14. Segment Information

The Company determines an operating segment if a component (1) engages in business activities from which it earns revenues and incurs expenses, (2) has discrete financial information and that is (3) regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions regarding resource allocation for the segment and assess its performance. During June of 2016, the Company entered into a Separation and Release Agreement with its former Chief Operating Officer in connection with a limited restructuring of the Company’s corporate department. This change to the Company’s management structure was designed to provide the CODM greater visibility into the operating performance of individual Partner Firms and has resulted in a corresponding change in the level at which the CODM reviews the operating results of such Partner Firms. As a result, in the third quarter of 2016, the Company reassessed its determination of operating segments and concluded that each Partner Firm represents an operating segment. The Company assessed the average long-term gross margins expected for each Partner Firm together with the qualitative characteristics set forth in ASC 280-10-50 and aggregated the Partner Firms that meet the aggregation criteria into one Reportable segment and combined and disclosed those Partner Firms that do not meet the aggregation criteria as an “all other” segment. The Company also reports the Corporate Group.

•

The Reportable segment is comprised of the Company’s integrated advertising, media, and public relations service firms. These core or principal service offerings are similar and/or complementary in many respects and the firms that provide these service offerings both compete and/or collaborate with each other for new business. Each Partner Firm represents an operating segment and the Company aggregates its Partner Firms to report in one Reportable segment along with an “all other” segment. Firms within this segment include Allison & Partners, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors, Hunter PR, kbs, MDC Media Partners, and 72andSunny, among others. These firms share similar characteristics related to the nature of their services as well as the type of clients and the methods used to provide their services. In addition, the class of customer is also common among the Partner Firms in this Reportable segment. This results in the firms having similar economics of their business and the Company believes the average long-term gross margin expectations are similar among the firms aggregated in the Reportable segment.

•

The “all other” segment is comprised of the firms that provide the Company’s specialist marketing offerings such as direct marketing, sales promotion, market research, strategic communications, database and customer relationship management, data analytics and insights, corporate identity, design and branding, and product and service innovation. Firms within this segment include Gale Partners, Kingsdale, Relevent, Team, Redscout and Y Media Labs. The nature of the specialized services provided by these firms vary from those firms aggregated into the Reportable segment in that such services are generally complimentary and are provided to round out the portfolio of services offered by the Company. This results in these firms having different current and long-term performance expectations from those firms aggregated in the Reportable segment.

•

The Corporate Group consists of corporate office expenses incurred in connection with the strategic resources provided to the Partner Firms, as well as certain other centrally managed expenses that are not fully allocated to the Reportable segments. These office and general expenses include (1) salaries and related expenses for corporate office employees including employees dedicated to supporting the Partner Firms, (2) occupancy expense relating to properties occupied by all corporate office employees, (3) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (4) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the Partner Firms are allocated to the Reportable and “all other” segments.

Prior year results have been recast to reflect the new segment reporting.



	For the year ended December 31, 2016
	Reportable Segment			All Other			Corporate			Total
Revenue	$	1,147,173		238,612			—			1,385,785
Cost of services sold	775,129			161,004			—			936,133
Office and general expenses	223,823			39,895			42,533			306,251
Depreciation and amortization	33,848			11,013			1,585			46,446
Goodwill impairment	—			48,524			—			48,524
Operating profit (loss)	114,373			(21,824		)	(44,118		)	48,431
Other Income (Expense):
Other income, net										414
Foreign exchange loss										(213		)
Interest expense, finance charges, and loss on redemption of notes, net										(98,348		)
Loss from continuing operations before income taxes and equity in earnings of non-consolidated affiliates										(49,716		)
Income tax benefit										(7,301		)
Loss from continuing operations before equity in earnings of non-consolidated affiliates										(42,415		)
Equity in losses of non-consolidated affiliates										(309		)
Net loss										(42,724		)
Net income attributable to noncontrolling interests	(3,676		)	(1,542		)	—			(5,218		)
Net loss attributable to MDC Partners Inc.										(47,942		)
Stock-based compensation	$	14,143		$	4,335		$	2,525		$	21,003
Capital expenditures from continuing operations	$	26,856		$	2,543		$	33		$	29,432
Goodwill and intangibles	$	742,454		$	187,376		$	—		$	929,830
Total assets	$	1,150,318		$	266,316		$	160,744		$	1,577,378



	For the year ended December 31, 2015
	Reportable Segment			All other			Corporate			Total
Revenue	$	1,101,675		$	224,581		$	—		$	1,326,256
Cost of services sold	724,749			154,967			—			879,716
Office and general expenses	208,837			49,972			63,398			322,207
Depreciation and amortization	32,501			17,948			1,774			52,223
Operating profit (loss)	135,588			1,694			(65,172		)	72,110
Other Income (Expense):
Other income, net										7,238
Foreign exchange loss										(39,328		)
Interest expense and finance charges, net										(57,436		)
Loss from continuing operations before income taxes and equity in earnings of non-consolidated affiliates										(17,416		)
Income tax expense										5,664
Loss from continuing operations before equity in earnings of non-consolidated affiliates										(23,080		)
Equity in earnings of non-consolidated affiliates										1,058
Loss from continuing operations										(22,022		)
Loss from discontinued operations attributable to MDC Partners Inc., net of taxes										(6,281		)
Net loss										(28,303		)
Net income attributable to noncontrolling interests	(7,202		)	(1,822		)	(30		)	(9,054		)
Net loss attributable to MDC Partners Inc.										$	(37,357	)
Stock-based compensation	$	10,231		$	4,825		$	2,740		$	17,796
Capital expenditures from continuing operations	$	21,434		$	1,770		$	371		$	23,575
Goodwill and intangibles	$	699,730		$	242,953		$	—		$	942,683
Total assets	$	1,057,512		$	317,861		$	202,252		$	1,577,625



	For the year ended December 31, 2014
	Reportable Segment			All other			Corporate			Total
Revenue	$	991,245		$	232,267		$	—		$	1,223,512
Cost of services sold	631,635			166,883			—			798,518
Office and general expenses	188,757			35,024			66,292			290,073
Depreciation and amortization	30,631			14,756			1,785			47,172
Operating profit (loss)	140,222			15,604			(68,077		)	87,749
Other Income (Expense):
Other income, net										689
Foreign exchange loss										(18,482		)
Interest expense and finance charges, net										(54,847		)
Income from continuing operations before income taxes and equity in earnings of non-consolidated affiliates										15,109
Income tax expense										12,422
Income from continuing operations before equity in earnings of non-consolidated affiliates										2,687
Equity in earnings of non-consolidated affiliates										1,406
Income from continuing operations										4,093
Loss from discontinued operations attributable to MDC Partners Inc., net of taxes										(21,260		)
Net loss										(17,167		)
Net income attributable to noncontrolling interests	(5,398		)	(1,492		)	—			(6,890		)
Net loss attributable to MDC Partners Inc.										$	(24,057	)
Stock-based compensation	$	8,559		$	3,474		$	5,663		$	17,696
Capital expenditures from continuing operations	$	23,280		$	1,799		$	1,337		$	26,416
Goodwill and intangibles	$	715,092		$	222,402		$	—		$	937,494
Total assets	$	1,052,419		$	315,717		$	280,754		$	1,648,890

A summary of the Company’s long-lived assets, comprised of fixed assets, goodwill and intangibles, net, as at December 31, is set forth in the following table.



	United States		Canada		Other		Total
Long-lived Assets
2016	$	67,617	$	5,887	$	4,873	$	78,377
2015	$	52,305	$	6,817	$	4,435	$	63,557
Goodwill and Intangible Assets
2016	$	736,334	$	121,987	$	71,509	$	929,830
2015	$	798,746	$	122,821	$	21,116	$	942,683

A summary of the Company’s revenue as at December 31 is set forth in the following table.



	United States		Canada		Other		Total
Revenue:
2016	$	1,103,714	$	124,101	$	157,970	$	1,385,785
2015	$	1,085,051	$	129,039	$	112,166	$	1,326,256
2014	$	993,474	$	150,390	$	79,648	$	1,223,512