Mail Stop 0407
June 30, 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 supplemental response letter dated
June
14, 2005 as well as your filing and have the following comments.
As
noted in our comment letter dated May 31, 2005, we have limited
our
review to your financial statements and related disclosures and do
not intend to expand our review to other portions of your
documents.
Form 10-K for Fiscal Year Ended December 31, 2004
Management`s Discussion and Analysis
1. We note in your response to comment 1 your reasons for
presenting
combined results of operations within the marketing communications
segment. In order to provide investors clear information
explaining
the material changes in the Company`s historical results of
operations, please discuss in your future MD&A disclosures the
historical results of operations of your marketing communications
segment on a GAAP basis first, consistent with the information
disclosed in Note 17. We would not object if management follows
this
with a discussion of certain key performance indicators that
include
amounts that are combined with your equity method investee
amounts.
However, this should be limited to revenues and cost of revenues.
It
would then be necessary for you to accompany this disclosure with
a
comprehensive explanation of its purpose, quantified disclosure of
how it was calculated, a discussion of its limitations, and an
explanation of why management believes it is meaningful to
investors.
We do not consider the amount reported as the combined marketing
communications operating profit to be a non-GAAP measure of the
Company`s performance because it includes the operating profit of
other entities. We believe it is inappropriate, and potentially
confusing, to report and discuss a pro forma profit amount as if
you
own a controlling interest in these entities. Please confirm to
us
that you will fully comply with this comment in your future
filings.
Note 2 - Significant Accounting Policies, page 66
Goodwill and Indefinite Lived Intangibles, page 68
2. We note your response to comments 2 and 7. Based on the fact
that
the results of each business are regularly presented to your chief
operating decision maker, it appears to us that each of your 33
business units may represent an operating segment and a reporting
unit. Please address the following items:
* Clarify your statement, in response to comment 2, that you have
prepared an analysis of goodwill impairment on a "legal entity
level
basis." Tell us whether your legal entities are the same as your
"business units," as described in your response to comment 7.
* Tell us whether you would have recorded a different goodwill
impairment charge for the fiscal year ended December 31, 2003 if
you
had tested goodwill on a legal entity level basis.
* Describe for us in more detail how you determined that the
business
units have similar economic characteristics. Provide us with the
quantitative analysis you performed in reaching this conclusion.
* Regarding your 33 business units, tell us whether they operate
separately, on a stand alone basis, or if they work in concert, on
a
combined basis. If in concert, please explain your basis for this
belief and demonstrate to us how the business units are
economically
interdependent. Tell us the extent they share assets, trade
names,
work forces or other resources directly connected with the
generation
of revenue, and provide products or services to one another.
* Please provide us with an example of all reports that are
regularly
reviewed by your chief operating decision maker and segment
management, including the monthly "Flash" report.
*
Your statement that EBITDA is the measure primarily used to
evaluate
the performance of the company appears inconsistent with your
segment
disclosure at page 95, which indicates that operating profit is
the
salient measure of profit or loss. Clarify this apparent
discrepancy.
Note 16 - Gain on Sale of Assets and Settlement of Long-term Debt,
page 94
3. We note your response to comment 6, in which you describe the
transactions occurring in 2003 regarding your investments in
Custom
Direct, Inc. and Custom Direct Income Fund. Describe for us in
more
detail how you accounted for the exchange of your remaining 20%
interest in Custom Direct, Inc. for units of the Custom Direct
Income
Fund and your subsequent exchange of these units of the Fund for
settlement of the adjustable rate exchangeable debentures.
Note 19 - Commitments, Contingencies and Guarantees, page 100
4. We note your response to comment 9. In future filings,
disclose
the amount of your potential obligations to purchase the remaining
ownership interests in certain of your subsidiaries and your
accounting policy for these put options.
Item 9. Changes in and Disagreements With Accountants on
Accounting
and Financial Disclosures, page 116
5. We note your response to comment 10, in which you state that
you
were not a US domestic filer on May 5, 2004. This statement
appears
inconsistent with your disclosure on page 3 of your Form 10-K,
which
indicates that you became a domestic issuer effective February 25,
2004. Clarify for us the date at which your reporting obligations
as
a domestic issuer began.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. 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.
June 30, 2005
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