Mail Stop 0407
May 31, 2005
Mr. Miles S. Nadal
Chairman, President and Chief Executive Officer
MDC Partners Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Re: MDC Partners Inc.
Form 10-K for Fiscal Year Ended December 31, 2004
Filed April 18, 2005
Form 10-Q for Fiscal Quarter Ended March 31, 2005
File No. 1-13178
Dear Mr. Nadal:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents. Where indicated, we think you should
revise your documents in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for Fiscal Year Ended December 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 26
Presentation of "Combined" Revenue, Operating Costs and Operating
Profits, page 26
1. We note your presentation of "combined" results of operations
within the marketing communications segment. Tell us why you
believe
these measures are appropriate under the guidance in Item 10 of
Regulation S-K. In addition, please balance this discussion with
an
equally prominent and comparably detailed discussion of the
marketing
communications segment results on a US GAAP basis.
Note 2 - Significant Accounting Policies, page 66
Goodwill and Indefinite Lived Intangibles, page 68
2. Tell us how you have identified your reporting units under SFAS
142 for purposes of testing goodwill for impairment.
Note 7 - Investments in Affiliates, page 80
3. Tell us how you determined that you were not required to
present
separate financial statements under Rule 3-09 of Regulation S-X or
summarized financial information under Rule 4-08 of Regulation S-X
for any of your investments in affiliates, which are accounted for
using the equity method.
Note 9 - Variable Interest Entities, page 81
4. Describe for us in more detail your accounting for your
investment
in Crispin Porter + Bogusky, LLC (CPB) by clarifying the following
items:
* How you determined that CPB is a variable interest entity under
FIN
46R.
* How you determined that you were not the primary beneficiary
prior
to September 22, 2004
* The nature of the events that occurred on September 22, 2004 and
earlier in the third quarter that caused you to change your method
of
accounting for this investment.
* How you determined that you are the primary beneficiary of CPB
after September 22, 2004.
Note 14. Bank Debt, Long-Term Debt and Convertible Notes, page 87
(a) MDC Revolving Credit Facility, page 87
5. We note that on December 22, 2004, March 14, 2005, April 1,
2005,
and May 9, 2005 you obtained a waiver of any default that may have
occurred as a result of your failure to comply with your total
debt
ratio and fixed charge coverage ratio covenants. In light of
these
events, tell us how you applied the guidance in EITF 86-30 in
determining that it was appropriate to classify your debt as non-
current at December 31, 2004 and March 31, 2005.
Note 16 - Gain on Sale of Assets and Settlement of Long-term Debt,
page 94
6. Explain for us in more detail the nature of your investment in
Custom Direct Income Fund and Custom Direct, Inc. Clarify for us
how
you accounted for these investments, when you exchanged your
interests in Custom Direct, Inc. for units of Custom Direct Income
Fund, and how you accounted for this exchange. In addition, tell
us
the original terms of the adjustable rate exchangeable securities
that you issued on December 8, 2003. Were these securities
initially
exchangeable for shares of the Custom Direct Income Fund or for
shares of your own stock?
Note 17 - Segmented Information, page 95
7. Tell us how you have determined that you have two reportable
segments. If you have aggregated several operating segments into
one
reportable segment, tell us how you determined that you met the
criteria for aggregation in paragraph 17 of SFAS 131, including
the
requirement that the segments have similar economic
characteristics.
In addition, provide us with a chart of your organizational
structure
and tell us who you have identified as your chief operating
decision
maker.
Note 18 - Related Party Transactions, page 99
8. Disclose your transactions with related parties on the face of
your financial statements, as required by Rule 4-08(k) of
Regulation
S-X.
Note 19 - Commitments, Contingencies and Guarantees, page 100
9. Tell us how you accounted for the put options associated with
the
remaining ownership interests in certain of your subsidiaries and
your basis in the accounting literature.
Item 9. Changes in and Disagreements With Accountants on
Accounting
and Financial Disclosures, page 116
10. We note in your Form 10-Q for the quarter ended June 30, 2004
that you held an annual shareholders` meeting on June 9, 2004, at
which meeting KPMG LLP was appointed as auditors of the company.
Please file an Item 4.01 Form 8-K disclosing the information
required
by Item 304 of Regulation S-K or advise.
Item 9A. Controls and Procedures, page 116
Disclosure Controls and Procedures, page 116
11. We note that you have concluded your disclosure controls and
procedures were adequate to provide reasonable assurance that
recording, processing, summarizing and reporting of information
required to be included in your SEC reports occurred. It appears
that you did not disclose your conclusions regarding the
effectiveness of your disclosure controls and procedures, as
required
by Item 307 of Regulation S-K. In addition, we note that material
weaknesses in internal control over financial reporting existed as
of
December 31, 2004 and March 31, 2005. In light of these
weaknesses,
it appears that your disclosure controls and procedures were not
effective as of December 31, 2004 and March 31, 2005. Please
revise
your Form 10-K and Form 10-Q to disclose that your disclosure
controls and procedures were not effective as of the end of the
period covered by the reports.
12. We note that you have not completed your assessment of the
effectiveness of your internal control over financial reporting
and
your independent registered public accounting firm`s attestation
report on this assessment, as required by Item 308 of Regulation
S-K.
Tell us your estimated timetable for completing these requirements
and amending your Form 10-K to include these reports.
* * * *
As appropriate, please amend your filings and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendments to expedite our review. Please furnish a cover
letter
with your amendments that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendments and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Melissa Hauber, Senior Staff Accountant, at
(202) 551-3368 or Robert S. Littlepage, Jr., Accountant Branch
Chief,
at (202) 551-3361 if you have questions regarding comments on the
financial statements and related matters. Please contact me at
(202)
551-3810 with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Mr. Miles S. Nadal
MDC Partners Inc.
May 31, 2005
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