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Segment Information | 6 Months Ended
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Jun. 30, 2017
Segment Reporting [Abstract] |
Segment Information | 11. Segment Information The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions regarding resource allocation for the segment and assess its performance. During June 2016, the Company entered into a Separation and Release Agreement with its former Chief Operating Officer in connection with a limited restructuring of the Company’s corporate department. This change to the Company’s management structure was designed to provide the CODM greater visibility into the operating performance of individual Partner Firms and resulted in a corresponding change in the level at which the CODM reviews the operating results of such Partner Firms. As a result, in the third quarter of 2016, the Company concluded that each Partner Firm represents an operating segment. The Company then determined to aggregate its Partner Firms to report in one reportable segment along with an “all other” category. For the quarter ended June 30, 2017, based in part of feedback from the SEC Staff, the Company performed a comprehensive review of its reportable segments to determine if aggregation of its operating segments is consistent with the principles detailed in ASC 280. Based on this review, it was determined that the Company misapplied ASC 280 in its identification of reportable segments following the change in the Company’s management structure. The Company incorrectly concluded that there was one reportable segment since the third quarter of 2016. This misapplication of the standard had no impact on the Company’s consolidated statements of operations, balance sheets, or cash flows. Based on the comprehensive review, the Company reassessed the aggregation of its operating segments, identified four new reportable segments and revised the composition of the “All Other” category. This determination was based upon a quantitative analysis of the expected and historic average long-term profitability for each Partner Firm, together with an assessment of the qualitative characteristics set forth in Financial Accounting Standards Board Accounting Standards Codification Topic 280-10-50. The four reportable segments that meet the appropriate aggregation criteria are as follows: “Global Integrated Agencies”; “Domestic Creative Agencies”; “Specialist Communications”; and “Media Services". In addition, the Company combines and discloses those Partner Firms that do not meet the aggregation criteria as “All Other”. The Company also reports corporate expenses, as further detailed below, as “Corporate”. All segments follow the same basis of presentation and accounting policies as those described in Note 1 and 2, respectively.
• | The Global Integrated Agencies reportable segment is comprised of the Company’s six global, integrated Partner Firms with broad marketing communication capabilities, including advertising, branding, digital, social media, design and production services, serving multinational clients around the world. Each Partner Firm within this segment represents an operating segment which includes 72andSunny, Anomaly, Crispin Porter + Bogusky, Doner, Forsman & Bodenfors, and kbs+. These Partner Firms share similar characteristics related to (i) the nature of their services; (ii) the type of global clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these Partner Firms compete with each other for new business and from time to time have business move between them. The Company believes the expected historic and average long-term profitability is similar among the Partner Firms aggregated in the Global Integrated Agencies segment.
• | The Domestic Creative Agencies reportable segment is comprised of five Partner Firms that are national advertising agencies leveraging creative capabilities at their core. Each Partner Firm within this segment represents an operating segment which includes Colle + McVoy, Laird+Partners, Mono Advertising and Union. These Partner Firms share similar characteristics related to (i) the nature of their creative advertising services; (ii) the type of domestic client accounts and the methods used to provide services; and (iii) the extent to which they may be impacted by domestic economic and policy factors within North America. In addition, these Partner Firms compete with each other for new business and from time to time have business move between them. The Company believes the historic and expected average long-term profitability is similar among the Partner Firms aggregated in the Domestic Creative Agencies segment.
• | The Specialist Communications reportable segment is comprised of seven Partner Firms that are each communications agencies with core service offerings in public relations and related communications services. Each Partner Firm within this segment represents an operating segment which includes Allison & Partners, Hunter PR, HL Group Partners, Kwittken, Luntz Global, Sloane & Company and Veritas. These Partner Firms share similar characteristics related to (i) the nature of their public relations and communication services, including content creation, social media and influencer marketing; (ii) the type of client accounts and the methods used to provide services; (iii) the extent to which they may be impacted by domestic economic and policy factors within North America; and (iv) the regulatory environment regarding public relations and social media. In addition, these Partner Firms compete with each other for new business and from time to time have business move between them. The Company believes the expected historic and average long-term profitability is similar among the Partner Firms aggregated in the Specialist Communications segment.
• | The Media Services reportable segment is comprised of a unique single operating segment known as MDC Media Partners. MDC Media Partners is comprised of the Company’s network of stand-alone agencies with media buying and planning as their core competency, including the integrated platform Assembly. The agencies within this single operating segment share a Chief Executive Officer and Chief Financial Officer, who have operational oversight of these agencies. These agencies provide other services, including influencer marketing, content, insights & analytics, out-of-home, paid search, social media, lead generation, programmatic, artificial intelligence, and corporate barter. MDC Media Partners operates primarily in North America.
• | All Other consists of the Company’s remaining Partner Firms that provide a range of diverse marketing communication services, but generally do not have similar services offerings or financial characteristics as those aggregated in the reportable segments. Each Partner Firm within the All Other category represents an operating segment which includes 6Degrees, Bruce Mau Design, Concentric Partners, Civilian, Gale Partners, Hello Design, Kenna, Kingsdale, Northstar Research Partners, Redscout, Relevent, Source Marketing, Team, Vitro, Yamamoto and Y Media Labs. The nature of the specialist services provided by these Partner Firms vary among each other and from those Partner Firms aggregated into the reportable segments. This results in these Partner Firms having current and long-term performance expectations inconsistent with those Partner Firms aggregated in the reportable segments.
• | Corporate consists of 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. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the Partner Firms, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. 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.
Prior year results have been recast to reflect the new segment reporting.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Revenue: |  |  |  |  |  |  |
Global Integrated Agencies | $ | 206,233 |  |  | $ | 162,105 |  |  | $ | 382,956 |  |  | $ | 312,618 |
Domestic Creative Agencies | 22,390 |  |  | 22,466 |  |  | 43,300 |  |  | 44,093 |
Specialist Communications | 44,116 |  |  | 42,791 |  |  | 84,800 |  |  | 82,697 |
Media Services | 35,695 |  |  | 31,373 |  |  | 70,939 |  |  | 62,200 |
All Other | 82,098 |  |  | 78,312 |  |  | 153,237 |  |  | 144,481 |
Corporate | — |  |  | — |  |  | — |  |  | — |
Total | $ | 390,532 |  |  | $ | 337,047 |  |  | $ | 735,232 |  |  | $ | 646,089 |
Segment operating income (loss): |  |  |  |  |  |  |
Global Integrated Agencies | $ | 13,975 |  |  | $ | 11,069 |  |  | $ | 13,946 |  |  | $ | 21,443 |
Domestic Creative Agencies | 4,324 |  |  | 5,527 |  |  | 7,847 |  |  | 10,091 |
Specialist Communications | 4,301 |  |  | 4,428 |  |  | 8,635 |  |  | 6,759 |
Media Services | 3,555 |  |  | 1,753 |  |  | 6,197 |  |  | 3,044 |
All Other | 9,915 |  |  | 14,091 |  |  | 16,413 |  |  | 17,209 |
Corporate | (9,689 | ) |  | (12,801 | ) |  | (18,258 | ) |  | (25,931 | )
Total | $ | 26,381 |  |  | $ | 24,067 |  |  | $ | 34,780 |  |  | $ | 32,615 |
Other Income (Expense): |  |  |  |  |  |  |
Other income, net | 6,596 |  |  | 26 |  |  | 9,163 |  |  | 15,538 |
Interest expense and finance charges, net | (15,510 | ) |  | (16,971 | ) |  | (32,051 | ) |  | (65,666 | )
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 17,467 |  |  | 7,122 |  |  | 11,892 |  |  | (17,513 | )
Income tax expense | 4,641 |  |  | 4,744 |  |  | 8,610 |  |  | 3,110 |
Income (loss) before equity in earnings of non-consolidated affiliates | 12,826 |  |  | 2,378 |  |  | 3,282 |  |  | (20,623 | )
Equity in earnings (loss) of non-consolidated affiliates | 641 |  |  | (290 | ) |  | 502 |  |  | (61 | )
Net income (loss) | 13,467 |  |  | 2,088 |  |  | 3,784 |  |  | (20,684 | )
Net income (loss) attributable to the noncontrolling interest | (2,214 | ) |  | (1,254 | ) |  | (3,097 | ) |  | (2,113 | )
Net income attributable to MDC Partners Inc. | $ | 11,253 |  |  | $ | 834 |  |  | $ | 687 |  |  | $ | (22,797 | )
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Depreciation and amortization: |  |  |  |  |  |  |
Global Integrated Agencies | $ | 5,579 |  |  | $ | 4,471 |  |  | $ | 11,530 |  |  | $ | 8,875 |
Domestic Creative Agencies | $ | 366 |  |  | $ | 469 |  |  | $ | 726 |  |  | $ | 910 |
Specialist Communications | $ | 1,221 |  |  | $ | 2,476 |  |  | $ | 2,437 |  |  | $ | 4,934 |
Media Services | $ | 1,011 |  |  | $ | 1,057 |  |  | $ | 2,016 |  |  | $ | 2,099 |
All Other | $ | 2,290 |  |  | $ | 2,453 |  |  | $ | 4,346 |  |  | $ | 4,931 |
Corporate | $ | 299 |  |  | $ | 510 |  |  | $ | 609 |  |  | $ | 907 |
Total | $ | 10,766 |  |  | $ | 11,436 |  |  | $ | 21,664 |  |  | $ | 22,656 |
Stock-based compensation: |  |  |  |  |  |  |
Global Integrated Agencies | $ | 3,073 |  |  | $ | 3,730 |  |  | $ | 6,052 |  |  | $ | 6,140 |
Domestic Creative Agencies | $ | 171 |  |  | $ | 147 |  |  | $ | 325 |  |  | $ | 337 |
Specialist Communications | $ | 1,087 |  |  | $ | 607 |  |  | $ | 1,605 |  |  | $ | 992 |
Media Services | $ | 154 |  |  | $ | 58 |  |  | $ | 314 |  |  | $ | 117 |
All Other | $ | 537 |  |  | $ | 338 |  |  | $ | 1,072 |  |  | $ | 1,175 |
Corporate | $ | 518 |  |  | $ | 650 |  |  | $ | 1,122 |  |  | $ | 1,454 |
Total | $ | 5,540 |  |  | $ | 5,530 |  |  | $ | 10,490 |  |  | $ | 10,215 |
Capital expenditures: |  |  |  |  |  |  |
Global Integrated Agencies | $ | 8,790 |  |  | $ | 4,384 |  |  | $ | 15,689 |  |  | $ | 7,699 |
Domestic Creative Agencies | $ | 264 |  |  | $ | 463 |  |  | $ | 550 |  |  | $ | 698 |
Specialist Communications | $ | 175 |  |  | $ | 1,381 |  |  | $ | 467 |  |  | $ | 2,127 |
Media Services | $ | 271 |  |  | $ | 337 |  |  | $ | 1,284 |  |  | $ | 626 |
All Other | $ | 2,241 |  |  | $ | 1,340 |  |  | $ | 3,163 |  |  | $ | 2,266 |
Corporate | $ | 2 |  |  | $ | 4 |  |  | $ | 3 |  |  | $ | 32 |
Total | $ | 11,743 |  |  | $ | 7,909 |  |  | $ | 21,156 |  |  | $ | 13,448 |
Segment assets are not reported to, or used by, the Company's CODM to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed. A summary of the Company’s revenue by geographic area, based on the location in which the services originated, is set forth in the following table:
| United States |  | Canada |  | Other |  | Total
Revenue |  |  |  |  |  |  |  |  |  |  |
Three Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |
2017 | $ | 304,463 |  |  | $ | 30,583 |  |  | $ | 55,486 |  |  | $ | 390,532 |
2016 | $ | 272,992 |  |  | $ | 33,614 |  |  | $ | 30,441 |  |  | $ | 337,047 |
Six Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |
2017 | $ | 579,145 |  |  | $ | 57,053 |  |  | $ | 99,034 |  |  | $ | 735,232 |
2016 | $ | 525,190 |  |  | $ | 62,020 |  |  | $ | 58,879 |  |  | $ | 646,089 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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