MDC's Doft Says Firm Will Finalize SEC Deal In A Few Weeks

MDC CFO David Doft told a crowd at the UBS media conference in New York that the company expects to finalize a settlement agreement with U.S. Securities and Exchange Commission within the next few weeks. That would be good news for the company as the probe—into the firm’s accounting practices and trading activity—has been ongoing for over two years and has proved to be a damper on the company’s stock.

"It's very exciting for all of us," said Doft. The company announced that an agreement in principal had been reached with the SEC last month.  As part of the agreement, MDC confirmed it would pay a $1.5 million civil penalty to resolve all potential claims by the SEC against the company relating to the probe. The SEC staff had concluded that MDC unintentionally violated a number of SEC rules, but under the framework of the proposed deal the holding company is not admitting liability. 



Meanwhile, Doft told the UBS audience that the firm's new business pipeline now appears strong after stalling in Q3. Doft noted that this quarter's wins include General Mills, El Pollo Loco and Diesel. 

And international remains a bright spot with revenue growth contributions from clients including American Airlines and Beats, Doft said. Diageo, Unilever, and InBev also continue to add incremental business.  

Doft expects media reviews will continue in the coming year though not necessarily because clients are unhappy with their agencies. Rather it will be a reflection of how the industry has fundamentally changed. Clients that hired an agency five years ago before things like content creation and Snapchat were in existence are likely to ask whether their agencies are keeping up with all the change. 

MDC has reduced costs by $30 million annually largely through labor reductions, since labor makes up 75% of its expenses, said Doft. Most of these cuts happened in the U.S. and Canada, not internationally, he said. Some of these reductions occurred at MDC's struggling experiential agencies. 

Doft declined to provide an update on its initiative with financial advisor LionTree, though MDC is considering a "range of opportunities to bolster its balance sheet," he said.

Last month MDC confirmed that it had hired LionTree Advisors to assist in evaluating its financial and capital structure strategy. The hiring of an outside financial advisor is often a signal that a company is putting itself up for sale, although MDC officials denied at the time that that was the case. A few days later however the Wall Street Journal reported that a possible sale was one of the alternatives being considered.

Doft said MDC doesn't want decisions related to LionTree's input to be dragged out, adding that any announcement will happen in "months not quarters."

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