TORONTO, Ontario (October 30, 2003) – MDC Corporation Inc. operating as MDC Partners (“MDC”) of Toronto today announced its financial results for the third quarter and nine months ended September 30, 2003. Consolidated revenues were US$68.1 million for the quarter, representing a 23% decrease from the US$88.5 million reported for the same three-month period of the prior year. Operating income before other charges, at US$7.8 million, declined US$3.5 million or 31% compared to the US$11.3 million achieved during the third quarter of 2002. Net income for the three months ended September 30, 2003 was US$3.3 million compared to US$4.2 million for 2002. Diluted earnings per share for the quarter was US$0.15 compared to US$0.16 last year. Diluted cashflow per share was US$0.26 this quarter versus US$0.29 in the previous year. The inclusion in the 2002 results of the divested operations of Custom Direct, Spectron Security Print and Questa together with the increased focus on Marketing Communications makes the periods’ results less comparable.
“MDC has adopted the U.S. dollar as its reporting currency in order to 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,” said Miles S. Nadal, Chairman, President and Chief Executive Officer.
Consistent with the focus on Marketing Communications, MDC will be renamed MDC Partners Inc. on January 1, 2004, operating as MDC Partners until then. “The evolution of MDC has culminated in our rebranding as a result of our fundamental belief that it is time for a change in the Marketing Communications industry. Our commitment is to do great work for great clients that produces measurable results. MDC Partners is well positioned to lead this paradigm, and we believe that the quality of our Brands and the expertise they demonstrate consistently for their clients has, and will enable them to win significant new business in the future,” said Miles S. Nadal.
Marketing Communications reported revenues of US$47.5 million for the third quarter of 2003, an increase of US$5.3 million or 12% compared to the third quarter of 2002. Operating income before other charges increased 56% to US$7.4 million for the quarter from the US$4.8 million achieved in the same quarter in the previous year. Operating margins improved to 15.7% from 11.3%. These improvements were primarily the result of an increase in the demand for database management, direct marketing services, corporate communication and advertising in the United States. As a result of the privatization of Maxxcom and the merger of head offices, additional divisional cost reductions were achieved in the area of divisional corporate overheads.
“Marketing Communications continued to attract new clients throughout the quarter, including Circuit City, Target, Best Buy, Discovery Channel and Borders, resulting in annualized net new business wins with revenues of approximately US$2.8 million,” said Mr. Nadal. “Our operations remain focused on the generation of new business while maintaining a cost-effective structure. The positive momentum experienced in revenues and earnings is anticipated to continue as we benefit from the recovery expected in the marketing communications industry.”
Third quarter revenues of the Secure Transactions Division were US$18.9 million, a decrease of 58% from the US$45.5 million recorded for the same period of 2002. Operating income before other charges was US$1.2 million, down 84% from the US$7.3 million earned in the prior year. Excluding divested operations, revenues improved slightly compared to 2002, however, operating income decreased US$1.6 million primarily as a result of costs related to preparation for increased production under the long-term United States Postal Service contract announced last quarter and increased operating costs at Canadian facilities as a result of the strengthening Canadian dollar.
“We remain committed to the profitable operation of our remaining non-core businesses, and are pleased with progress to date on the implementation of state-of-the-art equipment at Ashton Potter. When fully operational, expected by the end of the fourth quarter, revenues and operating income of the operation are expected to improve significantly,” said Mr. Nadal.
On July 31, 2003 MDC completed the privatization of Maxxcom Inc. with the issuance of 2,473,183 Class A subordinated voting shares at Cdn.$13.25. The share capital issued as a result was US$23 million.
During the quarter, pursuant to its normal course issuer bid, MDC repurchased 626,916 Class A subordinate voting shares at an average price per share of Cdn. $13.80 for total consideration of US$6.3 million.
About MDC Partners (“MDC”)
MDC Corporation Inc. 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.
MDC CORPORATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THIRD QUARTER 2003 and 2002
(Unaudited)
$U.S. 000's - except
per share amounts
-----------------------
For the Three Months Ended September 30, 2003 2002(*) Change
-------------------------------------------------------------------------
Gross billings 132,140 140,545 (6%)
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-----------------------
Revenues 68,088 88,548 (23%)
Operating costs 60,252 77,267 (22%)
-----------------------
Operating income before other income
(charges) 7,836 11,281 (31%)
-----------------------
Other income (charges)
Net gain on asset dispositions and
other charges 445 1,456
Amortization (2,723) (3,566)
Interest, net (1,439) (3,873)
Income participation of minority
partners (1,455) (900)
-----------------------
(5,172) (6,883)
-----------------------
Income before income taxes and minority
interest 2,664 4,398 (39%)
Income taxes (recovery) (818) 224
-----------------------
Income before minority
interest 3,482 4,174 (17%)
Minority interest (recovery) 141 (5)
-----------------------
Net income for the period 3,341 4,179 (20%)
-----------------------
-----------------------
Cash Flow from operations 5,867 7,633 (23%)
-----------------------
-----------------------
Earnings Per Share
Net income
- Basic 0.17 0.23 (26%)
- Diluted 0.15 0.16 (6%)
Cash Flow Per Share
- Basic 0.30 0.44 (32%)
- Diluted 0.26 0.29 (10%)
Weighted average shares
outstanding during the period
- Basic 18,361,746 16,915,341 9%
- Diluted(xx) 23,249,320 26,558,351 (12%)
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SEGMENTED INFORMATION - BY OPERATING DIVISION
For the Three Months Ended September 30, 2003 2002(*) Change
-------------------------------------------------------------------------
Marketing
Communications
Revenues 47,476 42,207 12%
Operating income before other
income (charges) 7,444 4,764 56%
Secure Transactions
Revenues 18,898 45,516 (58%)
Operating income before other
income (charges) 1,208 7,336 (84%)
Corporate and Other
Revenues 1,714 825 108%
Operating loss before other
income (charges) (816) (819) -
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(*) Comparative figures have been reclassified to conform with current
presentation.
(xx) The Company has the option to satisfy the CDN$49,000 (US$36,299)
of 7% Convertible Notes ("Notes") with cash or Class A
Subordinated Voting Shares ("Shares") at 95% of the current share
price. As a result, the diluted shares outstanding include
4,013,104 (2002 - 9,633,911) Shares for the conversion of the
Notes at 95% of the average closing price of the Shares during the
period.
MDC CORPORATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THIRD QUARTER 2003 and 2002
(Unaudited)
$U.S. 000's - except
per share amounts
-----------------------
For the Nine Months Ended September 30, 2003 2002(*) Change
-------------------------------------------------------------------------
Gross billings 410,304 453,614 (10%)
-----------------------
-----------------------
Revenues 236,928 299,952 (21%)
Operating costs 211,159 259,555 (19%)
-----------------------
Operating income before other income
(charges) 25,769 40,397 (36%)
-----------------------
Other income (charges)
Net gain on asset dispositions
and other charges 15,415 99,483
Unrealized foreign exchange gain - 4,380
Amortization (9,868) (12,208)
Interest, net (9,654) (14,077)
Income participation of minority
partners (4,019) (2,252)
-----------------------
(8,126) 75,326
-----------------------
Income before income taxes and
minority interest 17,643 115,723 (85%)
Income taxes 6,122 21,479
-----------------------
Income before minority interest 11,521 94,244 (88%)
Minority interest (recovery) (1,044) 2,523
-----------------------
Net income for the period 12,565 91,721 (86%)
-----------------------
-----------------------
Cash Flow from operations 13,282 17,236 (23%)
-----------------------
-----------------------
Earnings Per Share
Net income
- 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 shares
outstanding during the period
- Basic 17,397,476 16,915,341 3%
- Diluted(xx) 23,541,571 25,501,775 (8%)
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SEGMENTED INFORMATION - BY OPERATING DIVISION
For the Nine Months Ended September 30, 2003 2002(*) Change
-------------------------------------------------------------------------
Marketing Communications
Revenues 136,869 123,210 11%
Operating income before other income
(charges) 18,831 13,045 44%
Secure Transactions
Revenues 96,173 168,504 (43%)
Operating income before other
income (charges) 9,849 30,129 (67%)
Corporate and Other
Revenues 3,886 8,238 (53%)
Operating loss before other
income (charges) (2,911) (2,777) (5%)
(*) Comparative figures have been reclassified to conform with the
current presentation.
(xx) The Company has the option to satisfy the CDN$49,000 (US$36,299) of
7% Convertible Notes ("Notes") with cash or Class A Subordinated
Voting Shares ("Shares") at 95% of the current share price. As a
result, the diluted shares outstanding include 5,751,174 (2002
-8,576,329) Shares for the conversion of the Notes at 95% of the
average closing price of the Shares during the period.
MDC CORPORATION INC.
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
($U.S. 000's)
---------------------
---------------------
As at As at
September December
30, 31,
2003 2002(*)
(Unaudited) (Audited)
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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(xx) 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
---------------------
---------------------
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(*) Comparative figures have been reclassified to conform with the
current presentation.
(xx) Includes $23,327 of share capital issued on the privatization of
Maxxcom Inc.