or commission, and (ii) that reimbursements received for out-of-pocket expenses incurred should be characterized in the income statement as revenue. Accordingly, the Company has included such reimbursed expenses in revenue. The Company earns revenue from agency arrangements in the form of retainer fees or commissions; from short-term project arrangements in the form of fixed fees or per diem fees for services; and from incentives or bonuses. Non-refundable retainer fees are generally recognized on a straight-line basis over the term of the specific customer arrangement. Commission revenue is earned and recognized upon the placement of advertisements in various media when the Company has no further performance obligations. Fixed fees for services are recognized upon completion of the earnings process and acceptance by the client. Per diem fees are recognized upon the performance of the Company’s services. In addition, for a limited number of certain service transactions, which require delivery of a number of service acts, the Company uses the proportional performance model, which generally results in revenue being recognized based on the straight-line method. For arrangements with customers for which the Company earns a fixed fee for development of customized mobile applications (“Apps”), revenue is recognized in accordance with the accounting guidance contained in ASC 605-35 and is primarily recognized using the proportional performance method of accounting. Performance is generally measured based upon the efforts incurred to date in relation to total estimated efforts to the completion of the contract. Fees billed to clients in excess of fees recognized as revenue are classified as advanced billings on the Company’s balance sheet. A small portion of the Company’s contractual arrangements with customers includes performance incentive provisions, which allow the Company to earn additional revenue as a result of its performance relative to both quantitative and qualitative goals. The Company recognizes the incentive portion of revenue under these arrangements when specific quantitative goals are assured, or when the Company’s clients determine performance against qualitative goals has been achieved. In all circumstances, revenue is only recognized when collection is reasonably assured. The Company records revenue net of sales and other taxes due to be collected and remitted to governmental authorities. |
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Cost of Services Sold [Policy Text Block] | Cost of Services Sold. Cost of services sold do not include depreciation charges for fixed assets. |
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Interest Expense | Interest Expense. Interest expense primarily consists of the cost of borrowing on the Company’s previously outstanding 6.75% Senior Notes due 2020 (the “6.75% Notes”); the Company’s currently outstanding 6.50% senior unsecured notes due 2024 (the “6.50% Notes”); and the Company’s $325 million senior secured revolving credit agreement due 2021 (the “Credit Agreement”). The Company uses the effective interest method to amortize the deferred financing costs on the 6.75% Notes and the 6.50% Notes as well as the original issue premium on the previously outstanding 6.75% Notes. The Company also uses the straight-line method to amortize the deferred financing costs on the Credit Agreement. For the three and nine months ended September 30, 2017 and 2016, interest expense included $24 and $77, respectively, and $30 and $181, respectively, relating to present value adjustments for fixed deferred acquisition consideration payments. The Company redeemed the 6.75% Notes with the net proceeds from the issuance of the 6.50% Notes. For further information see Note 6. |
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Income Tax | Income Taxes. The Company’s U.S. operating units are generally structured as limited liability companies, which are treated as partnerships for tax purposes. The Company is only taxed on its share of the profits, while noncontrolling holders are responsible for taxes on their share of the profits. Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. The Company currently has a fully reserved valuation allowance on its deferred tax assets related to U.S. net operating losses. Realization of our deferred tax assets is evaluated on a quarterly basis and is based upon all available evidence. It is possible that sufficient positive evidence to support the realization of the Company’s net deferred tax assets will exist in the near future, and the previously provided valuation allowance could be reversed in whole or in part. During the nine months ended September 30, 2017 and 2016, the Company’s effective tax rate was impacted by losses in certain tax jurisdictions where a valuation allowance was deemed necessary. During the second quarter of 2017, the Company identified and recorded out-of-period adjustments related to the misapplication of ASC 740 and ASC 850-740 accounting policies as they applied to the calculation of deferred tax liabilities. The corrections have resulted in a $6,916 increase to the Company’s deferred tax liability on the condensed consolidated balance sheet as of December 31, 2016. The Company has performed a qualitative and quantitative analysis of this misapplication and determined it not to be material to prior periods. The Company has revised prior period information presented on this Form 10-Q as follows: (i) for the three and nine months ended September 30, 2016, income tax expense has been decreased by $1,390 and decreased by $713, respectively, (ii) basic and diluted net loss attributable to MDC Partners Inc. common shareholders for the nine months ended September 30, 2016 increased by $0.01 per share, and (iii) deferred tax liabilities and accumulated deficit increased by $6,916 as of December 31, 2016. The correction had no impact on the Company’s cash flows. |
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Share-based Compensation | Stock-Based Compensation. Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period, in this case the award’s vesting period. The Company recognizes forfeitures as they occur. When awards are exercised, share capital is credited by the sum of the consideration paid, together with the related portion previously credited to additional paid-in capital when compensation costs were charged against income or acquisition consideration. The Company uses its historical volatility derived over the expected term of the award to determine the volatility factor used in determining the fair value of the award. Stock-based awards that are settled in cash, or may be settled in cash at the option of employees, are recorded as liabilities. The measurement of the liability and compensation cost for these awards is based on the fair value of the award, and is recorded in operating income over the service period, in this case the award’s vesting period. Changes in the Company’s payment obligation prior to the settlement date of a stock-based award are recorded as compensation cost in operating income in the period of the change. The final payment amount for such awards is established on the date of the exercise of the award by the employee. Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair value on the date of grant and recorded as additional paid-in capital. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing-model and is recorded in operating income over the service period, in this case the award’s vesting period. It is the Company’s policy for issuing shares upon the exercise and/or vesting of an equity incentive award to verify the amount of shares to be issued, as well as the amount of proceeds to be collected (if any) and to deliver new shares to the exercising party. The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met. The Company treats benefits paid by shareholders or equity members to employees as a stock-based compensation charge with a corresponding credit to additional paid-in-capital. From time to time, certain acquisitions and step-up transactions include an element of compensation related payments. The Company accounts for those payments as stock-based compensation. In January 2017, the Company issued 327,500 Stock Appreciation Rights (“SARS”) to its employees. The SARS have an exercise price of $6.60 and will vest on the three year anniversary of the grant date. The Company will be recording a stock-based compensation charge of $770 from the date of the grant through 2020 for these SARS awards. During the nine months ended September 30, 2017, the Company issued 243,000 shares of restricted stock and restricted stock units (collectively, “RSUs”) to its employees and directors. The RSUs have an aggregate grant date fair value of $1,966 and generally vest on the third anniversary of the date of grant. In addition, during the first quarter of 2017, the Company issued RSUs of which 930,600 awarded shares were outstanding as of September 30, 2017. However, the vesting of these awards is contingent upon the Company meeting a cumulative three year financial performance target and continued employment through the March 1, 2020 vesting date. These RSU awards do not yet have an established grant date fair value because the financial performance target is not yet established. Once the Company defines the financial performance target, and assuming the achievement of such performance targets is expected, the grant date is established and the Company will record the compensation expense over the vesting period. Additionally, the Company still has outstanding RSUs of 513,321 which are also based on a cumulative financial performance target and will vest on March 1, 2019. |
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New Accounting Pronouncements | In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. Amendments in this ASU will be applied prospectively to any award modified on or after the adoption date. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits, which requires the presentation of the service cost component of the net periodic pension and postretirement benefits costs in the same line item in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of the net periodic pension and postretirement benefits costs are required to be presented as non-operating expenses in the statement of operations. This guidance is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which eliminates step two from the two-step goodwill impairment test. Under the new guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value provided the loss recognized does not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. The Company will early adopt this guidance for our impairment test performed during 2017, and does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. This new guidance is intended to reduce diversity in practice regarding the classification of certain transactions in the statement of cash flows. This guidance is effective January 1, 2018 and requires a retrospective transition method. Early adoption is permitted. The Company currently classifies all cash outflows for contingent consideration as a financing activity. Upon adoption the Company is required to classify only the original estimated liability as a financing activity and any changes as an operating activity. In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases. Topic 842 will require lessees to recognize right-to-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP on the balance sheet. This guidance is effective for annual periods beginning after December 15, 2018 and early adoption is permitted. While not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets will have a significant impact on its total assets and liabilities with a minimal impact on equity. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities, which will require equity investments, except equity method investments, to be measured at fair value and any changes in fair value will be recognized in results of operations. This guidance is effective for annual and interim periods beginning after December 15, 2017 and early application is not permitted. Additionally, this guidance provides for the recognition of the cumulative effect of retrospective application of the new standard in the period of initial application. The Company does not expect the application of this guidance to have a significant impact on its consolidated financial position or results of operations. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace all existing revenue guidance under U.S GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. On July 9, 2015, the FASB approved a one year deferral of the effective date of ASU 2014-09 to all annual and interim periods beginning after December 15, 2017. ASU 2014-09 provides for one of two methods of transition: (i) retrospective application to each prior period presented (Full Retrospective); or (ii) recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application (Modified Retrospective). The Company plans to apply ASU 2014-09 on the effective date of January 1, 2018, and intends to apply the Modified Retrospective method. Based on the Company’s assessment, the application of the new standard will result in a change in the timing of our revenue recognition within certain of the Company’s arrangements. Performance incentives are currently recognized in revenue when specific quantitative goals are achieved, or when the Company’s performance against qualitative goals is determined by the client. Under the new standard, the Company will be required to estimate the amount of the incentive that will be earned at the inception of the contract and recognize such incentive over the term of the contract. While performance incentives are not material to the Company’s revenue, this will result in an acceleration of revenue recognition for certain contract incentives compared to the current method. Further, based on the Company’s initial assessment, it is expected that an input measure such as cost to cost or labor hours would be an appropriate measure of progress in the majority of situations for which over time revenue recognition is applied. Furthermore, in certain businesses, the Company records revenue as a principal and includes certain third-party-pass-through and out-of-pocket costs, which are billed to clients in connection with the services provided. In March 2016, the FASB issued further guidance on principal versus agent considerations; however, our initial assessments indicate that such change is not expected to have a material effect on the Company’s results of operations. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition, and the related disclosure requirements. |
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Goodwill and Intangible Assets, Intangible Assets, Indefinite-Lived, Policy [Policy Text Block] | Goodwill and Indefinite Lived Intangibles. In accordance with the FASB ASC Topic 350, Intangibles - Goodwill and Other, goodwill and indefinite lived intangible assets (trademarks) acquired as a result of a business combination, which are not subject to amortization, are tested for impairment annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For goodwill, impairment is assessed at the reporting unit level. For the nine months ended September 30, 2017 and the year ended December 31, 2016, goodwill was $839,361 and $844,759, respectively. For the three and nine months ended September 30, 2017, there was a reduction in goodwill of $17,593 relating to the sale of certain subsidiaries, which was offset by $12,195 net foreign exchange translation adjustments. As a result of the these transactions, the Company performed interim goodwill testing on two reporting units and determined that there was no impairment charge in respect to the impacted reporting units. For the three and nine months ended September 30, 2016, due to triggering events during the third quarter of 2016, the Company performed an interim goodwill impairment test and recognized goodwill impairment of $29,631. In addition, in the third quarter of 2016, the Company sold all of its ownership interests in Bryan Mills Iradesso Corporation (“Bryan Mills”) to the noncontrolling shareholders, resulting in a write off of goodwill of $764. See Note 4 for further information on the dispositions. |
Loss Per Common Share (Tables) |
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Schedule of Calculation of Numerator and Denominator in Earnings Per Share | The following table sets forth the computation of basic and diluted income (loss) per common share:
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Accruals and Other Liabilities (Tables) |
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Accrued and Other Liabilities Disclosure | At September 30, 2017 and December 31, 2016, accruals and other liabilities included accrued media of $169,460 and $201,872, respectively; and included amounts due to noncontrolling interest holders for their share of profits, which will be distributed within the next twelve months of $5,802 and $4,154, respectively. Changes in amounts due to noncontrolling interest holders included in accrued and other liabilities for the year ended December 31, 2016 and nine months ended September 30, 2017 were as follows:
At September 30, 2017 and December 31, 2016, accounts payable included $47,430 and $80,193 of outstanding checks, respectively. |
Other Income (Tables) |
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Schedule of Other Nonoperating Income, by Component [Table Text Block] |
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Significant Accounting Policies (Details) |
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Clients exceeding consolidated accounts receivable percentage | Clients | 0 | 0 | 0 | ||
Consolidated Accounts Receivable Percentage | 10.00% | 10.00% | 10.00% | ||
Clients exceeding consolidated largest client revenue | Clients | 0 | 0 | 0 | 0 | |
Consolidated Largest Client Revenue | 10.00% | 10.00% | 10.00% | ||
Option to purchase noncontrolling interest impairment charge | $ 0 | $ 0 | $ 0 | $ 0 | |
Beginning Balance | 60,180,000 | ||||
Redemptions | (337,000) | $ (520,000) | (9,650,000) | ||
Granted | 2,315,000 | 22,498,000 | |||
Ending Balance | 60,092,000 | 60,092,000 | $ 60,180,000 | ||
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Beginning Balance | 60,180,000 | $ 69,471,000 | 69,471,000 | ||
Redemptions | (816,000) | (1,708,000) | |||
Granted | 0 | 2,274,000 | |||
Changes in redemption value | 299,000 | (9,604,000) | |||
Currency Translation Adjustments | 429,000 | (253,000) | |||
Ending Balance | $ 60,092,000 | $ 60,092,000 | $ 60,180,000 |
Loss Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | The following table sets forth the computation of basic and diluted income (loss) per common share:
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Net loss attributable to MDC Partners Inc. | $ 18,493 | $ (32,140) | $ 19,180 | $ (54,937) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income (Loss) from Continuing Operations Attributable to Parent | 14,137 | (32,140) | 13,033 | (54,937) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment to Net Income, Allocated to Convertible Shares | 13 | 0 | 9 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (Loss) from Continuing Operations Attributable to Parent, Diluted | $ 14,150 | $ (32,140) | $ 13,042 | $ (54,937) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Denominator for basic income (loss) per common share - weighted average common shares | 57,566,707 | 52,244,819 | 53,915,536 | 50,861,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of dilutive securities: | 376,373 | 0 | 312,672 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denominator for diluted income (loss) per common share - adjusted weighted shares and assumed conversions | 57,943,080 | 52,244,819 | 54,228,208 | 50,861,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations attributable to MDC Partners Inc. common shareholders (usd per share) | $ 245.58 | $ (615.18) | $ 241.73 | $ (1,080.12) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations attributable to MDC Partners Inc. common shareholders (usd per share) | $ 244.21 | $ (615.18) | $ 240.50 | $ (1,080.12) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series 4 Convertible Preferred Stock [Domain] | Convertible Preferred Stock [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Numerator | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretion on convertible preferred shares | $ (1,948) | $ 0 | $ (4,365) | $ 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Allocated to Convertible Shares | $ (2,408) | $ 0 | $ (1,782) | $ 0 |
Acquisitions (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Gain (Loss) on Disposition of Business | $ (1,424,000) | $ (800,000) | $ (1,424,000) | $ (800,000) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination Disclosure [Text Block] | Valuations of acquired companies are based on a number of factors, including specialized know-how, reputation, competitive position and service offerings. The Company’s acquisition strategy has been focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of its various strategic business platforms to better serve the Company’s clients. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry. The Company’s model of “Perpetual Partnership” often involves acquiring a majority interest rather than a 100% interest and leaving management owners with a significant financial interest in the performance of the acquired entity for a minimum period of time, typically not less than five years. The Company’s acquisition model in this scenario typically provides for (i) an initial payment at the time of closing, (ii) additional contingent purchase price obligations based on the future performance of the acquired entity, and (iii) an option by the Company to purchase (and in some instances a requirement to so purchase) the remaining interest of the acquired entity under a predetermined formula. Contingent purchase price obligations. The Company’s contingent purchase price obligations are generally payable within a five year period following the acquisition date, and are based on (i) the achievement of specific thresholds of future earnings, and (ii) in certain cases, the growth rate of those earnings. Contingent purchase price obligations are recorded as deferred acquisition consideration on the balance sheet at the acquisition date fair value and adjusted at each reporting period through operating income or net interest expense, depending on the nature of the arrangement. On occasion, the Company may initiate a renegotiation of previously acquired ownership interests and any resulting change in the estimated amount of consideration to be paid is adjusted in the reporting period through operating income or net interest expense, depending on the nature of the arrangement. See Notes 2, 9, and 12 for additional information on the deferred acquisition consideration. Options to purchase. When acquiring less than 100% ownership, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as noncontrolling interests in the equity section of the Company’s balance sheet. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through additional paid-in capital (but not less than their initial redemption value), except for foreign currency translation adjustments. On occasion, the Company may initiate a renegotiation to acquire an incremental ownership interest and the amount of consideration paid may differ materially from the balance sheet amounts. See Note 12 for additional information on redeemable noncontrolling interests. Employment conditions. From time to time, specifically when the projected success of an acquisition is deemed to be dependent on retention of specific personnel, such acquisition may include deferred payments that are contingent upon employment terms as well as financial performance. The Company accounts for those payments through operating income as stock-based compensation over the required retention period. For the three and nine months ended September 30, 2017 and 2016, stock-based compensation included $4,064 and $9,792, respectively, and $2,259 and $7,184, respectively, of expense relating to those payments. Distributions to noncontrolling shareholders. If noncontrolling shareholders have the right to receive distributions based on the profitability of an acquired entity, the amount is recorded as income attributable to noncontrolling interests. However, there are circumstances when the Company acquires a majority interest and the selling shareholders waive their right to receive distributions with respect to their retained interest for a period of time, typically not less than five years. Under this model, the right to receive such distributions typically begins concurrently with the purchase option period and, therefore, if such option is exercised at the first available date, the Company may not record any noncontrolling interest over the entire period from the initial acquisition date through the acquisition date of the remaining interests. 2017 Acquisitions In 2017, the Company entered into various non-material transactions in connection with certain of its majority-owned entities. As a result of the foregoing, the Company made total cash closing payments of $3,858, increased fixed deferred consideration liability by $7,208, reduced redeemable noncontrolling interests by $816, reduced noncontrolling interests equity by $11,965, reduced noncontrolling interest payable by $397, and increased additional paid-in capital by $2,316. In addition, a stock-based compensation charge of $996 has been recognized representing the consideration paid in excess of the fair value of the interest acquired. 2017 Dispositions During the three months ended September 30, 2017, the Company sold all of its ownership interests in three subsidiaries resulting in recognition of a net loss on sale of business of $1,424. The net assets reflected in the calculation of the net loss on sale was inclusive of goodwill of $17,593. Goodwill was allocated to the subsidiaries based on the relative fair value of the sold subsidiaries compared to the fair value of the respective reporting units. See Note 1 for details. Additionally, the Company recorded a reduction in noncontrolling interests of $10,657. 2016 Acquisitions Effective July 1, 2016, the Company acquired 100% of the equity interests of Forsman & Bodenfors AB (“F&B”), an advertising agency based in Sweden, for an estimated aggregate purchase price at acquisition date of $49,837, consisting of a closing payment of 1,900,000 MDC Class A subordinate voting shares with an acquisition date fair value of $34,219, plus additional deferred acquisition payments with an estimated present value at acquisition date of $15,618. The amount of additional payments are based on the financial results of the acquired business for 2015 and 2016 as well as for the value of the Company’s shares from July 1, 2016 up to and including the close of business on November 2, 2016. During the three months ended June 30, 2017, the Company paid cash of $3,055 and issued an additional 2,450,000 MDC Class A subordinate voting shares with a fair value of $20,800 as a settlement of deferred acquisition consideration. An allocation of excess purchase price consideration of this acquisition to the fair value of the net assets acquired resulted in identifiable intangibles of $36,698, consisting primarily of customer lists, trade names and covenants not to compete, and goodwill of $24,778, including the value of the assembled workforce. The identified assets have a weighted average useful life of approximately 10.8 years and will be amortized in a manner represented by the pattern in which the economic benefits of such assets are expected to be realized. In addition, the Company has recorded $2,275 as the present value of redeemable noncontrolling interests and $5,514 as the present value of noncontrolling interests both relating to the noncontrolling interest of F&B’s subsidiaries. None of the intangibles and goodwill are tax deductible and the Company recorded a deferred tax liability of $8,074 related to the intangibles. F&B’s results are included in the Global Integrated Agencies segment. During the six months ended June 30, 2017, F&B earned revenue of $43,535 and incurred a net loss of $4,460, which is included in our consolidated results for the nine months ended September 30, 2017. The net loss was attributable to an increase in the deferred acquisition payment liability related to such acquisition, driven by the decrease in t he future market performance of the Company’s stock price and the amortization of the intangibles identified in the allocation of the purchase price consideration. Effective April 1, 2016, the Company acquired the remaining 40% ownership interests of Luntz Global Partners LLC. In 2016, the Company also entered into various non-material transactions in connection with other majority-owned entities. As a result of the foregoing, the Company made total cash closing payments of $1,581, eliminated the contingent deferred acquisition payments of $4,052 and fixed deferred acquisition payments of $467 related to certain initial acquisition of the equity interests, reduced other assets by $428, reduced redeemable noncontrolling interests by $1,005, reduced noncontrolling interests by $19,354, increased accruals and other liabilities by $94, and increased additional paid-in capital by $22,775. Additional deferred payments with an estimated present value at acquisition date of $2,393 that are contingent upon service conditions have been excluded from deferred acquisition consideration and will be expensed as stock-based compensation over the required service period. 2016 Dispositions Effective September 30, 2016, the Company sold all of its ownership interests in Bryan Mills to the noncontrolling shareholders and recognized a loss of $800. The net assets reflected in the calculation of the loss on sale was inclusive of goodwill of $764. Noncontrolling Interests Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the three and nine months ended September 30, 2017 and 2016 were as follows: Net Income (Loss) Attributable to MDC Partners Inc. and Transfers (to) from the Noncontrolling Interests
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Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests | (337,000) | (520,000) | $ (9,650,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest, Increase from Business Combination | 2,315,000 | 22,498,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Loss Including Transfer from Non Controlling Interests | 18,156,000 | (32,660,000) | 21,495,000 | (32,439,000) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest, Decrease from Deconsolidation | (10,657,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to MDC Partners Inc. | 18,493,000 | (32,140,000) | 19,180,000 | (54,937,000) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Paid-in Capital [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest, Increase from Business Combination | 2,315,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Parent [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests | $ (337,000) | $ (520,000) | 2,315,000 | $ 22,498,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest, Increase from Business Combination | 2,315,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to MDC Partners Inc. | $ 19,180,000 |
Accruals and Other Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Accrued and Other Liabilities [Abstract] | |||||
Net Income (Loss) Attributable to Noncontrolling Interest | $ 3,491 | $ 1,059 | $ 6,588 | $ 3,172 | $ 5,218 |
Payments to Noncontrolling Interests | (5,272) | (6,549) | (7,772) | ||
Beginning balance | 4,154 | $ 5,473 | 5,473 | ||
Other | 332 | 1,235 | |||
Ending balance | $ 5,802 | $ 5,802 | $ 4,154 |
Accruals and Other Liabilities (Details Textual) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Accrued and Other Liabilities [Abstract] | |||
Accrued Media Cost, Current | $ 169,460 | $ 201,872 | |
Accrued and Other Liabilities Attributable To Noncontrolling Interest | 5,802 | 4,154 | $ 5,473 |
Outstanding Checks | $ 47,430 | $ 80,193 |
Debt (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt [Line Items] | ||
Debt Issuance Costs, Net | $ (18,161,000) | $ (18,420,000) |
Revolving credit agreement | 48,607,000 | 54,425,000 |
Debt, Long-term and Short-term, Combined Amount, Total | 930,446,000 | 936,005,000 |
Obligations under capital leases | 743,000 | 431,000 |
Debt and Capital Lease Obligations | 931,189,000 | 936,436,000 |
Less current portion: | 300,000 | 228,000 |
Long-term Debt, Excluding Current Maturities, Total | 930,889,000 | 936,208,000 |
Notes due 2024 [Domain] | ||
Debt [Line Items] | ||
Senior Notes | $ 900,000,000 | $ 900,000,000 |
Share Capital (Details Textual) |
Oct. 27, 2017
shares
|
Sep. 30, 2017
vote
shares
|
Dec. 31, 2016
shares
|
---|---|---|---|
Preferred Stock [Member] | Series 4 Convertible Preferred Stock [Domain] | |||
Share Capital [Line Items] | |||
Shares, Outstanding | 95,000 | 95,000 | 0 |
Common Stock [Member] | |||
Share Capital [Line Items] | |||
Shares, Outstanding | 56,314,344 | 52,802,058 | |
Common Stock [Member] | Common Class A [Member] | |||
Share Capital [Line Items] | |||
Common Stock, Voting Rights, Number of Votes per Share | vote | 1 | ||
Shares, Outstanding | 56,310,589 | 52,798,303 | |
Common Stock [Member] | Common Class B | |||
Share Capital [Line Items] | |||
Common Stock, Voting Rights, Number of Votes per Share | vote | 20 | ||
Shares, Outstanding | 3,755 |
Convertible Preference Shares (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Mar. 31, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Preferred Units [Line Items] | ||||||
Stock Issued During Period, Shares, Convertible Preferred Shares | 90,220,000 | |||||
Series 4 Convertible Preferred Stock [Domain] | ||||||
Preferred Units [Line Items] | ||||||
Proceeds from issuance of convertible preference shares | $ 95,000 | $ 0 | ||||
Convertible Preferred Stock [Member] | Series 4 Convertible Preferred Stock [Domain] | ||||||
Preferred Units [Line Items] | ||||||
Stock Issued During Period, Shares, Convertible Preferred Shares | 95,000 | 95,000 | 0 | |||
Preferred Stock, Value, Issued | $ 90,220 | |||||
Accretion on convertible preferred shares | $ 1,948 | $ 0 | 4,365 | $ 0 | ||
Preferred Stock, Liquidation Preference, Value | $ 99,365 | $ 99,365 | $ 0 | |||
Preferred Stock, Conversion Basis, Common Stock Class A Closing Trade Price | 125.00% |
Fair Value Measurements (Details 1) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Ending balance of contingent payments | $ 144,847 |
Fair Value, Inputs, Level 3 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Payments | 73,358 |
Additions | 0 |
Redemption value adjustments | 19,233 |
Other | (27,118) |
Foreign translation adjustment | $ 1,336 |
Other Income (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Noncontrolling Interest, Decrease from Deconsolidation | $ 10,657,000 | |||
Realized gain (loss) from disposal of cost and equity method investments | $ 682,000 | $ 682,000 | ||
Other income (expense) | $ (7,000) | 26,000 | 271,000 | (220,000) |
Gain (Loss) on Disposition of Business | 1,424,000 | 800,000 | 1,424,000 | 800,000 |
Cost-method Investments, Realized Gains | 168,000 | 168,000 | ||
Foreign currency transaction gain | 9,912,000 | (5,916,000) | 18,797,000 | 9,868,000 |
Other, net | $ 8,649,000 | $ (6,008,000) | $ 17,812,000 | $ 9,530,000 |
Commitments, Contingencies and Guarantees (Details Textual) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Other Commitments [Line Items] | ||
Redeemable noncontrolling interests | $ 60,092 | $ 60,180 |
Investment commitments | 198 | |
Amount of letters of credit outstanding | $ 5,009 | |
Minimum [Member] | ||
Other Commitments [Line Items] | ||
Redeemable noncontrolling interest obligation, year of payment | 2017 | |
Maximum [Member] | ||
Other Commitments [Line Items] | ||
Redeemable noncontrolling interest obligation, year of payment | 2023 | |
Contractual redemption right [Member] | ||
Other Commitments [Line Items] | ||
Redemption value | $ 15,493 | |
Contractual redemption right [Member] | Common Class A [Member] | ||
Other Commitments [Line Items] | ||
Redemption value | 202 | |
Termination or death redemption right [Member] | ||
Other Commitments [Line Items] | ||
Redemption value | 42,268 | |
Excess initial redemption value [Member] | ||
Other Commitments [Line Items] | ||
Redemption value | $ 2,330 |
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