FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of, November 2003
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Commission File Number 001-13718
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MDC CORPORATION INC.
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(Translation of registrant's name into English)
45 Hazelton Avenue, Toronto, Ontario, Canada, M5R 2E3
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40F.
Form 20-F Form 40-F X
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Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________
DOCUMENT INDEX
Document Page No.
1. News Release dated November 18, 2003 4
2. News Release dated November 20, 2003 7
3. Third Quarter Report for the nine months
ended September 30, 2003 11
Document 1
MDC [LOGO OMITTED] PARTNERS
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
CONTACTS: Miles S. Nadal Peter M. Lewis
Chairman, President & CEO Executive Vice-President & CFO
(416) 960-9000 Ext.223 (416) 960-9000 Ext. 272
Walter Campbell Trevor Maunder
Senior Vice-President Finance Director, Investor Relations
(416) 960-9000 Ext.336 (416) 960-9000 Ext.226
TSE Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
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/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION
IN THE UNITED STATES/
MDC CORPORATION INC. ANNOUNCES FILING OF PRELIMINARY
PROSPECTUS FOR THE ISSUANCE OF 3,903,451 ADJUSTABLE RATE
EXCHANGEABLE SECURITIES DUE DECEMBER 31, 2028
THE SECURITIES WILL EACH BE EXCHANGEABLE INTO A UNIT OF CUSTOM
DIRECT INCOME FUND
TORONTO, Ontario (November 18, 2003) - MDC Corporation Inc. operating as MDC
Partners ("MDC") of Toronto today announced that it filed a preliminary
prospectus with the securities regulatory authorities in each of the provinces
of Canada to offer 3,903,451 Adjustable Rate Exchangeable Securities due
December 31, 2028. The proceeds will be used for general corporate purposes.
Interest payments on the Exchangeable Securities will be made in the same
amount and on the same dates as the distributions paid on units of Custom
Direct Income Fund (the "Fund"), but in no event will the monthly payment be
less than 0.25% per month (3.0% per annum). The offering is being underwritten
by a syndicate led by CIBC World Markets Inc., which includes TD Securities
Inc., Scotia Capital Inc., BMO Nesbitt Burns Inc., National Bank Financial
Inc. and Griffiths McBurney & Partners.
A holder of an Exchangeable Security will have the right to exchange the
security for a unit of the Fund once MDC has effectively exchanged its 20%
ownership of Custom Direct, Inc. into units of the Fund. MDC's shares of
Custom Direct, Inc. are effectively exchangeable into units of the Fund once
(a) the Fund has earned audited EBITDA of approximately US$22.2 million for
the year ending December 31, 2003 or for any fiscal year subsequent to 2003,
and (b) the Fund has made average monthly per unit cash distributions of at
least $0.1125 for the period from May 29, 2003 to December 31, 2003 or for any
fiscal year subsequent to 2003. For purposes of determining whether the EBITDA
target has been met, the audited financial statements for the year ending
December 31, 2003 are anticipated to be prepared by March, 2004. The
Exchangeable
Securities will also be redeemable by MDC for units of the Fund or for cash in
certain circumstances.
"We are very excited about the opportunity to continue to increase the
liquidity of MDC's balance sheet through the monetization of value in non core
assets. This transaction is an important incremental milestone enabling MDC to
continue to focus on its core business of marketing and communications
services. We are very pleased to have the opportunity to crystallize
significant value for the shareholders of MDC through this offering and recent
transactions including the initial public offering of the Custom Direct Income
Fund and the initial public offering of the Davis + Henderson Income Fund.
Custom Direct, Inc. is an outstanding organization and we have every
confidence in its future prospects," said Miles Nadal, Chairman and Chief
Executive Officer of MDC.
About MDC Partners
MDC Partners is one of the world's leading marketing communications firms.
Through its partnership of entrepreneurial firms, MDC provides creative,
integrated and specialized communication services to leading brands throughout
the United States, Canada and the United Kingdom. MDC Class A shares are
publicly traded on the Toronto Stock Exchange under the symbol MDZ.A and on
the NASDAQ under the symbol MDCA.
This press release contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve risks and
uncertainties which may cause the actual results or objectives to be
materially different from those expressed or implied by such forward-looking
statements. Such factors include, among other things, the Company's financial
performance; changes in the competitive environment; adverse changes in the
economy; ability to maintain long-term relationships with customers; financing
requirements and other factors set forth in the Company's Form 40-F for its
fiscal year ended December 31, 2002 and subsequent SEC filings.
Document 2
MDC [LOGO OMITTED] PARTNERS
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
CONTACTS: Miles S. Nadal Peter M. Lewis
Chairman, President & CEO Executive Vice-President & CFO
(416) 960-9000 Ext.223 (416) 960-9000 Ext. 272
Walter Campbell Trevor Maunder
Senior Vice-President Finance Director, Investor Relations
(416) 960-9000 Ext.336 (416) 960-9000 Ext.226
TSE Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
---------------
/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION
IN THE UNITED STATES/
MDC CORPORATION INC. OFFERING OF 3,400,000 ADJUSTABLE RATE
EXCHANGEABLE SECURITIES DUE DECEMBER 31, 2028 PRICED AT $8.75
PER SECURITY FOR GROSS PROCEEDS OF APPROXIMATELY $30 MILLION
GROSS PROCEEDS OF $34 MILLION IF OVER-ALLOTMENT OPTION EXERCISED
THE SECURITIES WILL EACH BE EXCHANGEABLE INTO A UNIT OF CUSTOM
DIRECT INCOME FUND
TORONTO, Ontario (November 20, 2003) - MDC Corporation Inc. operating as MDC
Partners ("MDC") of Toronto today announced that it entered into an
underwriting agreement with a syndicate of underwriters in connection with its
offering of 3,400,000 Adjustable Rate Exchangeable Securities due December 31,
2028 at an offering price of $8.75. MDC has also granted the underwriters an
over-allotment option to purchase up to an additional 503,451 Exchangeable
Securities at the same price, exercisable at any time until 30 days following
closing. Net proceeds are expected to be $27.5 million, or $31.7 million if
the over-allotment option is exercised in full, and will be used for general
corporate purposes. The securities will pay interest monthly at a rate equal
to the actual distribution by Custom Direct Income Fund in that month. The
offering is being underwritten by a syndicate led by CIBC World Markets Inc.,
which includes TD Securities Inc., Scotia Capital Inc., BMO Nesbitt Burns
Inc., National Bank Financial Inc. and Griffiths McBurney & Partners. Closing
is expected to occur on or about December 8, 2003.
A holder of an Exchangeable Security will have the right to exchange the
security for a unit of the Fund once MDC is entitled to effectively exchange
its 20% ownership of Custom Direct, Inc. into units of the Fund. MDC's shares
of Custom Direct, Inc. are effectively exchangeable into units of the Fund
once (a) the Fund has earned audited EBITDA of approximately US$22.2 million
for the
year ending December 31, 2003 or for any fiscal year subsequent to 2003, and
(b) the Fund has made average monthly per unit cash distributions of at least
$0.1125 for the period from May 29, 2003 to December 31, 2003 or for any
fiscal year subsequent to 2003. For purposes of determining whether the EBITDA
target has been met, the audited financial statements for the year ending
December 31, 2003 are anticipated to be prepared by March, 2004.
"We are very excited about the opportunity to continue to increase the
liquidity of MDC's balance sheet through the monetization of value in non core
assets. This transaction is an important incremental milestone enabling MDC to
continue to focus on its core business of marketing and communications
services. We are very pleased to have crystallized significant value for the
shareholders of MDC through this offering and recent transactions including
the initial public offering of the Custom Direct Income Fund and the initial
public offering of the Davis + Henderson Income Fund. Custom Direct, Inc. is
an outstanding organization and we have every confidence in its future
prospects," said Miles Nadal, Chairman and Chief Executive Officer of MDC.
About MDC Partners
MDC Partners is one of the world's leading marketing communications firms.
Through its partnership of entrepreneurial firms, MDC provides creative,
integrated and specialized communication services to leading brands throughout
the United States, Canada and the United Kingdom. MDC Class A shares are
publicly traded on the Toronto Stock Exchange under the symbol MDZ.A and on
the NASDAQ under the symbol MDCA.
This press release contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve risks and
uncertainties which may cause the actual results or objectives to be
materially different from those expressed or implied by such forward-looking
statements. Such factors include, among other things, the Company's financial
performance; changes in the competitive environment; adverse changes in the
economy; ability to maintain long-term relationships with customers; financing
requirements and other factors set forth in the Company's Form 40-F for its
fiscal year ended December 31, 2002 and subsequent SEC filings.
Document 3
[logo omitted]
MDC Corporation Inc.
Third Quarter Report
Nine months ended September 30, 2003
Financial Highlights
Consolidated Financial Summary
(in thousands of U.S. dollars, except per share amounts) (unaudited)
Three months ended September 30 2003 2002 % Change
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Gross billings 132,140 140,545 - 6
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Revenues 68,088 88,548 - 23
Operating income before other income (charges) 7,836 11,281 - 31
Cash flow from operations 5,867 7,633 - 23
Net income for the period 3,341 4,179 - 20
Earnings per share
Basic 0.17 0.23 - 26
Diluted 0.15 0.16 - 6
Cash flow per share
Basic 0.30 0.32 - 6
Diluted 0.26 0.25 + 4
Weighted average number of shares outstanding
Basic 18,361,746 16,915,341 + 9
Diluted 23,249,320 26,558,351 - 12
================================================
Nine months ended September 30 2003 2002 % Change
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Gross billings 410,304 453,614 - 10
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Revenues 236,928 299,952 - 21
Operating income before other income (charges) 25,769 40,397 - 36
Cash flow from operations 13,282 17,236 - 23
Net income for the period 12,565 91,721 - 86
Earnings per share
Basic 0.67 5.38 - 88
Diluted 0.55 3.61 - 85
Cash flow per share
Basic 0.71 0.98 - 28
Diluted 0.58 0.69 - 16
Weighted average number of shares outstanding
Basic 17,397,476 16,915,341 + 3
Diluted 23,541,571 25,501,775 - 8
===============================================
Management's Discussion & Analysis
The following discussion focuses on the operating performance of MDC
Corporation Inc. (the "Company") for the three- and nine-month periods ended
September 30, 2003 and 2002, and the financial condition as at September 30,
2003. This analysis should be read in conjunction with the consolidated
interim financial statements presented in this interim report and the annual
audited consolidated financial statements and Management's Discussion and
Analysis presented in the Annual Report to Shareholders for the year ended
December 31, 2002. All amounts are in U.S. dollars unless otherwise stated.
Overview
Effective September 30, 2003, MDC has adopted the U.S. dollar as its reporting
currency in order to more fully reflect the global nature of the Company's
business and shareholder base. In addition, MDC has modified its financial
statement presentation to improve investors' ability to compare the Company's
results with those of most other publicly traded businesses in the marketing
communications industry.
The third quarter financial results reflect both MDC's strategy to focus
resources on Marketing Communications and management's commitment to the
profitable operation of the remaining non-core businesses. During the quarter,
MDC successfully completed the privatization of Maxxcom, the acquisition of
the 15% interest in Metaca, the Canadian card operation, owned by Symcor Inc.,
and the sale of its remaining units of the Custom Direct Income Fund (the
"Fund") by way of a fully underwritten private placement. MDC continues to own
a 20% subordinated interest in Custom Direct, which may be exchangeable into
units of the Fund after December 31, 2003. Significant progress was also made
with regard to the implementation of state-of-the art equipment at
Ashton-Potter, our U.S. stamp operation, in preparation for increased
production expected to commence by the end of the year.
Three Months Ended September 30, 2003 Compared with the Three Months Ended
September 30, 2002
Revenues
Consolidated revenues for the quarter ended September 30, 2003 totaled $68.1
million, representing a decrease of 23% or $20.4 million from the revenues of
$88.5 million reported for the same quarter of 2002.
Gross billings of the Marketing Communications Division increased 18% or $17.3
million compared with the third quarter of last year and revenues were $47.5
million, $5.3 million or 12% higher than the $42.2 million achieved in the
same prior-year period. The improvement in revenues resulted from an increase
in demand for database management, direct marketing services, corporate
communications and advertising in the United States.
The third quarter revenues generated by the Secure Transactions Division were
$18.9 million. The decrease of $26.6 million or 58% compared to the 2002 third
quarter is primarily due to the revenues of divested operations included in
the prior-year results. Excluding divested operations, revenues improved
slightly, primarily the result of an increase in the Canadian dollar relative
to the U.S. dollar.
Revenues of the Company's Corporate and Other operations increased $0.9
million to $1.7 million from the $0.8 million reported last year, primarily
due to the distributions received this quarter from Custom Direct.
Operating Costs
On a consolidated basis, operating costs for the quarter ended September 30,
2003 were $60.3 million, 22% or $17.0 million lower than the $77.3 million of
the same prior-year quarter.
Marketing Communications incurred operating costs of $40.0 million, $2.6
million higher than in the third quarter of 2002. However, operating costs as
a percentage of revenues were 84.3% in Q3 2003 versus 88.7% in Q3 2002 due to
growth in excess of cost increases combined with the elimination of head
office costs since the privatization of Maxxcom on July 31, 2003. Salaries and
related costs increased $1.6 million compared to the third quarter of the
previous year, but, as a percentage of sales, decreased from 47.2% to 45.4%.
Operating costs of the Secure Transactions Division amounted to $17.7 million
in the third quarter of this year and decreased by $20.5 million compared with
the $38.2 million of operating costs last year, primarily due to the
businesses that have been divested. Operating costs include cost of sales,
which increased as a percentage of sales from 44.8% in 2002 to 63.9% in 2003,
and salaries and related costs, which increased from 13.3% of sales to 16.2%
of sales. These increases are reflective of costs incurred by the stamp
operations related to preparation for increased production under the long-term
United States Postal Service contract announced last quarter and increased
U.S. dollar equivalent operating costs at Canadian facilities as a result of
the strengthening Canadian dollar.
The operating costs of Corporate and Other operations amounted to $2.5 million
for the quarter, $0.9 million higher than in the same quarter of 2002,
primarily the result of $0.6 million of costs allocated to Corporate and Other
with the merger of head offices upon the privatization of Maxxcom.
Operating Income before Other Income (Charges)
Operating income before other charges was $7.8 million for the third quarter
of this year, $3.4 million or 31% lower than the $11.3 million achieved last
year. The growth of the Marketing Communications Division was offset by the
impact of divested operations and the increased costs associated with the
remaining operations within the Secure Transactions Division. The operating
loss attributable to Corporate and Other operations remained at $0.8 million
for the quarter.
Marketing Communications contributed $7.4 million in operating income before
other charges for the quarter compared with $4.8 million in 2002. The
improvement of 56% or $2.7 million was primarily due to the improvement in
revenues and contribution from our partner operations combined with the cost
reductions achieved through the merger of head offices related to the
privatization of Maxxcom. As a result, operating margins were 15.7% of sales
in this quarter versus 11.3% of sales in the third quarter of last year.
The Secure Transactions Division earned $1.2 million of operating income
before other charges, a decrease of $6.1 million from the prior-year third
quarter. Operating income as a percentage of sales decreased from 16.1% last
year to 6.4% this year. Excluding the divested operations, the remaining
operating units reported a decrease in operating income of $1.6 million
compared to 2002 due primarily to higher operating costs in U.S. dollars at
Canadian facilities as a result of a stronger Canadian dollar.
Net Gain on Asset Dispositions and Other Charges
The net gain on asset dispositions and other charges was $0.4 million for the
third quarter of 2003. A gain on the disposition of the Fund units and
settlement of a holdback were partially offset by charges of $1.4 million each
for stock-based compensation expenses and a goodwill charge related to the
Canadian card operations. In 2002, the gain of $1.5 million related to the
divestiture of the non-core assets of A.E. McKenzie Co. Inc., The House of
Questa, and the Australian ticketing operation.
Amortization
Amortization expense for the period was $2.7 million, $0.9 million lower than
the amortization of $3.6 million last year primarily as a result of the
reduction in the capital assets of the Secure Transactions Division.
Amortization of the Marketing Communications Division remained relatively
unchanged compared to the third quarter of last year at $2.0 million.
Interest, Net
For the third quarter of 2003, interest expense was $1.4 million, down $2.5
million compared with the same period of 2002. The decrease is due primarily
to lower levels of indebtedness. The increase in interest expense of the
Marketing Communications Division was more than offset by the reduction of
interest in Secure Transactions and Corporate and Other due to the retirement
of the 10.5% Senior Subordinated Notes ("Notes") and the senior credit
facility at head office.
Income Participation of Minority Partners
Income participation of minority partners represents payments to minority
shareholders of subsidiary companies pursuant to their respective shareholder
agreements, and was $1.5 million for the quarter, $0.6 million higher than in
the same quarter of last year as a result of improved performance in the
Marketing Communications Division.
Income before Income Taxes and Minority Interest
The income before income taxes and minority interest was $2.7 million in the
quarter ended September 30, 2003, compared to $4.4 million in the 2002 third
quarter. The improvement in Marketing Communications was more than offset by
reductions in Secure Transactions, primarily due to divestitures, and
increased costs at Corporate and Other.
Income Tax Expense
The recovery of income tax recorded for the third quarter was $0.8 million
compared with income tax expense of $0.2 million last year. During the
quarter, the Company benefited from the recognition of previously unrecognized
tax losses.
Minority Interest
Minority interest expense for the quarter was $0.1 million compared with a
slight recovery in 2002, and represented the minority interest share of the
net income (losses) of Maxxcom and Metaca for the period in which those
operations were not wholly-owned subsidiaries.
Net Income for the Period
Net income for the third quarter of 2003 was $3.3 million compared with $4.2
million in 2002. The $1.7 million improvement in the net income of the
Marketing Communications
Division was offset by the impact of asset dispositions and a decrease in
income attributable to the remaining business segments.
Nine Months Ended September 30, 2003 Compared with the Nine Months Ended
September 30, 2002
Revenues
For the first nine months of 2003, consolidated revenues decreased $63.0
million or 21% to $236.9 million compared with $300.0 million for the same
period of 2002.
Marketing Communications reported gross billings of $310.2 million and
revenues of $136.9 million for the first nine months of 2003. This represents
an improvement in gross billings of $33.4 million or 12% and in revenues of
$13.7 million or 11% compared with the same period last year. Increased demand
in the United States for database management and direct marketing services and
growth in the U.K. were greater than the decline experienced in the Canadian
operations from a decrease in sales promotion activity and delays in projects
related to the "SARS" issues in Toronto.
Sales generated by the Secure Transactions Division for the period were $96.2
million versus $168.5 million in 2002. Revenues of the remaining stamp, card
and ticketing operations declined $2.3 million or 5% from last year.
Revenues attributable to Corporate and Other operations decreased $4.4 million
from the first nine months of 2002 due to dispositions completed of non-core
operations net of distributions from Custom Direct during the second and third
quarter of 2003.
Operating Costs
Operating costs, at $211.2 million for the first three quarters of the year,
declined 19% or $48.4 million from the first three quarters of last year
primarily as a result of dispositions. The operating costs of Marketing
Communications increased by $7.9 million, offset by decreases in operating
costs of the Secure Transactions Division and Corporate and Other operations
of $52.1 million and $4.2 million, respectively.
Operating costs incurred by the Marketing Communications Division during the
first nine months of the year totaled $118.0 million compared with $110.2
million for the same period last year. Expressed as a percentage of sales,
operating costs were 86.2% in 2003 versus 89.4% in 2002, and salaries and
related costs, included in operating costs, decreased from 48.4% to 47.2%,
reflective of the cost-efficient structure that has been implemented
throughout the organization.
To date in 2003, the operating costs of the Secure Transactions Division
totaled $86.3 million, a decrease of $52.1 million from $138.4 million for the
first three quarters of 2002, primarily due to dispositions completed since
the third quarter of last year.
Operating Income before Other Income (Charges)
Operating income before other charges was $25.8 million for the year-to-date
period ended September 30, 2003, and decreased $14.6 million or 36% compared
with the $40.4 million earned in the same prior-year period.
The Marketing Communications group improved operating income before other
charges by $5.8 million or 44% from the $13.0 million achieved during the
first nine months of 2002. Operating income, at $18.8 million, was positively
impacted by the improvement in revenues and cost reduction initiatives,
including the divisional cost reductions that resulted from the privatization
of Maxxcom and the merger of head offices. Operating margins improved to 13.8%
of sales on a year-to-date basis from 10.6% of sales in 2002.
Operating income before other charges contributed by the Secure Transactions
Division was $9.8 million compared with $30.1 million for the prior year.
Excluding the operating profits of disposed operations, operating income of
the remaining stamp, ticketing and card businesses was $1.8 million compared
to $4.4 million in 2002. The decrease of $2.6 million was principally due to
reduced levels of activity and increased costs being incurred by Ashton-Potter
to retrofit the plant for increased production related to the Multiprint III
contract. Production under the new state-of-the-art equipment is scheduled to
commence by the end of the year. Operating income of the remaining operations
as a percentage of revenues decreased from 8.8% last year to 3.7% this year.
The operating loss incurred by Corporate and Other operations was $2.9 million
for the first three quarters of the year in 2003, relatively unchanged from
the $2.8 million reported for 2002, the result of increased head office costs
partially offset by dispositions.
Net Gain on Asset Dispositions and Other Charges
For the first nine months of 2003, the net gain on asset dispositions and
other charges of $15.4 million comprised gains primarily related to the
disposition of the U.S. cheque operations, net of provisions against specific
assets and goodwill charges relating to remaining non-core operations and
stock-based compensation expense. The disposition of the Canadian cheque
operations, A.E. McKenzie Co. Inc. and The House of Questa, and the settlement
of $112.5 million of the Notes at 89% of the original principal amount, net of
provisions recorded against non-core assets, resulted in a net gain of $99.5
million for the comparable prior-year period.
Unrealized Foreign Exchange Gain
In the first half of 2002, an unrealized foreign exchange gain of $4.4 million
was recorded with respect to the U.S. dollar denominated Notes. On July 1,
2002, the Notes were designated as a hedge against the foreign exchange
exposure of the U.S. Secure Transactions operations, and any foreign exchange
translation adjustment of the Notes reduced offsetting foreign exchange
translation adjustment of the U.S. operations, which was reflected in the
cumulative translation account within shareholders' equity.
Amortization
Consolidated amortization expense was $9.9 million for the nine-month period
ended September 30, 2003, $2.3 million lower than in 2002 primarily due to the
lower level of assets associated with the Secure Transactions Division as a
result of the divestitures that have been completed.
Interest, Net
The interest expense totaled $9.7 million year-to-date at September 30, 2003,
down $4.4 million or 31% from the $14.1 million incurred during the 2002
period due primarily to the significantly reduced level of long-term
indebtedness outstanding during the period related to the Secure Transactions
and Corporate and Other divisions. The interest expense of the Marketing
Communications Division increased $0.6 million for the first nine months of
2003 versus 2002, the net effect of the lower average level of borrowings, the
higher weighted average cost of borrowing, and the unfavorable impact the
strengthening Canadian dollar had on a significant portion of the debt and
related interest payments denominated in Canadian dollars.
Income Participation of Minority Partners
Marketing Communications recorded an expense of $4.0 million with respect to
income participation of minority partners for the first nine months of the
year compared with $2.3 million for the three quarters of last year, primarily
the result of the improved operating performance of the division.
Income before Income Taxes and Minority Interest
Income before income taxes and minority interest was $17.6 million for the
nine months ended September 30, 2003, versus $115.7 million in 2002. The $98.1
million decrease is the net effect of improved earnings from Marketing
Communications and distributions from portfolio investments, dispositions
completed by the Secure Transactions and Corporate and Other divisions,
foreign exchange, and interest associated with indebtedness that has been
repaid.
Income Tax Expense
Income tax expense was $6.1 million in the first three quarters of this year,
compared with $21.5 million last year. Income taxes were 34.7% of income
before income taxes and minority interest in 2003 and 18.6% in 2002.
Minority Interest
Minority interest expense represents the minority interest share of the net
income (losses) of Maxxcom and Metaca, and, in 2002, also included the
minority interest share of the net earnings of Davis + Henderson, Limited
Partnership. A recovery of $1.0 million was recorded for the first nine months
of 2002 compared with an expense of $2.5 million for the same period of 2002.
Net Income for the Period
Net income earned through the first three quarters was $12.5 million this year
compared with $91.7 million in 2002.
Liquidity and Capital Resources
Working Capital
At September 30, 2003, working capital was $26.2 million compared with $40.1
million at the end of the second quarter of 2003 and negative $3.5 million at
December 31, 2002. The $13.9 decrease in working capital since June 30 is due
primarily to the sale of the Custom Direct Income Fund units in the third
quarter, the acquisition of capital assets, the repurchase of shares under a
normal course issuer bid and the increase in the current portion of long-term
indebtedness. Compared to June 30, 2003, on a consolidated basis, securities
held for sale decreased by $20.7 million and accounts receivable increased by
$2.1 million. Accounts payable and accrued liabilities decreased by $1.3
million and deferred acquisition consideration by $4.0 million, offset by
increases in deferred revenue and the current portion of long-term
indebtedness of $1.4 million and $7.3 million, respectively.
It was decided that the Company possessed sufficient liquid funds to finance
foreseeable requirements and hence decided to cancel its $25 million senior
credit facility during the third quarter. At September 30, 2003, Maxxcom had
utilized approximately $30 million of its $43 million facility in the form of
drawings and letters of credit. Cash and undrawn available bank credit
facilities to support the Company's future cash requirements, as at September
30, 2003, were approximately $65 million.
Long-term Indebtedness
Long-term indebtedness (including the current portion of long-term
indebtedness) at the end of the third quarter was $91.2 million, a reduction
of $68.4 million compared with the $159.6 million outstanding at December 31,
2002, due primarily to the redemption of the Notes in the second quarter
partially offset by new indebtedness incurred by Maxxcom, also in the second
quarter, to fund deferred acquisition consideration paid and certain capital
expenditures. During the third quarter of 2003, $0.9 million of long-term
indebtedness was repaid, including the repurchase of CDN$1.0 million of the
CDN$50.0 million 7% convertible notes under a normal course issuer bid.
Deferred Acquisition Consideration
Acquisitions of businesses by the Company typically include commitments to
contingent deferred purchase obligations and often include rights to require
the Company to acquire the remaining ownership interests held by subsidiary
shareholders. Deferred purchase price obligations are generally payable
annually over a three-year period following the acquisition date and are
payable based on achievement of certain thresholds of future earnings and, in
certain cases, also based on the rate of growth of those earnings. At
September 30, 2003, approximately $5.4 million of deferred purchase price
obligations related to prior-year acquisitions is reflected on the Company's
balance sheet. A portion of this obligation, approximately $2.1 million, may
be settled through the issuance of the Company's Class A subordinate voting
shares. The cash portion of this obligation is expected to be funded during
2003 and 2004 through the use of operating funds and bank borrowings.
Based on various assumptions as to future operating results of the existing
relevant entities, it is estimated that approximately $0.6 million of further
additional deferred purchase obligations would be earned during 2003 or
thereafter.
Put Rights of Subsidiaries' Minority Shareholders
Owners of interests in certain of the Marketing and Communications
subsidiaries have the right in certain circumstances to require the Company to
acquire the remaining ownership interests held by them. The owners' ability to
exercise these rights is subject to the satisfaction of certain conditions,
such as the provision of a period of notice in advance of exercising such
right or the installation of successor management in the subsidiary, and in
some cases is related to the employment status of the holder of the right. 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 period 2003 to 2009. Except as described below, 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 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 that date of exercise, the growth rate of
the earnings of the relevant subsidiary during that period, and, in most
cases, the currency exchange rate at the date of payment.
Management estimates, assuming that the subsidiaries perform over the relevant
future periods at their 2002 earnings levels, that these rights, if all
exercised, could require the Company, in future periods, to pay an aggregate
of approximately $49 million to the owners of such rights to acquire the
remaining ownership interests in the relevant subsidiaries. Of this amount,
the Company is entitled, at its option, to fund approximately $5 million by
the issuance of share capital.
The ultimate amount payable in the future 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. The
actual amounts paid will be different from these estimates, and these
differences could be material.
If these rights were exercised in aggregate, the Company would acquire
incremental ownership interests in the relevant Marketing and Communications
subsidiaries entitling the Company to additional annual operating income
before other charges estimated to be approximately $8 million, using the same
earnings basis used to determine the aggregate purchase price noted above. The
actual amounts paid will be different from this estimate, and these
differences could be material.
Of the estimated aggregate amount, approximately $6 million relates to rights
exercisable in 2003 associated with three subsidiaries. Shareholders of two of
the subsidiaries have given one-year advance notice of their intent to
exercise their rights to require the Company to purchase one-third of their
total respective interests in the related subsidiaries. The shareholder of the
third subsidiary is fully expected to exercise in 2003. Should these three
shareholders ultimately exercise the right as indicated, the Company will be
required to fund these obligations in the fourth quarter of 2003. The actual
amounts ultimately paid will be different from these estimates, and these
differences may be material. The Company expects to fund the acquisition of
these interests, if and when they become due, through
the use of cash derived from operations and bank borrowings. Accordingly, the
acquisition of these equity interests will not be recorded in the Company's
financial statements until ownership is transferred.
Cash Flow from Operations
Cash flow from operations, before changes in non-cash working capital, for the
three and nine months ended September 30, 2003 was $5.9 million and $13.3
million, respectively. This represents a decrease of $1.8 million from the
cash flow generated from the same quarter of 2002 and of $4.0 million from the
first nine months, reflective of the impact of lower revenues and operating
income before other charges related to the Secure Transactions and Corporate
and Other operations.
Cash flows from investing activities were $7.7 million for the quarter
compared with $0.5 million in the third quarter of 2002. During the quarter,
net proceeds received from the sale of Fund units net of the investing
activities, including the payment of $4.0 million of Earnouts, amounted to
$12.4 million. The $4.3 million increase in capital and other assets
expenditures in the third quarter versus the same quarter of last year was
primarily related to the development of customer service centers, additional
investment in new premises and applications software by Marketing and
Communications, and the purchase of manufacturing equipment in Secure
Transactions, partially offset by the repayment of employee loans.
During the quarter, cash flows used in financing activities amounted to $5.6
million and comprised a repayment of $0.9 million of long-term indebtedness,
proceeds of $1.7 million from the issuance of share capital through the
exercise of options, and $6.3 million used to repurchase shares of the Company
under a normal course issuer bid.
Outlook
We remain focused on growing our Marketing and Communications organization
combined with the prudent divestiture of the remaining non-core operations. We
are building a partnership of innovative, entrepreneurial firms, each with a
point of difference in its respective market. To better reflect this direction
and the central role of the dedicated people at our partner companies, MDC
will be changing the company name to MDC Partners Inc. Management believes MDC
is well positioned to achieve significant growth both organically and through
selective acquisitions.
Consolidated Interim Financial Statements
Consolidated Interim Balance Sheets
(in thousands of U.S. dollars)
September 30, December 31,
As at 2003 2002
-----------------------------------------------------------------------------------------------------------------------
(unaudited) (audited)
Assets
Current
Cash and cash equivalents $ 52,700 $ 37,788
Accounts receivable 78,021 67,457
Inventory 5,464 7,005
Prepaid expenses and sundry 5,676 6,266
--------------------------------------
141,861 118,516
Portfolio investments 15,834 103
Capital and other assets 59,660 79,864
Goodwill 100,879 185,637
--------------------------------------
$ 318,234 $ 384,120
======================================
Liabilities and Shareholders' Equity
Current
Accounts payable and accrued liabilities $ 83,402 $ 82,874
Deferred acquisition consideration 5,350 23,966
Deferred revenue 15,011 11,104
Current portion of long-term indebtedness 11,885 4,088
-------------------------------------
115,648 122,032
Long-term indebtedness 79,288 155,514
-------------------------------------
194,936 277,546
-------------------------------------
Minority interest 2,534 9,824
-------------------------------------
Shareholders' equity
Share capital (note 5) 115,025 96,407
Contributed surplus 1,900 -
Other paid-in capital 29,146 24,179
Cumulative translation adjustment (5,370) 7,858
Retained earnings (deficit) (19,937) (31,694)
-------------------------------------
120,764 96,750
-------------------------------------
$ 318,234 $ 384,120
=====================================
The accompanying notes are an integral part of these financial statements.
Consolidated Interim Statements of Retained Earnings (Deficit)
(in thousands of U.S. dollars) (unaudited)
For the three months For the nine months
ended September 30, ended September 30,
2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Retained earnings (deficit),
beginning of period as
previously reported $ (23,009) $ (36,997) $ (31,694) $ (61,575)
Impact of transitional goodwill
impairment charge - - - (62,477)
---------------------------------------------------------------
Opening retained earnings
(deficit), as restated (23,009) (36,997) (31,694) (124,052)
Net income for the period 3,341 4,179 12,565 91,721
---------------------------------------------------------------
(19,668) (32,818) (19,129) (32,331)
Allocation to other paid-in
capital, net of income
tax recovery (269) (245) (808) (732)
---------------------------------------------------------------
Retained earnings (deficit),
end of period $ (19,937) $ (33,063) $ (19,937) $ (33,063)
===============================================================
The accompanying notes are an integral part of these financial statements.
Consolidated Interim Statements of Operations
(in thousands of U.S. dollars, except per share amounts) (unaudited)
For the three months For the nine months
ended September 30, ended September 30,
2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------
Gross billings $ 132,140 $ 140,545 $ 410,304 $ 453,614
===============================================================
Revenues $ 68,088 $ 88,548 $ 236,928 $ 299,952
Operating costs 60,252 77,267 211,159 259,555
---------------------------------------------------------------
Operating income before
other income (charges) 7,836 11,281 25,769 40,397
---------------------------------------------------------------
Other income (charges)
Net gain on asset dispositions
and other charges (note 6) 445 1,456 15,415 99,483
Unrealized foreign exchange gain - - - 4,380
Amortization (2,723) (3,566) (9,868) (12,208)
Interest, net (1,439) (3,873) (9,654) (14,077)
Income participation of minority
partners (note 7) (1,455) (900) (4,019) (2,252)
---------------------------------------------------------------
(5,172) (6,883) (8,126) 75,326
---------------------------------------------------------------
Income before income taxes and
minority interest 2,664 4,398 17,643 115,723
Income taxes (recovery) (818) 224 6,122 21,479
---------------------------------------------------------------
Income before minority interest 3,482 4,174 11,521 94,244
Minority interest (recovery) 141 (5) (1,044) 2,523
---------------------------------------------------------------
Net income for the period $ 3,341 $ 4,179 $ 12,565 $ 91,721
===============================================================
Earnings per share
Basic $ 0.17 $ 0.23 $ 0.67 $ 5.38
===============================================================
Diluted $ 0.15 $ 0.16 $ 0.55 $ 3.61
===============================================================
The accompanying notes are an integral part of these financial statements.
Consolidated Interim Statements of Cash Flows
(in thousands of U.S. dollars) (unaudited)
For the three months For the nine months
ended September 30, ended September 30,
2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net income for the period $ 3,341 $ 4,179 $ 12,565 $ 91,721
Items not involving cash
Net gain on asset dispositions
and other charges (445) (1,286) (15,415) (100,010)
Unrealized foreign exchange gain - - - (4,380)
Restructuring and other
charges - paid (216) (608) (804) (3,261)
Amortization 2,723 3,566 9,868 12,208
Future income taxes (516) 176 4,867 18,889
Interest capitalized 1,344 1,692 3,408 2,458
Other (364) (86) (1,207) (389)
-----------------------------------------------------------------
5,867 7,633 13,282 17,236
Changes in non-cash
working capital (2,434) 1,172 (5,512) (629)
-----------------------------------------------------------------
Cash flows from operating
activities 3,433 8,805 7,770 16,607
-----------------------------------------------------------------
Investing activities
Investments and acquisitions, net 12,386 2,347 95,860 161,234
Capital assets, net (5,819) (1,519) (14,456) (5,671)
Other assets 1,117 (346) 3,933 (1,111)
-----------------------------------------------------------------
Cash flows from investing
activities 7,684 482 85,337 154,452
-----------------------------------------------------------------
Financing activities
Proceeds on issuance of
long-term indebtedness - - 11,439 3,046
Repayment of long-term indebtedness (918) (7,679) (89,330) (185,751)
Issuance of share capital 1,652 - 1,652 -
Repurchase of share capital (6,343) - (6,343) -
-----------------------------------------------------------------
Cash flows used in
financing activities (5,609) (7,679) (82,582) (182,705)
-----------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 2,305 733 4,387 5,247
-----------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents during the period 7,813 2,341 14,912 (6,399)
Cash and cash equivalents,
beginning of period 44,887 28,491 37,788 37,231
-----------------------------------------------------------------
Cash and cash equivalents,
end of period $ 52,700 $ 30,832 $ 52,700 $ 30,832
=================================================================
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2003 (in thousands of U.S. dollars,
except per share amounts) (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared by management in
accordance with generally accepted accounting principles in Canada for interim
financial statements. The financial statements have, in management's opinion,
been properly prepared using judgement within reasonable limits of materiality.
These interim financial statements do not include all the note disclosures
required for annual financial statements and therefore they should be read in
conjunction with the Company's audited annual financial statements for the year
ended December 31, 2002. The significant accounting policies follow that of the
most recently reported annual financial statements, except for the following:
REPORTING CURRENCY
Historically, the Company's consolidated financial statements have been
presented in Canadian dollars. In order to more fully reflect the global nature
of the Company's business and shareholder base, and to improve investors'
ability to compare the Company's results with those of most other publicly
traded businesses in the marketing communications industry, which also report
in U.S. dollars, the U.S. dollar has been adopted as the Company's reporting
currency effective September 30, 2003. The functional currencies of each of the
Company's operations are unchanged. The consolidated financial statements and
notes thereto have been restated in U.S. dollars for all periods presented.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 2003, the Company adopted, on a prospective basis, the
recommendations of the Canadian Institute of Chartered Accountants ("CICA")
with respect to the impairment of long-lived assets. These standards require
that an impairment loss be recognized when the carrying amount of a long-lived
asset exceeds the sum of the undiscounted cash flows expected to result from
its use and eventual disposition. An impairment loss is measured as the amount
by which the long-lived asset's carrying amount exceeds its fair value.
GOODWILL AND OTHER INTANGIBLES
Effective January 1, 2002, the Company adopted the recommendations of the CICA
with respect to goodwill and other intangibles. These standards require that
goodwill and other intangible assets determined to have indefinite lives are no
longer amortized but tested for impairment on adoption of the standard and at
least annually thereafter. Transitional impairment tests for goodwill were
completed in the second quarter of 2002, and as a result, a transitional
impairment loss of $99,513 (net of income tax recovery of $16,000) was charged
to opening retained earnings. The comparative quarterly results have been
restated to reflect this change effective January 1, 2002.
2. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from management's best
estimates as additional information becomes available in the future.
3. ACQUISITIONS
The following are the acquisitions during the period. These acquisitions were
accounted for by the purchase method and consolidated from the respective
effective date of acquisition.
2003 ACQUISITIONS
Effective July 31, 2003, the Company acquired the remaining 26% of Maxxcom Inc.
that it did not already own.
Effective September 30, 2003, the Company acquired the remaining 15% of Metaca
Corporation that it did not already own.
The assets acquired and the consideration given are as follows:
Net assets acquired at fair value
Reduction in minority interest $ 6,844
Goodwill 24,461
--------------
$ 31,305
==============
Consideration
Cash $ 2,496
Class A shares issued 23,327
Fair value of stock options and warrants issued 1,900
Other acquisition costs 3,582
--------------
$ 31,305
==============
4. INTEREST IN JOINTLY CONTROLLED ENTITY
The Company accounts for its 49% interest in Crispin Porter + Bogusky LLC, a
jointly controlled entity, using the proportionate consolidation method. The
following is the Company's proportionate share of the major components of the
financial statements of the jointly controlled entity as at and for the nine
months ended September 30:
2003 2002
-----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET
Current assets $ 13,176 $ 11,193
Long-term assets 2,601 423
Current liabilities (11,718) (10,917)
STATEMENT OF OPERATIONS
Gross billings $ 44,872 $ 23,465
Revenues 9,230 6,145
Expenses 6,395 4,738
Income before income taxes 2,835 1,407
Net income 1,768 878
STATEMENT OF CASH FLOWS
Cash provided by (used in):
Operating activities $ 1,834 $ 1,932
Investing activities (1,453) (151)
Financing activities 21 (1,184)
5. SHARE CAPITAL
Changes to the Company's issued and outstanding share capital during the nine
months ended September 30, 2003 are as follows:
Shares Amount
-----------------------------------------------------------------------------------------------------------------------
CLASS A
Balance, January 1, 2003 16,464,871 $ 96,272
Shares acquired and cancelled pursuant to a
normal course issuer bid (636,916) (6,343)
Share options exercised 268,000 1,652
Shares issued on privatization of Maxxcom Inc. 2,473,183 23,327
Share issue costs - (18)
------------------------------------
Balance, September 30, 2003 18,569,138 114,890
====================================
CLASS B
Balance, January 1, 2003 and September 30, 2003 450,470 135
------------------------------------
TOTAL CLASS A AND CLASS B SHARE CAPITAL 19,019,608 $ 115,025
====================================
Share option transactions during the nine months ended September 30, 2003 are
summarized as follows:
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Number Price per Number Price per
Outstanding Share Outstanding Share
Balance, beginning of period 2,249,628 $ 6.45 1,353,344 $ 7.63
Granted 594,000 5.71
Granted on privatization of
Maxxcom Inc. 534,960 6.24
Exercised (268,000) 6.13
Expired and cancelled (831,794) 9.46
--------------------------------------------------------------
Balance, end of period 2,278,794 $ 6.33 920,526 $ 7.95
==============================================================
Share options outstanding as at September 30, 2003 are summarized as follows:
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------------------------------------------------
Range of Weighted Weighted Weighted
Exercise Average Average Average
Prices Number Contractual Price per Number Price per
Outstanding Life Share Exercisable Share
$ 2.86 - $ 4.50 814,535 4.1 $ 3.94 172,907 $ 3.89
$ 4.51 - $ 6.00 535,515 4.7 $ 5.38 112,132 $ 5.40
$ 6.01 - $ 9.00 547,607 3.4 $ 7.18 353,188 $ 7.41
$ 9.01 - $ 13.50 369,707 2.8 $ 10.61 270,869 $ 10.86
$ 40.00 - $ 42.00 11,430 0.8 $ 41.80 11,430 $ 41.80
The Company records no compensation expense when options are issued to
employees and directors, but provides pro forma information for options granted
after January 1, 2002. The Company estimates the fair value of each share
option on the date of grant using the Black-Scholes option pricing model with
the following assumptions: risk-free interest rate of 6%; expected volatility
of 40%; expected option life of five years; and no dividend payment. Had
compensation expense been recorded for employee and director stock option
grants, the resulting pro forma net income and earnings per share would be as
follows:
Three months Nine months
ended September 30, ended September 30,
2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Pro forma net income $ 3,203 $ 4,174 $ 12,256 $ 91,713
================================================================
Pro forma earnings per share
Basic $ 0.16 $ 0.23 $ 0.65 $ 5.38
================================================================
Diluted $ 0.14 $ 0.16 $ 0.53 $ 3.61
================================================================
The Company, however, does record compensation expense with respect to stock
appreciation rights. During the nine months ended September 30, 2003, the
Compensation Committee of the Board of Directors approved a stock appreciation
rights compensation program for senior executives of the Company. Stock
appreciation rights have a term of four years and vest one-third on each
anniversary date. During the nine months ended September 30, 2003, 1,650,479
stock appreciation rights were granted with rights prices ranging from $3.70 to
$7.41 with an average price of $5.53. The Company has recorded non-cash
compensation expense of $2,175 with respect to stock appreciation rights.
6. NET GAIN ON ASSET DISPOSITIONS AND OTHER CHARGES
For the three months For the nine months
ended September 30, ended September 30,
2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Non-cash charges against
specific assets $ - $ - $ (8,129) $ (3,209)
Stock-based compensation
expense (1,428) - (2,175) -
Goodwill charges (1,438) - (10,101) -
Net gain on asset dispositions 3,311 1,456 35,820 102,692
----------------------------------------------------------------
$ 445 $ 1,456 $ 15,415 $ 99,483
================================================================
7. INCOME PARTICIPATION OF MINORITY PARTNERS
These amounts represent payments to minority shareholders of subsidiary
companies pursuant to their respective shareholder agreements.
8. COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the current
period presentation.
9. SEGMENTED INFORMATION
Based on the Company's internal management structure, the Company's operations
are in primarily two business segments - Marketing Communications and Secure
Transactions. Marketing Communications services, through MDC's network of
entrepreneurial firms, include advertising and media, customer relationship
management, and marketing services. Secure Transactions operations provide
security products and services in three primary areas: electronic transaction
products such as credit, debit, telephone and smart cards; secure ticketing
products such as airline, transit and event tickets; and stamps, both postal
and excise.
For the three months ended Marketing Secure Corporate
September 30, 2003 Communications Transactions & Other Total
-----------------------------------------------------------------------------------------------------------------------
EARNINGS
GROSS BILLINGS $ 111,528 $ 18,898 $ 1,714 $ 132,140
====================================================================
REVENUES $ 47,476 $ 18,898 $ 1,714 $ 68,088
--------------------------------------------------------------------
OPERATING COSTS
Cost of sales - 12,073 189 12,262
Salaries and related costs 21,566 3,069 979 25,614
General and other operating costs 18,466 2,548 1,362 22,376
--------------------------------------------------------------------
40,032 17,690 2,530 60,252
--------------------------------------------------------------------
OPERATING INCOME (LOSS) BEFORE
OTHER INCOME (CHARGES) 7,444 1,208 (816) 7,836
--------------------------------------------------------------------
Net gain (loss) on asset dispositions
and other charges 47 1,876 (1,478) 445
Amortization (1,990) (544) (189) (2,723)
Interest, net (1,717) (238) 516 (1,439)
Income participation of minority partners (1,455) - - (1,455)
--------------------------------------------------------------------
(5,115) 1,094 (1,151) (5,172)
--------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 2,329 2,302 (1,967) 2,664
Income taxes (recovery) 252 (480) (590) (818)
--------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST 2,077 2,782 (1,377) 3,482
Minority interest - 14 127 141
--------------------------------------------------------------------
NET INCOME (LOSS) $ 2,077 $ 2,768 $ (1,504) $ 3,341
====================================================================
For the three months ended Marketing Secure Corporate
September 30, 2002 Communications Transactions & Other Total
-----------------------------------------------------------------------------------------------------------------------
EARNINGS
GROSS BILLINGS $ 94,204 $ 45,516 $ 825 $ 140,545
====================================================================
REVENUES $ 42,207 $ 45,516 $ 825 $ 88,548
--------------------------------------------------------------------
OPERATING COSTS
Cost of sales - 20,396 238 20,634
Salaries and related costs 19,961 6,064 718 26,743
General and other operating costs 17,482 11,720 688 29,890
--------------------------------------------------------------------
37,443 38,180 1,644 77,267
--------------------------------------------------------------------
OPERATING INCOME (LOSS) BEFORE
OTHER INCOME (CHARGES) 4,764 7,336 (819) 11,281
--------------------------------------------------------------------
Net gain (loss) on asset dispositions
and other charges - 1,349 107 1,456
Amortization (1,926) (1,415) (225) (3,566)
Interest, net (1,369) (2,540) 36 (3,873)
Income participation of
minority partners (900) - - (900)
--------------------------------------------------------------------
(4,195) (2,606) (82) (6,883)
--------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 569 4,730 (901) 4,398
Income taxes (recovery) 165 367 (308) 224
--------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST 404 4,363 (593) 4,174
Minority interest (recovery) - (89) 84 (5)
--------------------------------------------------------------------
NET INCOME (LOSS) $ 404 $ 4,452 $ (677) $ 4,179
====================================================================
For the nine months ended Marketing Secure Corporate
September 30, 2003 Communications Transactions & Other Total
-----------------------------------------------------------------------------------------------------------------------
EARNINGS
GROSS BILLINGS $ 310,245 $ 96,173 $ 3,886 $ 410,304
====================================================================
REVENUES $ 136,869 $ 96,173 $ 3,886 $ 236,928
--------------------------------------------------------------------
OPERATING COSTS
Cost of sales - 46,422 544 46,966
Salaries and related costs 64,610 14,835 3,051 82,496
General and other operating costs 53,428 25,067 3,202 81,697
--------------------------------------------------------------------
118,038 86,324 6,797 211,159
--------------------------------------------------------------------
OPERATING INCOME (LOSS) BEFORE
OTHER INCOME (CHARGES) 18,831 9,849 (2,911) 25,769
--------------------------------------------------------------------
Net gain (loss) on asset dispositions
and other charges 163 17,603 (2,351) 15,415
Unrealized foreign exchange gain - - - -
Amortization (5,852) (3,170) (846) (9,868)
Interest, net (4,624) (4,664) (366) (9,654)
Income participation of
minority partners (4,019) - - (4,019)
--------------------------------------------------------------------
(14,332) 9,769 (3,563) (8,126)
--------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 4,499 19,618 (6,474) 17,643
Income taxes (recovery) 1,133 6,931 (1,942) 6,122
--------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST 3,366 12,687 (4,532) 11,521
Minority interest (recovery) - (1,536) 492 (1,044)
--------------------------------------------------------------------
NET INCOME (LOSS) $ 3,366 $ 14,223 $ (5,024) $ 12,565
====================================================================
TOTAL ASSETS $ 220,681 $ 45,329 $ 52,224 $ 318,234
====================================================================
For the nine months ended Marketing Secure Corporate
September 30, 2002 Communications Transactions & Other Total
-----------------------------------------------------------------------------------------------------------------------
EARNINGS
GROSS BILLINGS $ 276,872 $ 168,504 $ 8,238 $ 453,614
====================================================================
REVENUES $ 123,210 $ 168,504 $ 8,238 $ 299,952
--------------------------------------------------------------------
OPERATING COSTS
Cost of sales - 77,827 3,907 81,734
Salaries and related costs 59,583 22,969 2,077 84,629
General and other operating costs 50,582 37,579 5,031 93,192
--------------------------------------------------------------------
110,165 138,375 11,015 259,555
--------------------------------------------------------------------
OPERATING INCOME (LOSS) BEFORE
OTHER INCOME (CHARGES) 13,045 30,129 (2,777) 40,397
--------------------------------------------------------------------
Net gain (loss) on asset dispositions
[GRAPHIC OMITTED]and other charges - 101,838 (2,355) 99,483
Unrealized foreign exchange gain - - 4,380 4,380
Amortization (5,449) (5,903) (856) (12,208)
Interest, net (4,033) (8,378) (1,666) (14,077)
Income participation of minority partners (2,252) - - (2,252)
--------------------------------------------------------------------
(11,734) 87,557 (497) 75,326
--------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST 1,311 117,686 (3,274) 115,723
Income taxes (recovery) 12 22,580 (1,113) 21,479
--------------------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST 1,299 95,106 (2,161) 94,244
Minority interest (recovery) - 2,197 326 2,523
--------------------------------------------------------------------
NET INCOME (LOSS) $ 1,299 $ 92,909 $ (2,487) $ 91,721
====================================================================
TOTAL ASSETS $ 181,327 $ 164,048 $ 21,213 $ 366,588
====================================================================
For the three months For the nine months
ended September 30, ended September 30,
2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC INFORMATION
REVENUES
Canada $ 24,266 $ 23,618 $ 65,532 $ 109,044
United States 36,535 56,633 153,324 167,945
Other countries 7,287 8,297 18,072 22,963
----------------------------------------------------------------
Total $ 68,088 $ 88,548 $ 236,928 $ 299,952
================================================================
As at September 30, 2003 2002
-----------------------------------------------------------------------------------------------------------------------
CAPITAL ASSETS AND GOODWILL
Canada $ 28,969 $ 40,360
United States 106,671 156,823
Other countries 6,914 12,944
--------------------------------
Total $ 142,554 $ 210,127
================================
SHAREHOLDER INFORMATION
LEGAL COUNSEL INVESTOR RELATIONS
CANADA For Investor Relations information
Fogler, Rubinoff please call Trevor Maunder
Toronto, Ontario Director, Investor Relations
(416) 960-9000 ext. 226
USA
Simpson Thacher & Bartlett
New York, New York STOCK EXCHANGE LISTING
Skadden Arps Slate Meagher & Flom The Class A shares of the Company are listed on The
New York, New York Toronto Stock Exchange and on the NASDAQ National Market
in the United States.
AUDITORS THE TORONTO STOCK EXCHANGE
TRADING SYMBOL
BDO Dunwoody LLP
MDZ.A
BANKERS
NASDAQ NATIONAL MARKET
The Toronto-Dominion Bank
Canadian Imperial Bank MDCA
of Commerce
Bank of Nova Scotia
TRANSFER AGENT
CIBC Mellon Trust Company
CIBC Mellon Trust Company operates
a telephone information inquiry line
that can be reached by dialing toll-free
1-800-387-0825 or (416) 643-5500.
Correspondence may be
addressed to:
MDC Corporation Inc.
c/o CIBC Mellon Trust Company
Corporate Trust Services
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5G 2M7
MDC Corporation Inc., operating as MDC Partners, is one of the world's leading
marketing communications firms. Through its partnership of entrepreneurial
firms, MDC provides creative, integrated and specialized communication services
to leading brands throughout the United States, Canada and the United Kingdom.
MDC also offers security-sensitive transaction products and services through
its Secure Transactions Division. MDC Class A shares are publicly traded on the
Toronto Stock Exchange under the symbol MDZ.A and on the NASDAQ under the
symbol MDCA.
45 Hazelton Avenue
Toronto, Ontario
Canada M5R 2E3
Phone: (416) 960-9000
Fax: (416) 960-9555
www.mdccorp.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MDC CORPORATION INC.
------------------------------------------
(Registrant)
Date: December 8, 2003 By: /s/ Walter Campbell
------------------------ ----------------------------------
(Signature)
Walter Campbell
Senior Vice President Finance