[GRAPHIC OMITTED]
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR: MDC Partners Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
CONTACTS: Steven Berns Walter Campbell
Vice Chairman and Chief Financial Officer
Executive Vice President Tel: 416-960-9000 ex. 336
Tel: 416-960-9000 ex. 225
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdc-partners.com
MDC PARTNERS INC. ANNOUNCES FINANCIAL RESULTS FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2004
TORONTO, Ontario (November 4, 2004) - MDC Partners Inc. ("MDC Partners") today
announced its financial results for the third quarter and nine months ended
September 30, 2004. Consolidated revenue for the third quarter was $86.3
million, an increase of 33% from the $64.9 million in the same quarter last
year. Operating profit of $2.3 million was achieved, compared to $3.0 million
reported for the third quarter of 2003. The net loss for the quarter was $1.5
million, compared to net income of $3.2 million in 2003. Diluted loss per share
for the quarter ended September 30, 2004 was $0.07 versus diluted earnings per
share of $0.15 last year.
Consolidated revenue for the nine months was $237.4 million, an increase of 4%
from the $227.7 million reported in 2003. The net loss was $1.1 million versus
net income of $26.8 million in 2003. Diluted loss per share was $0.05 compared
to diluted earnings per share of $1.19 in the 2003 period.
Due to the significant impact that certain operating affiliates have on the
results of operations of the Company, the foregoing discussion and analysis of
the Company's results consolidate the equity-accounted affiliate operations of
the Marketing Communications Division (the "Combined" basis). As previously
disclosed, beginning September 22, 2004, MDC Partners consolidated the financial
results of Crispin Porter + Bogusky, LLC.
On a Combined basis, revenues were $98.0 million in the third quarter compared
to $71.4 million, an improvement of 37% or $26.6 million. Operating profit was
$4.1 million, a decrease of $0.5 million from the prior-year period. On the same
Combined basis, revenues for the nine months ended September 30, 2004 were
$272.8 million, an increase of 11% over the prior year. Operating profit was
$11.2 million, compared to an operating loss of $1.1 million in 2003.
Marketing Communications revenue on a Combined basis was $77.5 million for the
quarter, 51% more than the comparable $51.3 million reported in the third
quarter of 2003 primarily due to acquisitions completed in 2004 and organic
growth. Organic revenue increased 8.7% for the third quarter and 12.8% in the
year-to-date period. EBITDA (please see the reconciliation of EBITDA to
operating profit below) for the quarter was $8.0 million, an increase of 29%
from the $6.2 million earned in the same prior-year
period. EBITDA margins were 10.3% for the quarter versus 12.1% in the previous
year due to an increase in operating costs disproportionate to the increase in
revenue. For the nine months ended September 30, 2004, Marketing
Communications' Combined revenue was $215.6 million with EBITDA of $21.6
million, an increase of 46% and 40%, respectively, over the prior year.
However, excluding operating losses of a non-core marketing unit and investment
spending of a start-up unit, EBITDA was $9.8 million for the quarter and $27.3
million for the nine months ended September 30, 2004.
"We are extremely pleased with the progress that our partner companies have made
during the third quarter," said Miles S. Nadal, Chairman, President & CEO of MDC
Partners. "New business wins in the quarter were substantial including work for
Unilever, a major U.S.-based retailer, and Sprint."
Revenue attributable to Secure Products International ("SPI") totaled $20.5
million for the third quarter of 2004, an increase of $1.6 million or 8%
compared to the 2003 third quarter revenues. A significant increase in
production at Ashton Potter related to the USPS contract awarded in 2003
generated a 112% improvement in the revenues of the stamp operation. Operating
profits earned by SPI amounted to $1.3 million for the quarter compared to $0.8
million, primarily the result of increased production and profitability at
Ashton Potter and Placard. Operating income generated by Mercury was relatively
unchanged from the prior-year third quarter, despite the impact of the NHL
lockout on ticket revenues, while Metaca, the Canadian card operations,
experienced a decline in operating profits. Management continues to undertake
initiatives designed to reduce the cost structure and improve efficiencies at
Metaca. In connection with this effort, severance and other related charges of
$0.2 million were recorded in the quarter. SPI generated $2.1 million to EBITDA
for the third quarter, an increase of 79% versus the same period of 2003.
For the nine months ended September 30, 2004, SPI revenues totaled $56.5 million
compared to $96.2 million in the prior year. 2003 revenues include $49.0 million
related to an operation that was divested in the second quarter of 2003.
Operating profit for the nine months was $2.1 million compared to an operating
loss of $10.9 million in the prior year.
"We continue to manage our SPI assets and believe the prospects for market share
gains and growth in profitability are significant. However, our previously
stated strategy of realizing on our investment via an initial public offering
remains our ultimate objective," said Mr. Nadal. "The expected improvement in
operating performance of the Division combined with the relative weakness of the
Canadian income trust market has moved our timetable for such a transaction."
Corporate and other operating expenses increased from $3.8 million in the 2003
third quarter to $5.8 million this quarter as a result of increased compliance
costs associated with US GAAP reporting and Sarbanes-Oxley legislation, an
increase in the provision for stock-based compensation, and an increase in
overhead costs in connection with the establishment of a US corporate office in
New York. Year to date, corporate and other operating expenses were $17.1
million compared to $8.8 million in the prior year.
On September 22, MDC Partners entered into a new revolving credit agreement with
a syndicate of banks led by JP Morgan Chase, including Toronto Dominion Bank,
Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce,
which provided for borrowings of up to $100 million. At the same time, a cash
management program was established with partner companies to centrally manage a
substantial portion of their cash balances. This cash management program,
together with the initial use of the credit facility, repaid in full the
outstanding balances on the Company's two senior and one mezzanine credit
facilities and a term debt facility, and reduced MDC Partners' debt by
approximately $45 million. The resultant consolidation of the Company's various
debt instruments has also amounted to a reduction in weighted average borrowing
rates of approximately 250 basis points.
During the third quarter, upon further review of the Company's interest in an
affiliate, the Company determined that it should have consolidated the financial
results of this affiliate for the quarter ended June 30, 2004. As a result, the
Company will be filing an amended Form 10-Q for the periods ended June 30, 2004.
The amended results for both the second quarter and six-month periods ended June
30, 2004 increased operating expenses by $0.7 million with corresponding
adjustments to income taxes, equity in affiliates and minority interest and had
no impact on the Company's revenues, net earnings nor its earning per share.
During the quarter the Company repurchased 616,000 shares under a normal course
issuer bid at an average price of $11.32 per share for total cash consideration
of $7.0 million.
"Our prospects for the future are truly exciting. Everyday, we deliver
world-class ideas and execution for our clients, helping to grow their
businesses," said Mr. Nadal.
Conference Call
Management will host a conference call today at 5:00 p.m. (ET) to discuss third
quarter results and will be accessible by dialing 416-640-4127 or Toll Free
1-800-814-4862. An investor presentation has been posted to our website
www.mdc-partners.com and will be referred to during the conference call.
About MDC Partners Inc.
MDC Partners is one of the world's leading marketing communications firms.
Through its partnership of entrepreneurial firms, MDC Partners provides
advertising and specialized communication services to leading brands throughout
the United States, Canada and the United Kingdom. MDC Partners Class A shares
are publicly traded on the Toronto Stock Exchange under the symbol MDZ.A and on
the NASDAQ under the symbol MDCA.
This press release contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve risks and
uncertainties which may cause the actual results or objectives to be materially
different from those expressed or implied by such forward-looking statements.
Such factors include, among other things, the Company's financial performance;
changes in the competitive environment; adverse changes in the economy; ability
to maintain long-term relationships with customers; financing requirements and
other factors set forth in the Company's Form 40-F for its fiscal year ended
December 31, 2003 and subsequent SEC filings.
MDC PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THIRD QUARTER 2004 and 2003
(Unaudited) ($U.S. 000's -except share and per share amounts)
Combined* US GAAP
---------------------------- ----------------------------
For the Three Months Ended September 30, 2004 2003 2004 2003**
---------------------------------------------------------- ------------- -------------- -- ------------ ---------------
Revenue 97,980 71,422 86,295 64,885
------------- -------------- ------------ ---------------
Operating Expenses
Cost of sales 12,567 12,073 12,567 12,073
Salary and related costs 43,536 27,405 36,346 24,301
Stock-based compensation 1,649 1,397 1,558 1,397
General and other operating expenses 32,768 23,315 30,426 21,662
Depreciation and amortization 3,345 2,614 3,051 2,465
------------- -------------- ------------ ---------------
93,865 66,804 83,948 61,898
------------- -------------- ------------ ---------------
Operating Profit 4,115 4,618 2,347 2,987
Other Income (Expense)
Gain (loss) on sale of assets (299) 1,842 (299) 1,842
Other (3) - (3) -
Interest expense, net (1,461) (1,826) (1,437) (1,826)
------------- -------------- ------------ ---------------
Income Before Income Taxes 2,352 4,634 608 3,003
Income Taxes (Recovery) 711 (875) 329 (1,221)
------------- -------------- ------------ ---------------
Income After Income Taxes 1,641 5,509 279 4,224
Equity in Affiliates 51 - 504 530
Minority Interests (3,159) (2,351) (2,250) (1,596)
------------- -------------- ------------ ---------------
Net Income (Loss) for the Period (1,467) 3,158 (1,467) 3,158
============= ============== ============ ===============
Earnings (Loss) Per Share
Net income (loss)
o Basic (0.07) 0.17 (0.07) 0.17
o Diluted (0.07) 0.15 (0.07) 0.15
Weighted average shares outstanding during the period
o Basic 22,392,533 18,361,746 22,392,533 18,361,746
o Diluted 22,392,533 23,249,320 22,392,533 23,249,320
---------------------------------------------------------- ------------- -------------- ------------ ---------------
Combined* US GAAP
SEGMENTED INFORMATION - BY OPERATING DIVISION
------------- -------------- ------------ ---------------
For the Three Months Ended September 30, 2004 2003 2004 2003**
---------------------------------------------------------- ------------- -------------- ------------ ---------------
Marketing Communications
Revenue 77,450 51,343 65,765 44,806
Operating Profit 8,687 6,343 6,919 4,712
EBITDA 8,011 6,207 6,767 5,182
Secure Products International
Revenue 20,530 18,898 20,530 18,898
Operating Profit 1,263 849 1,263 849
EBITDA 2,140 1,194 2,140 1,194
Corporate and Other
Revenue - 1,181 - 1,181
Operating Loss (5,835) (2,574) (5,835) (2,574)
EBITDA (4,201) (1,123) (4,201) (1,123)
---------------------------------------------------------- ------------- -------------- ------------ ---------------
* Combined results consolidate affiliates of the Marketing Communications Division that are equity accounted
under US GAAP.
** Comparative figures have been restated to conform with current period US GAAP presentation.
MDC PARNTERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS 2004 and 2003
(Unaudited) ($U.S. 000's -except share and per share amounts)
Combined* US GAAP
---------------------------- ----------------------------
For the Nine Months Ended September 30, 2004 2003 2004 2003**
----------------------------------------------------------- ------------- -------------- -- ------------ ---------------
Revenue 272,752 246,535 237,395 227,698
------------- -------------- ------------ ---------------
Operating Expenses
Cost of sales 34,864 46,422 34,864 46,422
Salary and related costs 117,920 87,260 100,067 78,337
Stock-based compensation 6,516 2,166 6,351 2,166
General and other operating expenses 93,346 84,174 86,677 80,189
Depreciation and amortization 8,916 9,492 8,120 9,140
Write-down of fixed and other assets - 8,126 - 8,126
Goodwill charges - 10,012 - 10,012
------------- -------------- ------------ ---------------
261,562 247,652 236,079 234,392
------------- -------------- ------------ ---------------
Operating Profit (Loss) 11,190 (1,117) 1,316 (6,694)
Other Income (Expense)
Gain on sale of assets 6,793 50,436 6,793 50,436
Other (3) - (3) -
Interest expense, net (5,136) (10,865) (5,063) (10,917)
------------- -------------- ------------ ---------------
Income Before Income Taxes 12,844 38,454 3,043 32,825
Income Taxes 3,496 5,853 1,468 4,770
------------- -------------- ------------ ---------------
Income After Income Taxes 9,348 32,601 1,575 28,055
Equity in Affiliates 51 - 3,247 1,752
Minority Interests (10,489) (5,769) (5,912) (2,975)
------------- -------------- ------------ ---------------
Net Income (Loss) for the Period (1,090) 26,832 (1,090) 26,832
============= ============== ============ ===============
Earnings (Loss) Per Share
Net income (loss)
o Basic (0.05) 1.54 (0.05) 1.54
o Diluted (0.05) 1.19 (0.05) 1.19
Weighted average shares outstanding during the period
o Basic 21,063,632 17,397,476 21,063,632 17,397,476
o Diluted 21,063,632 23,541,571 21,063,632 23,541,571
----------------------------------------------------------- ------------- -------------- ------------ ---------------
Combined* US GAAP
SEGMENTED INFORMATION - BY OPERATING DIVISION
------------- -------------- ------------ ---------------
For the Nine Months Ended September 30, 2004 2003 2004 2003**
----------------------------------------------------------- ------------- -------------- ------------ ---------------
Marketing Communications
Revenue 215,551 147,929 180,194 129,092
Operating Profit 25,469 16,180 15,595 10,603
EBITDA 21,637 15,422 15,379 12,287
Secure Products International
Revenue 56,536 96,173 56,536 96,173
Operating Profit 2,143 (10,903) 2,143 (10,903)
EBITDA 4,502 11,385 4,502 11,385
Corporate and Other
Revenue 665 2,433 665 2,433
Operating Loss (16,422) (6,394) (16,422) (6,394)
EBITDA (10,006) (3,897) (10,006) (3,897)
----------------------------------------------------------- ------------- -------------- ------------ ---------------
* Combined results consolidate affiliates of the Marketing Communications Division that are equity accounted
under US GAAP.
** Comparative figures have been restated to conform with current period US GAAP presentation
MDC PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------ ------------------------------------
($U.S. 000's)
------------------------------------
As at As at
September 30, December 31,
2004 2003*
(Unaudited) (Audited)
------------------------------------------------------------------ ------------------ -----------------
ASSETS
Current
Cash and cash equivalents 16,579 66,726
Accounts receivable 109,423 60,115
Expenditures billable to clients 21,938 7,422
Inventory 7,737 6,795
Prepaid expenses and sundry 6,732 4,924
------------------ -----------------
162,409 145,982
Fixed Assets 54,737 42,025
Investment in Affiliates 4,655 36,084
Goodwill 189,197 87,479
Deferred Tax Benefits 11,363 12,580
Other Assets 9,311 6,030
------------------ -----------------
431,672 330,180
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank Indebtedness 13,836 -
Accounts payable and accrued liabilities 128,871 74,050
Advance billings 42,689 13,391
Current portion of long-term debt 2,452 16,486
Deferred acquisition consideration 416 1,113
------------------ -----------------
188,264 105,040
Long-term Debt 54,234 95,946
Convertible Notes - 37,794
Other Liabilities 4,091 516
------------------ -----------------
246,589 239,296
------------------ -----------------
Minority Interests 36,947 2,533
------------------ -----------------
Shareholders' equity
Common stock 167,015 115,996
Contributed surplus 14,910 3,272
Retained earnings (deficit) (29,904) (25,148)
Accumulated other comprehensive income (loss) (3,885) (5,769)
------------------ -----------------
148,136 88,351
------------------ -----------------
431,672 330,180
================== =================
------------------------------------------------------------------ ------------------ -----------------
* Comparative figures have been restated to conform with the current period US GAAP
presentation.
MDC PARTNERS INC.
RECONCILIATION OF EBITDA* TO OPERATING PROFIT
($U.S. 000's)
For the Three Months Ended September 30, 2004
Combined As Reported under US GAAP
----------------- --------------------------------------------
Less Secure
Marketing Equity Marketing Products Corporate &
Communications Affiliates Communications International Other Total
-------------- ----------- -------------- ------------- ----------- ------------
Operating Profit (Loss) as Reported 8,687 1,768 6,919 1,263 (5,835) 2,347
Add
Depreciation and amortization 2,343 294 2,049 877 125 3,051
Stock-based compensation 140 91 49 - 1,509 1,558
--------------- ----------- -------------- ------------ ------------ ------------
11,170 2,153 9,017 2,140 (4,201) 6,956
Less Minority Interests (3,159) (909) (2,250) - - (2,250)
--------------- ----------- -------------- ------------ ------------ ------------
EBITDA* 8,011 1,244 6,767 2,140 (4,201) 4,706
=============== =========== ============== ============ ============ ============
For the Three Months Ended September 30, 2003
Combined As Reported under US GAAP
----------------- --------------------------------------------
Less Secure
Marketing Equity Marketing Products Corporate &
Communications Affiliates Communications International Other Total
-------------- ----------- -------------- ------------- ----------- ------------
Operating Profit (Loss) as Reported 6,343 1,631 4,712 849 (2,574) 2,987
Add
Depreciation and amortization 2,074 149 1,925 359 181 2,465
Stock-based compensation - - - - 1,397 1,397
-------------- ----------- ------------- ------------ ------------ -----------
8,417 1,780 6,637 1,208 (996) 6,849
Less Minority Interests (2,210) (755) (1,455) (14) (127) (1,596)
-------------- ----------- ------------- ------------ ------------ -----------
EBITDA* 6,207 1,025 5,182 1,194 (1,123) 5,253
============== =========== ============= ============ ============ ===========
* EBITDA is a non-GAAP measure, but as shown above it represents operating profit plus depreciation and amortization
plus stock-based compensation less minority interests.
MDC PARTNERS INC.
RECONCILIATION OF EBITDA* TO OPERATING PROFIT
($U.S. 000's)
For the Nine Months Ended September 30, 2004
Combined As Reported under US GAAP
----------------- --------------------------------------------
Less Secure
Marketing Equity Marketing Products Corporate &
Communications Affiliates Communications International Other Total
-------------- ----------- -------------- ------------- ----------- ------------
Operating Profit (Loss) as Reported 25,469 9,874 15,595 2,143 (16,422) 1,316
Add
Depreciation and amortization 6,333 796 5,537 2,359 224 8,120
Stock-based compensation 324 165 159 - 6,192 6,351
-------------- ------------ --------------- ------------ ------------ -----------
32,126 10,835 21,291 4,502 (10,006) 15,787
Less Minority Interests (10,489) (4,577) (5,912) - - (5,912)
-------------- ------------ --------------- ------------ ------------ -----------
EBITDA* 21,637 6,258 15,379 4,502 (10,006) 9,875
============== ============ =============== ============ ============ ===========
For the Nine Months Ended September 30, 2003
Combined As Reported under US GAAP
----------------- --------------------------------------------
Less Secure
Marketing Equity Marketing Products Corporate &
Communications Affiliates Communications International Other Total
-------------- ----------- -------------- ------------- ----------- ------------
Operating Profit (Loss) as Reported 16,180 5,577 10,603 (10,903) (6,394) (6,694)
Add
Depreciation and amortization 6,055 352 5,703 2,614 823 9,140
Stock-based compensation - - - - 2,166 2,166
Writedown of fixed and
other assets - - - 10,012 - 10,012
Goodwill charges - - - 8,126 - 8,126
-------------- ----------- --------------- ------------ ------------ -----------
22,235 5,929 16,306 9,849 (3,405) 22,750
Less Minority Interests (6,813) (2,794) (4,019) 1,536 (492) (2,975)
-------------- ----------- --------------- ------------ ------------ -----------
EBITDA* 15,422 3,135 12,287 11,385 (3,897) 19,775
============== =========== =============== ============ ============ ===========
* EBITDA is a non-GAAP measure, but as shown above it represents operating profit plus depreciation and amortization
plus stock-based compensation less minority interests.