1
FORM 6-K
Securities and Exchange Commission
washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of, May 2003
----------------------------------- ----------------
Commission File Number 001-13718
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MDC CORPORATION INC.
--------------------------------------------------------------------------------
(Translation of registrant's name into English)
45 Hazelton Avenue, Toronto, Ontario, Canada, M5R 2E3
--------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40F.
Form 20-F Form 40-F X
---------------- ----------------
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained
in this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
------------------ ------------------
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b) : 82-_______________
DOCUMENT INDEX
Document Page No.
1. News Release dated May 1, 2003 ("MDC Corporation Inc. 4
announces financial results for the first quarter ended
March 31, 2003").
2. News Release dated May 15, 2003 ("Custom Direct Income Fund 11
Agrees to Initial Public Offering of Units for Expected
Gross Proceeds of $ 110 Million - Total Gross Proceeds to
MDC Expected to Total $ 161.8 Million").
3 News Release dated May 15, 2003 ("Custom Direct Income Fund 14
Agrees to Initial Public Offering of Units for Expected
Gross Proceeds of $ 110 Million - Total Gross Proceeds to
MDC Expected to Total $ 161.8 Million").
4. News Release dated May 29, 2003 ("MDC Corporation Inc. and 17
Custom Direct Income Fund Close Initial Public Offering of
Units for Gross Proceeds of $110 Million; Total Gross
Proceeds to MDC Including Credit Facilities to Total $162
Million; Custom Direct Enters Into Currency and Interest
Rate Hedge Arrangements").
5. News Release dated May 29, 2003 ("MDC Corporation Inc. gives 21
notice of its intention to redeem all of its outstanding
10 1/2% senior subordinated notes due 2006 on June 30, 2003").
6. News Release dated May 30, 2003 ("MDC announces normal 24
course issuer bid").
7. First Quarter Report for Three Months Ended March 31, 2003. 28
Document 1
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
CONTACTS: Miles S. Nadal
Chairman, President & CEO
(416) 960-9000 Ext.223
Peter M. Lewis Walter Campbell
Executive Vice-President & CFO Senior Vice-President Finance
(416) 960-9000 Ext.272 (416) 960-9000 Ext.336
TSE Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
MDC CORPORATION INC. ANNOUNCES FINANCIAL RESULTS FOR THE
FIRST QUARTER ENDED MARCH 31, 2003
TORONTO, Ontario (May 1, 2003) - MDC Corporation Inc. ("MDC") of Toronto today
announced its financial results for the first quarter ended March 31, 2003.
Consolidated sales for the quarter decreased 23% to $209.8 million from the
$271.3 million reported for the same quarter of the previous year. Operating
income before other charges was $13.0 million, representing a decline of 56%
from the $29.9 million achieved in the quarter ended March 31, 2002. Net income
for the first quarter of 2003 was $1.3 million compared to $12.1 million in
2002. Fully diluted earnings per share for the quarter ended March 31, 2003 was
$0.05 compared to $0.45 last year. Fully diluted cashflow per share was $0.30, a
decrease of 29% over the $0.42 achieved in 2002.
The financial results for the first quarter of 2002 include the results of
operations that have been disposed. Pro forma 2002 results have been compiled
that exclude the results of divested operations and restructuring and other
charges. Comparing first quarter 2003 to pro forma 2002, sales increased by $4.8
million or 2% from $204.9 million and operating income before other charges
increased by $1.5 million or 13% from $11.5 million. On the same basis, net
income improved $0.3 million from the $1.0 million generated in the previous
year, and fully diluted earnings per share increased to $0.05 from $0.03.
"We are pleased with the progress we have made in improving all aspects of our
financial performance in our core operations despite a difficult economic
environment. In addition, the strengthening Canadian dollar negatively impacted
operating income by approximately $0.9 million," said Miles S. Nadal, Chairman,
President and Chief Executive Officer.
The Secure Transactions Division reported sales of $66.2 million for the first
quarter, down 49% from the $131.0 million achieved in the same quarter of 2002.
Operating income before other charges was $7.9 million, down from $24.3 million
in the 2002 first quarter. However, excluding divested operations, sales
increased by $1.6 million or 3% and operating income increased $1.9 million or
32%, primarily as a result of improvements at Custom Direct, MDC's U.S.
direct-to-consumer cheque operation, and at Metaca, the Canadian card operation,
partially offset by a reduction in the operating income of the stamp group.
As recently announced, revenues and operating income at Custom Direct have
improved due to an increase in both the number of orders and the average order
revenue with the continued migration of customers to higher value ordering
channels including the telephone and Internet. During the quarter, sales
increased 9.8% to US$29.0 million and operating income increased 23.9% to US$6.0
million over the same period last year. Operating income margins improved to
20.6% of sales from 18.2% a year earlier.
Ashton-Potter, our stamp operation, operated at low production levels in the
first quarter of 2003, but has recently been awarded a significant long-term
contract to produce definitive and commemorative postage stamp products for the
United States Postal Service. The increased volumes anticipated under this
contract are expected to positively impact revenues and operating profits in the
latter half of the year.
For the first quarter, Maxxcom achieved sales of $143.5 million, an increase of
$3.2 million from the $140.3 million recorded in the first quarter of 2002.
Operating income before other charges was $5.2 million, a decrease of $0.4
million or 7% from the $5.6 million generated in the first quarter of 2002. The
U.S. operations, which comprised 71% of revenues in the quarter, experienced
moderate growth, which was offset by the stronger Canadian dollar and reduced
revenues in Canada and the United Kingdom.
"The difficult economic environment continues to impact the advertising and
communications industry, particularly in the United States," said Mr. Nadal.
"However, we remain encouraged by the recent increase in business activity
witnessed by the Maxxcom subsidiaries, and are confident that profitability will
improve throughout the balance of the year."
"With regards to the balance sheet, we are pleased with the progress we have
made to date and remain committed to improving our working capital and reducing
the Corporation's indebtedness further," said Peter Lewis, Executive
Vice-President and Chief Financial Officer.
MDC recommenced plans for an initial public offering of its U.S.-based cheque
business, operated by Custom Direct, Inc., through Custom Direct Income Fund,
with the refiling of the preliminary prospectus with the securities regulatory
authorities in Canada.
"The revenue growth and improved operating performance achieved by Custom
Direct is expected to continue throughout 2003," commented Mr. Nadal. "MDC has
grown Custom Direct to become the second largest direct-to-consumer cheque
supplier in the U.S., and we are excited by the opportunity provided by the
income fund offering to crystallize the value that has been created."
About MDC Corporation Inc. ("MDC")
MDC is a publicly traded international business services organization with
operating units in Canada, the United States, United Kingdom and Australia. MDC
provides marketing communication services, through Maxxcom, and offers security
sensitive transaction products and services in four primary areas: personalized
transaction products such as personal and business cheques; electronic
transaction products such as credit, debit, telephone & smart cards; secure
ticketing products, such as airline, transit and event tickets, and stamps, both
postal and excise. MDC shares are traded on the Toronto Stock Exchange under the
symbol MDZ.A and on Nasdaq National Market under the symbol MDCA.
About Maxxcom Inc. ("Maxxcom")
Maxxcom, a subsidiary of MDC, is a multi-national business services company with
operating units in Canada, the United States and the United Kingdom. Maxxcom is
built around entrepreneurial partner firms that provide a comprehensive range of
communications services to clients in North America and the United Kingdom.
Services include advertising, direct marketing, database management, sales
promotion, corporate communications, marketing research, corporate identity and
branding, and interactive marketing. Maxxcom shares are traded on the Toronto
Stock Exchange under the symbol MXX.
This press release contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve risks and
uncertainties which may cause the actual results or objectives to be materially
different from those expressed or implied by such forward-looking statements.
Such factors include, among other things, the Company's financial performance;
changes in the competitive environment; adverse changes in the economy; ability
to maintain long-term relationships with customers; financing requirements and
other factors set forth in the Company's Form 40-F for its fiscal year ended
December 31, 2001 and subsequent SEC filings.
- ### -
MDC CORPORATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FIRST QUARTER 2003 and 2002
(Unaudited, $CDN 000's - except per share amounts)
Pro forma
For the Three Months Ended March 31, 2003 2002 2002*
----------------------------------------------------------------- ------------- -------------- --------------
Sales 209,758 271,305 204,933
Cost of sales 109,542 138,999 105,159
------------- -------------- --------------
Gross profit 100,216 132,306 99,774
Operating expenses 87,181 102,401 88,229
------------- -------------- --------------
Operating income before other income (charges) 13,035 29,905 11,545
------------- -------------- --------------
Other income (charges)
Restructuring, dispositions, and other charges - 9,544 -
Unrealized foreign exchange loss - (280) -
Amortization (5,378) (8,567) (5,215)
Interest, net (5,678) (10,157) (6,075)
------------- -------------- --------------
(11,056) (9,460) (11,290)
------------- -------------- --------------
Income before income taxes and minority interest 1,979 20,445 255
Income taxes (recovery) 636 4,631 (673)
------------- -------------- --------------
Income before minority interest 1,343 15,814 928
Minority interest (recovery) 9 3,679 (39)
------------- -------------- --------------
Net income for the period 1,334 12,135 967
============= ============== ==============
Cash Flow from operations 7,833 11,455 3,601
============= ============== ==============
Earnings Per Share
Net income
o Basic 0.05 0.69 0.03
o Fully Diluted 0.05 0.45 0.03
Cash Flow Per Share
o Basic 0.44 0.65 0.19
o Fully Diluted 0.30 0.42 0.14
Weighted average shares outstanding during the period
Earnings per share
o Basic 16,915,341 16,915,341 16,915,341
o Fully Diluted 16,951,759 27,606,645 16,921,345
Cashflow per share
o Basic 16,915,341 16,915,341 16,915,341
o Fully Diluted** 26,403,555 27,606,645 27,606,645
----------------------------------------------------------------- ------------- -------------- --------------
SEGMENTED INFORMATION - BY OPERATING DIVISION
Pro forma
For the Three Months Ended March 31, 2003 2002 2002
----------------------------------------------------------------- ------------- -------------- --------------
Secure Transactions
Sales 66,236 130,968 64,596
Operating Income 7,876 24,331 5,971
Maxxcom
Sales 143,522 140,337 140,337
Operating Income 5,159 5,574 5,574
----------------------------------------------------------------- ------------- -------------- --------------
* Pro forma results exclude the impact of restructuring, dispositions, and
other charges, foreign exchange, the results of divested operations and
removal of interest associated with indebtedness that has been repaid.
** The Company has the option to satisfy the $50,000 of 7% Convertible Notes
("Notes") with cash or Class A Subordinated Voting Shares ("Shares") at 95%
of the current share price. As a result, the fully diluted shares
outstanding include 9,451,796 (2002 - 10,351,967) Shares for the conversion
of the Notes at 95% of the average closing price of the Shares during the
period.
MDC CORPORATION INC.
CONSOLIDATED BALANCE SHEETS
($CDN 000's)
------------------------------------------------------------------------ ------------------ -----------------
As at As at
March 31, December 31,
2003 2002
(Unaudited) (Audited)
------------------------------------------------------------------------ ------------------ -----------------
ASSETS
Current
Cash and cash equivalents 48,108 59,615
Accounts receivable 108,808 106,419
Inventory 10,305 11,050
Prepaid expenses and sundry 12,568 9,886
------------------ -----------------
179,789 186,970
Capital and other assets 121,469 126,155
Goodwill 266,707 292,861
------------------ -----------------
567,965 605,986
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 154,840 168,550
Deferred revenue 23,703 17,517
Current portion of long-term indebtedness 5,806 6,450
------------------ -----------------
184,349 192,517
Long-term indebtedness 231,406 245,339
------------------ -----------------
415,755 437,856
------------------ -----------------
Minority interest 14,985 15,499
------------------ -----------------
Shareholders' equity
Share capital 144,542 144,542
Other paid-in capital 38,812 38,145
Cumulative translation adjustment 3,155 20,139
Retained earnings (deficit) (49,284) (50,195)
------------------ -----------------
137,225 152,631
------------------ -----------------
567,965 605,986
================== =================
Document 2
FOR IMMEDIATE RELEASE
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES
For: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Contacts:
MILES S. NADAL PETER M. LEWIS GRAHAM L. ROSENBERG
Chairman and Executive Vice-President Executive Vice-President
Chief Executive Officer and Chief Financial Officer MDC Corporation Inc.
MDC Corporation Inc. MDC Corporation Inc. Tel: (416) 960-9000, ext. 239
Tel: (416) 960-9000 ext. 223 Tel: (416) 960-9000 ext. 272
JOHN C. BROWNING BRIAN D. BRIGGS
President and Chief Executive Officer Chief Financial Officer
Custom Direct, Inc. Custom Direct, Inc.
Tel: (410) 679-3300 ext. 2202 Tel: (410) 679-3300 ext. 2262
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
MDC CORPORATION INC.
CUSTOM DIRECT INCOME FUND
Custom Direct Income Fund Agrees to
Initial Public Offering of Units for Expected Gross Proceeds of $110 Million
Total Gross Proceeds to MDC Expected to Total $161.8 Million
TORONTO - May 15, 2003 - MDC Corporation Inc. of Toronto
(TSX: MDZ.A; NASDAQ: MDCA) and Custom Direct Income Fund announced today that
they have entered into:
o an agreement to transfer to the Fund, indirectly, an 80% interest
in Custom Direct, Inc., the second largest participant in the
direct-to-consumer segment of U.S. cheque industry, and
o an underwriting agreement relating to an initial public offering
of units of the Fund expected to result in gross proceeds of $110
million (or $126.5 million assuming exercise of the underwriters'
over-allotment option for 1,650,000 units).
Custom Direct is also entering into arrangements which will
provide it with a $58.7 million (US$42.5 million) credit facility of which $51.8
million (US$37.5 million) will be drawn on closing under the term loan portion
of the facility and $6.9 million (US$5 million) will be a revolving facility
that will be undrawn at closing.
The gross proceeds of the offering and the term loan portion
of the credit facility (before commissions, fees and expenses) will total $161.8
million (or $178.3 million assuming exercise of the underwriters' over-allotment
option) and will be paid (net of commissions, fees and expenses) to MDC,
directly and through a subsidiary, for the 80% interest in Custom Direct. The
Fund is filing a final prospectus with the securities regulatory authorities in
each of the provinces and territories of Canada in connection with the offering.
After the offering, prior to the exercise of the underwriters' over-allotment
option, MDC will own 29.6% of the Fund (or 4,613,804 units) and a 20%
subordinated interest in the business (which it has agreed not to sell until
after December 31, 2003) for a fully diluted interest in the Fund of 43.6%.
The offering is being underwritten by a syndicate led by CIBC
World Markets Inc. and TD Securities Inc., which includes Scotia Capital Inc.,
BMO Nesbitt Burns Inc., National Bank Financial Inc. and Griffiths McBurney &
Partners. Closing of the offering is expected to occur on May 29, 2003.
"We are pleased with the success of the offering, which has
more than met our expectations. Our ability to crystalize significant value from
this investment is consistent with our previously announced plan of selling our
non-core businesses in order to repay our existing debt and increase our
liquidity," said Miles Nadal, Chairman and Chief Executive Officer of MDC.
"We are excited about our future prospects and the
flexibility the offering provides us to focus our resources on MDC's core
businesses," added Nadal.
About Custom Direct
Based in Maryland and Arkansas, Custom Direct has been selling
cheques and cheque related accessories across the United States since 1992 and
offers the industry's widest selection of product designs. Custom Direct is the
second largest participant in the direct-to-consumer segment of the U.S. cheque
industry with sales and EBITDA for the year ending December 31, 2002 of
approximately US$103 million and US$20 million respectively.
About MDC Corporation Inc.
MDC is a publicly traded international business services
organization with operating units in Canada, the United States, United Kingdom
and Australia. MDC provides marketing communication services, through Maxxcom,
and offers security sensitive transaction products and services in four primary
areas: personalized transaction products such as personal and business cheques;
electronic transaction products such as credit, debit, telephone & smart cards;
secure ticketing products, such as airline, transit and event tickets; and
stamps, both postal and excise.
Document 3
FOR IMMEDIATE RELEASE
For: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Contacts:
MILES S. NADAL PETER M. LEWIS GRAHAM L. ROSENBERG
Chairman and Executive Vice-President Executive Vice-President
Chief Executive Officer and Chief Financial Officer MDC Corporation Inc.
MDC Corporation Inc. MDC Corporation Inc. Tel: (416) 960-9000, ext. 239
Tel: (416) 960-9000 ext. 223 Tel: (416) 960-9000 ext. 272
JOHN C. BROWNING BRIAN D. BRIGGS
President and Chief Executive Officer Chief Financial Officer
Custom Direct, Inc. Custom Direct, Inc.
Tel: (410) 679-3300 ext. 2202 Tel: (410) 679-3300 ext. 2262
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
MDC CORPORATION INC.
CUSTOM DIRECT INCOME FUND
Custom Direct Income Fund Agrees to
Initial Public Offering of Units for Expected Gross Proceeds of $110 Million
Total Gross Proceeds to MDC Expected to Total $161.8 Million
TORONTO - May 15, 2003 - MDC Corporation Inc. of Toronto
(TSX: MDZ.A; NASDAQ: MDCA) and Custom Direct Income Fund announced today that
they have entered into:
o an agreement to transfer to the Fund, indirectly, an 80%
interest in Custom Direct, Inc., the second largest
participant in the direct-to-consumer segment of U.S. cheque
industry, and
o an underwriting agreement relating to an initial public
offering of units of the Fund expected to result in gross
proceeds of $110 million (or $126.5 million assuming
exercise of the underwriters' over-allotment option for
1,650,000 units).
Custom Direct is also entering into arrangements which will
provide it with a $58.7 million (US$42.5 million) credit facility of which $51.8
million (US$37.5 million) will be drawn on closing under the term loan portion
of the facility and $6.9 million (US$5 million) will be a revolving facility
that will be undrawn at closing.
The gross proceeds of the offering and the term loan portion
of the credit facility (before commissions, fees and expenses) will total $161.8
million (or $178.3 million assuming exercise of the underwriters' over-allotment
option) and will be paid (net of commissions, fees and expenses) to MDC,
directly and through a subsidiary, for the 80% interest in Custom Direct. The
Fund is filing a final prospectus with the securities regulatory authorities in
each of the provinces and territories of Canada in connection with the offering.
After the offering, prior to the exercise of the underwriters' over-allotment
option, MDC will own 29.6% of the Fund (or 4,613,804 units) and a 20%
subordinated interest in the business (which it has agreed not to sell until
after December 31, 2003) for a fully diluted interest in the Fund of 43.6%.
The Fund units have not been registered under the United
States Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements.
"We are pleased with the success of the offering, which has
more than met our expectations. Our ability to crystalize significant value from
this investment is consistent with our previously announced plan of selling our
non-core businesses in order to repay our existing debt and increase our
liquidity," said Miles Nadal, Chairman and Chief Executive Officer of MDC.
"We are excited about our future prospects and the
flexibility the offering provides us to focus our resources on MDC's core
businesses," added Nadal.
About Custom Direct
Based in Maryland and Arkansas, Custom Direct has been selling
cheques and cheque related accessories across the United States since 1992 and
offers the industry's widest selection of product designs. Custom Direct is the
second largest participant in the direct-to-consumer segment of the U.S. cheque
industry with sales and EBITDA for the year ending December 31, 2002 of
approximately US$103 million and US$20 million respectively.
About MDC Corporation Inc.
MDC is a publicly traded international business services
organization with operating units in Canada, the United States, United Kingdom
and Australia. MDC provides marketing communication services, through Maxxcom,
and offers security sensitive transaction products and services in four primary
areas: personalized transaction products such as personal and business cheques;
electronic transaction products such as credit, debit, telephone & smart cards;
secure ticketing products, such as airline, transit and event tickets; and
stamps, both postal and excise.
Document 4
FOR IMMEDIATE RELEASE
For: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Contacts:
MILES S. NADAL PETER M. LEWIS GRAHAM L. ROSENBERG
Chairman, President and Executive Vice-President Executive Vice-President
Chief Executive Officer and Chief Financial Officer MDC Corporation Inc.
MDC Corporation Inc. MDC Corporation Inc. Tel: (416) 960-9000 ext. 239
Tel: (416) 960-9000 ext. 223 Tel: (416) 960-9000 ext. 272
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
- and -
For: Custom Direct Income Fund
79 Wellington Street West
Suite 3000, TD Centre
Maritime Life Tower
Toronto, Ontario M5K 1N2
Contacts:
JOHN C. BROWNING BRIAN D. BRIGGS
President and Chief Executive Officer Chief Financial Officer
Custom Direct, Inc. Custom Direct, Inc.
Tel: (410) 679-3300 ext. 2202 Tel: (410) 679-3300 ext. 2262
TSX Stock Symbol: CDI.UN
Website: www.cdifund.com
MDC CORPORATION INC.
CUSTOM DIRECT INCOME FUND
MDC Corporation Inc. and Custom Direct Income Fund Close
Initial Public Offering of Units for Gross Proceeds of $110 Million
Total Gross Proceeds to MDC Including Credit Facilities to Total $162 Million
Custom Direct Enters Into Currency and Interest Rate Hedge Arrangements
TORONTO - May 29, 2003 - MDC Corporation Inc. ("MDC") and
Custom Direct Income Fund (the "Fund") announced today that they closed:
o the transfer to the Fund, indirectly, of an 80% interest in
Custom Direct, Inc., ("Custom Direct") the second largest
participant in the direct-to-consumer segment of the U.S.
cheque industry, and
o an initial public offering of units of the Fund resulting in
gross proceeds of $110 million.
Custom Direct has completed arrangements which provide it
with a $58.9 million (US$42.5 million) credit facility of which $52 million
(US$37.5 million) has been drawn under the term loan portion of the facility and
$6.9 million (US$5 million) is available under a revolving facility which is
undrawn.
The gross proceeds of the offering and the term loan portion
of the credit facility (before commissions, fees and expenses) have totalled
$162 million and have been paid (net of commissions, fees and expenses) to MDC,
directly and through a subsidiary, for the 80% interest in Custom Direct. The
underwriters have been granted an over-allotment option for 1,650,000 units,
which if fully exercised, would result in additional gross proceeds to MDC of
$16.5 million and occur no later than June 27, 2003.
MDC owns 29.6% of the Fund (or 4,613,804 units) and a 20%
subordinated interest in the business (which it has agreed not to sell until
after December 31, 2003) for a fully diluted interest in the Fund of 43.6%
(35.2% if the underwriters' over-allotment option is fully exercised).
"We are very pleased with the success of the offering, which
has more than met our expectations. Our ability to crystalize significant value
from this investment is consistent with our previously announced plan of selling
our non-core businesses in order to repay our existing debt and increase our
liquidity," said Miles S. Nadal, Chairman, President and Chief Executive Officer
of MDC.
"We are excited about our future prospects and the
flexibility the offering provides us to focus our resources on MDC's core
businesses," added Nadal.
Commensurate with the closing, Custom Direct entered into
certain currency and interest rate hedge arrangements. Under the terms of the
currency hedge arrangement, Custom Direct will be able to exchange US dollars
for Canadian dollars at a fixed rate of 1.412, a favourable rate to the one used
in the Fund's prospectus of 1.394. Custom Direct has also fixed the interest
rate on the term portion of its credit facility at 5%, the rate used in the
prospectus.
"These arrangements will ensure that for the next 3 years,
the Fund's ability to meet its target distributions to unitholders will not be
affected by currency and interest rate fluctuations. These arrangements will
allow management to focus its attention on day to day operations and on
delivering expected business performance," said John Browning, President and CEO
of Custom Direct.
The offering has been underwritten by a syndicate led by CIBC
World Markets Inc. and TD Securities Inc., which includes Scotia Capital Inc.,
BMO Nesbitt Burns Inc., National Bank Financial Inc. and Griffiths McBurney &
Partners.
The Fund units have not been registered under the United
States Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements.
About Custom Direct
Based in Maryland and Arkansas, Custom Direct has been selling
cheques and cheque related accessories across the United States since 1992 and
offers the industry's widest selection of product designs. Custom Direct is the
second largest participant in the direct-to-consumer segment of the U.S. cheque
industry with sales and EBITDA for the year ending December 31, 2002 of
approximately US$103 million and US$20 million respectively.
About MDC Corporation Inc.
MDC is a publicly traded international business services
organization with operating units in Canada, the United States, United Kingdom
and Australia. MDC provides marketing communication services, through Maxxcom
Inc., and offers security sensitive transaction products and services in four
primary areas: personalized transaction products such as personal and business
cheques; electronic transaction products such as credit, debit, telephone &
smart cards; secure ticketing products, such as airline, transit and event
tickets; and stamps, both postal and excise.
About Maxxcom Inc.
Maxxcom, a subsidiary of MDC, is a multi-national business
services company with operating units in Canada, the United States and the
United Kingdom. Maxxcom is built around entrepreneurial partner firms that
provide a comprehensive range of communications services to clients in North
America and the United Kingdom. Services include advertising, direct marketing,
database management, sales promotion, corporate communications, marketing
research, corporate identity and branding, and interactive marketing. Maxxcom
Shares are traded on the Toronto Stock Exchange under the symbol MXX.
Document 5
FOR IMMEDIATE RELEASE
FOR: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario
M5R 2E3
CONTACTS: Miles S. Nadal Graham L. Rosenberg
Chairman, President & CEO Executive Vice President
(416) 960-9000 ext. 223 (416) 960-9000 ext. 239
Peter M. Lewis
Executive Vice President & CFO
(416) 960-9000 ext. 272
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
MDC CORPORATION INC.
GIVES NOTICE OF ITS INTENTION TO REDEEM ALL OF ITS
OUTSTANDING 10 1/2% SENIOR SUBORDINATED NOTES
DUE 2006 ON JUNE 30, 2003
TORONTO, May 29, 2003 - MDC Corporation Inc. ("MDC") today
announced that it will redeem all of its US$86.4 million ($119.8 million)
outstanding 10 1/2% Senior Subordinated Notes due December 1, 2006 (the
"Notes"). The aggregate redemption price for each US$1,000 principal amount of
Notes shall be US$1,035, for an aggregate redemption price of US$89.5 million
($124.1 million), plus accrued and unpaid interest to but excluding the date of
redemption. The redemption will take place on June 30, 2003.
Earlier today, MDC announced that it closed the Custom Direct
Income Fund for total gross proceeds of $162 million, which have been paid to
MDC (net of commissions, fees and expenses). MDC intends to use US$89.5 million
($124.1 million) of such net proceeds to consummate the redemption of its Notes.
The Trustee under the Indenture governing the Notes, The Bank
of Nova Scotia Trust Company of New York, will act as the Paying Agent.
"This is the culmination of the restructuring effort that we
commenced 18 months ago. We are thrilled with the results of our efforts and our
current liquidity and financial strength," said Miles S. Nadal, Chairman,
President and Chief Executive Officer of MDC
About MDC Corporation Inc.
MDC is a publicly traded international business services
organization with operating units in Canada, the United States, United Kingdom
and Australia. MDC provides marketing communication services, through Maxxcom
Inc., and offers security sensitive transaction products and services in four
primary areas: personalized transaction products such as personal and business
cheques; electronic transaction products such as credit, debit, telephone &
smart cards; secure ticketing products, such as airline, transit and event
tickets; and stamps, both postal and excise.
About Maxxcom Inc.
Maxxcom, a subsidiary of MDC, is a multi-national business
services company with operating units in Canada, the United States and the
United Kingdom. Maxxcom is built around entrepreneurial partner firms that
provide a comprehensive range of communications services to clients in North
America and the United Kingdom. Services include advertising, direct marketing,
database management, sales promotion, corporate communications, marketing
research, corporate identity and branding, and interactive marketing. Maxxcom
Shares are traded on the Toronto Stock Exchange under the symbol MXX.
Document 6
FOR IMMEDIATE RELEASE
For: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
Contacts:
MILES S. NADAL PETER M. LEWIS WALTER CAMPBELL
Chairman, President and Executive Vice-President Senior Vice President, Finance
Chief Executive Officer and Chief Financial Officer (416) 960-9000 ext. 336
MDC Corporation Inc. MDC Corporation Inc.
Tel: (416) 960-9000 ext. 223 Tel: (416) 960-9000 ext. 272
TSX Stock Symbol: MDZ.A
NASDAQ Stock Symbol: MDCA
Website: www.mdccorp.com
MDC ANNOUNCES NORMAL COURSE ISSUER BID
May 30, 2003, TORONTO, Ontario: MDC Corporation Inc. ("MDC") of Toronto
announced today that The Toronto Stock Exchange (the "Exchange") has accepted a
notice filed by MDC of its intention to make a normal course issuer bid.
The notice provides that MDC may, during the 12 month period commencing June 3,
2003 and ending June 2, 2004 purchase for cancellation up to a total of
1,269,889 Class A subordinate voting shares being approximately 10% of the
public float of 12,698,895 Class A subordinate voting shares. The price which
MDC will pay for any such shares will be the market price at the time of
acquisition. The actual number of Class A subordinate voting shares which may be
purchased and the timing of any such purchases will be determined by management
of MDC. There are approximately 16,464,871 Class A Subordinate Voting Shares and
450,470 Class B multiple voting shares outstanding.
MDC has not purchased any of its Class A subordinate voting shares within the
twelve months preceding the date of the notice.
About MDC Corporation Inc.
MDC is a publicly traded international business services organization with
operating units in Canada, the United States, United Kingdom and Australia. MDC
provides marketing communication services, through Maxxcom, and offers security
sensitive transaction products and services in four primary areas: personalized
transaction products such as personal and business cheques; electronic
transaction products such as credit, debit, telephone & smart cards; secure
ticketing products, such as airline, transit and event tickets, and stamps, both
postal and excise. MDC shares are traded on the Toronto Stock Exchange under the
symbol MDZ.A and on NASDAQ National Market under the symbol MDCA.
About Maxxcom Inc. ("Maxxcom")
Maxxcom, a subsidiary of MDC, is a multi-national business services company with
operating units in Canada, the United States and the United Kingdom. Maxxcom is
built around entrepreneurial partner firms that provide a comprehensive range of
communications services to clients in North America and the United Kingdom.
Services include advertising, direct marketing, database management, sales
promotion, corporate communications, marketing research, corporate identity and
branding, and interactive marketing. Maxxcom shares are traded on the Toronto
Stock Exchange under the symbol MXX
Document 7
MDC
CORPORATION, INC.
First Quarter Report
Three months ended March 31, 2003
Financial Highlights
Consolidated Financial Summary
(in thousands of Canadian dollars, except per share amounts) (unaudited)
For the three months ended March 31, 2003 2002 % Change
----------------------------------------------------------------- -------------- --------------- -------------
Sales 209,758 271,305 - 23
Operating income 13,035 29,905 - 56
Cash flow from operations 7,833 11,455 - 32
Net income for the period 1,334 12,135 - 89
Earnings per share
Net income
Basic 0.05 0.69 - 93
Fully diluted 0.05 0.45 - 89
Cash flow per share
Basic 0.44 0.65 - 32
Fully diluted 0.30 0.42 - 29
Weighted average number of shares outstanding
Earnings per share
Basic 16,915,341 16,915,341 0
Fully diluted 16,951,759 27,606,645 - 39
Cash flow per share
Basic 16,915,341 16,915,341 0
Fully diluted 26,403,555 27,606,645 - 4
-------------- --------------- -------------
Management's Discussion & Analysis
The following discussion focuses on the operating performance of MDC
Corporation Inc. (the "Company") for the three-month period ended March 31,
2003 and 2002, and the financial condition as at March 31, 2003. This analysis
should be read in conjunction with the consolidated interim financial
statements presented in this interim report and the annual audited
consolidated financial statements and Management Discussion and Analysis
presented in the Annual Report to Shareholders for the year ended December 31,
2002. All amounts are in Canadian dollars unless otherwise stated.
Overview
The impact of the significant changes that have been made throughout the MDC
organization since the third quarter of 2001 is reflected in the first quarter
results of 2003. Management has worked diligently to focus resources on the
Company's core businesses, and also capitalize on market opportunities to
dispose of assets and reduce indebtedness. The remaining operations of the
Company reported improved performance in comparison with the 2002 first
quarter, and it is anticipated that these businesses will continue to generate
sustainable, profitable revenue growth.
Three Months Ended March 31, 2003 Compared with the Three Months Ended March
31, 2002
Sales
Consolidated sales for the three months ended March 31, 2003 were $209.8
million, representing a decrease of $61.5 million or 23% from the same period
of the previous year. However, on a more comparable basis, after removing from
the 2002 results the revenues of operations disposed of by the Secure
Transactions Division, sales increased by $4.8 million or 2% over the $204.9
million achieved for the first quarter of 2002.
The Secure Transactions Division reported quarterly sales of $66.2 million
compared to $131.0 million for the 2002 first quarter. Sales of the remaining
operations for the first quarter of 2003 increased by $1.6 million or 3% from
the first quarter last year. Custom Direct, MDC's U.S. cheque operation, the
Canadian card operation of Metaca, and Mercury, the Canadian ticketing
business, all contributed to the revenue growth, partially offset by a decline
in sales from the North American stamp operation.
Maxxcom sales for the quarter ended March 31, 2003 totaled $143.5 million, an
increase of $3.2 million or 2% over the $140.3 million reported for the same
year-earlier period.
Gross Profit
Gross profit of $100.2 million for the quarter decreased by $32.1 million or
24% from the first quarter of 2002 due primarily to the 2002 dispositions.
Gross profit of the operations that remain improved by $0.4 million from $99.8
million in the prior year. The gross margin percentage, at 47.8%, declined 1 %
from 48.8% for the first quarter last year.
$37.9 million of the gross profit is attributable to the Secure Transactions
Division. The decrease of $31.3 million compared to the first quarter of 2002
was primarily due to the disposal of the Canadian cheque operation. The gross
profit of the remaining operations of
MDC 2003 Q1 Report
the Secure Transactions Division improved $1.2 million over last year and
gross margin improved from 56.8% of sales in 2002 to 57.3% of sales in 2003.
Maxxcom's gross profit was $62.3 million, representing a decrease of $0.8
million or 1% from the prior-year first quarter. Gross margin declined from
44.9% to 43.4%.
Operating Expenses
Consolidated operating expenses of $87.2 million were 15% or $15.2 million
lower than the $102.4 million of the first quarter last year. Operating costs
of both the Secure Transactions Division and Maxxcom decreased, by $14.8
million and $0.4 million, respectively.
After adjusting for the effect of disposed operations, the operating expenses
incurred by the Secure Transactions Division in the first quarter of this year
decreased by $0.6 million to $30.1 million from $30.7 million in the first
quarter of 2002. Similarly, operating expenses as a percentage of sales
improved to 45.4% in 2003 from 47.6% in 2002 reflecting the efforts made over
the past year to reduce costs.
At Maxxcom, operating expenses of $57.1 million for the quarter were 1% lower
compared to the $57.5 million for the same quarter last year. Maxxcom has
significantly reduced the infrastructure of its organization since the third
quarter of 2001 in response to reduced revenue levels, and as a result,
operating expenses, expressed as a percentage of sales, continued to decrease,
at 39.8% in 2003 versus 41.0% in 2002.
Operating Income before Other Income (Charges)
For the first quarter of 2003, operating income before other charges of $13.0
million decreased $16.9 million or 56% from the $29.9 million generated last
year. Excluding divested operations, operating income improved $1.5 million
compared to Q1 2002 and improved to 6.2% of sales in 2003 from 5.6% of sales
in 2002.
The Secure Transactions Division reported operating income before other
charges of $7.9 million, an increase of $1.9 million over the prior-year first
quarter excluding the operating income from disposed operations. Improvements
in operating income were generated from the U.S. cheque and Canadian card
operations, partially offset by declines in the North American stamp
operations. On the same basis, operating income as a percentage of sales
increased from 9.2% last year to 11.9% this quarter.
There was a $0.4 million decline in the operating income before other charges
of Maxxcom at $5.2 million for the quarter ended March 31, 2003 compared to
$5.6 million in 2002, primarily the result of foreign exchange due to a
strengthening Canadian dollar and reduced operating income from Canadian
operations. Operating margins were 3.6% of sales in this quarter versus 4.0%
of sales in the first quarter of last year.
Net Gain on Asset Dispositions and Other Charges
The net gain on asset dispositions and other charges for the first quarter of
2002 was $9.5 million and primarily related to the disposition of a 4.54%
interest in the Canadian
2
MDC 2003 Q1 Report
cheque operations of Davis + Henderson through the exercise of the
over-allotment option by the underwriters, net of provisions on non-core
assets. There were no gains or charges in the first quarter this year.
Unrealized Foreign Exchange Loss
MDC recorded an unrealized foreign exchange loss of $0.3 million in the first
quarter of 2002 related to its U.S. dollar denominated 10.5% Senior
Subordinated Notes ("Notes"). Effective July 1, 2002, management designated
the Notes as a hedge against the foreign exchange exposure of the U.S. Secure
Transactions operations. The hedge was applied on a prospective basis from the
effective date whereby any foreign exchange translation adjustment of the
Notes will reduce offsetting foreign exchange translation adjustment of the
U.S. operations which is reflected in the cumulative translation account
within shareholders' equity.
Amortization
Consolidated amortization expense was $5.4 million this quarter, and decreased
$3.2 million from the quarter ended March 31, 2002 as a result of the lower
level of capital assets associated with the Secure Transactions Division,
offset partially by a slight increase in amortization at Maxxcom related to
capital and other asset expenditures since last year.
Interest, Net
Interest expense on a consolidated basis totaled $5.7 million for the quarter,
down $4.5 million or 44% compared to the same period of 2002 due primarily to
the significantly reduced level of long-term indebtedness outstanding during
the period.
Income before Income Taxes and Minority Interest
The income before income taxes and minority interest was $2.0 million in the
quarter ended March 31, 2003, compared to $20.4 million last year. The
decrease can be attributed to the divestitures made over the last year
partially offset by an improvement from operations that remain.
Income Tax Expense
Income tax expense was $0.6 million in the first quarter of the year, compared
with $4.6 million last year. Income taxes were 32.1 % of income before income
taxes and minority interest in the 2003 first quarter versus 22.7% in 2002.
The increase in the tax rate was primarily the result of the divestitures that
have been completed.
Minority Interest
Minority interest expense represents the minority interest share of the net
income (losses) of Maxxcom and Metaca, and in 2002, also included the minority
interest share of the net earnings of Davis + Henderson, Limited Partnership.
An expense of $3.7 million was recorded for the first quarter of 2002;
however, a nominal charge was incurred for the quarter ended March 31, 2003
due to the disposition of our remaining ownership interest in the Canadian
cheque operations in the second quarter of last year.
3
MDC 2003 Q1 Report
Net Income for the Period
Net income for the first quarter of 2003 was $1.3 million, compared to $12.1
million in 2002. Adjusting for the impact of restructuring, dispositions and
other charges; foreign exchange; the results of divested operations and the
removal of interest associated with indebtedness that has been repaid, net
income improved $0.4 million or 38% on a quarter-over-quarter basis from 2002.
Liquidity and Capital Resources
Working Capital
Working capital remained negative at the end of the first quarter at $4.6
million, $0.9 million or 16% improved from the negative $5.5 million in
working capital at December 31, 2002. The improvement was due to an increase
in the working capital of Maxxcom. During the quarter on a consolidated basis,
accounts receivable increased by $2.4 million and inventory and prepaid
expenses increased by $1.9 million. Accounts payable and accrued liabilities
decreased by $13.7 million, partially offset by a $6.2 million increase in
deferred revenue.
The Company has a senior credit facility of up to US$40 million, of which
US$25 million is committed, and Maxxcom has an additional facility of $60
million. At March 31, 2003, the Company, including Maxxcom, had utilized
approximately $34 million under these credit facilities in the form of
drawings and letters of credit. Cash and undrawn available bank credit
facilities to support the Company's future cash requirements, as at March 31,
2003, were approximately $115 million.
Long-term Indebtedness
At March 31, 2003, long-term indebtedness (including the current portion of
long-term indebtedness) was $237.2 million, a reduction of $14.6 million
compared to the $251.8 million outstanding at December 31, 2002. During the
quarter, $3.5 million of long-term indebtedness was repaid. The remainder of
the decrease is due to the effect on the U.S. dollar denominated debt of a
strengthening in the Canadian to U.S. dollar exchange rate net of $0.2 million
in proceeds related to new indebtedness.
Deferred Acquisition Consideration
Acquisitions of businesses by the Company typically include commitments to
contingent deferred purchase obligations and often rights to require the
Company to acquire the remaining ownership interests held by subsidiary
shareholders. Deferred purchase price obligations are generally payable
annually over a three-year period following the acquisition date and are
payable based on achievement of certain thresholds of future earnings and, in
certain cases, also based on the rate of growth of those earnings. At March
31, 2003, approximately $33.1 million of deferred purchase price obligations
related to prior-year acquisitions is reflected in accounts payable and
accrued liabilities on the Company's balance sheet. A portion of this
obligation, approximately $6 million, is expected to be settled through the
issuance of Maxxcom's common shares to the applicable vendor. The cash portion
of this obligation is expected to be funded during 2003 and 2004 through the
use of operating
4
MDC 2003 Q1 Report
funds, bank borrowings or the proceeds of an equity offering and/or debt
refinancing, although there can be no certainty that the Company will be able
to access sources of capital in advance of or concurrently with such
obligations becoming due.
Due to the Company's acquisition hiatus, and based on various assumptions as
to future operating results of the existing relevant entities, it is estimated
that approximately $3.0 million of further additional deferred purchase
obligations would be earned during 2003 or thereafter.
The actual amounts that the Company will pay may be different from these
estimates, and these differences may be material.
Put Rights of Subsidiaries' Minority Shareholders
Owners of interests in certain of Maxxcom's subsidiaries have the right in
certain circumstances to require Maxxcom to acquire the remaining ownership
interests held by them. The owners' ability to exercise these rights is
subject to the satisfaction of certain conditions, such as the provision of a
period of notice in advance of exercising such right or the installation of
successor management in the subsidiary, and in some cases is related to the
employment status of the holder of the right. In addition, these rights cannot
be exercised prior to specified staggered exercise dates. The exercise of
these rights at their earliest contractual date would result in obligations of
Maxxcom to fund the related amounts during the period 2003 to 2009. Except as
described below, it is not determinable, at this time, if or when the owners
of these rights will exercise all or a portion of these rights.
The amount payable by Maxxcom in the event such rights are exercised is
dependent on various valuation formulas and on future events, such as the
average earnings of the relevant subsidiary through that date of exercise, the
growth rate of the earnings of the relevant subsidiary during that period,
and, in most cases, the currency exchange rate at the date of payment.
Management estimates, assuming that the subsidiaries perform over the relevant
future periods at their 2002 earnings levels, that these rights, if all
exercised, could require Maxxcom, in future periods, to pay an aggregate of
approximately $71 million to the owners of such rights to acquire the
remaining ownership interests in the relevant subsidiaries. Of this amount,
Maxxcom is entitled, at its option, to fund approximately $8 million by the
issuance of Maxxcom common shares.
The ultimate amount payable in the future relating to these transactions will
vary because it is dependent on the future results of operations of the
subject businesses and the timing of when these rights are exercised. The
actual amounts Maxxcom pays will be different from these estimates and these
differences could be material.
If these rights were exercised in aggregate, Maxxcom would acquire incremental
ownership interests in the relevant subsidiaries entitling Maxxcom to
additional annual operating income before other charges estimated to be, using
the same earnings basis used to determine the aggregate purchase price noted
above, approximately $11 million. The actual amounts Maxxcom acquires will be
different from this estimate and these differences could be material.
5
MDC 2003 Q1 Report
Maxxcom expects to fund these obligations, if and when they become due,
through the issuance of Maxxcom common shares to the interest holders pursuant
to existing contractual rights described above, and through the use of cash
derived from operations, bank borrowings, and equity and/or debt offerings.
There can be no certainty that Maxxcom will be able, to the extent required,
to access sources of capital in advance of or concurrently with such
obligations becoming due.
Of the estimated aggregate amount, approximately $5 million relates to rights
exercisable in 2003 associated with three subsidiaries. Shareholders of two
subsidiaries have given one year advance notice of their intent to exercise
their rights to require Maxxcom to purchase one-third of their total
respective interests in the related subsidiaries. It is estimated that these
obligations will be approximately $3.6 million. Should these two shareholders
ultimately exercise the right as indicated, Maxxcom will be required to fund
these obligations in the fourth quarter of 2003. The actual amounts that
Maxxcom will pay will be different from these estimates, and these differences
may be material. Maxxcom expects to fund the acquisition of these interests,
if and when they become due, through the use of cash derived from operations
and bank borrowings. Accordingly, the acquisition of these equity interests
will not be recorded in the Company's financial statements until ownership is
transferred.
Cash Flow from Operations
Cash flow from operations, before changes in non-cash working capital, was
$7.8 million for the quarter, a decrease of $3.6 million from the cash flow
generated in the same quarter of 2002, reflective of the impact of lower
revenues and operating income before other charges combined with the payment
of $0.5 million of previously accrued restructuring charges.
Cash flows used in investing activities were $6.2 million for the quarter
compared to cash flows arising from investing activities of $7.4 million in
the first quarter of 2002. In 2002, net proceeds from the exercise of the
over-allotment option by the underwriters of the Davis + Henderson, Limited
Partnership, net of Earnouts paid, amounted to $13.5 million. During the first
quarter of 2003, Maxxcom paid approximately $1.3 million of the Earnout
obligation accrued at December 31, 2002. Capital and other asset expenditures
in the first quarter were $1.6 million lower than the first quarter of the
prior year.
During the quarter, cash flows used in financing activities amounted to $3.2
million, primarily the result of the repayment of $3.5 million of loans,
including the repayment of $2.4 million by Maxxcom, partially offset by $0.2
million of new capital leases of the Secure Transactions Division.
6
MDC 2003 Q1 Report
Outlook
MDC remains committed to managing each of its businesses effectively and will
continue to explore opportunities to improve the balance sheet and realize
value for its shareholders.
The recent increase in business activity witnessed by the Maxxcom subsidiaries
is encouraging. Management's strategy of emphasizing new business development
while maintaining a cost-effective structure is anticipated to improve
operating performance throughout the balance of the year.
The Secure Transactions Division is expected to continue to experience
moderate growth from Metaca, the Canadian card operation, and from Mercury,
the North American ticketing business. Ashton-Potter, our stamp operation,
operated at low production levels in the first quarter of 2003, but has
recently been awarded a significant long-term contract to produce definitive
and commemorative postage stamp products for the United States Postal Service.
The increased volumes anticipated under this contract are expected to
positively impact revenues and operating profits in the latter half of the
year.
At Custom Direct, the Company's U.S.-based direct-to-consumer cheque
operation, it is anticipated that revenues and operating income will continue
to improve with increased activity from call centers and the Internet, which
typically produce higher average order values than the traditional order
channels. Production efficiencies will be further improved in the third
quarter of this year as the production of the Artistic brand is internalized
following the termination of a third party supply contract.
MDC recommenced plans for an initial public offering of its U.S.-based cheque
business, operated by Custom Direct, Inc., through Custom Direct Income Fund,
with the refiling of the preliminary prospectus with the securities regulatory
authorities in Canada.
Risks and Uncertainties
There are risks and uncertainties associated with MDC Corporation Inc.'s
businesses and the economic environments in which those businesses operate.
These risks and uncertainties are discussed in detail in the Company's Annual
Report to Shareholders for the year ended December 31, 2002.
7
MDC 2003 Q1 Report
Consolidated Interim Financial Statements
Consolidated Interim Balance Sheets
(in thousands of Canadian dollars)
As at March 31, 2003 December 31, 2002
-------------------------------------------------------------------- -------------------- -------------------
(unaudited) (audited)
Assets
Current
Cash and cash equivalents $ 48,108 $ 59,615
Accounts receivable 108,808 106,419
Inventory 10,305 11,050
Prepaid expenses and sundry 12,568 9,886
-------------------- -------------------
179,789 186,970
Capital and other assets 121,469 126,155
Goodwill 266,707 292,861
-------------------- -------------------
$ 567,965 $ 605,986
==================== ===================
Liabilities and Shareholders' Equity
Current
Accounts payable and accrued liabilities $ 154,840 $ 168,550
Deferred revenue 23,703 17,517
Current portion of long-term indebtedness 5,806 6,450
-------------------- -------------------
184,349 192,517
Long-term indebtedness 231,406 245,339
-------------------- -------------------
415,755 437,856
-------------------- -------------------
Minority interest 14,985 15,499
-------------------- -------------------
Shareholders' equity
Share capital (Note 4) 144,542 144,542
Other paid in-capital 38,812 38,145
Cumulative translation adjustment 3,155 20,139
Retained earnings (deficit) (49,284) (50,195)
-------------------- -------------------
137,225 152,631
-------------------- -------------------
$ 567,965 $ 605,986
==================== ===================
The accompanying notes are an integral part of these financial statements.
8
MDC 2003 Q1 Report
Consolidated Interim Statement of Retained Earnings (Deficit)
(in thousands of Canadian dollars) (unaudited)
For the three months ended March 31, 2003 2002
---------------------------------------------------------------------- ------------------- ------------------
Retained earnings (deficit), beginning of period
as previously reported
$ (50,195) $ (97,463)
Impact of transitional goodwill impairment charge -- (99,513)
------------------- ------------------
Opening retained earnings (deficit), as restated (50,195) (196,976)
Net income for the period 1,334 12,135
------------------- ------------------
(48,861) (184,841)
Allocation to other paid-in capital, net of income
tax recovery of $244 (2001 - $241)
(423) (383)
------------------- ------------------
Retained earnings (deficit), end of period $ (49,284) $ (185,224)
=================== ==================
The accompanying notes are an integral part of these financial statements.
9
MDC 2003 Q1 Report
Consolidated Interim Statements (continued)
Consolidated Interim Statement of Operations
(in thousands of Canadian dollars, except per share amounts) (unaudited)
For the three months ended March 31, 2003 2002
-------------------------------------------------------------------- -------------------- -------------------
Sales $ 209,758 $ 271,305
Cost of sales 109,542 138,999
-------------------- -------------------
Gross profit 100,216 132,306
Operating expenses 87,181 102,401
-------------------- -------------------
Operating income before other income (charges) 13,035 29,905
-------------------- -------------------
Other income (charges)
Net gain on asset dispositions and other charges -- 9,544
Unrealized foreign exchange loss -- (280)
Amortization (5,378) (8,567)
Interest, net (5,678) (10,157)
-------------------- -------------------
(11,056) (9,460)
-------------------- -------------------
Income before income taxes and minority interest 1,979 20,445
Income taxes 636 4,631
-------------------- -------------------
Income before minority interest 1,343 15,814
Minority interest 9 3,679
-------------------- -------------------
Net income for the period $ 1,334 $ 12,135
==================== ===================
Earnings per share
Basic $ 0.05 $ 0.69
==================== ===================
Fully diluted $ 0.05 $ 0.45
==================== ===================
The accompanying notes are an integral part of these financial statements.
10
MDC 2003 Q1 Report
Consolidated Interim Statement of Cash Flows
(in thousands of Canadian dollars) (unaudited)
For the three months ended March 31, 2003 2002
---------------------------------------------------------------------- ------------------- ------------------
Cash provided by (used in)
Operating activities
Net income for the period $ 1,334 $ 12,135
Items not involving cash
Net gain on asset dispositions and other charges -- (9,544)
Unrealized foreign exchange loss -- 280
Restructuring and other charges - paid (452) (2,754)
Amortization 5,378 8,567
Future income taxes 306 1,858
Interest capitalized 1,440 --
Other (173) 913
------------------- ------------------
7,833 11,455
Changes in non-cash working capital (7,323) (5,687)
------------------- ------------------
Cash flows from operating activities 510 5,768
------------------- ------------------
Investing activities
Investments, acquisitions and dispositions, net (1,682) 13,494
Capital assets, net (4,202) (4,238)
Other assets (270) (1,877)
------------------- ------------------
Cash flows from (used in) investing activities (6,154) 7,379
------------------- ------------------
Financing activities
Proceeds on issuance of long-term indebtedness 240 4,789
Repayment of long-term indebtedness (3,484) (19,343)
------------------- ------------------
Cash flows used in financing activities (3,244) (14,554)
------------------- ------------------
Foreign exchange gain (loss) on cash held (2,619) 115
in foreign currencies
------------------- ------------------
Decrease in cash and cash equivalents during the period (11,507) (1,292)
Cash and cash equivalents, beginning of period 59,615 59,301
------------------- ------------------
Cash and cash equivalents, end of period $ 48,108 $ 58,009
=================== ==================
The accompanying notes are an integral part of these financial statements.
11
MDC 2003 Q1 Report
Notes to Consolidated Interim Financial Statements
March 31, 2003 (in thousands of Canadian dollars, except per share
amounts) (unaudited)
1. Significant Accounting Policies
The financial statements of the Company have been prepared by management in
accordance with generally accepted accounting principles in Canada for interim
financial statements. The financial statements have, in management's opinion,
been properly prepared using judgement within reasonable limits of
materiality. These interim financial statements do not include all the note
disclosures required for annual financial statements, and therefore they
should be read in conjunction with the Company's audited annual financial
statements for the year ended December 31, 2002. The significant accounting
policies follow that of the most recently reported annual financial
statements, except for the following:
Impairment of Long-lived Assets
Effective January 1, 2003, the Company adopted, on a prospective basis, the
recommendations of the Canadian Institute of Chartered Accountants ("CICA")
with respect to the impairment of long-lived assets. These standards require
that an impairment loss be recognized when the carrying amount of a long-lived
asset exceeds the sum of the undiscounted cash flows expected to result from
its use and eventual disposition. An impairment loss is measured as the amount
by which the long-lived asset's carrying amount exceeds its fair value.
Goodwill and Other Intangibles
Effective January 1, 2002, the Company adopted the recommendations of the CICA
with respect to goodwill and other intangibles. These standards require that
goodwill and other intangible assets determined to have indefinite lives are
no longer amortized but tested for impairment on adoption of the standard and
at least annually thereafter. Transitional impairment tests for goodwill were
completed in the second quarter of 2002, and as a result, a transitional
impairment loss of $99,513 (net of income tax recovery of $16,000) was charged
to opening retained earnings. The comparative quarterly results have been
restated to reflect this charge effective January 1, 2002.
2. Accounting Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from management's best
estimates as additional information becomes available in the future.
3. Interest in Jointly Controlled Entity
The Company accounts for its 49% interest in Crispin Porter + Bogusky LLC, a
jointly controlled entity, using the proportionate consolidation method. The
following is the
12
MDC 2003 Q1 Report
Company's proportionate share of the major components of the financial
statements of the jointly controlled entity as at and for the three months
ended March 31:
2003 2002
--------------------------------------------------------------------- ------------------- -------------------
Balance Sheet
Current assets $ 21,672 $ 12,113
Long-term assets 1,180 585
Current liabilities (21,249) (11,690)
Statement of Operations
Sales $ 4,092 $ 2,527
Expenses 2,900 2,108
------------------- -------------------
Net income $ 1,192 $ 419
=================== ===================
Statement of Cash Flows Cash provided by (used in):
Operating activities $ 159 $ 666
Investing activities (760) (43)
Financing activities -- (169)
4. Share Capital
Share option transactions during the period ended March 31, 2003 are
summarized as follows:
Options Outstanding Options Exercisable
--------------------------------------- ------------------------------------- -------------------------------
Weighted Average Weighted Average
Number Price Number Price per
Outstanding per Share Outstanding Share
Balance, beginning of period 2,249,628 $ 10.17 1,353,344 $ 12.03
Expired and cancelled (57,810) 10.52
------------------ -------------- ---------------- ----------------
Balance, end of period 2,191,818 $ 10.16 1,348,402 $ 12.10
================== ============== ================ ================
Share options outstanding as at March 31, 2003 are summarized as follows:
Options Outstanding Options Exercisable
---------------------------- ---------------- --------------- --------------- ----------------- -------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Contractual Price Number Price per
Prices Outstanding Life per Share Exercisable Share
$ 3.86 - $ 6.00 805,000 4.5 $ 5.32 166,000 $ 5.27
$ 6.01 -$10.00 294,500 0.9 $ 9.71 268,900 $ 9.91
$10.01 - $12.00 292,001 2.2 $ 10.88 197,101 $ 10.92
$12.01 - $14.25 457,483 0.5 $ 13.75 442,133 $ 13.76
$14.26 - $18.00 342,834 1.3 $ 16.55 274,268 $ 16.55
13
MDC 2003 Q1 Report
Notes to Consolidated Interim Statements (continued)
The Company records no compensation expense when options are issued to
employees, but provides pro forma information for options granted after
January 1, 2002. The Company estimates the fair value of each share option on
the date of grant using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate of 6%; expected volatility of
40%; expected option life of five years; and no dividend payment. Had
compensation expense been recorded for employee stock option grants, the
resulting pro forma net earning and earnings per share would be as follows:
For the three months ended March 31, 2003 2002
------------------------------------------------------------------------ ------------------ -----------------
Pro forma net income $ 1,236 $ 12,135
================= =================
Pro forma earnings per share
Basic $ 0.05 $ 0.69
================= =================
Fully diluted $ 0.05 $ 0.45
================= =================
5. Segmented Information
Based on the Company's internal management structure, the Company's continuing
operations are in primarily two business segments - Secure Transactions and
Marketing Communications through Maxxcom Inc. Secure Transactions operations
provide security products and services in four primary areas: personalized
transaction products such as personal and business cheques; electronic
transaction products such as credit, debit, telephone and smart cards; secure
ticketing products such as airline, transit and event tickets; and stamps,
both postal and excise. Maxxcom provides a comprehensive range of
communication services which include advertising, direct marketing, database
management, sales promotion, corporate communications, marketing research,
corporate identity and branding, and interactive marketing.
For the three months ended March 31, 2003 Secure Maxxcom Total
Transactions
----------------------------------------------------------- ----------------- --------------- ---------------
Earnings
Sales $ 66,236 $ 143,522 $ 209,758
================= =============== ===============
Operating income before other charges $ 7,876 $ 5,159 $ 13,035
----------------- --------------- ---------------
Amortization (2,560) (2,818) (5,378)
Interest, net (3,720) (1,958) (5,678)
----------------- --------------- ---------------
(6,280) (4,776) (11,056)
----------------- --------------- ---------------
Income before income taxes and 1,596 383 1,979
minority interest
Income taxes 339 297 636
----------------- --------------- ---------------
Income before minority interest 1,257 86 1,343
Minority interest 9 -- 9
----------------- --------------- ---------------
Net income for the period $ 1,248 $ 86 $ 1,334
================= =============== ===============
Total assets $ 272,443 $ 295,522 $ 567,965
================= =============== ===============
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MDC 2003 Q1 Report
For the three months ended March 31, 2002 Secure Maxxcom Total
Transactions
---------------------------------------------------------- ----------------- ----------------- --------------
Earnings
Sales $ 130,968 $ 140,337 $ 271,305
================= ================= ==============
Operating income before other $ 24,331 $ 5,574 $ 29,905
income (charges)
----------------- ----------------- --------------
Net gain on asset dispositions and other charges 9,544 -- 9,544
Unrealized foreign exchange loss (280) -- (280)
Amortization (5,840) (2,727) (8,567)
Interest, net (8,057) (2,100) (10,157)
----------------- ----------------- --------------
(4,633) (4,827) (9,460)
----------------- ----------------- --------------
Income before income taxes and minority interest 19,698 747 20,445
Income taxes (recovery) 4,693 (62) 4,631
----------------- ----------------- --------------
Income before minority interest 15,005 809 15,814
Minority interest 3,679 -- 3,679
----------------- ----------------- --------------
Net income for the period $ 11,326 $ 809 $ 12,135
================= ================= ==============
Total assets $ 484,685 $ 312,247 $ 796,932
================= ================= ==============
For the three months ended March 31, 2003 2002
---------------------------------------------------------------------------- ----------------- ---------------
Geographic Information
Sales
Canada $ 51,397 $ 111,809
United States 149,623 145,224
Other countries 8,738 14,272
----------------- ---------------
Total $ 209,758 $ 271,305
================= ===============
Capital Assets and Goodwill
Canada $ 80,259 $ 193,768
United States 241,719 241,484
Other countries 18,600 17,710
----------------- ---------------
Total $ 340,578 $ 452,962
================= ===============
15
MDC 2003 Q1 Report
Shareholder Information
Legal Counsel
Canada
Fogler, Rubinoff
Toronto, Ontario
USA
Simpson Thacher & Bartlett
New York, New York
Skadden Arps Slate Meagher & Flom New York, New York
Auditors
BDO Dunwoody LLP
Bankers
The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce
Bank of Nova Scotia
Transfer Agent
CIBC Mellon Trust Company
CIBC Mellon Trust Company operates a telephone information inquiry line that
can be reached by dialing toll-free 1-800-387-0825 or (416) 643-5500.
Correspondence may be addressed to: MDC Corporation Inc.
c/o CIBC Mellon Trust Company
Corporate Trust Services
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5G 2M7
Investor Relations
For Investor Relations information please call Stephanie Ivy,
Vice-President, Finance (416) 960-9000 ext. 296
Stock Exchange Listing
The Class A shares of the Company are listed on the Toronto Stock Exchange and
on the NASDAQ National Market in the United States.
The Toronto Stock Exchange Trading Symbol
MDZ.A
NASDAQ National Market
MDCA
16
MDC 2003 Q1 Report
MDC is a publicly traded international business services organization with
operating units in Canada, the United States, the United Kingdom and
Australia. MDC provides marketing communication services, through Maxxcom and
offers security sensitive transaction products and services in four primary
areas: personalized transaction products such as personal and business
cheques; electronic transaction products such as credit, debit, telephone and
smart cards; secure ticketing products, such as airline, transit and event
tickets; and stamps, both postal and excise. MDC shares are traded on the
Toronto Stock Exchange under the symbol MDZ.A and on NASDAQ National Market
under the symbol MDCA.
Maxxcom, a subsidiary of MDC, is a multi-national business services company
with operating units in Canada, the United States and the United Kingdom.
Maxxcom is built around entrepreneurial partner firms that provide a
comprehensive range of communications services to clients in North America and
the United Kingdom. Services include advertising, direct marketing, database
management, sales promotion, corporate communications, marketing research,
corporate identity and branding, and interactive marketing. Maxxcom shares are
traded on the Toronto Stock Exchange under the symbol MXX.
MDC
CORPORATION INC.
45 Hazelton Avenue
Toronto, Ontario
Canada M5R 2E3
Phone: (416) 960-9000
Fax: (416) 960-9555
www.mdccorp.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MDC CORPORATION INC.
-----------------------------------------
(Registrant)
Date: June 6, 2003 By: /s/ Walter Campbell
------------------------ ---------------------------------
(Signature)
Walter Campbell
Senior Vice President Finance