Company Quick10K Filing
Quick10K
MDC Partners
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$2.02 72 $145
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-08 Officers, Exhibits
8-K 2019-03-14 Enter Agreement, Earnings, Sale of Shares, Officers, Amend Bylaw, Regulation FD, Exhibits
8-K 2019-01-18 Amend Bylaw, Other Events, Exhibits
8-K 2018-12-21 Officers, Exhibits
8-K 2018-12-11 Officers, Exhibits
8-K 2018-11-28 Other Events, Exhibits
8-K 2018-11-12 Other Events
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-09-20 Other Events, Exhibits
8-K 2018-09-09 Officers, Other Events, Exhibits
8-K 2018-08-02 Exhibits
8-K 2018-07-24 Officers
8-K 2018-06-18 Other Events
8-K 2018-06-06 Officers, Shareholder Vote, Exhibits
8-K 2018-05-09 Exhibits
8-K 2018-04-26 Officers, Exhibits
8-K 2018-04-02 Sale of Shares, Regulation FD, Exhibits
8-K 2018-02-22 Exhibits
EL Estee Lauder Companies 61,340
HBI Hanesbrands 6,780
TELL Tellurian 2,420
BGS B&G Foods 1,590
ILPT Industrial Logistics Properties Trust 1,330
FOSL Fossil Group 650
ACNB ACNB 275
IDSY ID Systems 104
NRIS Norris Industries 0
ENGT Energy & Technology 0
MDCA 2018-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
EX-10.8 mdca-20181231xex108.htm
EX-10.9 mdca-20181231xex109.htm
EX-10.71 mdca-20181231xex1071.htm
EX-21 mdca-20181231xex21.htm
EX-23 mdca-20181231xex23.htm
EX-31.1 mdca-20181231xex311xddoft.htm
EX-31.2 mdca-20181231xex312xmgendel.htm
EX-31.3 mdca-20181231xex313ross.htm
EX-31.4 mdca-20181231xex314xsnerli.htm
EX-32.1 mdca-20181231xex321xddoft.htm
EX-32.2 mdca-20181231xex322xmgendel.htm
EX-32.3 mdca-20181231xex323xdross.htm
EX-32.4 mdca-20181231xex324xsnerli.htm

MDC Partners Earnings 2018-12-31

MDCA 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 mdca-20181231x10k.htm 10-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
 
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2018
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission File Number 001-13718
 
 
MDC PARTNERS INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Canada
 
98-0364441
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
745 Fifth Avenue, 19th Floor, New York, New York, 10151
(646) 429-1800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Class A Subordinate Voting Shares, no par value
 
NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None.
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer ý Non-accelerated filer o Smaller reporting company o Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No ý
The aggregate market value of the shares of all classes of voting and non-voting common stock of the registrant held by non-affiliates as of June 29, 2018, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $223.8 million, computed upon the basis of the closing sales price $4.60 of the Class A subordinate voting shares on that date.
As of February 28, 2019, there were 57,577,825 outstanding shares of Class A subordinate voting shares without par value, and 3,755 outstanding shares of Class B multiple voting shares without par value, of the registrant.




DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to the 2019 Annual General Meeting of Stockholders are incorporated by reference in Part III of this report.



MDC PARTNERS INC. 

TABLE OF CONTENTS

 
 
Page
PART I
PART II
PART III
PART IV
 

i


References in this Annual Report on Form 10-K to “MDC Partners,” “MDC,” the “Company,” “we,” “us” and “our” refer to MDC Partners Inc. and, unless the context otherwise requires or otherwise is expressly stated, its subsidiaries. References in the Annual Report on Form 10-K to “Partner Firms” generally refer to the Company’s subsidiary agencies.
All dollar amounts are stated in U.S. dollars unless otherwise stated.
DOCUMENTS INCORPORATED BY REFERENCE
The following sections of the Proxy Statement for the Annual Meeting of Stockholders to be held on June 4, 2019, are incorporated by reference in Parts I and III: “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Executive Compensation,” “Report of the Human Resources and Compensation Committee on Executive Compensation,” “Outstanding Shares,” “Appointment of Auditors,” and “Certain Relationships and Related Transactions.”


ii


FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. The Company’s representatives may also make forward-looking statements orally from time to time. Statements in this document that are not historical facts, including statements about the Company’s beliefs and expectations, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
risks associated with severe effects of international, national and regional economic conditions;
the Company’s ability to attract new clients and retain existing clients;
the spending patterns and financial success of the Company’s clients;
the Company’s ability to retain and attract key employees;
the Company’s ability to achieve the full amount of its stated cost saving initiatives;
the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; and
foreign currency fluctuations.
Investors should carefully consider these risk factors and the additional risk factors outlined in more detail in this Annual Report on Form 10-K under Item 1A, under the caption “Risk Factors” and in the Company’s other SEC filings.
SUPPLEMENTARY FINANCIAL INFORMATION
The Company reports its financial results in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”). However, the Company has included certain non-U.S. GAAP financial measures and ratios, which it believes, provide useful information to both management and readers of this report in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by U.S. GAAP and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other titled measures determined in accordance with U.S. GAAP.

iii


PART I
Item 1. Business
MDC PARTNERS INC.
MDC was formed by Certificate of Amalgamation effective December 19, 1986, pursuant to the Business Corporations Act (Ontario). Effective December 19, 1986, MDC amalgamated with Branbury Explorations Limited, and thereby became a public company operating under the name of MDC Corporation. On January 1, 2004, MDC changed its name to its current name, MDC Partners Inc., and on June 28, 2004, MDC was continued under Section 187 of the Canada Business Corporations Act. MDC’s registered address is located at 33 Draper Street, Toronto, Ontario, M5V 2M3, and its head office address is located at 745 Fifth Avenue, 19th Floor, New York, New York 10151.
About Us
MDC is a leading global provider of marketing, advertising, activation, communications and strategic consulting solutions. Through its network of Partner Firms (as defined below), MDC delivers a broad range of customized services, including (1) global advertising and marketing, (2) media buying, planning and optimization, (3) interactive and mobile marketing, (4) direct marketing, (5) database and customer relationship management, (6) sales promotion, (7) corporate communications, (8) market research, (9) data analytics and insights, (10) corporate identity, design and branding services, (11) social media communications, (12) product and service innovation, (13) e-commerce management, and (14) technology services.
Market Strategy
MDC’s strategy is to build, grow and acquire market-leading businesses that deliver innovative, value-added marketing, activation, communications and strategic consulting services to their clients. By doing so, MDC strives to be a partnership of marketing communications and consulting companies (or “Partner Firms”) whose strategic, creative and innovative solutions are media-agnostic, challenge the status quo, achieve measurable superior returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
The MDC model is driven by three key elements:
Perpetual Partnership.  The perpetual partnership model creates ongoing alignment of interests between MDC and its Partner Firms to drive the Company’s overall performance by (1) identifying the “right” Partner Firms with a sustainable differentiated position in the marketplace, (2) creating the “right” partnership structure by taking a majority ownership position and leaving a substantial noncontrolling equity or economic ownership position in the hands of operating management to incentivize long-term growth, (3) providing succession planning support and compensation models to incentivize future leaders and second-generation executives, (4) leveraging the network’s scale to provide access to strategic resources and best practices and (5) focusing on delivering financial results.
Entrepreneurialism.  The entrepreneurial spirit of both MDC and its Partner Firms is optimized through (1) its unique perpetual partnership model that incentivizes senior-level involvement and ambition, (2) access to shared resources within the Corporate Group that allow individual firms to focus on client business and company growth and (3) MDC’s collaborative creation of customized solutions to support and grow Partner Firm businesses.
Human and Financial Capital.  The perpetual partnership model balances accountability with financial flexibility and meaningful incentives to support growth.
Reporting Segments
MDC has four reportable segments, plus an All Other category, all of which form the Advertising and Communications Group. The Partner Firms provide a wide range of service offerings both domestically and globally. While in some cases the firms provide the same or similar service offerings, the core or principal service offering is the key factor that distinguishes the Partner Firms from one another.
The following discussion provides additional detailed disclosure for the four reportable segments and the All Other category:
Global Integrated Agencies - This segment is comprised of the Company’s five global, integrated Partner Firms serving multinational clients around the world. The operating segments within the Global Integrated Agencies reportable segment provides a range of different services for its clients, including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast).
Domestic Creative Agencies - This segment is comprised of five Partner Firms that are national advertising agencies leveraging creative capabilities at their core.

1


Specialist Communications - This segment is comprised of five Partner Firms that are each communications agencies with core service offerings in public relations and related communications services.
Media Services - This segment is comprised of two operating segments with media buying and planning as its core competency.
All Other - This category consists of the Company’s remaining Partner Firms that provide a range of diverse marketing communication services but are not eligible for aggregation with the reportable segments. Each of the Partner Firms in the All Other category represent less than 10% of consolidated revenue and do not meet the criteria to be a separate reportable segment.
Corporate - In addition, MDC reports its corporate office expenses incurred in connection with the strategic resources provided to the Partner Firms, as well as certain other centrally managed expenses that are not fully allocated to the Partner Firms as Corporate. Corporate provides client and business development support to the Partner Firms as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions. Additional expenses managed by the corporate office that are directly related to the Partner Firms are allocated to the appropriate reportable segment and the All Other category.
For further information relating to the Company’s segments, including financial information, see Note 16 of the Notes to the Consolidated Financial Statements and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Ownership Information
MDC maintains a majority or 100% ownership position in substantially all of its Partner Firms with management of the partner companies owning the remaining equity.  MDC generally has rights to increase ownership of non-wholly owned subsidiaries to 100% over a defined period of time. MDC’s effective economic interest in each Partner Firm may vary from its voting ownership interest due to certain factors, such as the existence of contingent deferred acquisition payments and/or cash distribution hurdles related to noncontrolling interest holders. 
The table below sets forth MDC’s voting ownership percentage of each listed Partner Firm as of December 31, 2018.  The table does not display all agencies or components within each Partner Firm for which MDC may or may not maintain the same ownership percentage.

2


MDC PARTNERS INC.
SCHEDULE OF ADVERTISING AND COMMUNICATIONS COMPANIES

 
 
Year of Initial
 
 
 
Company
 
Investment
 
Locations
Ownership %
Consolidated:
 
 
 
 
 
Global Integrated Agencies:
 
 
 
 
 
72andSunny
 
2010
 
Los Angeles, New York, Netherlands, UK, Australia, Singapore
100.0
%
Anomaly
 
2011
 
New York, Los Angeles, Netherlands, Canada, UK, China, Germany
100.0
%
Crispin Porter Bogusky
 
2001
 
Boulder, Los Angeles, UK, Brazil, China
100.0
%
Doner
 
2012
 
Detroit, Cleveland, Los Angeles, UK
100.0
%
Forsman & Bodenfors
 
2004
 
Sweden, New York, Canada, China, UK, Los Angeles, Singapore
100.0
%
Attention
 
2009
 
New York, Los Angeles
100.0
%
The Media Kitchen
 
2004
 
New York, Canada, UK
100.0
%
Domestic Creative Agencies:
 
 
 
 
 
Colle + McVoy
 
1999
 
Minneapolis
100.0
%
Laird + Partners
 
2011
 
New York
65.0
%
Mono Advertising
 
2004
 
Minneapolis, San Francisco
70.0
%
Union
 
2013
 
Canada
75.0
%
Yamamoto
 
2000
 
Minneapolis
100.0
%
Civilian
 
2000
 
Chicago
100.0
%
Specialist Communications:
 
 
 
 
 
Allison & Partners
 
2010
 
San Francisco, Los Angeles, New York and other US Locations, China, France, Singapore, UK, Japan, Germany
100.0
%
Luntz Global
 
2014
 
Washington, D.C.
100.0
%
Sloane & Company
 
2010
 
New York
100.0
%
HL Group Partners
 
2007
 
New York, Los Angeles, China
100.0
%
Hunter PR
 
2014
 
New York, UK
65.0
%
KWT Global
 
2010
 
New York, UK, Canada
77.5
%
Veritas
 
1993
 
Canada
90.0
%
Media Services:
 
 
 
 
 
MDC Media Partners
 
2010
 
New York
 
Assembly
 
2010
 
New York, Detroit, Atlanta, Los Angeles
100.0
%
EnPlay
 
2015
 
New York
100.0
%
Trade X
 
2011
 
New York
90.0
%
Unique Influence
 
2015
 
Austin
100.0
%
Yes & Company
 
2018
 
New York
 

3


Bruce Mau Design
 
2004
 
Canada, New York
100.0
%
Northstar Research Partners
 
1998
 
Canada, New York, UK, Indonesia
100.0
%
Varick Media Management
2

2010
 
New York
100.0
%
All Other:
 
 
 
 
 
6degrees Communications
 
1993
 
Canada
74.9
%
Concentric Partners
 
2011
 
New York, UK
72.3
%
Gale Partners
 
2014
 
Canada, New York, India, Singapore
60.0
%
Instrument
 
2018
 
Portland
51.0
%
Kenna
 
2010
 
Canada
100.0
%
Kingsdale
 
2014
 
Canada, New York
65.0
%
Redscout
 
2007
 
New York, San Francisco, UK
100.0
%
Relevent
 
2010
 
New York
100.0
%
TEAM
 
2010
 
Ft. Lauderdale
100.0
%
Vitro
 
2004
 
San Diego, Austin
81.6
%
Y Media Labs
 
2015
 
Redwood City, New York, India,
60.0
%

Competition
MDC operates in a highly competitive and fragmented industry. Our Partner Firms compete for business and talent with the operating subsidiaries of large global holding companies such as Omnicom Group Inc., Interpublic Group of Companies, Inc., WPP plc, Publicis Groupe SA, Dentsu Inc. and Havas SA, as well as with numerous independent agencies that operate in multiple markets. Our firms also face competition from consultancies, tech platforms, media companies and other services firms that have begun to offer related services. MDC’s Partner Firms must compete with all of these other companies to maintain existing client relationships and to obtain new clients and assignments.
MDC’s Partner Firms compete at this level by providing clients with progressive advertising and marketing ideas and solutions that are focused on increasing clients’ revenues and profits. MDC also benefits from cooperation among its entrepreneurial Partner Firms through referrals and the sharing of both services and expertise, which enables MDC to service clients’ varied marketing needs around the world by crafting custom integrated solutions. Additionally, MDC’s consistent maintenance of separate, independent operating companies enables MDC to effectively manage potential conflicts of interest by representing competing clients across its network.
Industry Trends
There are several recent economic and industry trends that affect or may be expected to affect the Company’s results of operations. Historically, advertising has been the primary service provided by the marketing communications industry. However, as clients aim to establish one-to-one relationships with customers, and more accurately measure the effectiveness of their marketing expenditures, specialized and digital communications services and database marketing and analytics are consuming a growing portion of marketing dollars. The Company believes these changes in the way consumers interact with media is increasing the demand for a broader range of non-advertising marketing communications services (i.e., direct marketing, sales promotion, interactive, mobile, strategic communications and public relations), which we expect could have a positive impact on our results of operations. In addition, the rise of technology and data solutions have rendered scale less crucial as it once was in areas such as media buying, creating significant opportunities for agile and modern players. Global marketers now demand breakthrough and integrated creative ideas, and no longer require traditional brick-and-mortar communications partners in every market to optimize the effectiveness of their marketing efforts. Combined with the fragmentation of the media landscape, these factors provide new opportunities for small to mid-sized communications companies like those in the MDC network. In addition, marketers now require ever greater speed-to-market to drive financial returns on their marketing and media investment, causing them to turn to more nimble, entrepreneurial and collaborative communications firms like MDC Partner Firms.
As client procurement departments have focused increasingly on marketing services company fees in recent years, the Company has invested in resources to work with client procurement departments to ensure that we are able to deliver against client goals in a mutually beneficial way. For example, the Company has explored new compensation models, such as performance-based incentive payments and equity, in order to greater align our success with our clients. These incentive payments may offset negative pricing pressure from client procurement departments.

4


Clients
MDC serves a large base of clients across the full spectrum of industry verticals. In many cases, we serve the same clients in various geographic locations, across multiple disciplines, and through multiple Partner Firms. Representation of a client rarely means that MDC handles marketing communications for all brands or product lines of the client in every geographical location. During 2018, 2017 and 2016, the Company did not have a client that accounted for 5% or more of revenues. In addition, MDC’s ten largest clients (measured by revenue generated) accounted for 23% of revenue for the three year period ended December 31, 2018.
MDC’s agencies have written contracts with many of their clients. As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice, usually 90 days. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview” for a further discussion of MDC’s arrangements with its clients.
Employees
As of December 31, 2018, we employed approximately 6,024 people worldwide. The following table provides a breakdown of full time employees across MDC’s four reportable segments, the All Other category, and Corporate:
Segment
 
Total
Global Integrated Agencies
 
2,719

Domestic Creative Agencies
 
482

Specialist Communications
 
705

Media Services
 
535

All Other
 
1,513

Corporate
 
70

Total
 
6,024

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the effect of cost of services sold on MDC’s historical results of operations. Because of the personal service character of the marketing communications businesses, the quality of personnel is of crucial importance to MDC’s continuing success. MDC considers its relations with its employees to be satisfactory.
Effect of Environmental Laws
MDC believes it is substantially in compliance with all regulations concerning the discharge of materials into the environment, and such regulations have not had a material effect on the capital expenditures or operations of MDC.
Seasonality
Historically, with some exceptions, we generate the highest quarterly revenues during the fourth quarter in each year. The fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur. See Note 22 of the Notes to the Consolidated Financial Statements for information relating to the Company’s quarterly results.
Available Information
Information regarding the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, will be made available, free of charge, at the Company’s website at http://www.mdc-partners.com, as soon as reasonably practicable after the Company electronically files such reports with or furnishes them to the Securities and Exchange Commission (the “SEC”). The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this Annual Report or Form 10-K. The Company’s filings are also available to the public from the SEC’s website at http://www.sec.gov.
The Company’s Code of Conduct (Whistleblower Policy) and each of the charters for the Audit Committee, Human Resources and Compensation Committee and Nominating and Corporate Governance Committee, are available free of charge on the Company’s website at http://www.mdc-partners.com or by writing to MDC Partners Inc., 745 Fifth Avenue, 19th Floor, New York, New York 10151, Attention: Investor Relations.


5


Item 1A. Risk Factors
The following factors could adversely affect the Company’s revenues, results of operations or financial condition. See also “Forward-Looking Statements.”
Future economic and financial conditions could adversely impact our financial condition and results.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, as well as specific budgeting levels and buying patterns. Adverse developments including heightened uncertainty could reduce the demand for our services, which could adversely affect our revenue, results of operations, and financial position in 2019.
a. As a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions.
Global economic conditions affect the advertising and marketing services industry more severely than other industries. In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses. This pattern may recur in the future. Decreases in our revenue would negatively affect our financial results, including a reduction of our estimates of free cash flow from operations.
b. If our clients experience financial distress, their weakened financial position could negatively affect our own financial position and results.
We have a diverse client base, and at any given time, one or more of our clients may experience financial difficulty, file for bankruptcy protection or go out of business. The unfavorable economic and financial conditions that have impacted many sectors of the global economy could result in an increase in client financial difficulties that affect us. The direct impact on us could include reduced revenues and write offs of accounts receivable. If these effects were severe, the indirect impact could include impairments of goodwill, covenant violations relating to MDC’s senior secured revolving credit agreement (as amended, the “Credit Agreement”) or the $900 million aggregate principal amount of 6.50% notes due 2024 (the “6.50% Notes”), or reduced liquidity. Our ten largest clients (measured by revenue generated) accounted for 23% of our revenue in 2018.
c. Conditions in the credit markets could adversely impact our results of operations and financial position.
Turmoil in the credit markets or a contraction in the availability of credit would make it more difficult for businesses to meet their capital requirements and could lead clients to change their financial relationship with their vendors, including us. If that were to occur, it could materially adversely impact our results of operations and financial position.
MDC competes for clients in highly competitive industries.
The Company operates in a highly competitive environment in an industry characterized by numerous firms of varying sizes, with no single firm or group of firms having a dominant position in the marketplace. MDC is, however, smaller than several of its larger industry competitors. Competitive factors include creative reputation, management, personal relationships, quality and reliability of service and expertise in particular niche areas of the marketplace. In addition, because a firm’s principal asset is its people, barriers to entry are minimal, and relatively small firms are, on occasion, able to take all or some portion of a client’s business from a larger competitor.
While many of MDC’s client relationships are long-standing, companies put their advertising and marketing services businesses up for competitive review from time to time, including at times when clients enter into strategic transactions or experienced senior management changes. From year to year, the identities of MDC’s ten largest customers may change, as a result of client losses and additions and other factors. To the extent that the Company fails to maintain existing clients or attract new clients, MDC’s business, financial condition and operating results may be affected in a materially adverse manner.
The loss of lines of credit under the Credit Agreement could adversely affect MDC’s liquidity and our ability to implement MDC’s acquisition strategy and fund any put options if exercised.
MDC uses amounts available under the Credit Agreement, together with cash flow from operations, to fund its working capital needs, to fund the exercise of put option obligations and to fund our strategy of making selective acquisitions of ownership interests in entities in the marketing communications services industry, including through contingent deferred acquisition payments.
On March 12, 2019, in connection with an amendment to the Credit Agreement, we reduced the maximum amount of revolving commitments provided by the lenders to $250 million from $325 million.
The Company is currently in compliance with all of the terms and conditions of the Credit Agreement. If, however, events were to occur, which result in MDC losing all or a substantial portion of its available credit under the Credit Agreement, or if MDC was prevented from accessing such lines of credit due to other restrictions such as those in the indenture governing the 6.50% Notes, MDC could be required to seek other sources of liquidity. In addition, if MDC were unable to replace these sources

6


of liquidity, then MDC’s ability to fund its working capital needs and any contingent obligations with respect to put options or contingent deferred acquisition payments would be materially adversely affected.
We have significant contingent obligations related to deferred acquisition consideration and noncontrolling interests in our subsidiaries, which will require us to utilize our cash flow and/or to incur additional debt to satisfy.
The Company has made a number of acquisitions for which it has deferred payment of a portion of the purchase price, usually for a period between one to five years after the acquisition. The deferred acquisition consideration is generally payable based on achievement of certain thresholds of future earnings of the acquired company and, in certain cases, also based on the rate of growth of those earnings. Once any contingency is resolved, the Company may pay the contingent consideration over time.
The Company records liabilities on its balance sheet for deferred acquisition payments at their estimated value based on the current performance of the business, which are remeasured each quarter. At December 31, 2018, these aggregate liabilities were $83.7 million, of which $32.9 million, $29.5 million and $21.3 million would be payable in 2019, 2020 and 2021.
In addition to the Company’s obligations for deferred acquisition consideration, managers of certain of the Company’s acquired subsidiaries hold noncontrolling interests in such subsidiaries. In the case of certain noncontrolling interests related to acquisitions, such managers are entitled to a proportionate distribution of earnings from the relevant subsidiary, which is recognized on the Company’s consolidated income statement under “Net income attributable to the noncontrolling interests.”
Noncontrolling shareholders often have the right to require the Company to purchase all or part of its interest, either at specified dates or upon the termination of such shareholder’s employment with the subsidiary or death (put rights). In addition, the Company usually has rights to call noncontrolling shareholders’ interests at a specified date. The purchase price for both puts and calls is typically calculated based on specified formulas tied to the financial performance of the subsidiary.
The Company recorded $51.5 million on its December 31, 2018 balance sheet as redeemable noncontrolling interests for its estimated obligations in respect of noncontrolling shareholder put and call rights based on the current performance of the subsidiaries, $20.0 million of which related to put rights for which, if exercised, the payments are due at specified dates, with the remainder of redeemable noncontrolling interests attributable to put or call rights exercisable only upon termination of employment or death. No estimated obligation is recorded on the balance sheet for noncontrolling interests for which the Company has a call right but the noncontrolling holder has no put right.
Payments to be made by the Company in respect of deferred acquisition consideration and noncontrolling shareholder put rights may be significantly higher than the estimated amounts described above because the actual obligation adjusts based on the performance of the acquired businesses over time, including future growth in earnings from the calculations made at December 31, 2018. Similarly, the payments made by the Company under call rights would increase with growth in earnings of the acquired businesses. The Company expects that deferred contingent consideration and noncontrolling interests for managers may be features of future acquisitions that it may undertake and that it may also grant similar noncontrolling interests to managers of its subsidiaries unrelated to acquisitions.
The Company expects that its obligations in respect of deferred acquisition consideration and payments to noncontrolling shareholders under put and call rights will be a significant use of the Company’s liquidity in the foreseeable future, whether in the form of free cash flow or borrowings under the Company’s revolving credit agreement or from other funding sources. For further information, see the disclosure under the heading “Business — Ownership Information” and the heading “Liquidity and Capital Resources.”
MDC may not realize the benefits it expects from past acquisitions or acquisitions MDC may make in the future.
MDC’s business strategy includes ongoing efforts to engage in acquisitions of ownership interests in entities in the marketing communications services industry. MDC intends to finance these acquisitions by using available cash from operations and through incurrence of debt or bridge financing, either of which may increase its leverage ratios, or by issuing equity, which may have a dilutive impact on its existing shareholders. At any given time, MDC may be engaged in a number of discussions that may result in one or more material acquisitions. These opportunities require confidentiality and may involve negotiations that require quick responses by MDC. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transactions, the announcement of any such transaction may lead to increased volatility in the trading price of its securities.
Our expenses have, in certain periods, increased at a greater rate than revenues, which in part reflects both the increase in expenses for deferred acquisition consideration and from our investment in headcount for certain growth initiatives. Should our acquisitions continue to outperform current expectations, expenses for deferred acquisition consideration could increase as well in future periods. If our growth initiatives do not provide sufficient revenue to offset the incremental costs in future periods, profits could be reduced and severance expense could be incurred in order to return to targeted profit margins over time.
The success of acquisitions or strategic investments depends on the effective integration of newly acquired businesses into MDC’s current operations. Such integration is subject to risks and uncertainties, including realization of anticipated synergies and cost savings, the ability to retain and attract personnel and clients, the diversion of management’s attention from other business

7


concerns, and undisclosed or potential legal liabilities of the acquired company. MDC may not realize the strategic and financial benefits that it expects from any of its past acquisitions, or any future acquisitions.
MDC’s business could be adversely affected if it loses key clients or executives.
MDC’s strategy has been to acquire ownership stakes in diverse marketing communications businesses to minimize the effects that might arise from the loss of any one client or executive. The loss of one or more clients could materially affect the results of the individual Partner Firms and the Company as a whole. Management succession at our operating units is very important to the ongoing results of the Company because, as in any service business, the success of a particular agency is dependent upon the leadership of key executives and management personnel. If key executives were to leave our operating units, the relationships that MDC has with its clients could be adversely affected.
MDC’s ability to generate new business from new and existing clients may be limited.
To increase its revenues, MDC needs to obtain additional clients or generate demand for additional services from existing clients. MDC’s ability to generate initial demand for its services from new clients and additional demand from existing clients is subject to such clients’ and potential clients’ requirements, pre-existing vendor relationships, financial conditions, strategic plans and internal resources, as well as the quality of MDC’s employees, services and reputation and the breadth of its services. To the extent MDC cannot generate new business from new and existing clients due to these limitations, MDC’s ability to grow its business and to increase its revenues will be limited.
MDC’s business could be adversely affected if it loses or fails to attract key employees.
Employees, including creative, research, analytics, media, technology development, account and practice group specialists, and their skills and relationships with clients, are among MDC’s most important assets. An important aspect of MDC’s competitiveness is its ability to retain key employee and management personnel. Compensation for these key employees is an essential factor in attracting and retaining them, and MDC may not offer a level of compensation sufficient to attract and retain these key employees. If MDC fails to hire and retain a sufficient number of these key employees, it may not be able to compete effectively. If key executives were to leave our operating units, the relationships that MDC has with its clients could be adversely affected.
MDC is exposed to the risk of client defaults.
MDC’s agencies often incur expenses on behalf of their clients for productions in order to secure a variety of media time and space, in exchange for which they receive a fee. The difference between the gross cost of the production and media and the net revenue earned by us can be significant. While MDC takes precautions against default on payment for these services (such as credit analysis and advance billing of clients) and has historically had a very low incidence of default, MDC is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn. Such a loss could have a material adverse effect on our results of operations and financial position.
MDC’s results of operations are subject to currency fluctuation risks.
Although MDC’s financial results are reported in U.S. dollars, a portion of its revenues and operating costs are denominated in currencies other than the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and other currencies, particularly the Canadian dollar, may affect MDC’s financial results and competitive position.
Goodwill and intangible assets may become impaired.
We have recorded a significant amount of goodwill and intangible assets in our consolidated financial statements in accordance with U.S. GAAP resulting from our acquisition activities, which principally represents the specialized know-how of the workforce at the agencies we have acquired. We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2 of the Notes to the Consolidated Financial Statements included herein. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows.
The Company recognized an impairment of goodwill and other assets of $80.1 million for the twelve months ended December 31, 2018. The impairment primarily consists of the write-down of goodwill equal to the excess carrying value above the fair value of a reporting unit one in each of the Global Integrated Agencies reportable segment, the Media Services reportable segment and within the All Other category and the full write-down of a trademark for a reporting unit also within the Global Integrated Agencies reportable segment. The trademark is no longer in active use following the merger of the underlying agency with another reporting unit in the third quarter of 2018. See Note 10 of the Notes to the Consolidated Financial Statements for information related to the merger.

MDC is subject to regulations and litigation risk that could restrict our activities or negatively impact our revenues.

8


Advertising and marketing communications businesses are subject to government regulation, both domestic and foreign. There has been an increasing tendency in the United States on the part of advertisers to resort to litigation and self-regulatory bodies to challenge comparative advertising on the grounds that the advertising is false and deceptive. Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products and the usage of personally identifiable information. Representatives within government bodies, both domestic and foreign, continue to initiate proposals to ban the advertising of specific products and to impose taxes on or deny deductions for advertising which, if successful, may have an adverse effect on advertising expenditures and consequently MDC’s revenues.
Certain of MDC’s agencies produce software and e-commerce tools for their clients, and these product offerings have become increasingly subject to litigation based on allegations of patent infringement or other violations of intellectual property rights. As we expand these product offerings, the possibility of an intellectual property claim against us grows. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations and may result in us deciding to enter into license agreements to avoid ongoing patent litigation costs. If we are not successful in defending such claims, we could be required to stop offering these services, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our clients. Such arrangements may cause our operating margins to decline.
In addition, laws and regulations related to user privacy, use of personal information and Internet tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s recently enacted General Data Protection Regulation, or “GDPR”). These laws and regulations could affect the acceptance of the Internet as an advertising medium. These actions could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial position.
We rely extensively on information technology systems and cybersecurity incidents could adversely affect us.
We rely on information technologies and infrastructure to manage our business, including digital storage of client marketing and advertising information and developing new business opportunities. Increased cybersecurity threats and attacks, which are becoming more sophisticated, pose a risk to our systems and networks. Security breaches, improper use of our systems and unauthorized access to our data and information by employees and others may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. We also have access to sensitive or personal data or information that is subject to privacy laws and regulations. Our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats. In addition, we use third-party service providers, including cloud providers, to store, transmit and process data.  Any breakdown or breach in our systems or data-protection policies, or those of our third-party service providers, could adversely affect our reputation or business.   
Future issuances of equity securities, which may include securities that would rank senior to our Class A shares, may cause dilution to our existing shareholders and adversely affect the market price of our Class A shares.
The market price of our Class A shares could decline as a result of sales of a large number of our Class A shares in the market, or the sale of securities convertible into a large number of our Class A shares. The perception that these sales could occur may also depress the market price of our Class A shares. On March 4, 2017, we issued 95,000 Series 4 convertible preference shares (the “Series 4 Preference Shares”) with an initial aggregate liquidation preference of $95.0 million, which will be convertible into Class A shares or our Series 5 convertible preference shares at a current conversion price of $7.42 per share.  On March, 15, 2019, we issued 50,000 Series 6 convertible preference shares (the “Series 6 Preference Shares” and, together with the Series 4 Preference Shares, the “Preference Shares”) with an initial aggregate liquidation preference of $50.0 million, which will be convertible into Class A shares or our Series 7 convertible preference shares at an initial conversion price of $5.00 per share.  The terms of the Preference Shares provide that the conversion price may be reduced, which would result in the Preference Shares being convertible into additional Class A shares, upon certain events including distributions on our Class A shares or issuances of additional Class A shares or equity-linked securities at a price less than the then-applicable conversion price. The issuance of Class A Shares upon conversion of the Preference Shares may result in immediate and substantial dilution to the interests of our Class A Shares holders since the holders of the Preference Shares may ultimately receive and sell all of shares issuable in connection with the conversion of such Preference Shares.  The market price of our Class A shares may also be affected by factors, such as whether the market price is near or above the conversion price, that could make conversion of the Preference Shares more likely.
Further, the Preference Shares will rank senior to the Class A shares, which could affect the value of the Class A shares on liquidation or, as a result of contractual provisions, on a change in control transaction. For example, pursuant to the related purchase agreements, the Company has agreed, with certain exceptions, not to become party to certain change in control transactions that are approved by the Board other than a qualifying transaction in which holders of Preference Shares are entitled to receive cash or qualifying listed securities with a value equal to the then-applicable liquidation preference plus accrued and unpaid dividends.

9


See Note 14 and 23 of the Notes to the Consolidated Financial Statements for more information regarding the Series 4 Preference Shares and the Series 6 Preference Shares, respectively.
Additionally, any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our Class A shares, and may result in dilution to owners of our Class A shares. Because our decision to issue additional debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. Also, we cannot predict the effect, if any, of future issuances of our Class A shares on the market price of our Class A shares.
The indenture governing the 6.50% Notes and the Credit Agreement governing our secured line of credit contain various covenants that limit our discretion in the operation of our business.
The indenture governing the 6.50% Notes and the Credit Agreement governing our lines of credit contain various provisions that limit our discretion in the operation of our business by restricting our ability to:
sell assets;
pay dividends and make other distributions;
redeem or repurchase our capital stock;
incur additional debt and issue capital stock;
create liens;
consolidate, merge or sell substantially all of our assets;
enter into certain transactions with our affiliates;
make loans, investments or advances;
repay subordinated indebtedness;
undergo a change in control;
enter into certain transactions with our affiliates;
engage in new lines of business; and
enter into sale and leaseback transactions.
These restrictions on our ability to operate our business in our discretion could seriously harm our business by, among other things, limiting our ability to take advantage of financing, mergers and acquisitions and other corporate opportunities. The Credit Agreement is subject to various additional covenants, including a senior leverage ratio, a total leverage ratio, a fixed charge coverage ratio, and a minimum EBITDA level (as defined). Events beyond our control could affect our ability to meet these financial tests, and we cannot assure you that they will be met.
Our substantial indebtedness could adversely affect our cash flow and prevent us from fulfilling our obligations, including the 6.50% Notes.
As of December 31, 2018, MDC had $954.6 million, net of debt issuance costs, of indebtedness. In addition, we expect to make additional drawings under the Credit Agreement from time to time. Our ability to pay principal and interest on our indebtedness is dependent on the generation of cash flow by our subsidiaries. Our subsidiaries’ business may not generate sufficient cash flow from operations to meet MDC’s debt service and other obligations. If we are unable to meet our expenses and debt service obligations, we may need to obtain additional debt, refinance all or a portion of our indebtedness on or before maturity, sell assets or raise equity. We may not be able to obtain additional debt, refinance any of our indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to default on our obligations and impair our liquidity. Our inability to generate sufficient cash flow to satisfy our debt obligations, to obtain additional debt or to refinance our obligations on commercially reasonable terms would have a material adverse effect on our business, financial condition and results of operations.
Further, we currently receive senior unsecured and long-term debt and corporate quality ratings from Standard & Poor’s and Moody’s. Our ratings are subject to periodic review, and we cannot assure you that we will be able to retain our current or any future ratings. If our ratings are reduced from their current levels, this could further adversely affect our liquidity and our business, financial condition and results of operation.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under the Credit Agreement could terminate their commitments to loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation. Our level of indebtedness could have important consequences. For example, it could:

10


make it more difficult for us to satisfy our obligations with respect to the 6.50% Notes;
make it difficult for us to meet our obligations with respect to our contingent deferred acquisition payments;
limit our ability to increase our ownership stake in our Partner Firms;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other activities;
limit our flexibility in planning for, or reacting to, changes in our business and the advertising industry, which may place us at a competitive disadvantage compared to our competitors that have less debt; and
limit, particularly in concert with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds or take other actions.
Despite our current debt levels, we may be able to incur substantially more indebtedness, which could further increase the risks associated with our leverage.
We may incur substantial additional indebtedness in the future. The terms of our Credit Agreement and the indenture governing the 6.50% Notes permit us and our subsidiaries to incur additional indebtedness subject to certain limitations. If we or our subsidiaries incur additional indebtedness, the related risks that we face could increase.
We may be subject to adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax liabilities given the ultimate tax determination is uncertain.
We are a Canada-domiciled multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.
We are a holding company dependent on our subsidiaries for our ability to service our debt.
MDC is a holding company with no operations of our own. Consequently, our ability to service our debt is dependent upon the earnings from the businesses conducted by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Although our operating subsidiaries have generally agreed to allow us to consolidate and “sweep” cash, subject to the timing of payments due to noncontrolling interest holders, any distribution of earnings to us from our subsidiaries is contingent upon the subsidiaries’ earnings and various other business considerations. Also, our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of common stock to participate in those assets, will be structurally subordinated to the claims of that subsidiary’s creditors. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
Item 1B. Unresolved Staff Comments
None.


11


Item 2. Properties
See Note 18 of the Consolidated Financial Statements included in this Annual Report for a discussion of the Company’s lease commitments and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the impact of occupancy costs on the Company’s operating expenses.
The Company maintains office space in many cities in the United States, Canada, Europe, Asia and South America. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. This office space is in suitable and well-maintained condition for MDC’s current operations. All of the Company’s materially important office space is leased from third parties with varying expiration dates. Certain of these leases are subject to rent reviews or contain various escalation clauses and certain of our leases require our payment of various operating expenses, which may also be subject to escalation. In addition, leases related to the Company’s non-U.S. businesses are denominated in currencies other than U.S. dollars and are therefore subject to changes in foreign exchange rates.
The table below provides a brief description of all locations in which office space is maintained and the related reportable segment.
Reportable Segment
 
Office Locations
Global Integrated Agencies
 
Los Angeles, New York, Boulder, Detroit, Cleveland, Canada, Sweden, UK, Netherlands, China, Australia, Singapore, Germany, and Brazil.
Domestic Creative Agencies
 
New York, Minneapolis, San Francisco, and Canada.
Specialist Communications
 
San Francisco, Los Angeles, New York, Washington D.C., Canada, UK, China, France, Singapore, Japan, Germany and Thailand.
Media Services
 
New York, Detroit, Atlanta, Los Angeles, and Austin.
All Other
 
New York, Portland, San Francisco, Ft. Lauderdale, San Diego, Austin, Redwood City, Canada, India, Singapore, UK.
Corporate
 
New York
Item 3. Legal Proceedings
Dismissal of Class Action Litigation
On August 7, 2015, Roberto Paniccia issued a Statement of Claim in the Ontario Superior Court of Justice in the City of Brantford, Ontario seeking to certify a class action suit naming the following as defendants: MDC, former CEO Miles S. Nadal, former CAO Michael C. Sabatino, CFO David Doft and BDO U.S.A. LLP. The Plaintiff alleged violations of section 138.1 of the Ontario Securities Act (and equivalent legislation in other Canadian provinces and territories) as well as common law misrepresentation based on allegedly materially false and misleading statements in the Company’s public statements, as well as omitting to disclose material facts with respect to the SEC investigation. The Company vigorously defended this suit. On June 1, 2018, the Ontario Superior Court of Justice dismissed the plaintiff’s motion to proceed with the class action. Plaintiff agreed not to appeal this dismissal decision, and in July 2018 the Court entered a final order approving the dismissal of this claim.
Closing of Antitrust Investigation
In June 2016, one of the Company’s subsidiaries received a subpoena from the U.S. Department of Justice Antitrust Division (the “DOJ”) concerning the DOJ’s ongoing investigation of production practices in the advertising industry. The Company and its subsidiary fully cooperated with this confidential investigation. By letter dated November 5, 2018 (received by the Company’s counsel on November 12, 2018), the DOJ confirmed that the foregoing investigation had been closed. The DOJ did not bring any charges against the Company, its subsidiary or any of their respective employees.
Item 4. Mine Safety Disclosures
Not applicable.

12


PART II
Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of Class A Subordinate Voting Shares
The principal market on which the Company’s Class A subordinate voting shares are traded is the NASDAQ National Market (“NASDAQ”) (symbol: “MDCA”). There is no established public trading market for our Class B voting shares. As of February 28, 2019, the approximate number of registered holders of our Class A subordinate voting shares and Class B voting shares, including those whose shares are held in nominee name, was 220 and 87, respectively.
Dividend Practice
On November 3, 2016, the Company announced that it was suspending its quarterly dividend indefinitely.
The payment of any future dividends will be at the discretion of MDC’s board of directors and will depend upon limitations contained in our Credit Agreement and the indenture governing the 6.50% Notes, future earnings, capital requirements, our general financial condition and general business conditions.
Securities Authorized for Issuance Under Equity Compensation Plans
As of December 31, 2018, the total number of securities remaining available for future issuance is 2,766,602, including 111,866 securities to be issued upon exercise of outstanding options.
Equity Compensation Plans Not Approved by Security Holders
In connection with an employment agreement with a Senior Vice President, the Company awarded an inducement grant of 25,000 restricted shares of the Company’s Class A subordinated voting stock. The restricted stock award will vest on June 11, 2021, subject to continued employment.
See Note 13 of the Notes to the Consolidated Financial Statements included herein for further information on our equity compensation plans.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
For the twelve months ended December 31, 2018, the Company made no open market purchases of its Class A shares or its Class B shares. Pursuant to its Credit Agreement and the indenture governing the 6.50% Notes, the Company is currently limited from repurchasing its shares in the open market.
During 2018, the Company’s employees surrendered Class A shares in connection with the required tax withholding resulting from the vesting of restricted stock. The Company paid these withholding taxes on behalf of the related employees. These Class A shares were subsequently retired and no longer remain outstanding as of December 31, 2018. The following table details those shares withheld during the fourth quarter of 2018:
Period
 
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Program
 
Maximum Number of Shares That May Yet Be Purchased Under the Program
10/1/2018 - 10/31/2018
 
116

 
$
2.47

 

 

11/1/2018 - 11/30/2018
 

 

 

 

12/1/2018 - 12/31/2018
 

 

 

 

Total
 
116

 
$
2.47

 

 



13


Item 6. Selected Financial Data
The following selected financial data should be read in connection with Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related Notes that are included in this Form 10-K.
 
Years Ended December 31,
  
2018
 
2017
 
2016
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
  
(Dollars in Thousands, Except per Share Data)
Operating Data
  

 
  

 
  

 
  

 
  

Revenues
$
1,476,203

 
$
1,513,779

 
$
1,385,785

 
$
1,326,256

 
$
1,223,512

Operating income
$
9,696

 
$
131,959

 
$
48,431

 
$
72,110

 
$
87,749

Net income (loss)
$
(111,948
)
 
$
257,223

 
$
(40,621
)
 
$
(20,119
)
 
$
6,739

Stock-based compensation included in income (loss)
$
18,416

 
$
24,350

 
$
21,003

 
$
17,796

 
$
17,696

Net income (loss) per Share
  

 
  

 
  

 
  

 
  

Basic
  

 
  

 
  

 
  

 
  

Net income (loss) attributable to MDC Partners Inc. common shareholders
$
(2.31
)
 
$
3.72

 
$
(0.89
)
 
$
(0.58
)
 
$
(0.06
)
Diluted
  

 
  

 
  

 
  

 
  

Net income (loss) attributable to MDC Partners Inc. common shareholders
$
(2.31
)
 
$
3.71

 
$
(0.89
)
 
$
(0.58
)
 
$
(0.06
)
Cash dividends declared per share
$

 
$

 
$
0.63

 
$
0.84

 
$
0.74

Financial Position Data
  

 
  

 
  

 
  

 
  

Total assets
$
1,611,573

 
$
1,698,892

 
$
1,577,378

 
$
1,577,625

 
$
1,633,751

Total debt
$
954,585

 
$
883,119

 
$
936,436

 
$
728,883

 
$
727,988

Redeemable noncontrolling interests
$
51,546

 
$
62,886

 
$
60,180

 
$
69,471

 
$
194,951

Deferred acquisition consideration
$
83,695

 
$
122,426

 
$
229,564

 
$
347,104

 
$
205,368

Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (the “FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). As a result of the adoption of ASC 606, in 2018 revenue declined $51.6 million and operating income increased $10.7 million. See Notes 3 and 19 of the Notes to the Consolidated Financial Statements for additional information regarding the adoption of ASC 606.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, references to a “fiscal year” means the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal year 2018 means the period beginning January 1, 2018, and ending December 31, 2018).
The Company reports its financial results in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”). In addition, the Company has included certain non-U.S. GAAP financial measures and ratios, which it believes provide useful supplemental information to both management and readers of this report in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by U.S. GAAP and should not be construed as an alternative to other titled measures determined in accordance with U.S. GAAP.
Two such non-U.S. GAAP measures are “organic revenue growth” or “organic revenue decline” that refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth, excluding the impact of adoption of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 606 (“ASC 606”). The acquisition (disposition) component is calculated by aggregating the prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of in the current period. The organic revenue growth (decline) component reflects the constant currency impact (a) of the change in revenue of the Partner Firms which the Company has held throughout each of the comparable periods presented and (b) “non-GAAP acquisitions (dispositions), net.” Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the

14


previous year, the revenue effect from such acquisitions as if they had been owned during that entire year or same period as the current reportable period, taking into account their respective pre-acquisition revenues for the applicable periods and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year. The Company believes that isolating the impact of acquisition activity, foreign currency impacts and changes in accounting standards is an important and informative component to understand the overall change in the Company’s consolidated revenue. The change in the consolidated revenue that remains after these adjustments illustrates the underlying financial performance of the Company’s businesses. Specifically, it represents the impact of the Company’s management oversight, investments and resources dedicated to supporting the businesses’ growth strategy and operations. In addition, it reflects the network benefit of inclusion in the broader portfolio of firms that includes, but is not limited to, cross-selling and sharing of best practices. This approach isolates changes in performance of the business that take place under the Company’s stewardship, whether favorable or unfavorable, and thereby reflects the potential benefits and risks associated with owning and managing a talent-driven services business.
Accordingly, during the first twelve months of ownership by the Company, the organic growth measure may credit the Company with growth from an acquired business that is dependent on work performed prior to the acquisition date, and may include the impact of prior work in progress, existing contracts and backlog of the acquired businesses. It is the presumption of the Company that positive developments that may have taken place at an acquired business during the period preceding the acquisition will continue to result in value creation in the post-acquisition period.
While the Company believes that the methodology used in the calculation of organic revenue change is consistent with our closest U.S. competitors, the calculations may not be comparable to similarly titled measures presented by other publicly traded companies in other industries. Additional information regarding the Company’s acquisition activity as it relates to potential revenue growth is provided in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Certain Factors Affecting our Business.”
All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
Recent Developments
Strategic Review Process and Successor CEO Search
On September 20, 2018, the Company announced its evaluation of potential strategic alternatives, which included, among other things, the possible sale of the Company. On September 12, 2018, the Company announced that Scott Kauffman’s employment as the Company’s Chief Executive Officer would terminate, which it did effective December 31, 2018. The strategic review process proceeded in parallel with the Company’s search to identify a successor CEO.
During the interim period in which the Company was evaluating strategic alternatives and assessing potential new CEO candidates, the Board of Directors has established an executive committee comprised of David Doft (EVP, Chief Financial Officer), Mitchell Gendel (EVP, General Counsel), Stephanie Nerlich (EVP, Partner Development and Talent), and David Ross (EVP, Strategy & Corporate Development) (collectively, the “Executive Committee”). Effective January 1, 2019, the Executive Committee assumed the role and responsibilities of the Chief Executive Officer until the appointment of a successor. The Board of Directors’ Strategic Alternatives Committee, comprised of three independent directors of the Board (Irwin Simon, Larry Kramer and Anne Marie O’Donovan), have provided oversight for the Executive Committee during the interim period.
The Company has completed the strategic review process and search for a new CEO. On March 14, 2019, the Company entered into a securities purchase agreement with Stagwell Agency Holdings LLC (“Stagwell Holdings”), an affiliate of Stagwell Group LLC (“Stagwell”), pursuant to which Stagwell Holdings agreed to purchase, (i) 14,285,714 newly authorized Class A shares for $3.50 per share for an aggregate purchase price of $50 million and (ii) 50,000 newly authorized Series 6 convertible preference shares for an aggregate purchase price of $50 million. See Note 23 of the Notes to the Consolidated Financial Statements included herein for additional information.
Effective March 18, 2019, the Company’s Board of the Directors appointed Mark Penn as the Chief Executive Officer (succeeding the Executive Committee) and as a director of the Board. Mr. Penn is manager of Stagwell.
Amendment to Credit Agreement
On March 12, 2019 (the “Amendment Effective Date”), the Company, Maxxcom Inc. (a subsidiary of the Company) (“Maxxcom”) and each of their subsidiaries party thereto entered into an amendment (the “Amendment”) to the existing senior secured revolving credit facility, dated as of May 3, 2016 (as amended, the “Credit Agreement”), among the Company, Maxxcom Inc., a Delaware corporation, each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent (“Wells Fargo”), and the lenders from time to time party thereto.

15


The Amendment provides financial covenant relief by increasing the total leverage ratio applicable on each testing date after the Amendment Effective Date through the period ending December 31, 2020 from 5.5:1.0 to 6.25:1.0. The total leverage ratio applicable on each testing date after December 31, 2020 will revert to 5.5:1.0.
In addition, the Company is permitted to apply a portion of the net cash proceeds of the Kingsdale Sale (as defined below) to the prepayment, redemption, defeasement, purchase or other acquisition of the Company’s senior unsecured debt.
In connection with the Amendment, the Company reduced the aggregate maximum amount of revolving commitments provided by the lenders under the Credit Agreement to $250.0 million from $325.0 million. The foregoing summary description of the Amendment to the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement. The Amendment is filed as an exhibit to this Form 10-K.
Sale of Kingsdale
On March 8, 2019, the Company consummated the sale of its Kingsdale business (the "Kingsdale Sale"), including operations in Toronto and New York City, back to the Kingsdale Founder and CEO. As consideration for the sale, the Company was paid cash plus the assumption of certain liabilities totaling approximately $50 million in the aggregate.


16


Executive Summary
MDC conducts its business through its network of Partner Firms, the “Advertising and Communications Group,” who provide a comprehensive array of marketing and communications services for clients both domestically and globally. The Company’s objective is to create shareholder value by building, growing and acquiring market-leading Partner Firms that deliver innovative, value-added marketing, activation, communications and strategic consulting to their clients. Management believes that shareholder value is maximized with an operating philosophy of “Perpetual Partnership” with proven committed industry leaders in marketing communications.
MDC manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenues, operating expenses and capital expenditures. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth by client industry vertical, (iii) growth from existing clients and the addition of new clients, (iv) growth by primary discipline (v) growth from currency changes, (vi) growth from acquisitions, and (vii) the impact of dispositions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our Partner Firms. These indicators may include a Partner Firm’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Company’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
The Company aggregates operating segments into one of the four reportable segments and combines and discloses those operating segments that do not meet the aggregation criteria in the All Other category. Due to changes in the Company’s internal management and reporting structure during 2018, reportable segment results for 2017 and prior periods presented have been recast to reflect the reclassification of certain businesses between segments. Prior period segment information included herein has been adjusted to reflect this change. See Note 16 of the Notes to the Consolidated Financial Statements included herein for a description of each of our reportable segments and All Other category and further information regarding the reclassification of certain business between segments.
In addition, MDC reports its corporate office expenses incurred in connection with the strategic resources provided to the Partner Firms, as well as certain other centrally managed expenses that are not fully allocated to the Partner Firms as Corporate. Corporate provides client and business development support to the Partner Firms as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions. Additional expenses managed by the corporate office that are directly related to the Partner Firms are allocated to the appropriate reportable segment and the All Other category.
Certain Factors Affecting Our Business
Overall Factors Affecting our Business and Results of Operations.  The most significant factors include national, regional and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the creative product that our Partner Firms offer. A client may choose to change marketing communication firms for a number of reasons, such as a change in top management and the new management wants to retain an agency that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Further, global clients are trending to consolidate the use of numerous marketing communication firms to just one or two. Another factor in a client changing firms is the agency’s campaign or work product is not providing results and they feel a change is in order to generate additional revenues.
Clients will generally reduce or increase their spending or outsourcing needs based on their current business trends and profitability.
Acquisitions and Dispositions. The Company’s strategy includes acquiring ownership stakes in well-managed businesses with world class expertise and strong reputations in the industry. The Company provides post-acquisition support to Partner Firms in order to help accelerate growth, including in areas such as business and client development (including cross-selling), corporate communications, corporate development, talent recruitment and training, procurement, legal services, human resources, financial management and reporting, and real estate utilization, among other areas. As most of the Company’s acquisitions remain as stand-alone entities post acquisition, integration is typically implemented promptly, and new Partner Firms can begin to tap into the full range of MDC’s resources immediately. Often the acquired businesses may begin to tap into certain MDC resources in the pre-acquisition period, such as talent recruitment or real estate. The Company engaged in a number of acquisition and disposition transactions during the 2009 to 2018 period, which affected revenues, expenses, operating income and net income. Additional information regarding acquisitions and dispositions is provided in Note 5 of the Notes to the Consolidated Financial Statements included herein for further information.

17


Foreign Exchange Fluctuation.  Our financial results and competitive position are affected by fluctuations in the exchange rate between the U.S. dollar and non-U.S. dollar, primarily the Canadian dollar. See also “Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Foreign Exchange.”
Seasonality.  Historically, with some exceptions, we generate the highest quarterly revenues during the fourth quarter in each year. The fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur. See Note 22 of the Notes to the Consolidated Financial Statements for information relating to the Company’s quarterly results.

Results of Operations for the Years Ended December 31, 2018, 2017 and 2016:
 
Years Ended December 31,
 
2018
 
2017
 
2016
 
(Dollars in Thousands)

Revenue:
 
 
 
 
 
Global Integrated Agencies
$
698,872

 
$
797,347

 
$
712,793

Domestic Creative Agencies
102,063

 
104,417

 
97,199

Specialist Communications
179,065

 
172,565

 
170,285

Media Services
140,753

 
166,216

 
157,696

All Other
355,450

 
273,234

 
247,812

Total
$
1,476,203

 
$
1,513,779

 
$
1,385,785

 
 
 
 
 
 
Segment operating income (loss):
 
 
 
 
 
Global Integrated Agencies*
$
44,868

 
$
71,857

 
$
59,193

Domestic Creative Agencies
18,552

 
19,333

 
18,089

Specialist Communications
18,629

 
20,728

 
1,940

Media Services*
(51,196
)
 
13,126

 
5,554

All Other*
34,000

 
47,771

 
7,773

Corporate
(55,157
)
 
(40,856
)
 
(44,118
)
Total
$
9,696

 
$
131,959

 
$
48,431

 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
Interest expense and finance charges, net
$
(67,075
)
 
$
(64,364
)
 
$
(65,050
)
Foreign exchange transaction gain (loss)
(23,258
)
 
18,137

 
(213
)
Loss on redemption of Notes

 

 
(33,298
)
Other, net
230

 
1,346

 
414

Income (loss) before income taxes and equity in earnings (losses) of non-consolidated affiliates
(80,407
)
 
87,078

 
(49,716
)
Income tax expense (benefit)
31,603

 
(168,064
)
 
(9,404
)
Income (loss) before equity in earnings (losses) of non-consolidated affiliates
(112,010
)
 
255,142

 
(40,312
)
Equity in earnings of non-consolidated affiliates
62

 
2,081

 
(309
)
Net income (loss)
(111,948
)
 
257,223

 
(40,621
)
Net income attributable to the noncontrolling interest
(11,785
)
 
(15,375
)
 
(5,218
)
Net income (loss) attributable to MDC Partners Inc.
$
(123,733
)
 
$
241,848

 
$
(45,839
)
* An impairment charge primarily for goodwill and other intangible assets was recognized within the Global Integrated Agencies for $21,008, within Media Services for $52,041 and within the All Other category for $4,691 for the twelve months ended December 31, 2018. See Note 10 of the Notes to the Consolidated Financial Statements for information related to the impairment.

18



 
Years Ended December 31,
 
2018
 
2017
 
2016
 
(Dollars in Thousands)

Depreciation and amortization:
 
 
 
 
 
Global Integrated Agencies
$
23,571

 
$
23,831

 
$
21,555

Domestic Creative Agencies
1,583

 
1,582

 
1,811

Specialist Communications
4,252

 
4,714

 
6,637

Media Services
3,119

 
4,052

 
6,091

All Other
12,909

 
8,197

 
8,768

Corporate
762

 
1,098

 
1,584

Total
$
46,196

 
$
43,474

 
$
46,446

 
 
 
 
 
 
Stock-based compensation:
 
 
 
 
 
Global Integrated Agencies
$
8,521

 
$
15,225

 
$
12,177

Domestic Creative Agencies
1,100

 
887

 
651

Specialist Communications
714

 
2,954

 
3,629

Media Services
318

 
656

 
318

All Other
3,104

 
2,494

 
1,703

Corporate
4,659

 
2,134

 
2,525

Total
$
18,416

 
$
24,350

 
$
21,003

 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
Global Integrated Agencies
$
10,088

 
$
20,760

 
$
16,486

Domestic Creative Agencies
951

 
1,168

 
1,153

Specialist Communications
3,618

 
1,288

 
2,741

Media Services
966

 
3,842

 
5,266

All Other
4,574

 
5,877

 
3,753

Corporate
67

 
23

 
33

Total
$
20,264

 
$
32,958

 
$
29,432


YEAR ENDED DECEMBER 31, 2018 COMPARED TO YEAR ENDED DECEMBER 31, 2017
Consolidated Results of Operations
Revenues
Revenue was $1.48 billion for the twelve months ended December 31, 2018, compared to revenue of $1.51 billion for the twelve months ended December 31, 2017. See the Advertising and Communications Group section below for a discussion regarding consolidated revenues.
Operating Income
Operating income for the twelve months ended December 31, 2018 was $9.7 million, compared to $132.0 million for the twelve months ended December 31, 2017, representing a decrease of $122.3 million, or 92.7%. Operating income decreased by $108.0 million, or 62.5% in the Advertisement and Communication Group, while Corporate operating expenses increased by $14.3 million, or 35.0%. The decrease in operating income was largely due to an increase in the goodwill and other assets impairment charge and a decrease in revenue. The impact of adoption of ASC 606 increased operating income by $10.7 million. Adjusted to exclude the impact of the adoption of ASC 606, operating loss would have been $1.0 million, representing a decrease of $133.0 million compared to 2017.

19


Interest Expense and Finance Charges, Net
Interest expense and finance charges, net, for the twelve months ended December 31, 2018 was $67.1 million compared to $64.4 million for the twelve months ended December 31, 2017, representing an increase of $2.7 million. The increase was primarily due to higher interest rates in the current year as well as increased borrowings under the Company’s revolving Credit Agreement in comparison to the prior period. See Note 12 of the Notes to the Consolidated Financial Statements for additional information on the Credit Agreement.
Foreign Exchange Transaction Gain (Loss)
Foreign exchange loss was $23.3 million for the twelve months ended December 31, 2018 compared to a foreign exchange gain of $18.1 million for the twelve months ended December 31, 2017. The foreign exchange loss is primarily attributable to the weakening of the Canadian dollar against the U.S. dollar in 2018. In 2017, foreign exchange gain was primarily attributable to the Canadian dollar strengthening against the U.S. dollar. The change primarily related to U.S. dollar denominated indebtedness that is an obligation of our Canadian parent company.
Goodwill and Other Asset Impairment
The Company recognized an impairment of goodwill and other assets of $80.1 million in the twelve months ended December 31, 2018. The impairment primarily consists of the write-down of goodwill equal to the excess carrying value above the fair value of a reporting unit one in each of the Global Integrated Agencies reportable segment, the Media Services reportable segment and within the All Other category and the full write-down of a trademark for a reporting unit also within the Global Integrated Agencies reportable segment. The trademark is no longer in active use given its merger with another reporting unit in the third quarter of 2018. See Note 10 of the Notes to the Consolidated Financial Statements for information related to the merger.
Other, Net
Other income, net was $0.2 million for the twelve months ended December 31, 2018 compared to $1.3 million for the twelve months ended December 31, 2017.
Income Tax Expense (Benefit)
Income tax expense for the twelve months ended December 31, 2018 was $31.6 million (associated with a pretax loss of $80.4 million) compared to an income tax benefit of $168.1 million (associated with pretax income of $87.1 million) for the twelve months ended December 31, 2017. Income tax expense in 2018 included the impact of establishing a valuation allowance of $49.4 million primarily associated with Canadian deferred tax assets and the income tax benefit in 2017 included the impact of a release of a valuation allowance of $232.6 million in certain jurisdictions as well as the incremental tax benefit associated with the Tax Cuts and Jobs Act of 2017.
Equity in Earnings (Losses) of Non-Consolidated Affiliates
Equity in earnings (losses) of non-consolidated affiliates was income of $0.1 million for the twelve months ended December 31, 2018 compared to $2.1 million for the twelve months ended December 31, 2017.
Noncontrolling Interests
Net income attributable to noncontrolling interests was $11.8 million for the twelve months ended December 31, 2018, compared to $15.4 million for the twelve months ended December 31, 2017, representing a decrease of $3.6 million. This decrease was attributable to a reduction in operating results at Partner Firms with a noncontrolling interest.
Net Income (Loss) Attributable to MDC Partners Inc. Common Shareholders
As a result of the foregoing, net loss attributable to MDC Partners Inc. common shareholders for the twelve months ended December 31, 2018 was $132.1 million or $2.31 per diluted share, compared to a net income of $205.6 million, or $3.71 per diluted share reported for the twelve months ended December 31, 2017.
Advertising and Communications Group
The following discussion provides additional detailed disclosure for each of the Company’s four reportable segments, plus the “All Other” category, within the Advertising and Communications Group.
Revenue in the Advertising and Communications Group was $1.48 billion for the twelve months ended December 31, 2018, compared to revenue of $1.51 billion for the twelve months ended December 31, 2017, representing a decrease of $37.6 million, or 2.5%. The impact of the adoption of ASC 606 reduced revenue by $51.6 million, or 3.4%, primarily due to the shift in treatment of third-party costs from principal to agent for various client arrangements of certain Partner Firms and timing of revenue recognition. The other components of the change in revenue included a negative foreign exchange impact of $0.5 million, and an adverse impact from dispositions of $14.7 million, or 1.0%, offset by revenue from acquisitions of $28.3 million, or 1.9%, and an increase in revenue from existing Partner Firms of $0.9 million. Excluding the impact of the adoption of ASC 606, the change in revenue was attributable

20


to contribution from new client wins that was partially offset by client losses and reduction in spending by some clients. Additionally, the change in revenue was driven by growth in categories including transportation, consumer products, financials and healthcare offset by declines in automotive, and retail.



21


The components of the change in revenues in the Advertising and Communications Group for the twelve months ended December 31, 2018 were as follows:
 
Total
 
United States
 
Canada
 
Other
 
 
 
 
$
 
%
 
$
 
%
 
$
 
%
 
$
 
%
 
 
(Dollars in Thousands)
 
 
December 31, 2017
 
$
1,513,779

 
 
 
$
1,172,364

 
 
 
$
123,093

 
 
 
$
218,322

 
 
 
Components of revenue change:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange impact
 
(463
)
 
 %
 

 
 %
 
(301
)
 
(0.2
)%
 
(162
)
 
(0.1
)%
 
Non-GAAP acquisitions (dispositions), net
 
13,644

 
0.9
 %
 
14,466

 
1.2
 %
 

 
 %
 
(822
)
 
(0.4
)%
 
Impact of adoption of ASC 606
 
(51,636
)
 
(3.4
)%
 
(20,699
)
 
(1.8
)%
 
1,288

 
1.0
 %
 
(32,225
)
 
(14.8
)%
 
Organic revenue growth (decline)
 
879

 
0.1
 %
 
(12,940
)
 
(1.1
)%
 
(79
)
 
(0.1
)%
 
13,898

 
6.4
 %
 
Total Change
 
$
(37,576
)
 
(2.5
)%
 
$
(19,173
)
 
(1.6
)%
 
$
908

 
0.7
 %
 
$
(19,311
)
 
(8.8
)%
 
December 31, 2018
 
$
1,476,203

 
 
 
$
1,153,191

 
 
 
$
124,001

 
 
 
$
199,011

 
 
 
The Company also utilizes a non-GAAP metric called organic revenue growth (decline), as defined above. For the twelve months ended December 31, 2018, organic revenue growth was $0.9 million, or 0.1%, of which growth of $7.6 million, or 0.5% was generated through acquired Partner Firms and decline of $6.7 million or 0.4% was related to Partner Firms which the Company has held throughout each of the comparable periods presented.
The table below provides a reconciliation between the revenue in the Advertising and Communications Group from acquired businesses in the statement of operations to non-GAAP acquisitions (dispositions), net for the twelve months ended December 31, 2018:
Acquisition Revenue Reconciliation
 
Global Integrated
 
Specialist Communications
 
Media Services
 
All Other
 
Total
GAAP revenue from 2018 acquisitions (1)
 
$

 
$
1,276

 
$

 
$
34,841

 
$
36,117

Impact of adoption of ASC 606 from 2018 acquisition
 

 

 

 
(168
)
 
(168
)
Contribution to non-GAAP organic revenue (growth)
 

 

 

 
(7,606
)
 
(7,606
)
Prior year revenue from dispositions
 
(1,910
)
 

 
(11,569
)
 
(1,220
)
 
(14,699
)
Non-GAAP acquisitions (dispositions), net
 
$
(1,910
)
 
$
1,276

 
$
(11,569
)
 
$
25,847

 
$
13,644

(1) 
Operating segments not impacted by revenue from acquired Partner Firms in the 2018 and 2017 were excluded. See Note 5 of the Notes to the Consolidated Financial Statements included herein for further information pertaining to the acquisitions and dispositions.
(2) 
Contributions to organic revenue growth (decline) represents the change in revenue, measured on a constant currency basis, relative to the comparable pre-acquisition period for acquired businesses that is included in the Company’s organic revenue growth (decline) calculation.

The geographic mix in revenues in the Advertising and Communications Group for the years ended December 31, 2018 and 2017 was as follows:
 
2018
 
2017
United States
78.1
%
 
77.5
%
Canada
8.4
%
 
8.1
%
Other
13.5
%
 
14.4
%

22


The impact of the adoption of ASC 606 decreased revenue in the United States by $20.7 million or 1.8%, and $32.2 million or 14.8% in other regions outside of North America with a minimal impact in Canada.
Organic revenue performance was attributable to a contribution from net client wins and additional spending by some clients. The United States had organic revenue decline of $12.9 million, or 1.1%. In Canada, organic revenue declined $0.1 million, or 0.1%. Organic revenue growth outside of North America was $13.9 million, or 6.4%, consisting of contributions from existing Partner Firms due to net new client wins.
The negative foreign exchange impact of $0.5 million was primarily due to the fluctuation of the U.S. dollar against British Pound, Euro, Canadian dollar and Swedish Króna.
The change in expenses and operating profit as a percentage of revenue in the Advertising and Communications Group for the years ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Advertising and Communications
Group
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Revenue
 
$
1,476,203

 
 
 
$
1,513,779

 
 
 
$
(37,576
)
 
(2.5
)%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
991,215

 
67.1
%
 
1,023,476

 
67.6
%
 
(32,261
)
 
(3.2
)%
Office and general expenses
 
296,961

 
20.1
%
 
271,874

 
18.0
%
 
25,087

 
9.2
 %
Depreciation and amortization
 
45,434

 
3.1
%
 
42,376

 
2.8
%
 
3,058

 
7.2
 %
Goodwill and other asset impairment
 
77,740

 
5.3
%
 
3,238

 
0.2
%
 
74,502

 
NM

 
 
$
1,411,350

 
95.6
%
 
$
1,340,964

 
88.6
%
 
$
70,386

 
5.2
 %
Operating profit
 
$
64,853

 
4.4
%
 
$
172,815

 
11.4
%
 
$
(107,962
)
 
(62.5
)%
The decrease in operating profit was largely due to an increase in the goodwill and other asset impairment charge, and a decrease in revenue. The impact of the adoption of ASC 606 increased operating profit by $10.7 million. Excluding the impact of the adoption of ASC 606, operating profit would have been $54.1 million, representing a decrease of $118.7 million compared to 2017.
The change in the categories of expenses as a percentage of revenue in the Advertising and Communications Group for the years ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Advertising and Communications
Group
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Direct costs (1)
 
$
213,354

 
14.5
 %
 
$
260,776

 
17.2
 %
 
$
(47,422
)
 
(18.2
)%
Staff costs (2)
 
872,459

 
59.1
 %
 
829,568

 
54.8
 %
 
42,891

 
5.2
 %
Administrative costs
 
189,063

 
12.8
 %
 
187,687

 
12.4
 %
 
1,376

 
0.7
 %
Deferred acquisition consideration
 
(457
)
 
 %
 
(4,898
)
 
(0.3
)%
 
4,441

 
(90.7
)%
Stock-based compensation
 
13,757

 
0.9
 %
 
22,217

 
1.5
 %
 
(8,460
)
 
(38.1
)%
Depreciation and amortization
 
45,434

 
3.1
 %
 
42,376

 
2.8
 %
 
3,058

 
7.2
 %
Goodwill and other asset impairment
 
77,740

 
5.3
 %
 
3,238

 
0.2
 %
 
74,502

 
NM

Total operating expenses
 
$
1,411,350

 
95.6
 %
 
$
1,340,964

 
88.6
 %
 
$
70,386

 
5.2
 %
(1)
Excludes staff costs.
(2)
Excludes stock-based compensation and is comprised of amounts reported in both cost of services sold and office and general expenses.
The decrease in direct costs was primarily attributed to the adoption of ASC 606 in which various client arrangements of certain Partner Firms previously accounted for as principal are now accounted for as agent under ASC 606. The change resulted in a decrease in third-party costs included in revenue of approximately $62.4 million. This decrease was partially offset by revenue of an acquisition during the year.

23


The increase in staff costs was primarily attributed to contributions from an acquired Partner Firm, and higher costs to support the growth of certain Partner Firms, partially offset by staffing reductions at other Partner Firms.
Deferred acquisition consideration change for the twelve months ended December 31, 2018 and 2017 was primarily due to the aggregate performance of certain Partner Firms in the respective years relative to the previously projected expectations.
Stock-based compensation change for the twelve months ended December 31, 2018 was primarily due to the aggregate performance of certain Partner Firms in 2018 relative to the previously projected expectations.
The goodwill and other asset impairment in 2018 primarily consists of the write-down of goodwill equal to the excess carrying value above the fair value of a reporting unit one in each of the Global Integrated Agencies reportable segment, the Media Services reportable segment and within the All Other category and the full write-down of a trademark for a reporting unit also within the Global Integrated Agencies reportable segment in comparison to a partial impairment in 2017. For more information see Note 10 of the Notes to the Consolidated Financial Statements included herein.
Global Integrated Agencies
The change in revenue and expenses as a percentage of revenue in the Global Integrated Agencies reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Global Integrated Agencies
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Revenue
 
$
698,872

 
 
 
$
797,347

 
 
 
$
(98,475
)
 
(12.4
)%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
464,304

 
66.4
%
 
549,443

 
68.9
%
 
(85,139
)
 
(15.5
)%
Office and general expenses
 
145,121

 
20.8
%
 
149,475

 
18.7
%
 
(4,354
)
 
(2.9
)%
Depreciation and amortization
 
23,571

 
3.4
%
 
23,831

 
3.0
%
 
(260
)
 
(1.1
)%
Goodwill and other asset impairment
 
21,008

 
0.3
%
 
2,741

 
0.3
%
 
18,267

 
NM

 
 
$
654,004

 
93.6
%
 
$
725,490

 
91.0
%
 
$
(71,486
)
 
(9.9
)%
Operating profit
 
$
44,868

 
6.4
%
 
$
71,857

 
9.0
%
 
$
(26,989
)
 
(37.6
)%
The impact of the adoption of ASC 606 reduced the Global Integrated Agencies reportable segment revenue by $56.3 million or 7.1%. The other components of the change included a decline in revenue from existing Partner Firms of $39.5 million, or 5.0%, due to cutbacks and spending delays from several existing clients and a slower pace of conversion of new business, partially offset by client wins, and a negative impact from dispositions of $1.9 million or 0.2%, as well as a negative foreign exchange impact of $0.8 million, or 0.1%.
The decrease in operating profit was primarily attributed to the goodwill and other asset impairment recognized in 2018. In addition, lower revenues were mostly offset by a decline in expenses, as outlined below. The impact of the adoption of ASC 606 increased operating profit by $7.4 million. Excluding the impact of the adoption of ASC 606, operating profit would have been $37.5 million in 2018, representing a decrease of $34.4 million compared to 2017.

24


The change in the categories of expenses as a percentage of revenue in the Global Integrated Agencies reportable segment for the years ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Global Integrated Agencies
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Direct costs (1)
 
$
44,358

 
6.3
 %
 
$
108,688

 
13.6
%
 
$
(64,330
)
 
(59.2
)%
Staff costs (2)
 
461,286

 
66.0
 %
 
465,522

 
58.4
%
 
(4,236
)
 
(0.9
)%
Administrative
 
100,604

 
14.4
 %
 
104,879

 
13.2
%
 
(4,275
)
 
(4.1
)%
Deferred acquisition consideration
 
(5,344
)
 
(0.8
)%
 
4,604

 
0.6
%
 
(9,948
)
 
(216.1
)%
Stock-based compensation
 
8,521

 
1.2
 %
 
15,225

 
1.9
%
 
(6,704
)
 
(44.0
)%
Depreciation and amortization
 
23,571

 
3.4
 %
 
23,831

 
3.0
%
 
(260
)
 
(1.1
)%
Goodwill and other asset impairment
 
21,008

 
0.3
 %
 
2,741

 
%
 
18,267

 
 %
Total operating expenses
 
$
654,004

 
93.6
 %
 
$
725,490

 
91.0
%
 
$
(71,486
)
 
(9.9
)%
(1)
Excludes staff costs.
(2)
Excludes stock-based compensation and is comprised of amounts reported in both cost of services sold and office and general expenses.
The decrease in direct costs was primarily attributed to the adoption of ASC 606 in which various client arrangements of certain Partner Firms previously accounted for as principal are now accounted for as agent under ASC 606. The change resulted in a decrease in third-party costs included in revenue of $62.4 million.
The decrease in staff costs was attributed to staffing reductions at certain Partner Firms.
Deferred acquisition consideration change for the twelve months ended December 31, 2018 was primarily due to the aggregate performance of certain Partner Firms in 2018 relative to the previously projected expectations.
Stock-based compensation change for the twelve months ended December 31, 2018 was primarily due to the aggregate performance of certain Partner Firms in 2018 relative to the previously projected expectations.
The goodwill and other asset impairment in 2018 primarily consist of the write-down of goodwill equal to the excess carrying value above the fair value of a reporting unit and the full write-down of a trademark for a reporting unit in comparison to a partial impairment in 2017. For more information see Note 10 of the Notes to the Consolidated Financial Statements included herein.
Domestic Creative Agencies
The change in revenue and expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Domestic Creative Agencies
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Revenue
 
$
102,063

 
 
 
$
104,417

 
 
 
$
(2,354
)
 
(2.3
)%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
59,888

 
58.7
%
 
61,623

 
59.0
%
 
(1,735
)
 
(2.8
)%
Office and general expenses
 
22,040

 
21.6
%
 
21,879

 
21.0
%
 
161

 
0.7
 %
Depreciation and amortization
 
1,583

 
1.6
%
 
1,582

 
1.5
%
 
1

 
0.1
 %
 
 
$
83,511

 
81.8
%
 
$
85,084

 
81.5
%
 
$
(1,573
)
 
(1.8
)%
Operating profit
 
$
18,552

 
18.2
%
 
$
19,333

 
18.5
%
 
$
(781
)
 
(4.0
)%
The impact of the adoption of ASC 606 increased revenue in the Domestic Creative Agencies reportable segment by $1.2 million or 1.2%. In addition, revenue from existing Partner Firms declined $3.6 million or 3.5%.
The adoption of ASC 606 did not have a significant impact on operating profit.

25


The change in the categories of expenses as a percentage of revenue in the Domestic Creative Agencies reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Domestic Creative Agencies
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Direct costs (1)
 
$
2,888

 
2.8
%
 
$
4,362

 
4.2
%
 
$
(1,474
)
 
(33.8
)%
Staff costs (2)
 
66,020

 
64.7
%
 
65,814

 
63.0
%
 
206

 
0.3
 %
Administrative
 
11,920

 
11.7
%
 
12,080

 
11.6
%
 
(160
)
 
(1.3
)%
Deferred acquisition consideration
 

 
%
 
359

 
0.3
%
 
(359
)
 
(100.0
)%
Stock-based compensation
 
1,100

 
1.1
%
 
887

 
0.8
%
 
213

 
24.0
 %
Depreciation and amortization
 
1,583

 
1.6
%
 
1,582

 
1.5
%
 
1

 
0.1
 %
Total operating expenses
 
$
83,511

 
81.8
%
 
$
85,084

 
81.5
%
 
$
(1,573
)
 
(1.8
)%
(1)
Excludes staff costs.
(2)
Excludes stock-based compensation and is comprised of amounts reported in both cost of services sold and office and general expenses.
The decrease in direct costs was primarily attributed to lower costs to support the decline in revenue of certain Partner Firms.
Specialist Communications
The change in revenue and expenses as a percentage of revenue in the Specialist Communications reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Specialist Communications
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Revenue
 
$
179,065

 
 
 
$
172,565

 
 
 
$
6,500

 
3.8
 %
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
122,710

 
68.5
%
 
117,195

 
67.9
%
 
5,515

 
4.7
 %
Office and general expenses
 
33,474

 
18.7
%
 
29,928

 
17.3
%
 
3,546

 
11.8
 %
Depreciation and amortization
 
4,252

 
2.4
%
 
4,714

 
2.7
%
 
(462
)
 
(9.8
)%
 
 
$
160,436

 
89.6
%
 
$
151,837

 
88.0
%
 
$
8,599

 
5.7
 %
Operating profit
 
$
18,629

 
10.4
%
 
$
20,728

 
12.0
%
 
$
(2,099
)
 
(10.1
)%
The impact of the adoption of ASC 606 increased revenue in the Specialist Communications reportable segment by $1.2 million or 0.7%. The other components of the change included growth in revenue from existing Partner Firms of $3.8 million or 2.2%, revenue contributions of $1.3 million or 0.7% from an acquired Partner Firm.
The decrease in operating profit was due to the increase in revenues, offset by higher operating expenses, as outlined below.

26


The change in the categories of expenses as a percentage of revenue in the Specialist Communications reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Specialist Communications
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Direct costs (1)
 
$
45,627

 
25.5
%
 
$
42,754

 
24.8
 %
 
$
2,873

 
6.7
 %
Staff costs (2)
 
85,767

 
47.9
%
 
79,873

 
46.3
 %
 
5,894

 
7.4
 %
Administrative
 
22,969

 
12.8
%
 
21,961

 
12.7
 %
 
1,008

 
4.6
 %
Deferred acquisition consideration
 
1,107

 
0.6
%
 
(419
)
 
(0.2
)%
 
1,526

 
(364.2
)%
Stock-based compensation
 
714

 
0.4
%
 
2,954

 
1.7
 %
 
(2,240
)
 
(75.8
)%
Depreciation and amortization
 
4,252

 
2.4
%
 
4,714

 
2.7
 %
 
(462
)
 
(9.8
)%
Total operating expenses
 
$
160,436

 
89.6
%
 
$
151,837

 
88.0
 %
 
$
8,599

 
5.7
 %
(1)
Excludes staff costs.
(2)
Excludes stock-based compensation and is comprised of amounts reported in both cost of services sold and office and general expenses.
The increase in direct and staff costs were primarily attributed to supporting the growth in revenue of certain Partner Firms, and contributions from an acquired Partner Firm.
The change in the deferred acquisition consideration adjustment was due to the aggregate performance of certain Partner Firms in 2018 as compared to their performance in 2017.
Stock-based compensation declined for the twelve months ended December 31, 2018 primarily due to the aggregate performance of certain Partner Firms in 2018 relative to the previously projected expectations.
Media Services
The change in revenues and expenses as a percentage of revenue in the Media Services reportable segment for the twelve months ended December 31, 2018 and 2017 was as follows:
 
 
2018
 
2017
 
Change
Media Services
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
%
 
 
(Dollars in Thousands)
Revenue
 
$
140,753

 
 
 
$
166,216

 
 
 
$
(25,463
)
 
(15.3
)%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
102,117

 
72.6
 %
 
111,850

 
67.3
%
 
(9,733
)
 
(8.7
)%
Office and general expenses
 
34,672

 
24.6
 %
 
36,691

 
22.1
%
 
(2,019
)
 
(5.5
)%
Depreciation and amortization
 
3,119

 
2.2
 %
 
4,549

 
2.7
%
 
(1,430
)
 
(31.4
)%
Goodwill impairment
 
52,041

 
37.0
 %
 

 
%
 
52,041

 
100.0
 %
 
 
$
191,949

 
136.4
 %
 
$
153,090

 
92.1
%
 
$
38,859

 
25.4
 %
Operating profit (loss)
 
$
(51,196
)
 
(36.4
)%
 
$
13,126

 
7.9
%
 
$