UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K/A
 
Current Report Pursuant to Section 13
of the Securities Exchange Act of 1934
 
 
Date of Report (Date Earliest Event reported) — December 4, 2006 (November 15, 2006)
 
 
MDC PARTNERS INC.
 
(Exact name of registrant as specified in its charter)

 
 
 
Ontario
(Jurisdiction of Incorporation)
001-13718
(Commission File Number)
98-0364441
(IRS Employer Identification No.)
 
45 Hazelton Ave., Toronto, Ontario, Canada M5R 2E3
(Address of principal executive offices and zip code)
 
 
(416) 960-9000
(Registrant’s Telephone Number)
 
 
Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 
⃞
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
⃞
Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12)
 
⃞
Pre−commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b))
 
⃞ 
Pre−commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e− 4(c)) 
 
 
MDC PARTNERS INC.
 
TABLE OF CONTENTS
 
 
PART I
 
 
Page
Item 2.01
Acquisition or Disposition of Assets
2
Item 9.01
Financial Statements and Exhibits
2
 
Signatures
7
 
 
References in this Report on Form 8-K/A 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.

This Form 8-K/A is an amendment to the registrant’s current report on Form 8-K, filed on November 17, 2006 (relating to the registrant’s sale of stock of its Secured Products International Group) to file the pro forma financial information omitted from the initial filing of the Current Report.

Item 2.01
Completion of Acquisition or Disposition of Assets.
 
On November 3, 2006, the Company entered into a definitive agreement to sell the stock of its Secured Products International Group (“SPI”) to Secured Products (Cayman), Inc. (an affiliate of H.I.G. Capital), in exchange for consideration equal to approximately $27 million. On November 15, 2006, the Company consummated this transaction. Consideration for the sale of SPI was paid in the form of a $20 million cash payment at closing and additional $1 million annual payments over the next five years. In addition, the Company received a 7.5% equity interest in the newly-formed entity acquiring SPI. The net cash proceeds from the closing of the sale of SPI were used to repay borrowings under the Company’s credit facility.
 
Item 9.01
Financial Statements and Exhibits.
 
(b) Pro Forma Financial Information 
 
2

MDC PARTNERS INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of United States dollars, except share and per share amounts)
 
   
YEAR ENDED DECEMBER 31, 2005 
  
 
  
Historical
MDC
Partners
Inc.
  
Pro Forma
Adjustments
  
Notes
  
Pro Forma
Results
  
Revenue:
  
 
  
 
  
 
  
 
  
Services
  
$
363,362
  
$
 
        
$
363,362
  
Products
    
80,100
    
(80,100
)
  
3(i
)
  
-
  
 
    
443,462
    
(80,100
)
        
363,362
  
Operating Expenses:
                          
Cost of services sold
    
211,811
                
211,811
  
Cost of products sold
    
49,876
    
(49,876
)
  
3(i
)
  
-
  
Office and general expenses
    
131,231
    
(23,255
)
  
3(i
)
  
107,976
  
Depreciation and amortization
    
27,483
    
(4,340
)
  
3(i
)
  
23,143
  
Goodwill charges
    
473
    
-
    
3(i
)
  
473
  
 
    
420,874
    
(77,471
)
        
343,403
  
Operating Profit
    
22,588
    
(2,629
)
        
19,959
  
 
                          
Other Income (Expenses):
                          
Gain (loss) on sale of assets and settlement of long-term debt
    
615
    
(137
)
  
3(i
)
  
478
  
Foreign exchange gain (loss)
    
(887
)
  
967
    
3(i
)
  
80
  
Interest expense
    
(9,260
)
  
1,548
    
3(i), 3(ii
)
  
(7,712
)
Interest income
    
369
    
(21
)
  
3(i
)
  
348
  
 
(9,163
)
2,357
    
(6,806
)
 
                          
Income from continuing operations before income taxes, equity in affiliates and minority interests
    
13,425
    
(272
)
  
3(i
)
  
13,153
  
Income Taxes
    
2,157
    
153
    
3(i), 3(iii
)
  
2,310
  
 
                          
Income from continuing operations before equity in affiliates and minority interests
    
11,268
    
(425
)
        
10,843
  
Equity in earnings of non consolidated affiliates
    
1,402
    
-
          
1,402
  
Minority interests in income of consolidated subsidiaries
    
(21,192
)
  
-
          
(21,192
)
 
                          
Loss from Continuing Operations
     (8,522 )
$
(425
)
         (8,947 )
Income from Discontinued Operations
     573     425           998  
Net Loss
  
$
(7,949
)
$
-
        
$
(7,949
)
                           
Earnings/(Loss) Per Common Share:
                          
Basic:
                          
Continuing Operations
  
$
(0.37
)
            
$
(0.38
)
Discontinued Operations
  
$
0.03
              
$
0.04
  
Net Loss
  
$
(0.34
)
            
$
(0.34
)
Diluted
                          
Continuing Operations
  
$
(0.37
)
            
$
(0.38
)
Discontinued Operations
  
$
0.03
              
$
0.04
  
Net Loss
  
$
(0.34
)
            
$
(0.34
)
Weighted Average Number of Common Shares:
                          
Basic
    
23,298,795
                
23,298,795
  
Diluted
    
23,298,795
                
23,298,795
  
 
3

MDC PARTNERS INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of United States dollars, except share and per share amounts
 
   
YEAR ENDED DECEMBER 31, 2004
  
 
  
Historical
MDC
Partners
Inc.
  
Pro Forma
Adjustments
  
Notes
  
Pro Forma
Results
  
Revenue:
  
 
  
 
  
 
  
 
  
Services
  
$
247,073
  
$
 
        
$
247,073
  
Products
    
69,739
    
(69,739
)
  
3(i
)
      
 
    
316,812
    
(69,739
)
        
247,073
  
Operating Expenses:
    
                   
Cost of services sold
    
158,965
    
-
          
158,965
  
Cost of products sold
    
42,301
    
(42,301
)
  
3(i
)
  
-
  
Office and general expenses
    
99,349
    
(23,456
)
  
3(i
)
  
75,893
  
Other charges (recoveries)
    
(2,693
)
  
-
          
(2,693
)
Depreciation and amortization
    
13,738
    
(3,489
)
  
3(i
)
  
10,249
  
 
    
311,660
    
(69,246
)
        
242,414
  
 
    
                   
Operating Profit (loss)
    
5,152
    
(493
)
        
4,659
 
 
    
                   
Other Income (Expenses):
    
                   
Gain (loss) on sale of assets and settlement of long-term debt
    
14,844
    
(2,838
)
  
3(i
)
  
12,006
  
Foreign exchange gain (loss)
    
(498
)
  
647
    
3(i
)
  
149
  
Interest expense
    
(8,790
)
  
1,571
    
3(i), 3(ii
)
  
(7,219
)
Interest income
    
685
    
(37
)
  
3(i
)
  
648
  
 
    
6,241
    
(657
)
        
5,584
  
 
    
                   
Income from continuing operations before income taxes, equity in affiliates and minority interests
    
11,393
    
(1,150
)
        
10,243
  
Income Taxes
    
818
    
(199
)
  
3(i), 3(iii
)
  
619
  
 
    
                   
Income from continuing operations before equity in affiliates and minority interests
    
10,575
    
(951
)
        
9,624
  
Equity in earnings of non consolidated affiliates
    
3,651
    
-
          
3,651
  
Minority interests in income of consolidated subsidiaries
    
(9,235
)
  
-
          
(9,235
)
 
    
                   
Income from Continuing Operations
     4,991  
$
(951
)
         4,040  
Income (Loss) from Discontinued Operations
    
(7,148
)
  
951
          
(6,197
)
Net Loss
  
$
(2,157
)
$
-
        
$
(2,157
)
                           
Earnings/(Loss) Per Common Share:
                          
Basic:
                          
Continuing Operations
  
$
0.23
              
$
0.19
  
Discontinued Operations
  
$
(0.33
)
            
$
(0.29
)
Net Loss
  
$
(0.10
)
            
$
(0.10
)
Diluted
                          
Continuing Operations
  
$
0.22
          
 
$
0.18
  
Discontinued Operations
  
$
(0.31
)
            
$
(0.27
)
Net Loss
  
$
(0.09
)
            
$
(0.09
)
Weighted Average Number of Common Shares:
                          
Basic
     21,353,268                 21,353,268  
Diluted
     22,817,823                 22,817,823  

4

MDC PARTNERS INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of United States dollars, except share and per share amounts
 
   
YEAR ENDED DECEMBER 31, 2003
  
 
  
Historical
MDC
Partners
Inc.
  
Pro Forma
Adjustments
  
Notes
  
Pro Forma
Results
  
Revenue:
  
 
  
 
  
 
  
 
  
Services
  
$
164,850
  
$
—
    
 
$
164,850
  
Products
    
113,927
    
(68,691
)
  
3(i
)
  
45,236
  
 
    
278,777
    
(68,691
)
  
   
210,086
  
Operating Expenses:
          
   
       
Cost of services sold
    
105,908
    
—
    
   
105,908
  
Cost of products sold
    
56,654
    
(43,320
)
  
3(i
)
  
13,334
  
Office and general expenses
    
94,241
    
(21,831
)
  
3(i
)
  
72,410
  
Other charges
    
1,333
    
-
    
   
1,333
  
Depreciation and amortization
    
8,485
    
(1,898
)
  
3(i
)
  
6,587
  
Write-down of fixed assets
    
8,126
    
(8,126
)
  
3(i
)
  
-
  
Goodwill charges
    
10,012
    
(9,179
)
  
3(i
)
  
833
  
 
    
284,759
    
(84,354
)
        
200,405
  
 
                          
Operating Profit (Loss)
    
(5,982
)
  
15,663
          
9,681
  
 
                          
Other Income (Expenses):
                          
Gain (loss) on sale of assets and settlement of long-term debt
    
43,792
    
(4
)
  
3(i
)
  
43,788
  
Foreign exchange loss
    
(2,023
)
  
681
    
3(i
)
  
(1,342
)
Interest expense
    
(17,673
)
  
1,591
    
3(i), 3(ii
)
  
(16,082
)
Interest income
    
937
    
(39
)
  
3(i
)
  
898
  
 
    
25,033
    
2,229
          
27,262
  
 
                          
Income from continuing operations before income taxes, equity in affiliates and minority interests
    
19,051
    
17,892
          
36,943
  
Income Taxes
    
5,770
    
471
    
3(i), 3(iii
)
  
6,241
  
 
                          
Income from continuing operations before equity in affiliates and minority interests
    
13,281
    
17,421
          
30,702
  
Equity in earnings of non consolidated affiliates
    
4,929
    
-
          
4,929
  
Minority interests in income of consolidated subsidiaries
    
(4,508
)
  
(1,536
)
        
(6,044
)
 
          
   
       
Income from Continuing Operations
     13,702     15,885           29,587  
Loss from Discontinued Operations
    
(1,271
)
  
(15,885
)
        
(17,156
)
Net Income
  
$
12,431
  
$
-
        
$
12,431
  
                           
Earnings/(Loss) Per Common Share:
                          
Basic:
                          
Continuing Operations
  
$
0.77
              
$
1.66
  
Discontinued Operations
  
$
(0.07
)
            
$
(0.96
)
Net Income
  
$
0.70
                
0.70
  
Diluted
                          
Continuing Operations
  
$
0.70
          
 
$
1.44
  
Discontinued Operations
  
$
(0.05
)
            
$
(0.79
)
Net Loss
  
$
0.65
              
$
0.65
  
Weighted Average Number of Common Shares:
                          
Basic
     17,791,064                 17,791,064  
Diluted
     21,665,530                 21,665,530  

5

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except share and per share amounts)

1. Description of transaction:

On November 3, 2006, the Company entered into a definitive agreement to sell the stock of its Secured Products International Group (“SPI”) to Secured Products (Cayman), Inc. (an affiliate of H.I.G. Capital), in exchange for consideration equal to approximately $27 million. On November 15, 2006, the Company consummated this transaction. Consideration for the sale of SPI was paid in the form of a $20 million cash payment at closing and additional $1 million annual payments over the next five years. In addition, the Company received a 7.5% equity interest in the newly-formed entity acquiring SPI. The net cash proceeds from the closing of the sale of SPI were used to repay borrowings under the Company’s credit facility.

2. Basis of Presentation:

The accompanying unaudited pro forma consolidated statements of operations for the years ended December 31, 2005, 2004 and 2003 give effect to the disposition of SPI. The unaudited pro forma consolidated statements of operations presents our results as if the disposition of SPI had occurred on January 1, 2003. The unaudited pro forma consolidated statements of operations for the years ended December 31, 2005, 2004 and 2003 are based on our historical audited consolidated statements of operations.

The unaudited pro forma consolidated statements of operations include, in our opinion, all material adjustments necessary to reflect the disposition of SPI. The unaudited pro forma consolidated statements of operations do not purport to represent what the Company’s actual results of operations excluding the disposition of SPI would have been, nor do they purport to predict or indicate our results of operations at any future date or for any future period. The unaudited pro forma consolidated statements of operations should be read in conjunction with our audited consolidated financial statements and the related notes thereto. The audited consolidated financial statements have been prepared by management in accordance, with the United States generally accepted accounting principles (“GAAP”). The accounting policies used in the preparation of the unaudited pro forma consolidated statements of operations are consistent with those used by the Company in the preparation of the consolidated financial statements as of and for the year ended December 31, 2005.

3. Pro forma assumptions and adjustments:

The unaudited pro forma consolidated statement of operations for the years ended December 31, 2005, 2004 and 2003 incorporates the following assumptions and adjustments:

(i)
The disposition of SPI has been treated as a discontinued operation. 
(ii)
The Company has allocated interest expense to discontinued operations of $1,207, $1,198 and $1,339 for each of the years ended December 31, 2005, 2004 and 2003 respectively. The allocated amounts are based on net proceeds of $19,600 and the effective interest borrowing rate of 6.2%, 6.1% and 6.8% for the years ended December 31, 2005, 2004 and 2003, respectively.
(iii)
The tax effect of the allocated interest above.
 
(c)
Exhibits.
 
10.1
Stock Purchase Agreement, dated November 3, 2006, by and among the Company (as seller), Secured Products (Cayman), Inc. (as purchaser) and H.I.G. Capital Management, Inc. relating to the sale of the Company's Secured Products International Group (incorporated by reference to the Company's Form 10-Q filed on November 9, 2006).

6
 
Signatures 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned hereunto duly authorized.

 
 
 
 
 
Date: December 4, 2006
 
MDC Partners Inc.
 
 
 
 
 
 
 
By:
 
/s/ Mitchell Gendel
Mitchell Gendel
General Counsel & Corporate Secretary
         
 
7