FORM 6-K
Securities and Exchange Commission
washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of, February 2003
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MDC CORPORATION INC.
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(Translation of registrant's name into English)
45 Hazelton Avenue, Toronto, Ontario, Canada, M5R 2E3
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(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
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Indicate by check mark whether the registrant by furnishing the
information contained in this Form 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
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________
EXHIBIT INDEX
Exhibit Page No.
1 Press Release dated February 27, 2003, and 4
financial results for the year and fourth
quarter ended December 31, 2002
Exhibit 1
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR: MDC Corporation Inc.
45 Hazelton Avenue
Toronto, Ontario M5R 2E3
CONTACTS: Miles S. Nadal
Chairman & 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 YEAR AND FOURTH
QUARTER ENDED DECEMBER 31, 2002
TORONTO, Ontario (February 27, 2003) - MDC Corporation Inc. ("MDC") of Toronto
today announced its financial results for the year and fourth quarter ended
December 31, 2002. Consolidated sales for 2002 totaled $943.3 million, a
decrease of 15% compared to $1.113 billion achieved in 2001. Operating income
before other charges was $79.8 million, a decline of 33% from the $118.3
million reported in 2001. Income from continuing operations was $148.3 million
including pre-tax foreign exchange and asset disposition gains of $161.8
million, compared to a loss of $113.1 million, which included pretax
restructuring charges and foreign exchange losses totaling $256.7 million. Net
income for the year was $148.3 million. Fully diluted income per share for
2002 was $5.87 compared to a fully diluted loss per share of $9.20 reported
last year. Fully diluted cashflow per share was $1.51, a decrease of 77% over
the $6.64 achieved in 2001.
Included with the financial results are the results for 2002 and 2001 compiled
on a pro forma basis to reflect results of operations, other than
restructuring and other charges, that comprise MDC's existing portfolio of
companies. On a pro forma basis, sales increased by $7.2 million or 1% to
$863.6 million. Operating income before other charges increased by $8.6
million or 16% to $61.0 million. Pro forma net income was $12.7 million
compared to a loss of $20.3 million in 2001. Fully diluted pro forma earnings
per share amounted to $0.53, an increase of $1.87 from the loss of $1.34 in
2001.
"In 2002, we essentially completed the restructuring initiative commenced in
the fall of 2001. We improved the operating results of our remaining core
businesses, successfully divested several non-core operations, and
crystallized significant value for the shareholders of MDC through the income
trust offering of our remaining 54.55% interest in Davis + Henderson. Gross
proceeds of almost $300 million were generated by these combined transactions,
allowing us to significantly improve our balance sheet and liquidity, enhanced
with the purchase of US$113.6 million of outstanding Notes," said Miles S.
Nadal, Chairman and Chief Executive Officer. "Overall the sale of Davis +
Henderson generated gross proceeds of approximately $470 million from the two
transactions completed in 2001 and 2002."
For the fourth quarter, MDC generated sales of $230.0 million as compared to
$286.2 million in the same period last year. Operating income before other
charges was $19.7 million, $10.8 million or 36% less than the $30.5 million
generated in the fourth quarter of 2001. Excluding dispositions from both
periods, operating income before other charges for the fourth quarter of 2002
was $19.5 million, an increase of $11.0 million over the $8.5 million
generated in 2001, primarily the result of significant improvements at Custom
Direct, Metaca and Maxxcom. Net income for the quarter, including pre-tax
charges of $3.9 million, decreased to $2.3 million from the $40.9 million in
2001 which included pre-tax foreign exchange losses and disposition gains
totaling $59.6 million.
Sales within the Secure Transactions Division totaled $65.2 million in the
fourth quarter, down 49% from the $128.6 million achieved in the fourth
quarter of 2001. Operating income before other charges was $9.8 million, down
from the $24.6 million in the fourth quarter of 2001. For the year, sales of
$343.7 million and operating income of $53.0 million declined from 2001 by
$172.7 million and $38.4 million respectively as a result of divestitures.
Excluding divested operations, sales of continuing operations within the
Secure Transactions Division for 2002 increased by $4.5 million or 2% to
$264.0 million and operating income increased $8.7 million or 34% to $34.2
million.
For the fourth quarter, Maxxcom sales were $164.8 million, an increase of $7.1
million from the $157.7 million recorded in the fourth quarter of 2001.
Operating income before other charges was $9.8 million, an increase of $3.9
million or 66% from the $5.9 million generated in the fourth quarter of 2001.
Sales at Maxxcom for the year ended December 31, 2002 increased to $599.6
million compared to the $596.8 million reported in the prior year. Operating
income declined slightly to $26.8 million from $26.9 million. Despite the
effects of the global economic downturn and specifically a decline in demand
throughout the marketing communications industry in 2002, Maxxcom was able to
achieve revenue growth through several successful, high-profile campaigns, to
stabilize its operations and to remain focused on serving the needs of its
clients. The strong fourth quarter is evidence that a continued recovery in
the advertising and marketing communications industry is anticipated to
positively impact Maxxcom's future results.
In December 2002, MDC announced that due to market conditions, plans for an
initial public offering of its U.S. based direct-to-customer cheque business,
operated by Custom Direct, Inc. and affiliated companies via the Custom Direct
Income Fund (the "Fund") had been postponed. Costs in the amount of $8.1
million associated with this initiative, including the settlement of a supply
contract negotiation, have been expensed in the fourth quarter.
Custom Direct completed an excellent 2002 with sales of US$102.9 million and
operating income before other charges of US$20.1 million. These results
exceeded the forecast included in the Custom Direct Income Fund prospectus
filed in November 2002.
"The current uncertainty in the income trust market place is not conducive to
the completion of such offerings on reasonable terms and conditions. This
persuaded us to postpone the offering until more favourable market conditions
return," said Mr. Nadal. "We remain confident in the future of the Custom
Direct business and have no desire to compromise our belief in the value of
the enterprise. In the meantime, we expect to realize increased returns from
its highly predictable business model and reliable cash flows."
"We are very pleased with the progress we have accomplished over the past
year, and are highly confident that our core operations form a strong platform
from which to grow our business in 2003 and beyond. We will continue to
explore opportunities to create and realize value for our shareholders as
market conditions permit," said Mr. Nadal.
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.
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MDC CORPORATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOURTH QUARTER 2002 and 2001
(Unaudited, $CDN 000's - except per share amounts)
For the Three Months Ended December 31, 2002 2001* Change
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Sales 230,018 286,224 (20%)
Cost of sales 119,921 148,375 (19%)
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Gross profit 110,097 137,849 (20%)
Operating expenses 90,442 107,334 (16%)
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Operating income before other income (charges) 19,655 30,515 (36%)
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Other income (charges)
Restructuring, dispositions, and other charges (3,852) 62,428
Unrealized foreign exchange loss - (2,860)
Amortization (6,262) (9,488)
Interest, net (5,848) (12,980)
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(15,962) 37,100
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Income before income taxes, goodwill charges and
minority interest 3,693 67,615
Income taxes 609 18,381
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Income before goodwill charges and minority interest 3,084 49,234
Goodwill charges, net of income tax recovery - 9,608
Minority interest (recovery) 748 (1,247)
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Net income for the period 2,336 40,873
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Cash Flow from operations 9,422 108,942
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Earnings Per Share
Net income
o Basic 0.12 2.38
o Fully Diluted 0.10 1.24
Cash Flow Per Share
o Basic 0.53 6.41
o Fully Diluted 0.38 3.30
Weighted average shares outstanding during the period
o Basic 16,915,341 16,915,341
o Fully Diluted** 24,988,680 33,071,459
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SEGMENTED INFORMATION - BY OPERATING DIVISION
For the Three Months Ended December 31, 2002 2001 Change
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Secure Transactions
Sales 65,205 128,563 (49%)
Operating Income 9,809 24,598 (60%)
Maxxcom
Sales 164,813 157,661 5%
Operating Income 9,846 5,917 66%
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* Restated to reflect the change in accounting policy with respect to foreign exchange gains and losses on non-hedged
long-term monetary assets and liabilities.
** The Company has the option to satisfy the $50,000 of 7% Convertible Notes ("Notes") with cash or Class A
Subordinated Voting Shares ("Shares") at 95% of the current share price. As a result, the fully diluted shares
outstanding include 7,911,392 (2001 - 15,822,785) Shares for the conversion of the Notes at 95% of the average
closing price of the Shares during the period.
MDC CORPORATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2002 and 2001
($CDN 000's - except per share amounts)
For the Year Ended December 31, Pro forma Pro forma Audited Audited
2002* 2001* 2002 2001**
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Sales 863,555 856,321 943,332 1,113,272
Cost of sales 448,354 442,575 490,117 558,295
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Gross profit 415,201 413,746 453,215 554,977
Operating expenses 354,238 361,385 373,378 436,633
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Operating income before other income (charges) 60,963 52,361 79,837 118,344
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Other income (charges)
Restructuring, dispositions, and other charges - - 155,053 (91,612)
Unrealized foreign exchange gain (loss) - - 6,702 (18,660)
Amortization (22,129) (22,916) (25,481) (36,521)
Interest, net (24,031) (21,896) (28,018) (52,698)
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(46,160) (44,812) 108,256 (199,491)
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Income (loss) before income taxes, goodwill charges and
minority interest 14,803 7,549 188,093 (81,147)
Income taxes (recovery) 1,083 228 35,054 (28,663)
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Income (loss) before goodwill charges and minority interest 13,720 7,321 153,039 (52,484)
Goodwill charges, net of income tax recovery - 27,292 - 67,181
Minority interest (recovery) 1,008 330 4,726 (6,591)
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Income (loss) from continuing operations 12,712 (20,301) 148,313 (113,074)
Loss from discontinued operations - - - (40,000)
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Net income (loss) for the year 12,712 (20,301) 148,313 (153,074)
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Cash Flow from operations 42,525 25,914 37,642 152,694
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Earnings Per Share
Income (loss) from continuing operations
o Basic 0.66 (1.34) 8.68 (6.83)
o Fully Diluted 0.53 (1.34) 5.87 (6.83)
Reported
o Basic 0.66 (1.34) 8.68 (9.20)
o Fully Diluted 0.53 (1.34) 5.87 (9.20)
Cash Flow Per Share
o Basic 2.42 1.40 2.13 8.91
o Fully Diluted 1.70 1.14 1.51 6.64
Weighted average shares outstanding during the period
o Basic 16,915,341 16,885,877 16,915,341 16,885,877
o Fully Diluted*** 25,357,018 16,885,877 25,357,018 16,885,877
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SEGMENTED INFORMATION - BY OPERATING DIVISION
Pro forma Pro forma
For the Year Ended December 31, 2002* 2001* 2002 2001
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Secure Transactions
Sales 263,965 259,504 343,742 516,455
Operating Income 34,162 25,479 53,036 91,462
Maxxcom
Sales 599,590 596,817 599,590 596,817
Operating Income 26,801 26,882 26,801 26,882
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* 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.
** Restated to reflect the change in accounting policy with respect to foreign exchange gains and losses on
non-hedged long-term monetary assets and liabilities.
*** The Company has the option to satisfy the $50,000 of 7% Convertible Notes ("Notes") with cash or Class A
Subordinated Voting Shares ("Shares") at 95% of the current share price. As a result, the fully diluted
shares outstanding include 8,403,361 (2001 - NIL) Shares for the conversion of the Notes at 95% of the
average closing price of the Shares during the period.
MDC CORPORATION INC.
CONSOLIDATED BALANCE SHEETS
($CDN 000's)
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As at As at
December 31, December 31,
2002 2001*
(Audited) (Audited)
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ASSETS
Current
Cash and cash equivalents 59,615 59,301
Accounts receivable 106,419 142,769
Inventory 11,050 23,282
Prepaid expenses and sundry 9,886 11,969
Future income taxes - 28,000
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186,970 265,321
Capital and other assets 126,155 166,439
Goodwill 292,861 462,746
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605,986 894,506
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 168,550 204,994
Deferred revenue 17,517 23,771
Current portion of long-term indebtedness 6,450 12,049
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192,517 240,814
Long-term indebtedness 245,339 527,468
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437,856 768,282
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Minority interest 15,499 15,253
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Shareholders' equity
Share capital 144,542 142,599
Other paid-in capital 38,145 51,943
Cumulative translation adjustment 20,139 13,892
Retained earnings (deficit) (50,195) (97,463)
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152,631 110,971
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605,986 894,506
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* Restated to reflect the change in accounting policy with respect to foreign exchange gains and losses on
non-hedged long-term monetary assets and liabilities. The effect was a reduction in capital and other assets
and retained earnings (deficit) of $23,809.
SIGNATURES
Pursuant to the requirement 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.
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(Registrant)
Date: March 10, 2003 By: /s/ Walter Campbell
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(Signature)
Walter Campbell
Senior Vice President Finance
Print the name and title of the signing officer under their signature