Segment Information

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Information

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 that is, and (3) regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. During 2015, the Company had a change in the CODM as well as a change in how the CODM manages the business. As a result, in the fourth quarter of 2015, the Company reassessed its determination of operating segments. Decisions regarding allocations of resources are made and will be made based on the overall performance of the overall Partner Firm network. Therefore, the Company has determined that the Partner Firm network represents its operating segment. The Company also reassessed its previous allocation methodology and has conformed the allocations to align with how the CODM manages the business. The overall Partner Firm network consists of each of the Company’s operating agencies. The Company now reports in one reportable Advertising and Communications segment in addition to the Corporate Group described as follows:

• The Advertising and Communications segment consists of Partner Firms that deliver innovative, value-added marketing, activation, communications and strategic consulting services to their clients. MDC and its Partner Firms deliver a wide range of customized services, including (1) multi-channel media management and optimization, (2) interactive and mobile marketing, (3) direct marketing, (4) database and customer relationship management, (5) sales promotion, (6) corporate communications, (7) market research, (8) data analytics and insights, (9) corporate identity, design and branding services, (10) social media communications, (11) product and service innovation and (12) e-commerce management.

• The Corporate Group consists of corporate office expenses incurred in connection with the strategic resources provided to the Advertising and Communications segment, as well as certain other centrally managed expenses that are not fully allocated to the reportable segment. 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 (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 segment.

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

The significant accounting policies are in the summary of significant accounting policies included in the notes to the consolidated financial statements. 

Three Months Ended June 30, 2016

(thousands of United States dollars)

	Advertising and Communications			Corporate			Total
Revenue	$	337,047		$	—		$	337,047
Cost of services sold	228,835			—			228,835
Office and general expenses	60,418			12,291			72,709
Depreciation and amortization	10,926			510			11,436
Operating profit (loss)	36,868			(12,801		)	24,067
Other Income (Expense):
Other income, net							26
Interest expense and finance charges, net							(16,971		)
Income from continuing operations before income taxes and equity in earnings of non-consolidated affiliates							7,122
Income tax expense							4,405
Income from continuing operations before equity in earnings of non-consolidated affiliates							2,717
Equity in losses of non-consolidated affiliates							(290		)
Net income							2,427
Net income attributable to the noncontrolling interests	(1,254		)	—			(1,254		)
Net income attributable to MDC Partners Inc.							$	1,173
Stock-based compensation	$	4,880		$	650		$	5,530
Supplemental Segment Information:
Capital expenditures	$	7,905		$	4		$	7,909

Three Months Ended June 30, 2015

(thousands of United States dollars)

	Advertising and Communications			Corporate			Total
Revenue	$	336,606		$	—		$	336,606
Cost of services sold	225,042			—			225,042
Office and general expenses	43,638			9,437			53,075
Depreciation and amortization	13,554			453			14,007
Operating profit (loss)	54,372			(9,890		)	44,482
Other Income (Expense):
Other income, net							4,348
Interest expense and finance charges, net							(13,183		)
Income from continuing operations before income taxes and equity in earnings of non-consolidated affiliates							35,647
Income tax expense							4,679
Income from continuing operations before equity in earnings of non-consolidated affiliates							30,968
Equity in earnings of non-consolidated affiliates							104
Income from continuing operations							31,072
Income from discontinued operations attributable to MDC Partners Inc., net of taxes							1,329
Net income							32,401
Net income attributable to the noncontrolling interests	(2,841		)	—			(2,841		)
Net income attributable to MDC Partners Inc.							$	29,560
Stock-based compensation	$	4,863		$	451		$	5,314
Supplemental Segment Information:
Capital expenditures	$	3,653		$	195		$	3,848

Six Months Ended June 30, 2016

(thousands of United States dollars)

	Advertising and Communications			Corporate			Total
Revenue	$	646,089		$	—		$	646,089
Cost of services sold	440,281			—			440,281
Office and general expenses	125,513			25,024			150,537
Depreciation and amortization	21,749			907			22,656
Operating profit (loss)	58,546			(25,931		)	32,615
Other Income (Expense):
Other income, net							15,538
Interest expense and finance charges, net							(32,368		)
Loss on redemption of notes							(33,298		)
Loss from continuing operations before income taxes and equity in earnings of non-consolidated affiliates							(17,513		)
Income tax expense							2,433
Loss from continuing operations before equity in earnings of non-consolidated affiliates							(19,946		)
Equity in losses of non-consolidated affiliates							(61		)
Net loss							(20,007		)
Net income attributable to the noncontrolling interests	(2,113		)	—			(2,113		)
Net loss attributable to MDC Partners Inc.							$	(22,120	)
Stock-based compensation	$	8,761		$	1,454		$	10,215
Supplemental Segment Information:
Capital expenditures	$	13,416		$	32		$	13,448
Goodwill and intangibles	$	938,062		$	—		$	938,062
Total Assets	$	1,484,027		$	132,126		$	1,616,153

Six Months Ended June 30, 2015

(thousands of United States dollars)

	Advertising and Communications			Corporate			Total
Revenue	$	638,828		$	—		$	638,828
Cost of services sold	435,461			—			435,461
Office and general expenses	97,574			29,809			127,383
Depreciation and amortization	25,408			899			26,307
Operating profit (loss)	80,385			(30,708		)	49,677
Other Income (Expense):
Other expense, net							(13,692		)
Interest expense and finance charges, net							(28,160		)
Income from continuing operations before income taxes and equity in earnings of non-consolidated affiliates							7,825
Income tax expense							625
Income from continuing operations before equity in earnings of non-consolidated affiliates							7,200
Equity in earnings of non-consolidated affiliates							455
Income from continuing operations							7,655
Loss from discontinued operations attributable to MDC Partners Inc., net of taxes							(4,965		)
Net income							2,690
Net income attributable to the noncontrolling interests	(5,221		)	—			(5,221		)
Net loss attributable to MDC Partners Inc.							$	(2,531	)
Stock-based compensation	$	8,363		$	1,396		$	9,759
Supplemental Segment Information:
Capital expenditures	$	9,241		$	263		$	9,504
Goodwill and intangibles	$	961,860		$	—		$	961,860
Total Assets	$	1,657,959		$	176,806		$	1,834,765

A summary of the Company’s revenue by geographic area, based on the location in which the services originated, is set forth in the following table:

	United States		Canada		Other		Total
Revenue
Three Months Ended June 30,
2016	$	272,992	$	33,614	$	30,441	$	337,047
2015	$	271,375	$	35,432	$	29,799	$	336,606
Six Months Ended June 30,
2016	$	525,190	$	62,020	$	58,879	$	646,089
2015	$	523,392	$	65,258	$	50,178	$	638,828