UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-34209
MONSTER WORLDWIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE | 13-3906555 | |
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) |
622 Third Avenue, New York, New York 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 351-7000
(REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, par value $.001 per share | New York Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined under Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
x |
Accelerated filer |
¨ | |||
Non-accelerated filer |
¨ (Do not check if a smaller reporting company) |
Smaller reporting company |
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $1,861,877,365 as of June 30, 2011, the last business day of the registrants second fiscal quarter of 2011.
As of January 20, 2012, there were 123,092,598 shares of the registrants common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants definitive Proxy Statement to be used in connection with its 2012 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
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Special Note About Forward-Looking Statements
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the Company, Monster, Monster Worldwide, we, our or us) make forward-looking statements in this report and in other reports and proxy statements that we file with the United States Securities and Exchange Commission (SEC). Except for historical information contained herein, the statements made in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such forward-looking statements involve certain risks and uncertainties, including statements regarding our strategic direction, prospects and future results. Certain factors, including factors outside of our control, may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, among other things, the global economic and financial market environment; risks relating to our foreign operations; risks relating to the European debt crisis and market perceptions concerning the instability of the euro; our ability to maintain and enhance the value of our brands, particularly Monster; competition; fluctuations in our quarterly operating results; our ability to adapt to rapid developments in technology; our ability to continue to develop and enhance our information technology systems; concerns related to our privacy policies and our compliance with applicable data protection laws and regulations; intrusions on our systems; interruptions, delays or failures in the provision of our services; our vulnerability to intellectual property infringement claims brought against us by others; our ability to protect our proprietary rights and maintain our rights to use key technologies of third parties; our ability to replace our credit facilities as they mature; our ability to identify future acquisition opportunities or partners and the risk that future acquisitions or partnerships may not achieve the expected benefits to us; our ability to manage future growth; our ability to expand our operations in international markets; our ability to attract and retain talented employees, including senior management; potential write-downs if our goodwill or amortizable intangible assets become impaired; adverse determinations by domestic and/or international taxation authorities related to our estimated tax liabilities; effects of anti-takeover provisions in our organizational documents that could inhibit the acquisition of Monster Worldwide by others; volatility in our stock price; risks associated with government regulation; the outcome of litigation we may become involved in from time to time; and other risks and uncertainties set forth from time to time in our reports to the SEC, including under Item 1A. Risk Factors of this report.
We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.
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ITEM 1. | BUSINESS |
Introduction
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the Company, Monster, Monster Worldwide, we, our or us), parent company of Monster®, the premier global online employment solution, strives to inspire people to improve their lives. With a presence in approximately 55 countries around the world, including key markets in North America, Europe, South America and the Asia-Pacific region, Monster offers online recruiting solutions that we believe are redefining the way employers and job seekers connect. Through online media sites and services, Monster Worldwide delivers highly targeted audiences to advertisers.
Our principal executive offices are located at 622 Third Avenue, New York, New York 10017. Our telephone number is (212) 351-7000 and our Internet address is http://about-monster.com. Our predecessor business was founded in 1967, and our current company was incorporated in Delaware and became a public company in 1996. We make all of our public filings with the SEC available on our website, free of charge, under the caption Investor Relations SEC Filings. Included in these filings are our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, which are available as soon as reasonably practicable after we electronically file or furnish such materials with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
Our Strategy
Monster Worldwides long-term business strategy is designed to capitalize on the numerous opportunities that exist in the global online recruitment marketplace and related markets. Our strategy calls for strategic investment in product, technology, brand support and customer service to expand our global leadership position in an effort to achieve long-term growth and profitability and create shareholder value. In support of this strategy, we are investing in our operations on a global basis while controlling the growth of operating expenses.
Monsters focus is on the needs of its customers, both employers and job seekers. Our advanced products and services are intended to improve the seeker experience while also developing deeper relationships with our employer customers. Through innovative products and features, we offer greater value to all job seekers who look to manage their careers, even those seekers who are not actively engaged in a job search. Our product offerings and services are designed to enhance seeker engagement and increase job response rate. We believe that more active seeker engagement will translate directly into higher quality candidates for our employer customers. For employers, our tools and features allow them to more efficiently and effectively attract and find the most relevant candidates for their job openings.
Our investments in our technology platform have allowed us to deliver innovative products and services on a global basis. We have consolidated several technology systems and have created a platform that is more secure, scalable and redundant. In June 2011, to further extend our global reach and leverage the worlds most popular global social network, we launched BeKnown, a professional network application available on the Facebook platform. This application allows Facebook members in 49 countries and in 19 languages to establish a professional network on BeKnown. With BeKnown, users can seamlessly identify and connect with professional contacts from multiple sources and enhance their professional identities, while keeping their friends on Facebook separate from their professional contacts.
In 2008, we acquired Trovix Inc., a business that provides career-related products and services that utilize advanced search technology, focusing on key attributes such as skills, work history and education. Our patented 6Sense® semantic search and matching technology, which is based upon Trovix technology, is the backbone of a growing family of products for both job seekers and employers. Our innovative and proprietary semantic resume search product, Monster Power Resume Search® (PRS) has been available to customers in North America since late 2009, and more recently to customers in the United Kingdom and France. Most recently we launched PRS in Germany and expect to rollout PRS in the Netherlands and China in the future. Our 6Sense technology transforms traditional keyword-based processes by assisting our customers in matching candidates to their required job specifications. For seekers, our 6Sense powered job search has changed how seekers explore, find and apply for jobs. We introduced our cloud based search product SeeMore in the third quarter of 2011, which allows our customers to utilize our 6Sense technology on their own talent databases.
In 2007, we introduced in North America the Career Ad Network, or CAN, which is now the industrys largest recruitment-focused online advertising network that reaches nearly 105 million internet users on a global basis. We offer this innovative media product to customers in North America and most major markets in Europe, as well as in Australia and Brazil, and we expect to expand this offering further into South America and Asia. CAN distributes our customers job advertisements across a broad array of targeted websites and is an effective way of expanding our customers pool of active and passive seekers. Additionally, we offer our customers application tracking services, diversity resume database services and other ancillary services either directly or through alliances, to meet the changing needs of our customers.
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Our global sales structure allows us to sell and distribute our products and services to large, medium and small businesses on a local basis. Our objective is to offer existing customers additional products while expanding our coverage to attract new customers. We service existing and potential customers through a field sales force, telephone sales force and an online service, which we refer to as our eCommerce channel, where the customer can advertise jobs and access the resume database without sales force involvement. We have integrated our field and telesales forces in the United States and aligned our sales resources regionally so we can operate more efficiently and provide a high touch, consultative service to customers.
In order to support our broadened product portfolio and our expanded sales resources, we have in-sourced, centralized and standardized our global call center operations to create a customer focused, proactive value added model.
Our growth strategy includes global geographic expansion. On August 24, 2010, pursuant to an Asset Purchase Agreement dated as of February 3, 2010 between Monster and Yahoo! Inc. (Yahoo!), Monster completed the acquisition of substantially all of the assets exclusive to Yahoo! HotJobs (the HotJobs Assets) from Yahoo! The purchase price for the HotJobs Assets was $225.0 million. We acquired the HotJobs Assets, among other objectives, to expand our business in the North American online recruitment market. Concurrent with the closing of the acquisition, Monster and Yahoo! entered into a three year commercial traffic agreement whereby Monster became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada. This traffic agreement has increased our reach in North America. Separately, we formed a multi-country relationship with Yahoo! across South America to bring career opportunities and resources to Yahoo! users, employers and job-seekers. We are Yahoo!s exclusive provider of career and job content in key markets across South America. In February 2011, the Company completed the integration of the HotJobs website onto the Companys platform, which enables job seekers to benefit from the increased availability of jobs and precise search capabilities, and enables employers to benefit from the increased volume and quality of seeker traffic.
We believe there is a large opportunity to deepen our penetration in our existing markets in Europe, Asia and South America, in addition to extending our presence beyond the markets we currently serve. In October 2008, we completed the acquisition of China HR.com Holdings Ltd. (together with its subsidiaries, ChinaHR), a leading online recruiter, serving employers and job seekers in major provinces in the Peoples Republic of China. We believe there exists a significant opportunity to expand our presence in the Peoples Republic of China over time. In November 2008, the Company acquired a 50% equity interest in a company that provides online employment solutions in Australia. Additionally, the Company launched a website in Brazil in 2010 which we believe could result in significant growth in the future due to the size of the Brazilian market.
We continue to actively and aggressively support the Monster brand on a global scale through strategic investments in both online and offline advertising and promotion. Our advertising and promotion activities are designed to drive quality visitors to Monster.com and our affiliated online properties. We have centralized our media purchases and changed the timing of our media buying to receive beneficial rates, resulting in greater efficiencies for our marketing expenditures.
Our Services
We operate in three reportable segments: Careers North America, Careers International and Internet Advertising & Fees. For the year ended December 31, 2011, these operating segments represented approximately 47%, 43% and 10% of our consolidated revenue, respectively. See Note 15 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our segment results.
Careers (North America and International)
Monster is the premier global online employment solution, striving to inspire people to improve their lives. Monster has a presence in approximately 55 countries around the world. We earned 45%, 42% and 42% of our total revenue outside of the United States in the years ended December 31, 2011, 2010 and 2009, respectively. With a local presence in key markets in North America, Europe, South America and Asia, Monster works by connecting employers with quality job seekers at all levels and by providing searchable jobs and career management resources online. We have been able to build on Monsters brand and create worldwide awareness by offering online recruiting solutions that we believe are redefining the way employers and job seekers connect. For the employer, our goal is to provide the most effective solutions and easiest to use technology to simplify the hiring process and deliver access to our community of job seekers. For job seekers, our purpose is to improve their careers by providing work-related content, services and advice.
Our services and solutions include searchable job postings, resume database access, recruitment media solutions throughout our network and other career-related content. Job seekers can search our job postings and post their resumes on each of our career websites. Employers and human resources companies pay to advertise jobs, search our resume database, and utilize career site hosting and other services such as recruitment media.
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Monster has traditionally focused on the enterprise market, or those businesses that we consider to be among the 1,500 largest organizations globally. However, we have expanded our focus to include small-to-medium sized businesses (SMBs), those businesses with approximately 10 to 2,000 employees that operate primarily in local and regional markets. We currently have alliances with media and publishing companies, including approximately 1,000 newspapers, which extends our presence with local and regional job seekers in various markets across the United States.
Internet Advertising & Fees
Our Internet Advertising & Fees segment provides consumers with content, services and useful offerings that help them manage the development and direction of their current and future careers, while providing employers, educators and marketers with innovative and targeted media-driven solutions to impact these consumers at critical moments in their lives. We believe that by strengthening our user engagement, driving additional traffic and increasing usage of our websites, we can increase the appeal to our customers and reward them with a higher return on their marketing investment.
Revenue for the Internet Advertising & Fees segment is derived primarily from two types of services: display advertising and lead generation. Display advertising opportunities have been integrated across the Monster Worldwide network of websites, allowing marketers to deliver targeted online advertising messages via numerous sizes and formats of creative units. Consumers come to Monsters websites for information and advice on how to manage critical life transitions, and this environment is typically seen by marketers as desirable for the promotion of products and services as consumers are actively looking for new ideas and solutions. Lead generation is a direct response business in which marketers pay for connections to consumers whose demographics match the requirements of specific business offerings and who request information about the offerings. Our large database of users and ongoing collection of numerous points of data allows us to provide our clients with targeted and valuable opportunities to connect with interested consumers.
Sales and Marketing
The Companys sales resources consist of field sales, telesales, and a self service eCommerce channel. The Company has also created a global account team to provide further support for our customers who have global recruiting needs. Our sales activities are geared towards large, medium and small companies as well as government agencies, advertising agencies and educational institutions. The field and telesales resources for our Careers business in the United States are regionalized to better serve our customers with a more high touch, consultative approach, while providing greater efficiencies for developing new business opportunities. We have specialty units within the sales organization, dedicated to serving our vertical markets, such as enterprise, SMBs, government, healthcare and staffing. Our telesales staff is primarily responsible for telemarketing and customer service for SMBs and is located in our offices around the world. Our field sales staff focuses on both local and national clients and is also dispersed throughout our offices globally. Our eCommerce channel is available to all customer groups and is currently most heavily used by smaller employers. Our Internet Advertising & Fees sales force is located throughout the United States and is focused on cross-selling the products of each property within its network. New sales representatives who join the sales force during the year undergo a training program.
We use sponsorships and broad-based media, such as broadcast television, the Internet, radio, and business, consumer and trade publications, to market and promote the Monster brand. The majority of our marketing and promotion expense is allocated to our Careers North America and Careers International segments.
Customers
Our customers are comprised of individuals, small and medium-sized organizations, enterprise organizations, federal, state and local government agencies and educational institutions. No one customer accounts for more than 5% of our total annual revenue.
Competition
The markets for our services and products are highly competitive and are characterized by pressure to win new customers, expand the market for our services and incorporate new capabilities and technologies. We face competition from a number of sources. These sources include other employment-related websites, including websites that aggregate job postings from multiple company websites and job boards; professional networking and social networking websites; general classified advertising websites; traditional media companies (primarily newspaper publishers); Internet portals; search engines; and general-interest websites such as blogs. The barriers to entry into Internet businesses like ours are relatively low. As a result, new competitors continuously arise.
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In addition to traditional competitors that provide products and services that are very similar to Monsters core products and services, we face increasing competition from a broad range of competitor types. Jobs aggregator websites have become a significant source of competition, as they permit job seekers to search multiple company websites and job boards. Professional networking websites have had significant success over the past several years in gaining large numbers of members and attracting employer customers with products that compete directly with our products. Low-cost and free classified advertising websites have also gained increased acceptance with employers. Additionally, many niche career websites have been launched targeted at specific industry verticals, and many industry blogs and websites now provide employment advertising opportunities for employers within specific industries.
Some of our competitors or potential competitors may have greater financial, management, technological, development, sales, marketing and other resources than we do. In addition, our ability to maintain our existing clients and generate new clients depends to a significant degree on the quality of our services, pricing and reputation among our clients and potential clients.
Intellectual Property
Our success and ability to compete are dependent in part on the protection of our domain names, trademarks, trade names, service marks, patents and other proprietary rights. We rely on copyright laws to protect the original website content that we develop. In addition, we rely on federal, state and foreign trademark laws to provide additional protection for the identifying marks appearing on and the design and appearance of our Internet sites. A degree of uncertainty exists concerning the application and enforcement of copyright and trademark laws to the Internet, and there can be no assurance that existing laws will provide adequate protection for our original content or the appearance of our Internet sites. In addition, because copyright laws do not prohibit independent development of similar content, there can be no assurance that copyright laws will provide any competitive advantage to us.
We also assert common law protection on certain names and marks that we have used in connection with our business activities.
We rely on trade secret, copyright and patent laws to protect the proprietary technologies that we have developed to manage and improve our Internet sites and advertising services, but there can be no assurance that such laws will provide sufficient protection to us, that others will not develop technologies that are similar or superior to ours, or that third parties will not copy or otherwise obtain and use our technologies without authorization. We have obtained patents and applied for several other patents with respect to certain of our software systems, methods and related technologies, but there can be no assurance that any pending applications will be granted or that any patents will not in the future be challenged, invalidated or circumvented, or that the rights granted thereunder will provide us with a competitive advantage. In addition, we rely on certain technology licensed from third parties, and may be required to license additional technology in the future, for use in managing our Internet sites and providing related services to users and advertising customers. Our ability to generate fees from Internet commerce may also depend on data encryption and authentication technologies that we may be required to license from third parties. There can be no assurance that these third-party technology licenses will be available or will continue to be available to us on acceptable commercial terms or at all. The inability to enter into and maintain any of these technology licenses could significantly harm our business, financial condition and operating results.
Policing unauthorized use of our proprietary technology and other intellectual property rights could entail significant expense and could be difficult or impossible, particularly given the global nature of the Internet and the fact that the laws of other countries may afford us little or no effective protection of our intellectual property.
We have been named as defendants in lawsuits from time to time alleging that we infringed on patents of third parties. There can be no assurance that other third parties will not assert against us claims of patent, copyright or trademark infringement. We anticipate an increase in patent infringement claims involving Internet-related technologies as the number of products and competitors in this market grows and as related patents are issued. Further, there can be no assurance that third parties will not claim that we have misappropriated their trade secrets, creative ideas or formats or otherwise infringed their proprietary rights in connection with our Internet content or technology. Any claims of infringement or misappropriation, with or without merit, could be time consuming to defend, result in costly litigation, divert management attention, and require us to enter into costly royalty or licensing arrangements. If a party claiming infringement is successful, we could be required to pay substantial licensing fees or compensatory or punitive damages, and we could be enjoined from using important technologies or methods. If we are enjoined, it may not be possible or commercially practical for us to develop or obtain and implement substitute technologies or methods that are not covered by the third partys intellectual property. Any of these outcomes could significantly harm our business, financial condition and operating results.
Employees
As of January 20, 2012, we employed approximately 6,000 people worldwide, an increase of 150 employees over the prior year, primarily resulting from increased hiring in the Asia Pacific region.
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Executive Officers
As of January 20, 2012, our executive officers were as follows:
Name |
Age | Position | |||||
Salvatore Iannuzzi |
58 | Chairman of the Board of Directors, President and Chief Executive Officer | |||||
Timothy T. Yates |
64 | Executive Vice President, Director | |||||
James M. Langrock |
46 | Executive Vice President and Chief Financial Officer | |||||
Lise Poulos |
53 | Executive Vice President and Chief Administrative Officer | |||||
Mark Stoever |
44 | Executive Vice President, Corporate Development and Internet Advertising |
Salvatore Iannuzzi has been Chairman of the Board of Directors, President and Chief Executive Officer of the Company since April 2007. Prior to joining the Company, Mr. Iannuzzi served as President of Motorola, Inc.s Enterprise Mobility business from January 2007 to April 2007. Prior to that, Mr. Iannuzzi served as President and Chief Executive Officer of Symbol Technologies, Inc. (Symbol), a publicly traded company engaged in the business of manufacturing and servicing products and systems used in end-to-end enterprise mobility solutions, from January 2006 to January 2007, when Symbol was sold to Motorola, Inc. He previously served as Symbols Interim President and Chief Executive Officer and Chief Financial Officer from August 2005 to January 2006 and as Senior Vice President, Chief Administrative and Control Officer from April 2005 to August 2005. He also served as a director of Symbol from December 2003 to January 2007, serving as the Non-Executive Chairman of the Board from December 2003 to April 2005. From August 2004 to April 2005, Mr. Iannuzzi was a partner in Saguenay Capital, a boutique investment firm. Prior thereto, from April 2000 to August 2004, Mr. Iannuzzi served as Chief Administrative Officer of CIBC World Markets. From 1982 to 2000, he held several senior positions at Bankers Trust Company/Deutsche Bank, including Senior Control Officer and Head of Corporate Compliance.
Timothy T. Yates has been Executive Vice President and a Director since June 2007. From June 2007 until January 27, 2011, Mr. Yates also served as our Chief Financial Officer. Prior to joining the Company, Mr. Yates served as Senior Vice President, Chief Financial Officer and a director of Symbol from February 2006 to January 2007. From January 2007 to June 2007, he was a Senior Vice President of Motorola, Inc.s Enterprise Mobility business responsible for Motorolas integration of Symbol. From August 2005 to February 2006, Mr. Yates served as an independent consultant to Symbol. Prior to this, from October 2002 to November 2005, Mr. Yates served as a partner and Chief Financial Officer of Saguenay Capital, a boutique investment firm. Prior to that, he served as a founding partner of Cove Harbor Partners, a private investment and consulting firm, which he helped establish in 1996. From 1971 through 1995, Mr. Yates held a number of senior leadership roles at Bankers Trust New York Corporation, including serving as Chief Financial and Administrative Officer from 1990 through 1995.
James M. Langrock has been Executive Vice President and Chief Financial Officer since January 2011. From May 2008 until January 2011, Mr. Langrock served as the Companys Senior Vice President, Finance and Chief Accounting Officer. Prior to joining the Company, Mr. Langrock was Vice President, Finance of Motorola, Inc.s Enterprise Mobility business from January 2007 to April 2008. From May 2005 to January 2007, Mr. Langrock served as the Vice President, Chief Accounting Officer and Corporate Controller at Symbol. From December 2003 to May 2005, Mr. Langrock was Symbols Vice President Internal Audit. Before joining Symbol, he served as Chief Financial Officer at Empress International, Ltd., an importer and wholesale distributor, from May 2002 to November 2003. From 1991 to April 2002, Mr. Langrock held a variety of audit positions at Arthur Andersen LLP, including Senior Manager in the Audit and Business Advisory Practice.
Lise Poulos has been Executive Vice President and Chief Administrative Officer since January 2008. Previously, she had served as Executive Vice President since September 2007. Prior to joining the Company, Ms. Poulos served as Senior Vice President, Human Resources of Motorola, Inc.s Enterprise Mobility business from January 2007 to July 2007. From 1997 to January 2007, Ms. Poulos held various roles at Symbol, including Senior Vice President, Human Resources and Corporate Communications from August 2006 to January 2007, Vice President, Human Resources from November 2005 to August 2006 and Director, Human Resources from 2002 to November 2005. Prior to joining Symbol, Ms. Poulos worked at a major energy company and in the financial services industry.
Mark Stoever has been Executive Vice President, Corporate Development and Internet Advertising since October 2011. Previously, he had served as Executive Vice President, Corporate Development and Strategic Alliances from September 2008 to October 2011, as Executive Vice President, Internet Advertising & Fees from July 2007 to September 2008, and as Senior Vice
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President, Internet Advertising & Fees from July 2005 to July 2007. Prior to joining the Company, Mr. Stoever served as Executive Vice President of Decision Matrix Group, an investment fund specializing in technology market research, from January 2005 to May 2005. Prior to that, beginning in 1996 he held various management roles at Lycos, Inc., a global Internet content and service provider, most recently as President and Chief Executive Officer from October 2002 to November 2004. Prior to Lycos, Mr. Stoever held management roles at ON Technology Corporation, a software company, from 1994 to 1996, and at Microcom, Inc., a modem technology company, from 1989 to 1994.
ITEM 1A. | RISK FACTORS |
The existing global economic and financial market environment has had, and may continue to have, a negative affect on our business and operations.
Because demand for our services is sensitive to changes in the level of economic activity, our business has suffered during economic downturns. Many companies hire fewer employees when economic activity is slow. As a result, demand for our services is reduced, which leads to lower sales. If the economy does not fully recover or worsens, or unemployment remains at high levels, demand for our services and our sales may be further reduced. In addition, lower demand for our services may lead to lower prices for our services.
The volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the economy does not fully recover or worsens, our business, results of operations and financial condition could be materially and adversely affected.
We face risks relating to our foreign operations.
We have a presence in approximately 55 countries around the world. We earned 45%, 42% and 42% of our total revenue outside of the United States in the years ended December 31, 2011, 2010 and 2009, respectively. Such amounts are generally collected in local currencies. In addition, we generally pay operating expenses in local currencies. Therefore, we are at risk for exchange rate fluctuations between such local currencies and the United States dollar. Global foreign exchange markets have been experiencing heightened volatility in recent quarters and we cannot predict the direction or magnitude of future currency fluctuations. A weakening of the currencies in which we generate sales relative to the currencies in which our costs are denominated may lower our results of operations.
We are also subject to taxation in foreign jurisdictions. In addition, transactions between our foreign subsidiaries and us may be subject to United States and foreign withholding taxes. Applicable tax rates in foreign jurisdictions differ from those of the United States, and change periodically. The extent, if any, to which we will receive credit in the United States for taxes we pay in foreign jurisdictions will depend upon the application of limitations set forth in the Internal Revenue Code of 1986, as well as the provisions of any tax treaties that may exist between the United States and such foreign jurisdictions.
Our current or future international operations might not succeed or might fail to meet our expectations for a number of reasons, including:
| general political uncertainty; |
| difficulties in staffing and managing foreign operations; |
| competition from local recruiting services; |
| operational issues such as longer customer payment cycles and greater difficulties in collecting accounts receivable; |
| seasonal reductions in business activity; |
| language and cultural differences; |
| taxation issues; |
| complex legal and regulatory requirements that may be uncertain and may change; and |
| issues relating to uncertainties of laws and enforcement relating to the regulation and protection of intellectual property. |
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If we are forced to discontinue any of our international operations, we could incur material costs to close down such operations.
Also, we could be exposed to fines and penalties under United States laws such as the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot be sure that our employees, contractors or agents will not violate our policies. Any such violations could materially damage our reputation, our brand, our international expansion efforts, our business and our operating results.
Concerns regarding the European debt crisis and market perceptions concerning the instability of the euro could adversely affect the Companys business, results of operations and financing.
Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries. These concerns, or market perceptions concerning these and related issues, could adversely affect the value of the Companys euro- denominated assets and obligations and lead to future economic slowdowns.
We rely on the value of our brands, particularly Monster, and the costs of maintaining and enhancing our brand awareness are increasing.
Our success depends on our brands and their value. Our business would be harmed if we were unable to adequately protect our brand names, particularly Monster. We believe that maintaining and expanding the Monster brand is an important aspect of our efforts to attract and expand our user and client base. We also believe that the importance of brand recognition will increase due to the growing number of Internet sites and the relatively low barriers to entry. We have spent considerable money and resources to date on the establishment and maintenance of the Monster brand. We are devoting substantial resources to advertising, marketing and other brand-building efforts to preserve and enhance consumer awareness of the Monster brand. Despite this, we may not be able to successfully maintain or enhance consumer awareness of the Monster brand and, even if we are successful in our branding efforts, such efforts may not be cost-effective. If we are unable to maintain or enhance consumer awareness of the Monster brand in a cost-effective manner, our business, operating results and financial condition may be harmed significantly.
We also are susceptible to others imitating our products and brands, particularly our Monster brand, and infringing on our intellectual property rights. We may not be able to successfully protect our intellectual property rights, upon which we are dependent. While we believe we have strong trademark protection in the Monster brand worldwide in the careers and recruitment business, that protection does not extend fully to other businesses. Other companies and organizations use the Monster name, and more may do so in the future. This use could adversely affect our brand recognition and reputation if employers or job seekers confuse us with these other organizations. In addition, the laws of foreign countries do not necessarily protect intellectual property rights to the same extent as the laws of the United States. Imitation of our products or brands, particularly our Monster brand, or infringement of our intellectual property rights could diminish the value of our brands or otherwise reduce our revenues.
Our markets are highly competitive.
The markets for our services are highly competitive. They are characterized by pressures to:
| reduce prices; |
| incorporate new capabilities and technologies; and |
| accelerate hiring timelines. |
Furthermore, we face competition from a number of sources. These sources include:
| other employment-related websites, including large national and international competitors, niche career websites targeted at specific industry verticals, and jobs aggregator websites that aggregate job postings from multiple company websites and job boards; |
| professional networking and social networking websites; |
| general classified advertising websites, some of which offer a low-cost or free alternative to our offerings; |
| traditional media companies, including newspapers; and |
| Internet portals, search engines and general-interest websites such as blogs. |
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In addition to traditional competitors that provide products and services that are very similar to Monsters core products and services, we face increasing competition from a broad range of competitor types. Jobs aggregator websites have become a significant source of competition, as they permit job seekers to search multiple company websites and job boards. Professional networking websites have had significant success over the past several years in gaining large numbers of members and attracting employer customers with products that compete directly with our products. Low-cost and free classified advertising websites have also gained increased acceptance with employers. Additionally, many niche career websites have been launched targeted at specific industry verticals, and many industry blogs and websites now provide employment advertising opportunities for employers within specific industries.
Some of our competitors or potential competitors may have greater financial resources, management, technological development, sales, marketing and other resources than we do. Some of our competitors have more diversified businesses or may be owned by entities engaged in other lines of business, allowing them to operate their directly competitive operations at lower margins than our operations. In addition, our ability to maintain our existing clients and attract new clients depends to a large degree on the quality of our services and our reputation among our clients and potential clients.
Due to competition, we may experience reduced margins on our products and services, loss of market share or diminished use of our services by job seekers and our customers. If we are not able to compete effectively with current or future competitors as a result of these and other factors, our business, financial condition and results of operations could be significantly harmed.
We have no significant proprietary technology that would preclude or inhibit competitors from entering the online advertising market. Existing or future competitors may develop or offer services and products that provide significant performance, price, creative or other advantages over our services. If we do not keep pace with product and technology advances, there could be a material adverse effect on our competitive position, revenue and prospects for growth. This could significantly harm our business, financial condition and operating results.
Our operating results fluctuate from quarter to quarter.
Our quarterly operating results have fluctuated in the past and may fluctuate in the future. These fluctuations are a result of a variety of factors, including, but not limited to:
| the timing and amount of existing clients subscription renewals; |
| entering new markets; |
| enhancements to existing services; |
| the hiring cycles of employers; |
| changes in general economic conditions, such as recessions, that could, among other things, affect recruiting efforts generally and online recruiting efforts in particular; |
| the magnitude and timing of marketing initiatives; |
| the maintenance and development of our strategic relationships; |
| our ability to manage our anticipated growth and expansion; |
| our ability to attract and retain customers; |
| technical difficulties or system downtime affecting the Internet generally or the operation of our products and services specifically; |
| enhancements to technology to safeguard against security breaches; and |
| the timing and integration of our acquisitions. |
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We face risks relating to developing technology.
The market for our products and services is characterized by rapid technological developments, frequent new product introductions and evolving industry standards. The emerging character of these products and services and their rapid evolution will require continuous improvement in the performance, features and reliability of our Internet and mobile content, particularly in response to competitive offerings. We may not be successful in responding quickly, cost effectively and sufficiently to these developments. In addition, the widespread adoption of new technologies or standards (including several different mobile and smart phone operating systems) could require us to make substantial expenditures to modify or adapt our websites, applications and services. Each manufacturer or distributor of a mobile device or smart phone may establish unique technical standards for its devices, and our products and services may not work or be viewable on these devices as a result. As new devices and new platforms are continually being released, it is difficult to predict the problems we may encounter in developing versions of our products and services for use on these alternative devices and we may need to devote significant resources to the creation, support, and maintenance of such devices. If we are slow to develop products and technologies that are compatible with such devices, we might fail to capture a significant share of an increasingly important portion of the market for our products and services. This could harm our business, financial condition and operating results.
New Internet services or enhancements that we have offered or may offer in the future may contain design flaws or other defects that could require expensive modifications or result in a loss of client confidence. Any disruption in Internet access or in the Internet generally could significantly harm our business, financial condition and operating results. Slower response times or system failures may also result from straining the capacity of our software, hardware or network infrastructure. To the extent that we do not effectively address any capacity constraints or system failures, our business, results of operations and financial condition could be significantly harmed.
Trends that could have a critical impact on our success include:
| rapidly changing technology in online recruiting; |
| evolving industry standards relating to online recruiting; |
| developments and changes relating to the Internet and mobile devices; |
| evolving government regulations; |
| competing products and services that offer increased functionality; |
| changes in employer and job seeker requirements; and |
| customer privacy protection concerning transactions conducted over the Internet. |
We rely heavily on our information systems and if our access to this technology is impaired, or we fail to further develop our technology, our business could be significantly harmed.
Our success depends in large part upon our ability to store, retrieve, process and manage substantial amounts of information, including our client and candidate databases. To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. Our future success will depend on our ability to adapt to rapidly changing technologies, to adapt our information systems to evolving industry standards and to improve the performance and reliability of our information systems. This may require the acquisition of equipment and software and the development, either internally or through independent consultants, of new proprietary software. Our inability to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively could significantly harm our business, results of operations or financial condition.
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Concerns relating to our privacy policies and our compliance with applicable data protection laws and regulations could damage our reputation and deter current and potential customers, job seekers and other Internet users from using our products and services and subject us to fines.
Concerns about our practices with regard to the collection, use, disclosure or security of personal information or other privacy-related matters, even if unfounded, could damage our reputation, which in turn could significantly harm our business, financial condition and operating results.
While we strive to comply with all applicable data protection laws and regulations, as well as our own posted privacy policies, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, which could potentially have an adverse effect on our business. Moreover, failure or perceived failure to comply with applicable laws, regulations, requirements or our policies related to the collection, use, sharing or security of personal information or other privacy-related matters could result in a loss of confidence in us by customers, job seekers and other Internet users and could expose us to fines and penalties and could require us to expend significant sums in connection with any failure or perceived failure, each of which could adversely affect our business, financial condition and results of operations. Laws related to data protection continue to evolve. It is possible that certain jurisdictions may enact laws or regulations that impact our ability to offer our products and services and/or result in reduced traffic or contract terminations in those jurisdictions, which could harm our business, financial condition and results of operations.
Intrusions on our systems could damage our business.
Despite our implementation of network security measures, our servers are vulnerable to cyber attacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. Unauthorized access could jeopardize the security of information stored in our systems relating to our customers, job seekers and other website users, and can lead to phishing schemes whereby unauthorized persons pose as employers or Monster representatives and seek to obtain personal information from our customers and job seekers. In addition, malware or viruses could jeopardize the security of information stored or used in a users computer.
We have experienced these intrusions in the past. We may also experience these intrusions in the future and may be required to expend significant sums and resources to safeguard against or remediate them. Moreover, negative publicity arising from any intrusion is damaging to our reputation and may adversely impact traffic to our sites. Accordingly, any intrusion could significantly harm our business, financial condition and results of operations.
Interruptions, delays or failures in the provision of our services could damage our brand and harm our operating results.
Our systems are susceptible to outages and interruptions due to fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. Our systems continuing and uninterrupted performance is critical to our success. Customers, job seekers and other website users may become dissatisfied by any system failure that interrupts our ability to provide our services to them, including failures affecting our ability to serve web page requests without significant delay to the viewer. Sustained or repeated system failures would reduce the attractiveness of our solutions to customers, job seekers and other Internet users and result in reduced traffic, contract terminations, fee rebates and make goods, thereby reducing revenue. Moreover, negative publicity arising from these types of disruptions is damaging to our reputation and may adversely impact traffic to our sites.
We do not have multiple site redundancy for all of our services and some of our systems are not fully redundant in the event of any such occurrence. In an effort to reduce the likelihood of a geographical or other disaster impacting our business, we have distributed, and intend to continue assessing the need to distribute, our servers among additional data centers. Failure to execute these changes properly or in a timely manner could result in delays or interruptions to our service, which could result in a loss of users and damage to our brand, and harm our operating results. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service.
We are vulnerable to intellectual property infringement claims brought against us by others.
Successful intellectual property infringement claims against us could result in monetary liability or a material disruption in the conduct of our business. We cannot be certain that our products, content and brand names do not or will not infringe valid patents, trademarks, copyrights or other intellectual property rights held by third parties. We expect that infringement claims in our markets will increase in number. We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we were found to have infringed the intellectual property rights of a third party, we could be liable to that party for license fees, royalty payments, lost profits or other damages, and the owner of the intellectual property might be able to obtain injunctive relief to prevent us from using the technology or software in the future. If the amounts of these payments were significant or we were prevented from incorporating certain technology or software into our products, our business could be significantly harmed.
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We may incur substantial expenses in defending against these third party infringement claims, regardless of their merit. As a result, due to the diversion of management time, the expense required to defend against any claim and the potential liability associated with any lawsuit, any significant litigation could significantly harm our business, financial condition and results of operations.
If we are unable to protect our proprietary rights or maintain our rights to use key technologies of third parties, our business may be harmed.
A degree of uncertainty exists concerning the application and enforcement of trademark, trade dress and copyright laws to the Internet, and existing laws may not provide us adequate protection for our original content or the appearance of our Internet sites. In addition, because copyright laws do not prohibit independent development of similar content, copyright laws may not provide us with any competitive advantage. We have obtained patents and applied for other patents with respect to certain of our software systems, methods and related technologies, but our pending applications may not be granted and any patents issued to us may in the future be challenged, invalidated or circumvented, and the rights granted under patents may not provide us with a competitive advantage. We also face risks associated with our trademarks, particularly trademarks covering the Monster brand. Policing unauthorized use of our proprietary technology and other intellectual property rights could involve significant expense and could be difficult or impossible, particularly given the global nature of the Internet and the fact that the laws of certain other countries may afford us little or no effective protection of our intellectual property. Moreover, a recent amendment to the United States patent law will become effective in 2012 and may affect our ability to protect our innovations and defend against claims of patent infringement.
In addition, we rely on certain technology licensed from third parties, and may be required to license additional technology in the future for use in managing our Internet sites and providing related services to users and advertising customers. Our ability to generate fees from Internet commerce may also depend on data encryption, authentication and other technologies that we may be required to license from third parties. These third-party technology licenses may not continue to be available to us on acceptable commercial terms or at all. The inability to enter into and maintain any of these technology licenses could significantly harm our business, financial condition and operating results.
If the Company could not replace its credit facilities upon expiration, the Companys liquidity would be significantly adversely affected.
The Companys revolving and term credit facilities mature on December 21, 2012. The Company expects to be able to replace these credit facilities on or before their expiration. If due to the economic environment, the Companys performance or financial condition, or other factors the Company is unable to obtain replacement financing at a reasonable cost and in a timely manner, the Companys liquidity would be significantly adversely affected and the Companys business, operating results and financial condition would be significantly adversely affected.
We have made strategic acquisitions and entered into alliances and joint ventures in the past and intend to do so in the future. If we are unable to find suitable acquisitions or partners or to achieve expected benefits from such acquisitions or partnerships, there could be a material adverse effect on our business, growth rates and results of operations.
As part of our ongoing business strategy we engage in discussions from time to time with third parties regarding, and enter into agreements relating to, possible acquisitions, strategic alliances and joint ventures. If we are unable to identify future acquisition opportunities or reach agreements with such third parties, there could be a material adverse effect on our business, growth rates and results of operations.
Even if we are able to complete acquisitions or enter into alliances and joint ventures that we believe will be successful, such transactions, especially those involving companies like ChinaHR, are inherently risky. Our acquisitions can be accompanied by a number of risks, including:
| the difficulty of integrating the operations and personnel of our acquired companies into our operations; |
| the potential disruption of our ongoing business and distraction of management; |
| the difficulty of integrating acquired technology and rights into our services and unanticipated expenses related to such integration; |
| the impairment of relationships with customers and partners of the acquired companies or our customers and partners as a result of the integration of acquired operations; |
| the impairment of relationships with employees of the acquired companies or our employees as a result of integration of new management personnel; |
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| the difficulty of integrating the acquired companies accounting, management information, human resources and other administrative systems; |
| in the case of foreign acquisitions, uncertainty regarding foreign laws and regulations and difficulty integrating operations and systems as a result of cultural, systems and operational differences; and |
| the impact of known potential liabilities or unknown liabilities associated with the acquired companies. |
Our failure to be successful in addressing these risks or other problems encountered in connection with our past or future acquisitions could cause us to fail to realize the anticipated benefits of our acquisitions, incur unanticipated liabilities and significantly harm our business, financial condition and results of operations generally.
We have had and may face future difficulties managing growth.
Our business has experienced periods of rapid growth, both internally and through acquisitions. This expansion has resulted in substantial growth in the number of our employees, and put a significant strain on our management and operations. If our business experiences similar periods of rapid growth in the future, we expect it to result in increased responsibility for management personnel, and incremental strain on our operations, and financial and management systems. Our success under such conditions will depend, to a significant extent, on the ability of our executive officers and other members of senior management to operate effectively both independently and as a group. If we are not able to manage future growth, our business, financial condition and operating results may be significantly harmed.
Our future growth depends on our ability to expand operations in international markets. We may have limited experience or we may need to rely on business partners in these markets, and our future growth will be materially adversely affected if we are unsuccessful in our international expansion efforts.
We currently have a presence in approximately 55 countries around the world. Our future growth will depend significantly on our ability to expand Monster-branded product offerings in additional international markets. As we expand into new international markets, we will have only limited experience (if any) in marketing and operating our products and services in such markets. In other instances, including our CareerOne joint venture with News Limited in Australia, we have had to rely, and may have to continue to rely, on the efforts and abilities of foreign business partners in such markets. Certain international markets may be slower than domestic markets in adopting the online career and commerce medium and as a result, our operations in international markets may not develop at a rate that supports our level of investment.
Our business depends largely on our ability to attract and retain talented employees, including senior management.
We are substantially dependent on the continued services of our senior management, including those executive officers set forth in the table in the Executive Officers section of this report. The loss of any of these individuals could harm our business, financial condition and results of operations. Our business is also dependent on our ability to retain, hire, motivate and develop talented, highly skilled personnel. Experienced management and technical, marketing and support personnel in our industry are in high demand, and competition for their talents is intense. If we are less successful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected.
We may be required to record a significant charge to earnings if our goodwill or amortizable intangible assets become impaired.
We are required under generally accepted accounting principles to review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, slower growth rates in our industry or other materially adverse events. We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined. This may adversely impact our results of operations. As of December 31, 2011, our goodwill and amortizable intangible assets were $1,184.1 million, which represented 58% of total consolidated assets. We refer the reader to Footnote 1 (in Item 8 of this Annual Report on Form 10-K) of our Notes to Consolidated Financial Statements for the results of our annual impairment evaluation.
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We estimate tax liabilities, the final determination of which is subject to review by domestic and international taxation authorities.
We are subject to income taxes and other taxes in both the United States and the foreign jurisdictions in which we currently operate or have historically operated. We are also subject to review and audit by both domestic and foreign taxation authorities. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our consolidated financial statements.
Effects of anti-takeover provisions could inhibit the acquisition of Monster Worldwide by others.
Some of the provisions of our certificate of incorporation, bylaws and Delaware law could, together or separately:
| discourage potential acquisition proposals; |
| delay or prevent a change in control; and/or |
| limit the price that investors might be willing to pay in the future for shares of our Common Stock. |
In particular, our Board of Directors may authorize the issuance of up to 800,000 shares of Preferred Stock with rights and privileges that might be senior to our Common Stock, without the consent of the holders of the Common Stock. In addition, our certificate of incorporation and bylaws provide, among other things, for advance notice of stockholder proposals and director nominations.
There is volatility in our stock price.
The market for our Common Stock has, from time to time, experienced extreme price and volume fluctuations. Factors such as announcements of variations in our quarterly financial results and fluctuations in revenue could cause the market price of our Common Stock to fluctuate significantly. In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees, many of whom have been granted equity compensation.
The market price of our Common Stock can be influenced by stockholders expectations about the ability of our business to grow and to achieve certain profitability targets. If our financial performance in a particular quarter does not meet the expectations of our stockholders, it may adversely affect their views concerning our growth potential and future financial performance and, therefore, result in a drop in the market price of our Common Stock. In addition, if the securities analysts who regularly follow our Common Stock lower their ratings of our Common Stock, the market price of our Common Stock is likely to drop significantly.
We face risks associated with government regulation.
The application of existing laws and regulations to our websites relating to issues such as user privacy, security of data, defamation, advertising, taxation, promotions, content regulation, and intellectual property ownership and infringement can be unclear. In addition, we will also be subject to new laws and regulations directly applicable to our activities. Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, and dampen growth in Internet usage.
The federal CAN-SPAM Act and state anti-spam laws impose certain requirements on the use of e-mail. The implications of these laws have not been fully tested. Portions of our business rely on e-mail to communicate with consumers on our behalf and for our clients. We may face risk if our use of e-mail is found to violate the federal law or applicable state law.
We post our privacy policy and practices concerning the use and disclosure of user data on our websites. Any failure by us to comply with our posted privacy policy or other privacy-related laws and regulations could result in proceedings which could potentially harm our business, results of operations and financial condition. In this regard, there are a large number of legislative proposals before the United States Congress, various state legislative bodies as well as various European Union institutions, bodies and agencies regarding privacy issues related to our business. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could significantly harm our business, financial condition and results of operations through a decrease in user registrations and revenues. This could be caused by, among other possible provisions, the required use of disclaimers or other requirements before users can utilize our services.
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Due to the global nature of the Internet, it is possible that the governments of other states and foreign countries might attempt to regulate its transmissions or prosecute us for violations of their laws. We might unintentionally violate such laws or such laws may be modified and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) may significantly harm our business, operating results and financial condition.
Legal proceedings may significantly harm our business.
From time to time, we may become involved in litigation or other proceedings in the ordinary course of business. It is possible that such litigation or proceedings may significantly harm our future results of operations or financial condition due to expenses we may incur to defend ourselves or the ramifications of an adverse decision.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
ITEM 2. | PROPERTIES |
Our principal executive offices are located in New York, New York, where we occupy approximately 52,000 square feet of leased space. Our largest office space is located in Maynard, Massachusetts, where we occupy approximately 247,000 square feet of leased space. We also lease additional facilities in the United States in: Bedford, Massachusetts; Boston, Massachusetts; Chicago, Illinois; Cincinnati, Ohio; Dallas, Texas; Denver, Colorado; Florence, South Carolina; Indianapolis, Indiana; Laguna Hills, California; Los Angeles, California; McLean, Virginia; Milwaukee, Wisconsin; Mountain View, California; Raleigh, North Carolina; San Francisco, California; Tempe, Arizona; Washington, D.C; and Cambridge, Massachusetts. Our domestic properties are used generally by our Careers North America and Internet Advertising & Fees segments.
We also maintain leased facilities internationally in: Austria; Belgium; Brazil; Canada; Czech Republic; France; Germany; Hong Kong; Hungary; India; Ireland; Italy; Luxembourg; Malaysia; Mexico; the Netherlands; Norway; the Peoples Republic of China; Poland; the Republic of Korea; Russia; Singapore; Spain; Sweden; Switzerland; Turkey; United Arab Emirates and the United Kingdom. Our international properties are used generally by our Careers International segment.
We also operate data centers in the United States, Europe and Asia pursuant to various lease and co-location arrangements.
We consider our leased space to be adequate for the operation of our business, and we do not foresee any difficulties in meeting any future space requirements.
ITEM 3. | LEGAL PROCEEDINGS |
The Company is involved in various legal proceedings that are incidental to the conduct of its business. Aside from the matters discussed below, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or cash flows.
In December 2010, EIT Holdings LLP filed suit against the Company and six other named defendants for allegedly infringing a patent purporting to cover certain forms of pop-up advertising on websites. Subsequently, the Court dismissed the action on the basis that it could not be brought as one lawsuit against multiple defendants. In June 2011, plaintiff re-commenced the action against the Company on an individual basis in the United States District Court for the Northern District of California. The lawsuit was entitled EIT Holdings LLP v. Monster Worldwide, Inc. (Civil Action No.5:11-cv-02472-RMW). The plaintiff sought monetary damages, pre- and post-judgment interest, and attorneys fees. In November 2011, the matter was resolved and the lawsuit was dismissed with prejudice.
ITEM 4. | [REMOVED AND RESERVED] |
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ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our Common Stock is listed on the New York Stock Exchange under the symbol MWW.
As of January 20, 2012, the last reported sale price of our Common Stock as reported by the New York Stock Exchange was $9.00. The following table sets forth for the indicated periods the high and low sales prices per share for our Common Stock on the New York Stock Exchange.
2011 |
High | Low | ||||||
First Quarter |
$ | 25.90 | $ | 14.24 | ||||
Second Quarter |
$ | 18.47 | $ | 12.99 | ||||
Third Quarter |
$ | 15.30 | $ | 7.00 | ||||
Fourth Quarter |
$ | 9.90 | $ | 6.34 |
2010 |
High | Low | ||||||
First Quarter |
$ | 19.10 | $ | 12.82 | ||||
Second Quarter |
$ | 18.48 | $ | 11.59 | ||||
Third Quarter |
$ | 14.19 | $ | 10.01 | ||||
Fourth Quarter |
$ | 25.01 | $ | 12.61 |
Holders
As of January 20, 2012, there were 2,754 stockholders of record of our Common Stock, although we believe that there are a significantly larger number of beneficial owners.
Dividends
We have never declared or paid any cash dividends on our stock, and we do not anticipate paying cash dividends in the foreseeable future. The payment of any future dividends, if any, will be at the discretion of our Board and will depend upon, among other things, future earnings, operations, capital requirements, our general financial condition, contractual restrictions and general business conditions. Our credit agreement restricts, in certain circumstances, the payment of dividends on our stock.
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Stock Performance Graph
The following performance graph and related information shall not be deemed filed for the purposes of Section 18 of the Exchange Act or otherwise subject to liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act.
The following graph compares the cumulative total return of the Companys Common Stock during the period commencing December 31, 2006 to December 31, 2011, with the S&P 500 Index and the RDG Internet Composite Index. The graph depicts the results of investing $100 in the Companys Common Stock, the S&P 500 Index and the RDG Internet Composite Index at closing prices on December 31, 2006 and assumes, with respect to the S&P 500 Index and the RDG Internet Composite Index, that all dividends were reinvested. The Company has never declared or paid any cash dividends on its stock. Such returns are based on historical results and are not intended to suggest future performance.
Comparison of Five Year Cumulative Total Return
Among Monster Worldwide, Inc., The S&P 500 Index
and The RDG Internet Composite Index
Issuance of Unregistered Securities
None.
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Issuer Purchases of Equity Securities
A summary of the Companys repurchase activity for the three months ended December 31, 2011 is as follows:
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs* |
||||||||||||
October 1 October 31 |
| | | $ | 250,000,000 | |||||||||||
November 1 November 30 |
2,685,391 | $ | 7.5184 | 2,685,391 | $ | 229,810,201 | ||||||||||
December 1 December 31 |
2,819,505 | $ | 7.6869 | 2,819,505 | $ | 208,136,934 | ||||||||||
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Total |
5,504,896 | $ | 7.6047 | 5,504,896 | $ | 208,136,934 |
* | In October 2011, the Companys Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $250.0 million worth of shares of its Common Stock. The share repurchase program expires in April 2013. |
ITEM 6. | SELECTED FINANCIAL DATA |
The following tables present selected financial data for the five years ended December 31, 2011. See Managements Discussion and Analysis of Financial Condition and Results of Operations, found in Item 7 of this Annual Report, for information regarding business acquisitions, discontinued operations, critical accounting policies and items affecting comparability of the amounts below.
STATEMENTS OF OPERATIONS DATA:
For the Years Ended December 31, |
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(Dollars in thousands, except per share amounts) |
2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Revenue | $ | 1,040,105 | $ | 914,133 | $ | 905,142 | $ | 1,343,627 | $ | 1,323,804 | ||||||||||
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Salaries and Related, Office & General and Marketing & Promotion |
960,003 | 945,540 | 895,281 | 1,110,375 | 1,082,274 | |||||||||||||||
Restructuring and other special charges |
5,173 | | 16,105 | 16,407 | 16,597 | |||||||||||||||
Release of ChinaHR escrowed funds |
(17,400 | ) | | | | | ||||||||||||||
(Reversal of) provision for legal settlements, net |
| | (6,850 | ) | 40,100 | | ||||||||||||||
Amortization of Intangibles |
15,810 | 10,614 | 9,417 | 6,790 | 5,701 | |||||||||||||||
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Total operating expenses |
963,586 | 956,154 | 913,953 | 1,173,672 | 1,104,572 | |||||||||||||||
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Operating income (loss) |
$ | 76,519 | $ | (42,021 | ) | $ | (8,811 | ) | $ | 169,955 | $ | 219,232 | ||||||||
Income (loss) from continuing operations |
$ | 53,797 | $ | (32,359 | ) | $ | 18,927 | $ | 114,489 | $ | 150,095 | |||||||||
Net income (loss) |
$ | 53,797 | $ | (32,359 | ) | $ | 18,927 | $ | 124,793 | $ | 146,399 | |||||||||
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Basic earnings (loss) per share: |
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Income (loss) from continuing operations |
$ | 0.44 | $ | (0.27 | ) | $ | 0.16 | $ | 0.95 | $ | 1.17 | |||||||||
Income (loss) from discontinued operations, net of tax |
| | | 0.09 | (0.03 | ) | ||||||||||||||
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Basic earnings (loss) per share* |
$ | 0.44 | $ | (0.27 | ) | $ | 0.16 | $ | 1.04 | $ | 1.14 | |||||||||
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Diluted earnings (loss) per share:* |
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Income (loss) from continuing operations |
$ | 0.43 | $ | (0.27 | ) | $ | 0.16 | $ | 0.94 | $ | 1.15 | |||||||||
Income (loss) from discontinued operations, net of tax |
| | | 0.09 | (0.03 | ) | ||||||||||||||
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Diluted earnings (loss) per share * |
$ | 0.43 | $ | (0.27 | ) | $ | 0.16 | $ | 1.03 | $ | 1.12 | |||||||||
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* | Earnings per share may not add in certain periods due to rounding. |
20
BALANCE SHEET DATA (a):
(Dollars in thousands) |
2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Total Current Assets |
$ | 675,932 | $ | 585,371 | $ | 645,493 | $ | 682,821 | $ | 1,184,965 | ||||||||||
Total Current Liabilities |
782,963 | 686,824 | 507,156 | 723,708 | 828,660 | |||||||||||||||
Total Assets |
2,057,998 | 1,978,002 | 1,827,190 | 1,916,590 | 2,077,810 | |||||||||||||||
Long-Term Liabilities |
110,908 | 162,528 | 186,870 | 145,609 | 132,649 | |||||||||||||||
Total Stockholders Equity |
$ | 1,164,127 | $ | 1,128,650 | $ | 1,133,164 | $ | 1,047,273 | $ | 1,116,501 |
(a) | Year 2007 includes assets and liabilities of discontinued operations. |
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
We make forward-looking statements in this report and in other reports and proxy statements that we file with the SEC. Except for historical information contained herein, the statements made in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such forward-looking statements involve certain risks and uncertainties, including statements regarding our strategic direction, prospects and future results. Certain factors, including factors outside of our control, may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, among other things, the global economic and financial market environment; risks relating to our foreign operations; risks relating to the European debt crisis and market perceptions concerning the instability of the euro; our ability to maintain and enhance the value of our brands, particularly Monster; competition; fluctuations in our quarterly operating results; our ability to adapt to rapid developments in technology; our ability to continue to develop and enhance our information technology systems; concerns related to our privacy policies and our compliance with applicable data protection laws and regulations; intrusions on our systems; interruptions, delays or failures in the provision of our services; our vulnerability to intellectual property infringement claims brought against us by others; our ability to protect our proprietary rights and maintain our rights to use key technologies of third parties; our ability to replace our credit facilities as they mature; our ability to identify future acquisition opportunities or partners and the risk that future acquisitions or partnerships may not achieve the expected benefits to us; our ability to manage future growth; our ability to expand our operations in international markets; our ability to attract and retain talented employees, including senior management; potential write-downs if our goodwill or amortizable intangible assets become impaired; adverse determinations by domestic and/or international taxation authorities related to our estimated tax liabilities; effects of anti-takeover provisions in our organizational documents that could inhibit the acquisition of Monster Worldwide by others; volatility in our stock price; risks associated with government regulation; the outcome of litigation we may become involved in from time to time; and other risks and uncertainties set forth from time to time in our reports to the SEC, including under Item 1A. Risk Factors of this report.
OVERVIEW
Business
Monster is the premier global online employment solution provider, inspiring people to improve their lives, with a presence in approximately 55 countries around the world. We have built on Monsters brand and created worldwide awareness by offering online recruiting solutions that we believe are redefining the way employers and job seekers connect. For employers, our goal is to provide the most effective solutions and easiest to use technology to simplify the hiring process and cost effectively deliver access to our community of job seekers. For job seekers, our purpose is to help improve their careers by providing work-related content, services and advice. Our services and solutions include searchable job advertisements, resume database access, recruitment media solutions through our advertising network and partnerships, and other career-related content. Job seekers can search our job advertisements and post their resumes for free on each of our career websites and mobile applications. Employers pay to advertise available jobs and recruitment related services, search our resume database, and access other career-related services.
Our investments in our technology platform have allowed us to continue delivering innovative products and services on a global basis. Over the last few years, we consolidated several technology systems and created a platform that is more secure, scalable and redundant. Our strategy has been to grow our business both organically and through strategic acquisitions and alliances in which the perceived growth prospects fit our long-term strategic growth plan.
In June 2011, to further extend our global reach and leverage the worlds most popular global social network, we launched BeKnown, a professional network application available on the Facebook platform. This application allows Facebook members in
21
49 countries and in 19 languages to establish a professional network on BeKnown. With BeKnown, users can seamlessly identify and connect with professional contacts from multiple sources and enhance their professional identities, while keeping their friends on Facebook separate from their professional contacts.
Our growth strategy includes global geographic expansion. On August 24, 2010, the Company completed the acquisition of the HotJobs Assets (as defined below), which we believe will expand our market share in the North America online recruitment market. In February 2011, the Company completed the integration of the HotJobs website onto the Companys platform, which enables job seekers to benefit from the increased availability of jobs and precise search capabilities, and enable employers to benefit from the increased volume and quality of seeker traffic. Concurrent with the closing of the acquisition, Monster and Yahoo!, Inc. (Yahoo!) entered into a three year commercial traffic agreement whereby Monster became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada. This traffic agreement has increased our reach in North America. Separately, we formed a multi-country relationship with Yahoo! across South America to bring career opportunities and resources to Yahoo! users, employers and job-seekers. We are now Yahoo!s exclusive provider of career and job content in key markets across South America.
In 2008, we acquired Trovix Inc., a business that provides career-related products and services that utilize semantic search technology, focusing on key attributes such as skills, work history and education. Our patented 6Sense® semantic search and matching technology, which is based upon Trovix technology, is the backbone of a growing family of products for both job seekers and employers. Our innovative and proprietary semantic resume search product, Monster Power Resume Search® (PRS) has been available to customers in North America since late 2009, and more recently to customers in the United Kingdom and France. Most recently we launched PRS in Germany and expect to rollout PRS in the Netherlands and China in the future. Our 6Sense technology transforms traditional keyword-based processes by assisting our customers in matching candidates to their required job specifications. We also introduced 6Sense powered job search, which has changed how seekers explore, find and apply for jobs. We introduced our cloud based search product SeeMore in the third quarter of 2011, which allows our customers to utilize our 6Sense technology on their own talent databases.
In 2007, we introduced in North America the Career Ad Network, or CAN, which is now the industrys largest recruitment-focused online advertising network that reaches nearly 105 million internet users on a global basis. We offer this innovative media product to customers in North America and most major markets in Europe, as well as in Australia and Brazil, and we expect to expand this offering further into South America and Asia. CAN distributes our customers job advertisements across a broad array of targeted websites and is an effective way of expanding our customers pool of active and passive seekers. Additionally, we offer our customers application tracking services, diversity resume database services and other ancillary services either directly or through alliances to meet the changing needs of our customers.
We believe the long-term growth opportunities overseas are significant and believe that we are positioned to benefit from our expanded reach and broadened product portfolio, increased brand recognition around the world, and the continued secular shift towards online recruiting. Through a balanced mix of investments, strategic acquisitions and disciplined operating focus and execution, we believe Monster Careers segments can take advantage of this global market opportunity over the next several years.
Our Internet Advertising & Fees business operates a network of websites that connect companies to highly targeted audiences at critical stages in their lives. Our goal is to offer compelling online services for the users of such websites through personalization, community features and enhanced content. We monetize this web traffic through display advertising and lead generation. We believe that these properties appeal to advertisers and other third parties as they deliver certain discrete demographics entirely online. Beginning in the third quarter of 2011, the Company no longer engages in arbitrage lead generation activities due to the diminishing profit opportunity and the promulgation of new regulations applicable to the Companys customers in the for-profit education business.
Business Combinations
During the period January 1, 2009 through December 31, 2011, we completed the following business combinations. Although none of the following acquisitions were considered to be significant, either individually or in the aggregate, they do affect the comparability of results from period to period. The acquisitions and the acquisition dates are as follows:
Acquired Business |
Acquisition Date |
Business Segment | ||
JobBusan |
December 31, 2010 | Careers International | ||
HotJobs Assets (as defined below) |
August 24, 2010 | Careers North America | ||
CinCHouse LLC |
July 28, 2009 | Internet Advertising & Fees |
On August 24, 2010, pursuant to an Asset Purchase Agreement dated as of February 3, 2010 between Monster and Yahoo!, Monster completed the acquisition of substantially all of the assets exclusive to Yahoo! HotJobs (the HotJobs Assets) from Yahoo!. The purchase price for the HotJobs Assets was $225.0 million. Accordingly, the business attributable to the HotJobs Assets has been included in the Careers North America segment and reporting unit. The results of operations attributable to the HotJobs Assets
22
have been included in our consolidated financial statements since August 24, 2010. The Company funded the acquisition of the HotJobs Assets with available cash and proceeds from the Companys revolving credit facility (see Note 9 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K). In the three months ended March 31, 2011, the Company incurred $4.6 million of acquisition and integration-related costs associated with the acquisition of the HotJobs Assets, which were expensed as incurred and are included in office and general and salary and related expenses in the consolidated statement of operations. No integration-related costs were incurred by the Company subsequent to March 31, 2011.
Restructuring Programs
During the year ended December 31, 2011, the Company recorded $5.2 million of restructuring and other special charges comprised of severance of $3.3 million and facility costs of $1.9 million. The accrued restructuring balance as of December 31, 2011 was $3.0 million. These restructuring and other special charges resulted from the Company no longer engaging in certain activities within the Internet Advertising & Fees segment, the decision to cease operations within one country in the Careers International segment as well as targeted headcount reductions within the Careers North America segment.
On January 24, 2012, the Company committed to take a series of strategic restructuring actions. The Companys decision to adopt the strategic restructuring actions resulted from the Companys desire to provide the Company with more flexibility to invest in marketing and sales activities in order to improve its long-term growth prospects and profitability. The strategic restructuring actions include reducing the Companys current workforce by approximately 400 associates (or 7% of its full-time staff), the consolidation of certain office facilities, and continuing discretionary-spending and office and general expense controls. The Company anticipates that a majority of the strategic restructuring actions, and a majority of the charges associated with such actions, will be taken in the first quarter of 2012. The Company also anticipates that all strategic restructuring actions will be completed by the end of 2012. As a result of the restructuring initiatives, the Company expects to record an aggregate pre-tax charge within the range of $30.0 million to $40.0 million, beginning in the first quarter of 2012. Of the aggregate pre-tax charge, the Company expects to incur approximately $25.0 million to $35.0 million in cash expenditures.
23
RESULTS OF OPERATIONS
Consolidated operating results as a percent of revenue for the years ended December 31, 2011, 2010 and 2009 are as follows:
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Revenue |
100.0 | % | 100.0 | % | 100.0 | % | ||||||
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|
|
|
|
|
|||||||
Salaries and related |
49.6 | % | 53.7 | % | 51.2 | % | ||||||
Office and general |
23.5 | % | 26.6 | % | 25.6 | % | ||||||
Marketing and promotion |
20.7 | % | 24.3 | % | 23.2 | % | ||||||
Release of ChinaHR escrowed funds |
(1.7 | )% | 0.0 | % | 0.0 | % | ||||||
Restructuring and other special charges |
0.5 | % | 0.0 | % | 1.8 | % | ||||||
Reversal of legal settlements, net |
0.0 | % | 0.0 | % | (0.8 | )% | ||||||
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|
|
|
|
|
|||||||
Total operating expenses |
92.6 | % | 104.6 | % | 101.0 | % | ||||||
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|
|
|
|
|||||||
Operating income (loss) |
7.4 | % | (4.6 | )% | (1.0 | )% | ||||||
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|
|
|
|
|
|||||||
Interest and other, net |
(0.3 | )% | (0.2 | )% | (0.6 | )% | ||||||
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|
|
|
|
|
|||||||
Income (loss) before income taxes and loss in equity interests |
7.1 | % | (4.8 | )% | (1.6 | )% | ||||||
Provision for (benefit from) income taxes |
1.8 | % | (1.6 | )% | (4.2 | )% | ||||||
Loss in equity interests, net |
(0.2 | )% | (0.3 | )% | (0.5 | )% | ||||||
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|
|
|
|
|
|||||||
Net income (loss) |
5.2 | % | (3.5 | )% | 2.1 | % | ||||||
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|
The following presentation of our segment results is prepared based on the criteria we use when evaluating the performance of our business units.
The Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010
Consolidated Revenue, Operating Expenses and Operating Income (Loss)
Consolidated revenue, operating expenses and operating income (loss) for the years ended December 31, 2011 and 2010 are as follows:
% of | % of | Increase | % Increase | |||||||||||||||||||||
(Dollars in thousands) |
2011 | Revenue | 2010 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 1,040,105 | 100.0 | % | $ | 914,133 | 100.0 | % | $ | 125,972 | 13.8 | % | ||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||
Salaries and related |
516,198 | 49.6 | % | 490,791 | 53.7 | % | 25,407 | 5.2 | % | |||||||||||||||
Office and general |
244,272 | 23.5 | % | 242,797 | 26.6 | % | 1,475 | 0.6 | % | |||||||||||||||
Marketing and promotion |
215,343 | 20.7 | % | 222,566 | 24.3 | % | (7,223 | ) | (3.2 | )% | ||||||||||||||
Release of ChinaHR escrowed funds |
(17,400 | ) | (1.7 | )% | | 0.0 | % | (17,400 | ) | n/a | ||||||||||||||
Restructuring and other special charges |
5,173 | 0.5 | % | | 0.0 | % | 5,173 | n/a | ||||||||||||||||
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|
|
|||||||||||||||||||
Total operating expenses |
963,586 | 92.6 | % | 956,154 | 104.6 | % | 7,432 | 0.8 | % | |||||||||||||||
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|
|
|
|||||||||||||||||||
Operating income (loss) |
$ | 76,519 | 7.4 | % | $ | (42,021 | ) | (4.6 | )% | $ | 118,540 | 282.1 | % | |||||||||||
|
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|
Our consolidated revenue increased $126.0 million, or 13.8%, in 2011 compared to 2010. Our Careers International segment experienced a 23.3% increase in revenue, which includes $19.8 million of favorable foreign exchange impact, primarily due to growth in Europe including Germany, France and Sweden, and in Asia including South Korea, India and China. Our Careers North America segment experienced a 15.0% increase in revenue due to increased business activity from our enterprise customers, in addition to growth within our newspaper, staffing and e-commerce sectors. Careers North America also benefitted from the revenue generated from the HotJobs Assets, which we acquired on August 24, 2010. These increases in our consolidated Careers segments were due to the further adoption of the Companys broadened product portfolio (including PRS, CAN and the HotJobs Assets). Our Internet Advertising & Fees revenue decreased 16.2% in 2011 compared to 2010. This decrease was primarily attributable to the Company, as of the beginning of the third quarter of 2011, no longer engaging in arbitrage lead generation activities due to the lack of profitability in such business and in light of new regulations. This decrease was partially offset by an increase in our display advertising business. Overall bookings (which represent the value of contractual orders received during the relevant period),
24
excluding amounts related to our arbitrage lead generation activities, increased 16% on a global basis compared to 2010. However, the Company experienced a deceleration of booking and revenue growth in the latter half of 2011, particularly in the fourth quarter. The Company believes that the principal factor for such deceleration is the increased global economic uncertainty.
Salary and related expenses increased $25.4 million, or 5.2%, in 2011 compared to 2010, which includes $10.5 million of unfavorable foreign exchange. This increase in salaries and related expenses resulted primarily from increased regular salary costs associated with the impact of a full year of salary and related expenses from the HotJobs Assets, increased headcount in 2011 primarily in Asia as well as increased variable compensation costs resulting from increased booking activity in 2011. These increases were partially offset by decreased severance costs associated with our targeted headcount reductions, which primarily occurred in 2010, in addition to decreased costs associated with stock-based compensation and associate incentive plans.
Office and general expenses increased $1.5 million, or 0.6%, in 2011 compared to 2010, which includes $3.2 million of unfavorable foreign exchange impact. This increase in office and general expenses resulted primarily from increased amortization of acquired intangibles relating to the HotJobs Assets, charges relating to changes in estimated sublease assumptions for previously exited facilities as well as increased depreciation expense associated with our recent increase in capital expenditures. These increases in office and general expenses were partially offset by a decrease in professional fees associated with the HotJobs acquisition incurred primarily in 2010.
The Company does not allocate acquisition and integration-related expenses to their reportable segments. Accordingly, the $4.6 million and $24.3 million of acquisition and integration-related expenses incurred in 2011 and 2010, respectively, associated with the acquisition of the HotJobs Assets is recorded as a corporate expense.
Marketing and promotion expenses decreased $7.2 million, or 3.2%, in 2011 compared to 2010, which includes $3.5 million of unfavorable foreign exchange impact. This decrease in marketing and promotion expenses resulted primarily from the Company, beginning in the third quarter of 2011, no longer engaging in arbitrage lead generation activities. This decrease was partially offset by an increase in our traffic agreement with Yahoo!, whereby the Company became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada as well as our expenses related to our focus on brand awareness in Europe and Asia.
In the third quarter of 2011, we received $17.4 million in cash, net of professional fees reimbursed to the Company, from escrowed funds relating to the ChinaHR.com Holdings Ltd. (together with its subsidiaries, ChinaHR) acquisition.
We incurred $5.2 million of restructuring charges and other special charges in 2011 comprised primarily of severance and facility costs resulting from the Company no longer engaging in certain activities within the Internet Advertising & Fees segment, the decision to cease operations within one country in the Careers International segment as well as targeted headcount reductions within the Careers North America segment.
Our consolidated operating income was $76.5 million in 2011, compared to an operating loss of $42.0 million in 2010, as a result of the factors discussed above.
Careers North America
The operating results of our Careers North America segment for the years ended December 31, 2011 and 2010 are as follows:
% of | % of | Increase | % Increase |
|||||||||||||||||||||
(Dollars in thousands) |
2011 | Revenue | 2010 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 485,356 | 100.0 | % | $ | 422,193 | 100.0 | % | $ | 63,163 | 15.0 | % | ||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||
Salaries and related |
212,440 | 43.8 | % | 196,076 | 46.4 | % | 16,364 | 8.3 | % | |||||||||||||||
Office and general |
99,361 | 20.5 | % | 84,442 | 20.0 | % | 14,919 | 17.7 | % | |||||||||||||||
Marketing and promotion |
98,474 | 20.3 | % | 93,892 | 22.2 | % | 4,582 | 4.9 | % | |||||||||||||||
Restructuring and other special charges |
450 | 0.1 | % | | 0.0 | % | 450 | n/a | ||||||||||||||||
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|
|
|||||||||||||||||||
Total operating expenses |
410,725 | 84.6 | % | 374,410 | 88.7 | % | 36,315 | 9.7 | % | |||||||||||||||
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|
|
|
|||||||||||||||||||
Operating income |
$ | 74,631 | 15.4 | % | $ | 47,783 | 11.3 | % | $ | 26,848 | 56.2 | % | ||||||||||||
|
|
|
|
|
|
Revenue in our Careers North America segment increased $63.2 million, or 15.0%, in 2011 compared to 2010, due to increased business activity from our enterprise customers, in addition to growth within our newspaper, staffing and e-commerce sectors. Careers North America also benefitted from the revenue generated from the HotJobs Assets, which we acquired on August 24, 2010. The increase in our Careers North America segment was due to the further adoption of the Companys broadened product portfolio (including PRS, CAN and the HotJobs Assets). Our Careers North America bookings in 2011 increased 15% compared to the same period of 2010, however we experienced a deceleration of growth in the latter half of 2011. The Company believes that the principal factor for such deceleration is the increased global economic uncertainty.
25
Salary and related expenses increased $16.4 million, or 8.3%, in 2011 compared to 2010. This increase in salaries and related expenses resulted primarily from $14.2 million of increased variable compensation costs for the Companys sales force resulting from increased booking activity in 2011 as well as $10.9 million of increased regular salary costs primarily associated with the impact of a full year of salary and related expenses from the HotJobs Assets. These increases were partially offset by decreased associate incentive plans of $4.7 million as well as severance costs of $3.3 million associated with our targeted headcount reductions, which primarily occurred in 2010.
Office and general expenses increased $14.9 million, or 17.7%, in 2011 compared to 2010. This increase in office and general expenses resulted primarily from increased amortization expense of $5.6 million associated with the acquisition of the HotJobs Assets, $3.7 million of increased professional fees, $1.7 million of additional depreciation expense associated with our recent increase in capital expenditures as well as $1.2 million of additional occupancy costs.
Marketing and promotion expenses increased $4.6 million, or 4.9%, in 2011 compared to 2010. This increase in marketing and promotion expenses primarily resulted from our traffic agreement with Yahoo!, which became effective on August 24, 2010, whereby the Company became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada. This increase was partially offset by a decrease in our offline media costs.
We incurred $0.5 million of restructuring charges and other special charges in 2011 comprised primarily of severance costs resulting from targeted headcount reductions.
Our Careers North America operating income was $74.6 million in 2011, compared to operating income of $47.8 million in 2010, as a result of the factors described above.
Careers International
The operating results of our Careers International segment for the years ended December 31, 2011 and 2010 are as follows:
% of | % of | Increase | % Increase |
|||||||||||||||||||||
(Dollars in thousands) |
2011 | Revenue | 2010 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 444,869 | 100.0 | % | $ | 360,798 | 100.0 | % | $ | 84,071 | 23.3 | % | ||||||||||||
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|
|
|
|
|
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|
|
|||||||||||||
Salaries and related |
224,205 | 50.4 | % | 211,002 | 58.5 | % | 13,203 | 6.3 | % | |||||||||||||||
Office and general |
98,572 | 22.2 | % | 95,904 | 26.6 | % | 2,668 | 2.8 | % | |||||||||||||||
Marketing and promotion |
86,803 | 19.5 | % | 77,464 | 21.5 | % | 9,339 | 12.1 | % | |||||||||||||||
Restructuring and other special charges |
618 | 0.1 | % | | 0.0 | % | 618 | n/a | ||||||||||||||||
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|
|
|
|
|
|||||||||||||||||||
Total operating expenses |
410,198 | 92.2 | % | 384,370 | 106.5 | % | $ | 25,828 | 6.7 | % | ||||||||||||||
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|
|
|
|
|
|||||||||||||||||||
Operating income (loss) |
$ | 34,671 | 7.8 | % | $ | (23,572 | ) | (6.5 | )% | $ | 58,243 | 247.1 | % | |||||||||||
|
|
|
|
|
|
Our Careers International segment revenue increased $84.1 million, or 23.3%, in 2011 compared to 2010, which includes $19.8 million of favorable foreign exchange impact, primarily due to growth in Europe including Germany, France and Sweden, and in Asia including South Korea, India and China. The increase in our Careers International segment was due to the further adoption of the Companys broadened product portfolio and an improved economic environment in 2011 in certain countries as compared to 2010. Our Careers International bookings in 2011 increased 21% compared to 2010, however we experienced a deceleration of growth in the latter half of 2011. The Company believes that the principal factor for such deceleration is the increased global economic uncertainty.
Salary and related expenses increased $13.2 million, or 6.3%, in 2011 compared to 2010, which includes $9.3 million of unfavorable foreign exchange impact. This increase in salaries and related expenses resulted primarily from $16.4 million of increased regular salary costs primarily associated with increased headcount in 2011 compared to 2010 primarily in Asia. These increases were partially offset by decreased severance costs of $1.9 million associated with our targeted headcount reductions, which primarily occurred in 2010, as well as 2010 including the reversal of a previously accrued payroll tax liability.
Office and general expenses increased $2.7 million, or 2.8%, in 2011 compared to 2010, which includes $2.7 million of unfavorable foreign exchange impact. This increase in office and general expenses resulted primarily from $0.6 million of increased professional expenses as well as a partial reversal in 2010 of a previously recorded contingency resulting from a legal settlement.
26
Marketing and promotion expenses increased $9.3 million, or 12.1%, in 2011 compared to 2010, which includes $3.4 million of unfavorable foreign exchange impact. This increase in marketing and promotion expenses primarily resulted from our focus on brand awareness in Europe and Asia.
We incurred $0.6 million of restructuring charges and other special charges in 2011 which is primarily comprised of severance costs resulting from our decision to cease operations within one country.
Our Careers International operating income was $34.7 million in 2011, compared to an operating loss of $23.6 million in 2010, as a result of the factors discussed above.
Internet Advertising & Fees
The operating results of our Internet Advertising & Fees segment for the years ended December 31, 2011 and 2010 are as follows:
% of | % of | Increase | % Increase |
|||||||||||||||||||||
(Dollars in thousands) |
2011 | Revenue | 2010 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 109,880 | 100.0 | % | $ | 131,142 | 100.0 | % | $ | (21,262 | ) | (16.2 | )% | |||||||||||
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|
|
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Salaries and related |
47,613 | 43.3 | % | 50,420 | 38.4 | % | (2,807 | ) | (5.6 | )% | ||||||||||||||
Office and general |
26,317 | 24.0 | % | 26,015 | 19.8 | % | 302 | 1.2 | % | |||||||||||||||
Marketing and promotion |
26,631 | 24.2 | % | 50,483 | 38.5 | % | (23,852 | ) | (47.2 | )% | ||||||||||||||
Restructuring and other special charges |
4,105 | 3.7 | % | | 0.0 | % | 4,105 | n/a | ||||||||||||||||
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|
|
|||||||||||||||||||
Total operating expenses |
104,666 | 95.3 | % | 126,918 | 96.8 | % | (22,252 | ) | (17.5 | )% | ||||||||||||||
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|
|
|
|||||||||||||||||||
Operating income |
$ | 5,214 | 4.7 | % | $ | 4,224 | 3.2 | % | $ | 990 | 23.4 | % | ||||||||||||
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|
Revenue in our Internet Advertising & Fees segment decreased $21.3 million, or 16.2%, in 2011 compared to 2010. This decrease primarily resulted from the Company, as of the beginning of the third quarter of 2011, no longer engaging in the arbitrage lead generation activities, partially offset by an increase in our display advertising business.
Operating expenses decreased $22.3 million, or 17.5%, in 2011 compared to 2010. This decrease in operating expenses primarily resulted from a decrease in marketing expenses, partially offset by $4.1 million of restructuring and other special charges associated with the Company no longer engaging in the certain activities within our Internet Advertising & Fees segment.
Our Internet Advertising & Fees operating income was $5.2 million in 2011, compared to operating income of $4.2 million in 2010, as a result of the factors discussed above.
Interest and Other, net
Interest and other, net, for the years ended December 31, 2011 and 2010 resulted in an expense of $3.1 million and $1.9 million, respectively. Interest and other, net, primarily relates to interest expense on the Companys outstanding debt, interest income associated with the Companys various investments, foreign currency gains or losses and gains or losses related to the Companys auction rate securities. The increased expense in interest and other, net, of $1.2 million primarily resulted from higher interest expense in 2011, primarily relating to the funding of the acquisition of the HotJobs Assets and additional proceeds from borrowings on credit facilities in 2011 as well as lower gains on auction rate securities. These increases were partially offset by higher interest income primarily resulting from higher interest rates on our cash balances throughout 2011 as compared to 2010.
Income Taxes
Income taxes for the years ended December 31, 2011 and 2010 are as follows:
(Dollars in thousands) |
2011 | 2010 | $ Change | % Change |
||||||||||||
Income (loss) before income taxes and loss in equity interests |
$ | 73,410 | $ | (43,894 | ) | $ | 117,304 | 267.2 | % | |||||||
Provision for (benefit from) income taxes |
18,371 | (14,405 | ) | 32,776 | 227.5 | % | ||||||||||
Effective tax rate |
25.0 | % | 32.8 | % | n/a | n/a |
27
The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates globally with operations in various tax jurisdictions outside of the United States. Accordingly, the effective income tax rate is a composite rate reflecting the earnings in the various tax jurisdictions and the applicable rates. The tax rate in the United States is 35% and tax rates in the foreign countries in which we do business vary from approximately 15% to 35%. The mix of income in high and low tax jurisdictions can vary from year to year. Our future tax rates can be adversely affected if there is more income in countries with higher tax rates.
Our effective tax rates differ from the statutory rate due to the impact of state and local income taxes, tax exempt interest income, certain nondeductible expenses, foreign earnings taxed at different tax rates, valuation allowances and the accrual of interest on tax liabilities. During 2011, we received a non-taxable release of $17.4 million of escrowed funds with respect to our purchase of ChinaHR, which lowered our tax provision for the year ended December 31, 2011 by $4.4 million. The Company also reversed $6.6 million of accrued tax and accrued interest due to settlement of tax examinations and other adjustments to accrued uncertain tax positions. Our future effective tax rates could be adversely affected by earnings being lower in countries where we have lower statutory rates, changes in the valuation of our deferred tax assets, or changes in tax laws or interpretations thereof. In addition, our filed tax returns are subject to the examination by the United States Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
During 2010, the Company completed a tax examination in the United Kingdom. The tax authorities reviewed the character of certain intercompany loans as debt. The Company had previously established an uncertain tax position in the amount of $25.1 million for the tax benefits of accrued interest expense on these loans by reducing recorded deferred tax assets. Approximately $13.9 million of these benefits were sustained in the examination. As a result of resolution of the examination, the Company reversed the unrecognized tax benefits but established a valuation allowance for the benefits sustained due to uncertainty in their ultimate realization. Net of the recorded valuation allowance, the reversal did not have an effect on the effective tax rate. The Company also reversed accrued tax and interest due to settlement of tax examinations in the amount of $1.2 million.
The Company conducts business globally and as a result, the Company or one or more subsidiaries is subject to United States federal income taxes and files income tax returns in various states and approximately 36 foreign jurisdictions. In the normal course of business, the Company is subject to tax examinations by taxing authorities including major jurisdictions such as Germany, United Kingdom, China and the United States as well as other countries in Europe and the Asia Pacific region. The Company is generally no longer subject to examinations with respect to returns that have been filed for years prior to 2006 in Germany, 2009 in the United Kingdom, 2007 in China and 2006 in the United States. Tax years are generally considered closed from examinations when the statute of limitations expires. The Company is presently under examination by the United States Internal Revenue Service for tax years 2006 through 2009. No material adjustments have been proposed. The Company estimates that it is reasonably possible that unrecorded tax benefits may be reduced by as much as zero to $5.0 million in the next twelve months due to expirations of statutes of limitations or settlement of audits. The tax matters relate to allocation of income among jurisdictions.
Loss in Equity Interests, Net
Loss in equity interests, net, for the years ended December 31, 2011 and 2010 was $1.2 million and $2.9 million, respectively. The Companys equity investments consist of a 50% equity interest in a company located in Australia and a 25% investment in a company located in Finland. This decreased loss in 2011 primarily related to our Australian equity investment, which recorded a decreased loss from operations in 2011.
Net Income (Loss)
Our consolidated net income was $53.8 million in 2011 compared to a net loss of $32.4 million in 2010, as a result of the factors discussed above.
Diluted Earnings (Loss) Per Share
Diluted earnings per share in 2011 was $0.43 compared to a diluted loss per share of $0.27 in 2010. Diluted weighted average shares outstanding for the years ended December 31, 2011 and 2010 was 123.9 million shares and 120.6 million shares, respectively. For periods in which losses are presented, dilutive earnings per share calculations do not differ from basic earnings per share because the effects of any potential common stock equivalents are anti-dilutive and therefore not included in the calculation of dilutive earnings per share.
28
The Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009
Consolidated Revenue, Operating Expenses and Operating Income
Consolidated revenue, operating expenses and operating loss for the years ended December 31, 2010 and 2009 are as follows:
% of | % of | Increase | % Increase | |||||||||||||||||||||
(Dollars in thousands) |
2010 | Revenue | 2009 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 914,133 | 100.0 | % | $ | 905,142 | 100.0 | % | $ | 8,991 | 1.0 | % | ||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Salaries and related |
490,791 | 53.7 | % | 463,749 | 51.2 | % | 27,042 | 5.8 | % | |||||||||||||||
Office and general |
242,797 | 26.6 | % | 231,288 | 25.6 | % | 11,509 | 5.0 | % | |||||||||||||||
Marketing and promotion |
222,566 | 24.3 | % | 209,661 | 23.2 | % | 12,905 | 6.2 | % | |||||||||||||||
Reversal of legal settlements, net |
| 0.0 | % | (6,850 | ) | (0.8 | %) | 6,850 | (100.0 | %) | ||||||||||||||
Restructuring and other special charges |
| 0.0 | % | 16,105 | 1.8 | % | (16,105 | ) | (100.0 | %) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total operating expenses |
956,154 | 104.6 | % | 913,953 | 101.0 | % | 42,201 | 4.6 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Operating loss |
$ | (42,021 | ) | (4.6 | %) | $ | (8,811 | ) | (1.0 | %) | $ | (33,210 | ) | 376.9 | % | |||||||||
|
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|
|
|
|
Our consolidated revenue increased $9.0 million, or 1.0%, in 2010 compared to 2009, which includes $1.2 million of unfavorable foreign exchange impact and $19.0 million of revenue attributable to the operations of the HotJobs Assets, the acquisition which closed on August 24, 2010. Our Careers North America segment experienced a 3.7% increase in revenue and our Careers International segment experienced a 1.3% decrease in revenue. The deferred revenue balance at the beginning of 2009 was $414.3 million, or $108.4 million higher than the deferred revenue balance at the beginning of 2010 of $305.9 million. As such, revenue recognized in 2010 was negatively impacted by the lower beginning deferred revenue balance when compared to 2009. We continued to see improvements in global business activity in 2010 with bookings (which represent the value of contractual orders received during the relevant period) growth of 23% on a global basis compared to 2009. This increase in bookings occurred in most sectors of the North American market (particularly within our large enterprise, staffing, e-commerce and government customer sectors), most countries within Europe (driven by strong bookings growth in Germany, France and Sweden), as well as in our Asian markets (particularly in South Korea, India and China). We believe the increased bookings in these areas was the result of the improvement in the global economy in 2010 compared to 2009 as well as the improvements the Company has made in the customer value proposition.
Salary and related expenses increased $27.0 million, or 5.8%, in 2010 compared to 2009, which includes $0.3 million of unfavorable foreign exchange impact, $1.4 million of integration-related expenses associated with the acquisition of the HotJobs Assets and $6.8 million of costs attributable to the operations of the HotJobs Assets. This increase in salaries and related expenses resulted primarily from increased costs associated with the reintroduction of certain employee incentive programs which were modified in 2009, increased variable compensation costs for the Companys sales force resulting from increased booking activity in 2010, and increased stock-based compensation resulting from our broader equity and incentive programs. These increases were partially offset by decreased regular salary costs in 2010, primarily associated with North America where our targeted headcount reductions generated decreased regular salary costs that offset the incremental regular salary costs associated with the acquisition of the HotJobs Assets, which occurred on August 24, 2010.
Office and general expenses increased $11.5 million, or 5.0%, in 2010 compared to 2009, which included $0.4 million of unfavorable foreign exchange impact, $22.9 million of acquisition and integration-related expenses associated with the acquisition of the HotJobs Assets and $3.5 million of costs attributable to the operations of the HotJobs Assets. This increase in office and general expenses resulted primarily from increased legal, professional and other fees relating to acquisition and integration-related costs associated with the acquisition of the HotJobs Assets, partially offset by decreased bad debt expense and decreased occupancy costs in 2010.
The Company does not allocate acquisition and integration-related expenses to their reportable segments. Accordingly, the $24.3 million of acquisition and integration-related expenses incurred in 2010 associated with the acquisition of the HotJobs Assets is recorded as a corporate expense.
Marketing and promotion expenses increased $12.9 million, or 6.2%, in 2010 compared to 2009, which includes $0.2 million of unfavorable foreign exchange impact and $11.4 million of costs attributable to the operations of the HotJobs Assets. The increase in marketing and promotion expenses resulted primarily from increased investment in the second half of 2010 in our Careers International segment, increased online media costs in our Internet Advertising & Fees segment, primarily related to our lead generation business, and increased costs within our Careers North America segment primarily related to the traffic agreement with Yahoo!, which became effective on August 24, 2010, whereby the Company became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada.
29
In the third quarter of 2009, the Company reversed a previously recorded accrual of $6.9 million relating to settlement of all actions seeking recoveries from the Company as an outgrowth of the Companys historical stock option grant practices.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no restructuring charges were recorded in 2010.
Our consolidated operating loss was $42.0 million in 2010 compared to an operating loss of $8.8 million in 2009, as a result of the factors discussed above.
Careers North America
The operating results of our Careers North America segment for the years ended December 31, 2010 and 2009 are as follows:
% of | % of | Increase | % Increase |
|||||||||||||||||||||
(Dollars in thousands) | 2010 | Revenue | 2009 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 422,193 | 100.0 | % | $ | 407,118 | 100.0 | % | $ | 15,075 | 3.7 | % | ||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Salaries and related |
196,076 | 46.4 | % | 192,145 | 47.2 | % | 3,931 | 2.0 | % | |||||||||||||||
Office and general |
84,442 | 20.0 | % | 93,408 | 22.9 | % | (8,966 | ) | (9.6 | %) | ||||||||||||||
Marketing and promotion |
93,892 | 22.2 | % | 98,137 | 24.1 | % | (4,245 | ) | (4.3 | %) | ||||||||||||||
Restructuring and other special charges |
| 0.0 | % | 3,758 | 0.9 | % | (3,758 | ) | (100.0 | %) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total operating expenses |
374,410 | 88.7 | % | 387,448 | 95.2 | % | (13,038 | ) | (3.4 | %) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Operating income |
$ | 47,783 | 11.3 | % | $ | 19,670 | 4.8 | % | $ | 28,113 | 142.9 | % | ||||||||||||
|
|
|
|
|
|
Revenue in our Careers North America segment increased $15.1 million, or 3.7%, in 2010 compared to 2009, which includes $1.9 million of favorable foreign exchange impact and $19.0 million of revenue attributable to the operations of the HotJobs Assets. Revenue recognized in 2010 was negatively impacted by the lower beginning deferred revenue balance when compared to 2009, which was more than offset by improvements in most business sectors within North America. We experienced bookings growth in our large enterprise, staffing, e-commerce and government customer sectors. We believe the increased bookings in these areas are a result of the improvement in the economy in North America in 2010 compared to 2009 as well as the improvements the Company has made in the customer value proposition.
Salary and related expenses increased $3.9 million, or 2.0%, in 2010 compared to 2009, which includes $1.1 million of unfavorable foreign exchange impact and $6.8 million of expenses attributable to the operations of the HotJobs Assets. The increase in salaries and related expense resulted primarily from $8.3 million of increased variable compensation costs for the Companys sales force resulting from increased booking activity in 2010, $7.2 million of increased costs associated with the reintroduction of certain employee incentive programs which were modified in 2009 and $2.3 million of increased stock-based compensation resulting from our broader equity and incentive programs. These increases were partially offset by decreased regular salary costs of $12.7 million, primarily associated with our targeted headcount reductions which generated decreased regular salary costs that more than offset the incremental regular salary costs associated with the acquisition of the HotJobs Assets, which occurred on August 24, 2010.
Office and general expenses decreased by $9.0 million, or 9.6%, in 2010 compared to 2009, which includes $3.5 million of expenses attributable to the operations of the HotJobs Assets. This decrease in office and general expenses resulted primarily from $4.6 million of decreased bad debt expense in 2010, primarily associated with increased bad debt charges recorded in 2009 relating to customers negatively impacted by the global recession, as well as $4.9 million of decreased depreciation expense in 2010 resulting from certain assets that were abandoned and fully expensed in 2009. These decreases were partially offset by a $2.8 million increase in intangible amortization associated with the acquisition of the HotJobs Assets and increased travel related expenses of $1.4 million.
Marketing and promotion expenses decreased $4.2 million, or 4.3%, in 2010 compared to 2009, which includes $0.3 million of unfavorable foreign exchange impact and $11.4 million of expenses attributable to the operations of the HotJobs Assets. The reduction in marketing and promotion expenses resulted primarily from a more focused spending program in 2010, which included significant reductions in all categories of marketing and promotion, including the reduced number of Keep America Working tour events, the decision not to renew certain sponsorship agreements and the significant reduction in offline marketing costs incurred in the first quarter of 2009 to support the redesigned seeker website and employer product. This was partially offset by increased costs in the second half of 2010 resulting from the traffic agreement the Company entered into with Yahoo!, which became effective on August 24, 2010, whereby the Company became Yahoo!s exclusive provider of career and job content on the Yahoo! homepage in the United States and Canada.
30
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no restructuring charges were recorded in 2010.
Our Careers North America operating income was $47.8 million in 2010 compared to $19.7 million in 2009, as a result of the factors discussed above.
Careers International
The operating results of our Careers International segment for the years ended December 31, 2010 and 2009 are as follows:
% of | % of | Increase | % Increase |
|||||||||||||||||||||
(Dollars in thousands) | 2010 | Revenue | 2009 | Revenue | (Decrease) | (Decrease) | ||||||||||||||||||
Revenue |
$ | 360,798 | 100.0 | % | $ | 365,478 | 100.0 | % | $ | (4,680 | ) | (1.3 | %) | |||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Salaries and related |
211,002 | 58.5 | % | 194,633 | 53.3 | % | 16,369 | 8.4 | % | |||||||||||||||
Office and general |
95,904 | 26.6 | % | 100,257 | 27.4 | % | (4,353 | ) | (4.3 | %) | ||||||||||||||
Marketing and promotion |
77,464 | 21.5 | % | 66,503 | 18.2 | % | 10,961 | 16.5 | % | |||||||||||||||
Restructuring and other special charges |
| 0.0 | % | 10,368 | 2.8 | % | (10,368 | ) | (100.0 | %) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total operating expenses |
384,370 | 106.5 | % | 371,761 | 101.7 | % | 12,609 | 3.4 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Operating loss |
$ | (23,572 | ) | (6.5 | %) | $ | (6,283 | ) | (1.7 | %) | $ | (17,289 | ) | 275.2 | % | |||||||||
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|
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|
|
Revenue in our Careers International segment decreased $4.7 million, or 1.3%, in 2010 compared to 2009, which includes $3.1 million of unfavorable foreign exchange impact, with revenue recognized in 2010 negatively impacted by the lower beginning deferred revenue balance when compared to 2009. We continued to see improvements in our businesses in 2010 within Europe (driven by strong bookings growth in Germany, France and Sweden), as well as in our Asian markets (particularly in South Korea, India and China). We believe the increased bookings in these areas are a result of the improvement in the global economy in 2010 compared to 2009 as well as the improvements the Company has made in the customer value proposition.
Salary and related expenses increased $16.4 million, or 8.4%, in 2010 compared to 2009, which includes $0.9 million of favorable foreign exchange impact. This increase in salaries and related expenses resulted primarily from $7.9 million of increased regular salary costs in 2010, primarily relating to 2009 including a benefit associated with a change in actuarial assumptions related to a statutory pension plan, $3.7 million of increased variable compensation costs for the Companys sales force relating to increased bookings activity in 2010, $2.6 million of increased stock-based compensation resulting from our broader equity and incentive programs and $2.0 million of increased costs associated with the reintroduction of certain employee incentive programs which were modified in 2009. These increases were partially offset by decreased costs for temporary labor of $1.6 million.
Office and general expenses decreased $4.4 million, or 4.3%, in 2010 compared to 2009, which includes $0.4 million of unfavorable foreign exchange impact. This decrease in office and general expenses resulted primarily from $2.9 million of decreased bad debt expense, primarily associated with certain bad debt charges recorded in 2009 relating to customers negatively impacted by the global recession, decreased amortization expense of $1.6 million, resulting from the amortization period of certain intangible assets associated with previous acquisitions in Europe ending in early 2010, and decreased occupancy costs of $0.7 million. These decreases were partially offset by increased support agreements of $1.8 million, primarily relating to additional software licenses in the Asia Pacific region, and increased legal costs of $0.8 million.
Marketing and promotion expenses increased $11.0 million, or 16.5%, in 2010 compared to 2009, which includes $0.1 million of favorable foreign exchange impact. This increase in marketing and promotion expenses in 2010 resulted primarily from our continued expansion of our investments in the Asia Pacific region, particularly in China, as well as increased online marketing activities in Europe.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no restructuring charges were recorded in 2010.
Our Careers International operating loss was $23.6 million in 2010 compared to an operating loss of $6.3 million in 2009, as a result of the factors discussed above.
31
Internet Advertising & Fees
The operating results of our Internet Advertising & Fees segment for the years ended December 31, 2010 and 2009 are as follows:
(Dollars in thousands) |
2010 | % of Revenue |
2009 | % of Revenue |
Increase (Decrease) |
%
Increase (Decrease) |
||||||||||||||||||
Revenue |
$ | 131,142 | 100.0 | % | $ | 132,546 | 100.0 | % | $ | (1,404 | ) | (1.1 | %) | |||||||||||
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Salaries and related |
50,420 | 38.4 | % | 46,093 | 34.8 | % | 4,327 | 9.4 | % | |||||||||||||||
Office and general |
26,015 | 19.8 | % | 23,632 | 17.8 | % | 2,383 | 10.1 | % | |||||||||||||||
Marketing and promotion |
50,483 | 38.5 | % | 44,091 | 33.3 | % | 6,392 | 14.5 | % | |||||||||||||||
Restructuring and other special charges |
| 0.0 | % | 616 | 0.5 | % | (616 | ) | (100.0 | %) | ||||||||||||||
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|
|
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Total operating expenses |
126,918 | 96.8 | % | 114,432 | 86.3 | % | 12,486 | 10.9 | % | |||||||||||||||
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Operating income |
$ | 4,224 | 3.2 | % | $ | 18,114 | 13.7 | % | $ | (13,890 | ) | (76.7 | %) | |||||||||||
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Revenue in our Internet Advertising & Fees segment decreased $1.4 million, or 1.1% in 2010 compared to 2009. In 2010, we experienced a decrease in offline display advertising revenues which was partially offset by an increase in online display advertising.
Operating expenses increased $12.5 million, or 10.9%, in 2010 compared to 2009. This increase in operating expenses primarily resulted from $6.4 million of increased marketing and promotion costs, primarily associated with lead generation business, $2.2 million of increased costs associated with the reintroduction of certain employee incentive programs which were modified in 2009, $1.5 million of additional depreciation expense and $1.1 million of additional stock-based compensation.
The 2007 restructuring program was complete in the second quarter of 2009 and, accordingly, no restructuring charges were recorded in 2010.
Our Internet Advertising & Fees operating income was $4.2 million in 2010 compared to operating income of $18.1 million in 2009, as a result of the factors discussed above.
Interest and Other, net
Interest and other, net for the fiscal years ended December 31, 2010 and 2009 resulted in a net expense of $1.9 million and $5.8 million, respectively. Interest and other, net, primarily relates to interest expense on the Companys outstanding debt, interest income associated with the Companys various investments, foreign currency gains or losses and gains or losses on the Companys auction rate securities.
The decrease in interest and other, net, of $3.9 million resulted primarily from a reversal of auction rate security losses related to funds received in 2010 from RBC Capital Markets Corporation (RBC) related to contingent settlements, gains from security redemptions as well as a gain on a sale of an investment in the fourth quarter of 2010. These reductions in interest and other, net, were partially offset by decreased interest income, associated with a decline in invested balances and a decline in investment interest rates experienced during 2010, higher credit facility borrowing costs, higher unused fees, higher amortization costs associated with capitalized deferred financing fees and foreign currency losses in 2010 resulting primarily from losses on intercompany settlements and hedging activity.
32
Income Taxes
Income taxes for the years ended December 31, 2010 and 2009 are as follows:
(Dollars in thousands) |
2010 | 2009 | $ Change | % Change | ||||||||||||
(Loss) income from continuing operations before income taxes and equity interests |
$ | (43,894 | ) | $ | (14,639 | ) | $ | (29,255 | ) | (199.8 | )% | |||||
Income tax (benefit) provision |
(14,405 | ) | (37,883 | ) | 23,478 | 62.0 | % | |||||||||
Effective tax rate |
32.8 | % | 258.8 | % | n/a | n/a |
The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates globally with operations in various tax jurisdictions outside of the United States. Our effective tax rates differ from the statutory rate due to the impact of state and local income taxes, tax exempt interest income, certain nondeductible expenses, foreign earnings taxed at different tax rates, valuation allowances and the accrual of interest on tax liabilities. Our future effective tax rates could be adversely affected by earnings being lower in countries where we have lower statutory rates, changes in the valuation of our deferred tax assets, or changes in tax laws or interpretations thereof. In addition, our filed tax returns are subject to the examination by the United States Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
During 2010, the Company completed a tax examination in the United Kingdom. The tax authorities reviewed the character of certain intercompany loans as debt. The Company had previously established an uncertain tax position in the amount of $25.1 million for the tax benefits of accrued interest expense on these loans by reducing recorded deferred tax assets. Approximately $13.9 million of these benefits were sustained in the examination. As a result of resolution of the examination, the Company reversed the unrecognized tax benefits but established a valuation allowance for the benefits sustained due to uncertainty in their ultimate realization. Net of the recorded valuation allowance, the reversal did not have an effect on the effective tax rate.
The Company also recognized $1.4 million of previously unrecognized tax benefits due to settlement of a United States state tax examination, which on a net of tax basis impacted the effective tax rate by $0.9 million. The Company also reserved accrued interest and penalties related to unrecognized tax benefits of $0.6 million, which on a net of tax basis impacts the effective rate by $0.3 million. The total benefit reflected in the effective tax rate due to recognition of previously unrecognized benefits and reversals of interest and penalties thereon was $1.2 million.
Due to the expiration of the statute of limitations in the third and fourth quarter of 2009, the Company reversed $38.8 million of accrued tax attributable to uncertain tax positions of which $33.0 million impacts the Companys effective tax rate. The Company also reversed accrued interest and penalties related to uncertain tax positions of $9.0 million, which on a net tax basis impacts the effective rate by $5.7 million. The total benefit reflected in the 2009 income tax provision due to the reversal of tax and interest is $38.7 million.
Loss in Equity Interests, Net
Loss in equity interests, net, for the years ended December 31, 2010 and 2009 was $2.9 million and $4.3 million, respectively. The Companys equity investments consist of a 50% equity interest in a company located in Australia and a 25% investment in a company located in Finland. This decreased loss in 2010 primarily related to our Australian equity investment, which recorded a decreased loss from operations in 2010.
Net (Loss) Income
Our consolidated net loss was $32.4 million in 2010 compared to net income of $18.9 million in 2009, as a result of the factors discussed above. The Companys 2009 net income was positively impacted by the above noted tax benefit recorded in the third and fourth quarters of 2009 relating to the reversal of income tax reserves due to the expiration of the statute of limitations on uncertain tax positions.
33
Diluted (Loss) Earnings Per Share
Diluted loss per share in 2010 was $0.27 compared to diluted income per share of $0.16 in 2009. Diluted weighted average shares outstanding for the years ended December 31, 2010 and 2009 was 120.6 million shares and 121.2 million shares, respectively. For periods in which losses are presented, dilutive earnings per share calculations do not differ from basic earnings per share because the effects of any potential common stock equivalents are anti-dilutive and therefore not included in the calculation of dilutive earnings per share.
Financial Condition
The following table details our cash and cash equivalents and marketable securities as of December 31, 2011, 2010 and 2009:
Years Ended December 31, | ||||||||||||
(Dollars in thousands) |
2011 | 2010 | 2009 | |||||||||
Cash and cash equivalents |
$ | 250,317 | $ | 163,169 | $ | 275,447 | ||||||
Marketable securities |
| | 24,669 | |||||||||
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|
|
|
|
|
|||||||
Cash and cash equivalents and marketable securities |
$ | 250,317 | $ | 163,169 | $ | 300,116 | ||||||
Percentage of total assets |
12.2 | % | 8.2 | % | 16.4 | % | ||||||
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|
|
As of December 31, 2011, we had cash and cash equivalents of $250.3 million, compared to $163.2 million as of December 31, 2010. Our increase in cash and cash equivalents of $87.1 million in 2011 primarily resulted from $149.7 million provided by operating activities and $64.2 million of net proceeds from borrowings on credit facilities, partially offset by $61.8 million of capital expenditures and $42.0 million of repurchases of common stock.
As of December 31, 2010, we had cash and cash equivalents of $163.2 million, compared to cash, cash equivalents and marketable securities of $300.1 million as of December 31, 2009. The decrease of $136.9 million for the year ended December 31, 2010 primarily resulted from the acquisition of the HotJobs Assets in the amount of $225.0 million and capital expenditures of $57.1 million, partially offset by $93.1 million of cash provided by operating activities. The payment to Yahoo! of $225.0 million was funded by utilizing existing cash of $135.0 million and the remaining $90.0 million was funded from borrowings under the revolving credit facility.
Cash Flows
Consolidated cash flows for the fiscal year ended December 31, 2011, 2010 and 2009 are as follows:
(Dollars in thousands) |
2011 | 2010 | 2009 | |||||||||
Net cash provided by operating activities |
$ | 149,677 | $ | 93,072 | $ | 44,725 | ||||||
Net cash (used for) provided by investing activities |
(62,202 | ) | (261,260 | ) | 7,879 | |||||||
Net cash provided by (used for) financing activities |
5,132 | 60,573 | (11,418 | ) | ||||||||
Effect of exchange rates on cash |
(5,459 | ) | (4,663 | ) | 12,001 |
Cash provided by operating activities was $149.7 million for the year ended December 31, 2011, an increase of $56.6 million from $93.1 million of cash provided by operating activities for the year ended December 31, 2010. This increase in cash provided by operating activities resulted primarily from increased net income of $86.2 million and the impact of deferred taxes of $22.2 million. These increases were partially offset by $53.9 million of reduced cash flows provided by working capital items in 2011, primarily resulting from changes in accounts payable, deferred revenue, partially offset by accounts receivable and prepaid and other.
Cash provided by operating activities was $93.1 million for the year ended December 31, 2010, an increase of $48.3 million from $44.7 million of cash provided by operating activities for the year ended December 31, 2009. This increase in cash provided by operating activities resulted primarily from increased cash flows provided by working capital items in 2010 of $135.8 million, primarily resulting from changes in deferred revenue, accounts payable and accrued liabilities partially offset by accounts receivable. These increases were partially offset by $87.5 million of reduced cash flows provided by operating activities primarily from decreased net income of $51.3 million as well as reduced operating cash flows provided by deferred income taxes in 2010 of $29.1 million.
Cash used for investing activities was $62.2 million for the year ended December 31 2011, a decrease of $199.1 million from $261.3 million of cash used in investing activities for the year ended December 31, 2010. This decrease resulted primarily from the acquisition of the HotJobs Assets of $225.0 million during the year ended 2010, partially offset by decreased sales and maturities of marketable securities of $25.4 million.
Cash used for investing activities was $261.3 million for the year ended December 31 2010 compared to cash provided by investing activities of $7.9 million for the year ended December 31, 2009. This change is primarily a result of the acquisition of the HotJobs Assets in the third quarter of 2010 for $225.0 million, partially offset by decreased cash flows generated from the sale and maturity of marketable securities in 2010 of $43.9 million.
Cash provided by financing activities was $5.1 million for the year ended December 31, 2011, a decrease of $55.4 million from $60.6 million of cash provided by financing activities for the year ended December 31, 2010. This decrease resulted primarily from the repurchase of the Companys common stock of $42.0 million as well as $10.3 million of net repayments on borrowings on our term loan and revolving credit facilities.
Cash provided by financing activities was $60.6 million for the year ended December 31, 2010 compared to cash used for financing activities of $11.4 million for the year ended December 31, 2009. This change is primarily a result of the Company utilizing an additional $74.5 million of its credit facility in 2010 primarily relating to the acquisition of the HotJobs Assets.
34
Liquidity and Capital Resources
Our principal capital requirements have been to fund (i) working capital, (ii) marketing and development of our Monster network, (iii) acquisitions, (iv) capital expenditures and (v) share repurchases.
Historically, we have relied on funds provided by operating activities, equity offerings, short and long-term borrowings and seller-financed notes to meet our liquidity needs. We invest our excess cash predominantly in bank time deposits and commercial paper that matures within three months of its origination date. Due to the turmoil in the financial markets, we have redeployed our excess cash during 2009, 2010 and 2011 in conservative investment vehicles such as money market funds that invest solely in United States treasuries, top foreign sovereign regional, national and supra-national bank debt obligations and bank deposits at prime money center banks. We actively monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal while secondarily on maximizing yield on those funds. We can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
At any point in time we have funds in our operating accounts and customer accounts that are with third party financial institutions. These balances in the United States may exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or could be subject to other adverse conditions in the financial markets.
We believe that our current cash and cash equivalents, revolving credit facilities and cash we anticipate generating from operating activities will provide us with sufficient liquidity to satisfy our working capital needs, capital expenditures and meet our investment requirements and commitments through at least the next twelve months. Our cash generated from operating activities is subject to fluctuations in the global economy and overall hiring demand.
Credit Facilities
In December 2007, the Company entered into a senior unsecured revolving credit facility that provided for maximum borrowings of $250.0 million, including up to a $50.0 million sublimit for letters of credit. On August 31, 2009 (the Amendment Closing Date), with the objective of availing itself of the benefits of an improved credit market in an ongoing unstable macroeconomic environment, the Company amended certain terms and increased its borrowing capability under its existing credit agreement (the Amended Credit Agreement). The Amended Credit Agreement maintained the Companys existing $250.0 million revolving credit facility and provided for a new $50.0 million term loan facility, for a total of $300.0 million in credit available to the Company. The revolving credit facility and the term loan facility each mature on December 21, 2012. The term loan is subject to annual amortization of principal, with $5.0 million payable on each anniversary of the Amendment Closing Date and the remaining $35.0 million due at maturity.
The Amended Credit Agreement provided for increases in the interest rates applicable to borrowings and increases in certain fees. Borrowings under the Amended Credit Agreement will bear interest at a rate equal to (i) LIBOR plus a margin ranging from 300 basis points to 400 basis points depending on the Companys ratio of consolidated funded debt to trailing four-quarter consolidated earnings before interest, taxes, depreciation and amortization (the Consolidated Leverage Ratio) as defined in Amended Credit Agreement or (ii) for Dollar-denominated loans only, and upon the Companys election, the sum of (A) the highest of (1) the credit facilitys administrative agents prime rate, (2) the sum of 0.50% plus the overnight federal funds rate on such day or (3) subject to certain exceptions, the sum of 1.00% plus the 1-month LIBOR rate, plus (B) a margin ranging from 200 basis points to 300 basis points depending on the Companys Consolidated Leverage Ratio. In addition, the Company will be required to pay the following fees: (i) a fee on all outstanding amounts of letters of credit at a rate per annum ranging from 300 basis points to 400 basis points (depending on the Companys Consolidated Leverage Ratio); and (ii) a commitment fee on the unused portion of the revolving credit facility at a rate per annum ranging from 50 basis points to 75 basis points (depending on the Companys Consolidated Leverage Ratio). The Company is no longer required to pay a utilization fee on outstanding loans and letters of credit under any circumstances.
The Amended Credit Agreement also increased the maximum permitted Consolidated Leverage Ratio to: (a) 3.50:1.00 for the period beginning on August 31, 2009 and ending on September 29, 2010; (b) 3.00:1.00 for the period beginning on September 30, 2010 and ending on September 29, 2011; and (c) 2.75:1.00 beginning on September 30, 2011 and any time thereafter. The Company may repay outstanding borrowings at any time during the term of the credit facility without any prepayment penalty. The Amended Credit Agreement contains covenants which restrict, among other things, the ability of the Company to borrow, create liens, pay dividends, repurchase its common stock, acquire businesses and other investments, enter into new lines of business, dispose of property, guarantee debts of others or, lend funds to affiliated companies and contains requirements regarding the maintenance of certain financial statement amounts and ratios, all as provided in the Amended Credit Agreement. In January 2010, the Company received a technical amendment to the permitted investments section of the Amended Credit Agreement to accommodate the particular legal structure of the acquisition of the HotJobs Assets (see Note 3 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K). As of December 31, 2011, the Company was in full compliance with its covenants.
35
Additionally, on the Amendment Closing Date the Company entered into the United States Pledge Agreement which along with subsequent separate pledge agreements shall cause the Companys obligations under the Amended Credit Agreement to be secured by a pledge of: (a) all of the equity interests of the Companys domestic subsidiaries (other than certain specified inactive subsidiaries) and (b) 65% of the equity interests of each first-tier material foreign subsidiary of the Company.
In December 2010, the Company further amended its Amended Credit Agreement to (i) allow acquisition-related fees associated with the acquisition of the HotJobs Assets to be added back into Consolidated EBITDA (as defined in the agreement, subject to certain limitations) and (ii) to increase the amount of permitted secured indebtedness from $20.0 million to $45.0 million.
At December 31, 2011, the utilized portion of this credit facility was $40.0 million in borrowings on the term loan facility, $141.5 million of borrowings on the revolving credit facility, and $0.9 million in outstanding letters of credit. During the year ended December 31, 2011, the Company drew down $62.0 million, net under its revolving credit facility primarily for utilization under the share repurchase program. Additionally, the Company repaid $5.0 million on its term loan during the year ended December 31, 2011. The utilized portion of the revolving credit facility and the entire amount of borrowings on the term loan are due within one year, which represents $181.5 million of the total borrowings, and which is classified as short-term on the consolidated balance sheet as of December 31, 2011. As of December 31, 2011, based on the calculation of the maximum Consolidated Leverage Ratio, $107.6 million of the Companys revolving credit facility was available. At December 31, 2011, the one month US Dollar LIBOR rate, the credit facilitys administrative agents prime rate, and the overnight federal funds rate were 0.30%, 3.25% and 0.04%, respectively. As of December 31, 2011, the Company used the one month US Dollar LIBOR rate for the interest rate on these borrowings with an interest rate of 3.79%.
In the second quarter of 2011, the Companys subsidiary in China entered into an unsecured uncommitted revolving credit facility, guaranteed by the Company that provides for maximum borrowings of $7.5 million. The credit facility has a maximum tenure of one year and the lender has the right to terminate the facility at any time and demand immediate payment. The Company may prepay outstanding borrowings and accrued interest under the facility only with the consent of the lender. The Company is obligated to indemnify the lender for any costs and losses incurred by the lender as a result of such prepayment. The credit agreement contains covenants which include obtaining, complying and maintaining all verifications, authorizations, approvals, registrations, licenses and consents required by local law to perform its obligations to the lender under the loan agreement, notifying the lender forthwith of the occurrence of any event that may affect the Companys ability to perform any of its obligations under the loan agreement and using the credit facility for financing its working capital requirements. As of December 31, 2011, the Company was in full compliance with its covenants under this facility. As December 31, 2011, the interest rate on these borrowings was 6.71%, the utilized portion was $7.3 million, which is classified as short-term on the consolidated balance sheet as of December 31, 2011, and $0.1 million was available to be utilized by the Company.
Acquisition of the HotJobs Assets from Yahoo! Inc.
On August 24, 2010, pursuant to an Asset Purchase Agreement dated as of February 3, 2010 between Monster and Yahoo!, Monster completed the acquisition of substantially all of the assets exclusive to Yahoo! HotJobs (the HotJobs Assets) from Yahoo!. The purchase price for the HotJobs Assets was $225.0 million. Accordingly, the business attributable to the HotJobs Assets has been included in the Careers North America segment and reporting unit. The results of operations attributable to the HotJobs Assets have been included in our consolidated financial statements since August 24, 2010. The Company funded the acquisition of the HotJobs Assets with available cash and proceeds from the Companys revolving credit facility (see Note 9 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K). In the three months ended March 31, 2011, the Company incurred $4.6 million of acquisition and integration-related costs associated with the acquisition of the HotJobs Assets, which were expensed as incurred and are included in office and general and salary and related expenses in the consolidated statement of operations. No integration-related costs were incurred by the Company subsequent to March 31, 2011 and the Company does not expect to incur any integration costs during future periods.
Income Taxes
The Company has earned a significant portion of its income outside the United States, which the Company has asserted to be permanently reinvested in foreign operations. The Company evaluates its permanent reinvestment assertions each reporting period. In the fourth quarter of 2011, the Company changed its permanent reinvestment assertion with respect to its subsidiary in South Korea and plans to repatriate earnings in 2012. This determination was made by reviewing investment opportunities and expected financing needs in South Korea and the United States as well as considering the tax cost of repatriating from South Korea. United States residual taxes have been provided on unremitted earnings through December 31, 2011.
The amount of cash in subsidiaries offshore for which the Company maintains the permanent reinvestment assertion at December 31, 2011 was approximately $187.0 million. While we have not determined the total United States and foreign tax liabilities on such a repatriation, generally, if this cash were repatriated, a United States tax liability would be incurred for the excess of United States tax over local taxes paid, if any on the portion characterized as a taxable dividend for United States tax purposes. The Company reviewed
36
its liquidity needs in the United States and does not presently intend to repatriate these funds. In addition to the expected repatriation from South Korea in 2012 and cash expected from 2012 domestic operations, the Company can borrow from its credit facility in the United States should additional liquidity needs arise. We have borrowed funds domestically and continue to have the ability to borrow funds domestically at reasonable interest rates.
In 2011, we utilized our tax loss carryovers in the United States and did not pay significant United States cash taxes. We expect to utilize available tax loss carryovers to offset most United States tax liability through the end of 2012. We expect to continue to have taxable income in certain foreign tax jurisdictions in which we pay taxes on a quarterly basis.
Restructuring Activities
During the year ended December 31, 2011, the Company recorded $5.2 million of restructuring and other special charges comprised of severance of $3.3 million and facility costs of $1.9 million. The accrued restructuring balance as of December 31, 2011 was $3.0 million. These restructuring and other special charges resulted from the Company no longer engaging in certain activities within the Internet Advertising & Fees segment, the decision to cease operations within one country in the Careers International segment as well as targeted headcount reductions within the Careers North America segment.
On January 24, 2012, the Company committed to take a series of strategic restructuring actions. The Companys decision to adopt the strategic restructuring actions resulted from the Companys desire to provide the Company with more flexibility to invest in marketing and sales activities in order to improve its long-term growth prospects and profitability. The strategic restructuring actions include reducing the Companys current workforce by approximately 400 associates (or 7% of its full-time staff), the consolidation of certain office facilities, and continuing discretionary-spending and office and general expense controls. The Company anticipates that a majority of the strategic restructuring actions, and a majority of the charges associated with such actions, will be taken in the first quarter of 2012. The Company also anticipates that all strategic restructuring actions will be completed by the end of 2012. As a result of the restructuring initiatives, the Company expects to record an aggregate pre-tax charge within the range of $30.0 million to $40.0 million, beginning in the first quarter of 2012. Of the aggregate pre-tax charge, the Company expects to incur approximately $25.0 million to $35.0 million in cash expenditures.
Operating Lease Obligations
We have recorded significant charges and accruals relating to terminating certain operating lease obligations before the end of their terms once the Company no longer derives economic benefit from the lease. The liability is recognized and measured at its fair value when we determine that the cease use date has occurred and the fair value of the liability is determined based on the remaining lease rentals due, reduced by estimated sublease rental income that could be reasonably obtained for the property. The estimate of subsequent sublease rental income may change and require future changes to the fair value of the liabilities for the lease obligations.
Share Repurchase Plan
On October 25, 2011, the Board of Directors of the Company authorized a share repurchase program of up to $250.0 million. Under the share repurchase program, shares of common stock will be purchased on the open market or through privately negotiated transactions from time-to-time through April 2013. The timing and amount of purchases will be based on market conditions, corporate and legal requirements and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice. During the year ended December 31, 2011, the Company repurchased 5.5 million shares for a total repurchase of $42.0 million at an average price of $7.60 per share.
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Contractual Obligations
The commitments as of December 31, 2011 related to our continuing and discontinued operations are as follows:
Payment Due by Period | ||||||||||||||||||||
Contractual Obligations (Dollars in thousands) |
Total | Less Than
1 Year |
1-3 Years | 3-5 Years | More Than 5 years |
|||||||||||||||
Operating Leases |
$ | 232,358 | $ | 42,917 | $ | 80,529 | $ | 49,653 | $ | 59,259 | ||||||||||
Purchase commitmentsadvertising contracts |
84,735 | 33,365 | 46,245 | 5,125 | | |||||||||||||||
Short-term debt |
188,836 | 188,836 | | | | |||||||||||||||
Software Financing |
9,693 | 4,973 | 4,720 | | | |||||||||||||||
Interest Payments |
10,256 | 8,995 | 823 | 301 | 137 | |||||||||||||||
Other |
4,250 | 3,050 | 1,200 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 530,128 | $ | 282,136 | $ | 133,517 | $ | 55,079 | $ | 59,396 | ||||||||||
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|
|
|
|
|
|
In addition to the cash commitments above, we also have $94.8 million of long-term income taxes payable, for which the timing of payment is not reasonably estimable, given the many variables related to these liabilities. See Note 12 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of information related to long-term income taxes payable.
Fair Value Measurement
The Company values its assets and liabilities using the methods of fair value as described in ASC 820, Fair Value Measurements and Disclosures. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of fair value hierarchy are described below:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Inputs that are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Companys assumptions based on the best information available. There have been no transfers of assets or liabilities between the fair value measurement classifications in the year ended December 31, 2011.
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The Company has certain assets and liabilities that are required to be recorded at fair value on a recurring basis in accordance with accounting principles generally accepted in the United States. The following table summarizes those assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
||||||||||||||||
Bank time deposits |
$ | | $ | 114,839 | $ | | $ | 114,839 | ||||||||
Commercial paper |
| 75,066 | | 75,066 | ||||||||||||
Bankers' acceptance |
| 8,630 | | 8,630 | ||||||||||||
Government bondforeign |
| 7,143 | | 7,143 | ||||||||||||
Foreign exchange contracts |
| 215 | | 215 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Total Assets |
$ | | $ | 205,893 | $ | | $ | 205,893 | ||||||||
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|
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|
|
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Liabilities: |
||||||||||||||||
Lease exit liabilities |
$ | | $ | | $ | 14,938 | $ | 14,938 | ||||||||
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|
|
|
|
|
|
|
|||||||||
Total Liabilities |
$ | | $ | | $ | 14,938 | $ | 14,938 | ||||||||
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|
|
|
|
|
|
|
The following table summarizes those assets and liabilities measured at fair value on a recurring basis as of December 31, 2010:
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
||||||||||||||||
Bank time deposits |
$ | | $ | 55,954 | $ | | 55,954 | |||||||||
Commercial paper |
| 47,675 | | 47,675 | ||||||||||||
Government bonds foreign |
| 4,385 | | 4,385 | ||||||||||||
Foreign exchange contracts |
| 666 | | 666 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
Total Assets |
$ | | $ | 108,680 | $ | | $ | 108,680 | ||||||||
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|
|
|
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Liabilities: |
||||||||||||||||
Lease exit liabilities |
$ | | $ | | $ | 13,913 | $ | 13,913 | ||||||||
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|
|
|
|
|
|
|
|||||||||
Total Liabilities |
$ | | $ | | $ | 13,913 | $ | 13,913 | ||||||||
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The lease exit liabilities relate to vacated facilities associated with previously discontinued operations and realignment activities of the Company and are recorded in accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2011 and 2010. The fair value of the Companys lease exit liabilities within the Level 3 classification is based on a discounted cash flow model applied over the remaining term of the leased property.
The changes in the fair value of the Level 3 liabilities are as follows:
Lease Exit Liability | ||||||||
Year Ended December 31, | ||||||||
(Dollars in thousands) | 2011 | 2010 | ||||||
Balance, Beginning of Period |
$ | 13,913 | $ | 25,112 | ||||
Expense |
4,897 | | ||||||
Cash Payments |
(3,872 | ) | (11,199 | ) | ||||
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|
|
|
|||||
Balance, End of Period |
$ | 14,938 | $ | 13,913 | ||||
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|
|
|
The carrying value for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue and other current liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The Companys debt relates to borrowings under its credit facilities and term loan (see Note 9 to the Companys financial statements included in Item 8 of this Annual Report on Form 10-K), which approximates fair value due to market interest rates.
CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
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Our significant accounting policies are discussed in Note 1, Basis of Presentation and Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require managements most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
Revenue Recognition and Accounts Receivable
The Company recognizes revenue on agreements in accordance with ASC 605, Revenue Recognition.
Careers North America and Careers International. Our Careers North America and Careers International segments primarily earn revenue from the placement of job postings on the websites within the Monster network, access to the Monster networks online resume database and other career-related services. We recognize revenue at the time that job postings are displayed on the Monster network websites, based upon customer usage patterns. Revenue earned from subscriptions to the Monster networks resume database and other career-related services are recognized over the length of the underlying subscriptions, typically from two weeks to twelve months. Revenue associated with multiple element contracts is allocated based on the relative selling price of the services included in the contract. Unearned revenues are reported on the balance sheet as deferred revenue. We review accounts receivable for those that may potentially be uncollectible and any accounts receivable balances that are determined to be uncollectible are included in our allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
Internet Advertising & Fees. Our Internet Advertising & Fees segment primarily earns revenue from the display of advertisements on the Monster network of websites, click-throughs on text based links, leads provided to advertisers and subscriptions to premium services. We recognize revenue for online advertising as impressions are delivered. An impression is delivered when an advertisement appears in pages viewed by our users. We recognize revenue from the display of click-throughs on text based links as click-throughs occur. A click-through occurs when a user clicks on an advertisers listing. Revenue from lead generation is recognized as leads are delivered to advertisers. In addition, we recognize revenue for certain subscription products ratably over the length of the subscription. We review accounts receivable for those that may potentially be uncollectible and any accounts receivable balances that are determined to be uncollectible are included in our allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
Fair Value Measurements
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expense and other current liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. Our debt consists of borrowings under our credit facility, which approximates fair value due to the variable nature of the interest rates which approximates market.
Asset Impairment
Business Combinations, Goodwill and Intangible Assets. We account for business combinations in accordance with ASC 805, Business Combinations. The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition. Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition.
The judgments that we make in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income in periods following a business combination. We generally use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on the characteristics of the asset and the availability of information.
The Company tests the recorded amount of goodwill for recovery on an annual basis in the fourth quarter of each fiscal year. Goodwill is tested more frequently if indicators of impairment exist. The Company continually assesses whether any indicators of impairment exist, which requires a significant amount of judgment. Such indicators may include: a sustained significant decline in its share price and market capitalization; a decline in its expected future cash flows; a significant adverse change in legal factors or in the
40
business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; or slower growth rates, among others. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.
The goodwill impairment test is performed at the reporting unit level. The Company has four reporting units: Careers North America, Careers International, Careers China and Internet Advertising & Fees. The goodwill impairment test is a two step analysis. In Step One, the fair value of each reporting unit is compared to its book value. Management must apply judgment in determining the estimated fair value of these reporting units. Fair value is determined using a combination of present value techniques (income approach) and quoted market prices of comparable businesses. If the fair value of the reporting unit exceeds its book value, goodwill is not deemed to be impaired for that reporting unit, and no further testing would be necessary. If the fair value of the reporting unit is less than its book value, the Company performs Step Two. Step Two uses the calculated fair value of the reporting unit to perform a hypothetical purchase price allocation to the fair value of the assets and liabilities of the reporting unit. The difference between the fair value of the reporting unit calculated in Step One and the fair value of the underlying assets and liabilities of the reporting unit is the implied fair value of the reporting units goodwill. A charge is recorded in the financial statements if the carrying value of the reporting units goodwill is greater than its implied fair value. The determination of fair value of the reporting units and assets and liabilities within the reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, the discount rate, terminal growth rates, earnings before depreciation and amortization, and capital expenditures forecasts. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.
To determine fair value using the income approach, the Company discounts the expected future cash flows of the reporting units. The discount rate used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in our operations and the rate of return a market participant would expect to earn. The estimate cash flows beyond the final year of our model, the Company uses a terminal value approach. Under this approach, the Company uses estimated operating income before income, depreciation and amortization in the final year of its model, adjusts it to estimate a normalized cash flow, applies a perpetuity growth assumption and discounts it by a perpetuity discount factor to determine the terminal value. The Company incorporates the present value of the resulting terminal value into its estimate of fair value. To corroborate the results of the income approach, the Company estimated the fair value of its reporting units using several market-based approaches.
The Company evaluated the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting unit, as well as the fair values of the corresponding assets and liabilities within the reporting unit, and concluded they are reasonable. The Company has utilized the income approach in determining the fair value of the reporting units consistent with prior periods. The Company believes that this is appropriate since it is often difficult to find other appropriate companies that are similar to our reporting units and it is our view that future discounted cash flows are more reflective of the value of the reporting units.
For the annual goodwill impairment test performed in the fourth quarter of 2011, each of the Careers North America, Careers International and Internet Advertising & Fees reporting units had a fair value that substantially exceeded its carrying value. The recorded amount of goodwill for the Careers China reporting unit was $261.7 million as of December 31, 2011. For the Careers China reporting unit, the Company calculated a fair value that was within approximately 10% of the carrying value, using a discount rate of 13.5% and a terminal growth rate of 5%. The Company believes these and the other underlying assumptions to be reasonable based upon the risk profile and long-term growth prospects of this reporting unit in light of industry market data. In assessing the reasonableness of the calculated fair value of the Careers China reporting unit, the Company determined that the discount rate used to determine fair value would need to be increased by approximately 1.5% before its calculated fair value would be less than its book value. The Company does not believe the resulting discount rate would be reasonable relative to the risks associated with the future cash flows of this business. The Company also determined that the terminal growth rate used to determine fair value would need to decline from 5% to below 3% before its calculated fair value would be less than its book value. This growth rate would not be reasonable given the expected growth of the Careers China reporting units business nor the industry expectations of the growth in the reporting units markets. Therefore, the Company believes the inputs and assumptions used in determining the fair value of the Careers China reporting unit are reasonable.
Based on the results of our 2011 and 2010 annual assessments of the recoverability of goodwill, the fair values of all reporting units exceeded their book values, indicating that there was no impairment of goodwill.
The Company recognizes during certain periods our market capitalization has been below our book value. Accordingly, we monitor changes in our share price between annual impairment tests to ensure that our market capitalization continues to exceed or is not significantly below the carrying value of our net assets. We consider a decline in our market capitalization that corresponds to an overall deterioration in stock market conditions to be less of an indicator of goodwill impairment than a unilateral decline in our market capitalization which would reflect adverse changes in our underlying operating performance, cash flows, financial condition and/or liquidity. In the event that our market capitalization does decline below its book value, we consider the length and severity of
41
the decline and the reason for the decline when assessing whether a potential goodwill impairment exists. We believe that short-term fluctuations in share prices may not necessarily reflect underlying values. However, if a decline in our market capitalization below book value persists for an extended period of time, we would likely consider the decline to be indicative of a decline in the aggregate fair value at the reporting unit level.
Differences in the Companys actual future cash flows, operating results, growth rates, capital expenditures, cost of capital and discount rates as compared to the estimates utilized for the purpose of calculating the fair value of each reporting unit, as well as a decline in the Companys stock price and related market capitalization, could affect the results of our annual goodwill assessment and, accordingly, potentially lead to future goodwill impairment charges.
Long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the assets residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We use internal discounted cash flows estimates, quoted market prices when available and independent appraisals, as appropriate, to determine fair value. We derive the required cash flow estimates from our historical experience and our internal business plans and apply an appropriate discount rate.
Income Taxes
We utilize the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of taxable temporary items, projected future taxable income, tax planning strategies and recent financial operations. Assumptions used in making this evaluation require significant judgment and are consistent with the plans and estimates we are using to manage the underlying business. When we determine that we are not able to realize our recorded deferred tax assets, an increase in the valuation allowance is recorded, decreasing earnings in the period in which such determination is made.
We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is a 50% or less likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC 718, Compensation Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures. We use the Black-Scholes option-pricing model to determine the fair value of stock option awards and measure non-vested stock awards using the fair market value of our common stock on the date the award is approved. For certain 2008 awards, which were market-based grants, we estimated the fair value of the award utilizing a Monte Carlo simulation model. We award stock options, non-vested stock, market-based non-vested stock and performance-based non-vested stock to employees, directors and executive officers.
Restructuring and Other Operating Lease Obligations
We recognize a liability for costs to terminate an operating lease obligation before the end of its term when we no longer derive economic benefit from the lease. The liability is recognized and measured at its fair value when we determine that the cease use date has occurred and the fair value of the liability is determined based on the remaining lease rentals due, reduced by estimated sublease rental income that could be reasonably obtained for the property. The estimate of subsequent sublease rental income may change and require future changes to the fair value of the liabilities for the lease obligations.
Recently Issued Accounting Pronouncements
In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income Presentation of Comprehensive Income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of stockholders equity. It requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in
42
two separate but consecutive statements. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are currently evaluating the impact that the adoption will have on our consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments and will be applied retrospectively for all comparative periods presented. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company currently believes that this ASU will have no significant impact on its consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (VSOE) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company adopted ASU 2009-13 effective January 1, 2011. The adoption of ASU 2009-13 did not have an impact on our consolidated financial statements.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Foreign Exchange Risk
During 2011, revenue from our international operations accounted for 45% of our consolidated revenue. Revenue and related expenses are generally denominated in the functional currencies of the local countries. Our primary foreign currencies are Euros, British Pounds, Czech Korunas, Korean Won, Chinese Renminbi, Swedish Krona and Indian Rupee. The functional currency of our subsidiaries that either operate or support these websites is the same as the corresponding local currency. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused websites are exposed to foreign exchange rate fluctuations. Upon consolidation, as exchange rates vary, revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. The effect of the weakening United States dollar in 2011 positively impacted reported revenue by approximately $20.8 million and positively impacted reported operating income by approximately $3.6 million, compared to 2010.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents and marketable securities (foreign funds). Based on the balance of foreign funds at December 31, 2011 of $234.5 million, an assumed 5%, 10% and 20% negative currency movement would result in fair value declines of $11.7 million, $23.4 million and $46.9 million, respectively.
We use forward foreign exchange contracts as cash flow hedges to offset risks related to certain foreign currency transactions. These transactions primarily relate to non-functional currency denominated inter-company funding loans, non-functional currency denominated accounts receivable and non-functional currency denominated accounts payable. We do not enter into derivative financial instruments for trading purposes.
The financial statements of our non-United States subsidiaries are translated into United States dollars using current rates of exchange, with gains or losses included in the cumulative translation adjustment account, a component of stockholders equity. During the year ended December 31, 2011, our cumulative translation adjustment account increased $0.6 million, primarily attributable to the foreign currency movements of the United States dollar against the Chinese Renminbi, British Pound, Euro, and Indian Rupee.
Interest Rate Risk
Credit Facilities
As of December 31, 2011, our debt was comprised primarily of borrowings under our senior secured revolving credit facilities, term loan facilities and borrowings of our subsidiary in China under an unsecured uncommitted revolving credit facilities that we guarantee. The credit facilities interest rates may be reset due to fluctuation in a market-based index, such as the federal funds rate, the London Interbank Offered Rate (LIBOR), the administrative agents prime rate or the Peoples Bank of China rate. Assuming the amount of borrowings provided for under our credit facilities was fully drawn during 2011, we would have had $297.5 million outstanding under such facilities, and a hypothetical 1.00% (100 basis-point) change in the interest rate of our credit facilities would have changed our pre-tax earnings by approximately $3.0 million for the year ended December 31, 2011. Assuming the amount of borrowings under our credit facilities was equal to the amount of outstanding borrowings on December 31, 2011, we would have had
43
$189.8 million of total usage and a hypothetical 1.00% (100 basis-point) change in the interest rate of our credit facilities would have changed our pre-tax earnings by approximately $1.9 million for the year ended December 31, 2011. We do not manage the interest rate risk on our debt through the use of derivative instruments.
Investment Portfolio
Our investment portfolio is comprised primarily of cash and cash equivalents and investments in a variety of debt instruments of high quality issuers, money market funds which invest in United States Treasuries, top sovereign, regional, national and supra-national bank commercial paper, bank time deposits and government bonds that mature within three months of their origination date, as well as auction rate securities. A hypothetical 1.00% (100 basis-point) change in interest rates applicable to our investment portfolio balance as of December 31, 2011 would have changed our annual pretax earnings by approximately $2.3 million.
44
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The following are the consolidated financial statements of Monster Worldwide, Inc. and its consolidated subsidiaries, which are filed as part of this report.
MONSTER WORLDWIDE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No. | ||||
46 | ||||
47 | ||||
48 | ||||
49 | ||||
50 | ||||
51 | ||||
Supplemental Data: Financial Information by Quarter (Unaudited) |
74 |
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Monster Worldwide, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Monster Worldwide, Inc. (the Company) as of December 31, 2011 and 2010 and the related consolidated statements of operations, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Monster Worldwide, Inc. at December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Monster Worldwide, Inc.s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated January 31, 2012 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
New York, New York
January 31, 2012
46
MONSTER WORLDWIDE, INC.
(In thousands)
December 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 250,317 | $ | 163,169 | ||||
Accounts receivable, net of allowance for doubtful accounts of $5,240 and $5,420 |
343,546 | 346,751 | ||||||
Prepaid and other |
82,069 | 75,451 | ||||||
|
|
|
|
|||||
Total current assets |
675,932 | 585,371 | ||||||
|
|
|
|
|||||
Goodwill |
1,132,161 | 1,122,951 | ||||||
Property and equipment, net |
156,282 | 150,147 | ||||||
Intangibles, net |
51,961 | 66,184 | ||||||
Investment in unconsolidated affiliates |
1,183 | 1,359 | ||||||
Other assets |
40,479 | 51,990 | ||||||
|
|
|
|
|||||
Total assets |
$ | 2,057,998 | $ | 1,978,002 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 27,411 | $ | 36,569 | ||||
Accrued expenses and other current liabilities |
169,576 | 176,400 | ||||||
Deferred revenue |
380,310 | 376,448 | ||||||
Current portion of long-term debt and borrowings on revolving credit facilities |
188,836 | 84,500 | ||||||
Income taxes payable |
16,830 | 12,907 | ||||||
|
|
|
|
|||||
Total current liabilities |
782,963 | 686,824 | ||||||
|
|
|
|
|||||
Long-term income taxes payable |
94,750 | 95,390 | ||||||
Deferred income taxes |
4,665 | 17,186 | ||||||
Long-term debt, less current portion |
| 40,000 | ||||||
Other long-term liabilities |
11,493 | 9,952 | ||||||
|
|
|
|
|||||
Total liabilities |
893,871 | 849,352 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $.001 par value, authorized 800 shares; issued and outstanding: none |
| | ||||||
Common stock, $.001 par value, authorized 1,500,000 shares; issued: 137,855 and 135,834 shares, respectively; outstanding: 117,628 and 121,113 shares, respectively |
138 | 136 | ||||||
Class B common stock, $.001 par value, authorized 39,000 shares; issued and outstanding: none |
| | ||||||
Additional paid-in capital |
1,405,915 | 1,424,815 | ||||||
Accumulated deficit |
(305,669 | ) | (359,466 | ) | ||||
Accumulated other comprehensive income |
63,743 | 63,165 | ||||||
|
|
|
|
|||||
Total stockholders equity |
1,164,127 | 1,128,650 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 2,057,998 | $ | 1,978,002 | ||||
|
|
|
|
See accompanying notes.
47
MONSTER WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Revenue |
$ | 1,040,105 | $ | 914,133 | $ | 905,142 | ||||||
|
|
|
|
|
|
|||||||
Salaries and related |
516,198 | 490,791 | 463,749 | |||||||||
Office and general |
244,272 | 242,797 | 231,288 | |||||||||
Marketing and promotion |
215,343 | 222,566 | 209,661 | |||||||||
Release of ChinaHR escrowed funds |
(17,400 | ) | | | ||||||||
Restructuring and other special charges |
5,173 | | 16,105 | |||||||||
Reversal of legal settlements, net |
| | (6,850 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
963,586 | 956,154 | 913,953 | |||||||||
|
|
|
|
|
|
|||||||
Operating income (loss) |
76,519 | (42,021 | ) | (8,811 | ) | |||||||
Interest expense, net |
(6,000 | ) | (4,545 | ) | (1,431 | ) | ||||||
Other income (expense), net |
2,891 | 2,672 | (4,397 | ) | ||||||||
|
|
|
|
|
|
|||||||
Interest and other, net |
(3,109 | ) | (1,873 | ) | (5,828 | ) | ||||||
|
|
|
|
|
|
|||||||
Income (loss) before income taxes and loss in equity interests |
73,410 | (43,894 | ) | (14,639 | ) | |||||||
Provision for (benefit from) income taxes |
18,371 | (14,405 | ) | (37,883 | ) | |||||||
Loss in equity interests, net |
(1,242 | ) | (2,870 | ) | (4,317 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | 53,797 | $ | (32,359 | ) | $ | 18,927 | |||||
|
|
|
|
|
|
|||||||
Basic earnings (loss) per share |
$ | 0.44 | $ | (0.27 | ) | $ | 0.16 | |||||
|
|
|
|
|
|
|||||||
Diluted earnings (loss) per share |
$ | 0.43 | $ | (0.27 | ) | $ | 0.16 | |||||
|
|
|
|
|
|
|||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
122,002 | 120,608 | 119,359 | |||||||||
Diluted |
123,923 | 120,608 | 121,170 |
See accompanying notes.
48
MONSTER WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
Shares of | Accumulated | |||||||||||||||||||||||
Shares of | Class B | Common Stock | Other | Total | ||||||||||||||||||||
Common | Common | and Additional | Accumulated | Comprehensive | Stockholders | |||||||||||||||||||
Stock | Stock | Paid-in Capital | Deficit | Income (Loss) | Equity | |||||||||||||||||||
Balance January 1, 2009 |
133,335 | | $ | 1,367,506 | $ | (346,034 | ) | $ | 25,801 | $ | 1,047,273 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
| | | 18,927 | | 18,927 | ||||||||||||||||||
Reversal of net unrealized loss on investments |
| | | | 1,603 | 1,603 | ||||||||||||||||||
Change in cumulative foreign currency translation adjustment |
| | | | 36,763 | 36,763 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive income |
$ | 57,293 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Tax withholdings related to net share settlements of restricted stock awards and units |
(483 | ) | | (4,571 | ) | | | (4,571 | ) | |||||||||||||||
Issuance of common stock for stock option exercises |
7 | | 67 | | | 67 | ||||||||||||||||||
Tax provision for stock-based compensation |
| | (9,094 | ) | | | (9,094 | ) | ||||||||||||||||
Stock based compensation- restricted stock |
1,182 | | 39,306 | | | 39,306 | ||||||||||||||||||
Stock based compensation- stock options |
| | 615 | | | 615 | ||||||||||||||||||
Stock bonus award |
339 | | 2,275 | | | 2,275 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, December 31, 2009 |
134,380 | | $ | 1,396,104 | $ | (327,107 | ) | $ | 64,167 | $ | 1,133,164 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss |
| | | (32,359 | ) | | (32,359 | ) | ||||||||||||||||
Change in cumulative foreign currency translation |
| | | | (1,002 | ) | (1,002 | ) | ||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive loss |
$ | (33,361 | ) | |||||||||||||||||||||
|
|
|||||||||||||||||||||||
Tax withholdings related to net share settlements of restricted stock awards and units |
(869 | ) | | (14,227 | ) | | | (14,227 | ) | |||||||||||||||
Issuance of common stock for stock option exercises |
29 | | 300 | | | 300 | ||||||||||||||||||
Tax provision for stock-based compensation |
| | (4,417 | ) | | | (4,417 | ) | ||||||||||||||||
Stock based compensation- restricted stock |
2,294 | | 46,646 | | | 46,646 | ||||||||||||||||||
Stock based compensation- stock options |
| | 545 | | | 545 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, December 31, 2010 |
135,834 | | $ | 1,424,951 | $ | (359,466 | ) | $ | 63,165 | $ | 1,128,650 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
| | | 53,797 | | 53,797 | ||||||||||||||||||
Change in cumulative foreign currency translation |
| | | | 578 | 578 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive income |
$ | 54,375 | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Repurchase of common stock |
| | (41,973 | ) | | | (41,973 | ) | ||||||||||||||||
Tax withholdings related to net share settlements of restricted stock awards and units |
(1,145 | ) | | (17,139 | ) | | | (17,139 | ) | |||||||||||||||
Issuance of common stock for stock option exercises |
1 | | 23 | | | 23 | ||||||||||||||||||
Tax provision for stock-based compensation |
| | (4,628 | ) | | | (4,628 | ) | ||||||||||||||||
Stock based compensation- restricted stock |
3,165 | | 44,380 | | | 44,380 | ||||||||||||||||||
Stock based compensation- stock options |
| | 439 | | | 439 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, December 31, 2011 |
137,855 | | $ | 1,406,053 | $ | (305,669 | ) | $ | 63,743 | $ | 1,164,127 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
49
MONSTER WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows provided by operating activities: |
||||||||||||
Net income (loss) |
$ | 53,797 | $ | (32,359 | ) | $ | 18,927 | |||||
|
|
|
|
|
|
|||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
74,600 | 67,096 | 68,533 | |||||||||
Reversal of legal settlements, net |
| | (6,850 | ) | ||||||||
Provision for doubtful accounts |
3,329 | 2,947 | 10,154 | |||||||||
Non-cash compensation |
42,523 | 47,191 | 39,921 | |||||||||
Loss in equity interests, net |
1,242 | 2,870 | 4,317 | |||||||||
Non-cash restructuring write-offs, accelerated amortization and loss on disposal of assets |
130 | 255 | 4,779 | |||||||||
Deferred income taxes |
(5,659 | ) | (27,890 | ) | 1,189 | |||||||
(Gains) losses on auction rate securities |
(1,732 | ) | (2,415 | ) | 4,181 | |||||||
Changes in assets and liabilities, net of acquisitions: |
||||||||||||
Accounts receivable |
(856 | ) | (53,555 | ) | 80,462 | |||||||
Prepaid and other |
(5,510 | ) | (16,490 | ) | (2,669 | ) | ||||||
Deferred revenue |
5,056 | 62,488 | (111,634 | ) | ||||||||
Accounts payable, accrued liabilities and other |
(17,243 | ) | 42,934 | (66,585 | ) | |||||||
|
|
|
|
|
|
|||||||
Total adjustments |
95,880 | 125,431 | 25,798 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
149,677 | 93,072 | 44,725 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows (used for) provided by investing activities: |
||||||||||||
Capital expenditures |
(61,818 | ) | (57,126 | ) | (48,677 | ) | ||||||
Payments for acquisitions and intangible assets, net of cash acquired |
| (225,795 | ) | (300 | ) | |||||||
Purchase of marketable securities |
| | (8,585 | ) | ||||||||
Sales and maturities of marketable securities and other |
1,732 | 27,089 | 70,977 | |||||||||
Cash funded to equity investee |
(2,559 | ) | (5,648 | ) | (6,299 | ) | ||||||
Dividends received from unconsolidated investee |
443 | 220 | 763 | |||||||||
|
|
|
|
|
|
|||||||
Net cash (used for) provided by investing activities |
(62,202 | ) | (261,260 | ) | 7,879 | |||||||
|
|
|
|
|
|
|||||||
Cash flows provided by (used for) financing activities: |
||||||||||||
Proceeds from borrowings on credit facilities |
108,722 | 90,000 | 199,203 | |||||||||
Payments on borrowings on term loan and revolving credit facilities |
(44,501 | ) | (15,500 | ) | (256,196 | ) | ||||||
Proceeds from borrowings on term loan |
| | 50,000 | |||||||||
Repurchase of common stock |
(41,973 | ) | | | ||||||||
Tax withholdings related to net share settlements of restricted stock awards and units |
(17,139 | ) | (14,227 | ) | (4,571 | ) | ||||||
Proceeds from the exercise of employee stock options |
23 | 300 | 67 | |||||||||
Excess tax benefits from equity compensation plans |
| | 79 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used for) financing activities |
5,132 | 60,573 | (11,418 | ) | ||||||||
|
|
|
|
|
|
|||||||
Effects of exchange rates on cash |
(5,459 | ) | (4,663 | ) | 12,001 | |||||||
Net increase (decrease) in cash and cash equivalents |
87,148 | (112,278 | ) | 53,187 | ||||||||
Cash and cash equivalents, beginning of period |
163,169 | 275,447 | 222,260 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ | 250,317 | $ | 163,169 | $ | 275,447 | ||||||
|
|
|
|
|
|
See accompanying notes.
50
MONSTER WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the Company, Monster, Monster Worldwide, we, our, or us) has operations that consist of three reportable segments: Careers North America, Careers International and Internet Advertising & Fees. Revenue in the Companys Careers segments are primarily earned from the placement of job advertisements on the websites within the Monster network, access to Monsters network of online resume databases, recruitment media services and other career-related services. Revenue in the Companys Internet Advertising & Fees segment is primarily earned from the display of advertisements on the Monster network of websites, click-throughs on text based links and leads provided to advertisers. The Companys Careers segments provide online services to customers in a variety of industries throughout North America, Europe, South America and the Asia-Pacific region, while Internet Advertising & Fees delivers online services primarily in North America.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. Investments in which the Company does not have a controlling interest or is not the primary beneficiary are accounted for under the equity method. All inter-company accounts and transactions have been eliminated in consolidation. Certain reclassifications of prior year amounts have been made for consistent presentation.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities and revenues and expenses. These estimates include, among others, allowances for doubtful accounts, fair value of financial assets and liabilities, net realizable values on long-lived assets and deferred tax assets and liabilities, certain accrued expense accounts, deferred revenue, goodwill, revenue recognition and forfeitures associated with stock-based compensation. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue on agreements in accordance with Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition. Accordingly, the Company recognizes revenue when persuasive evidence of an arrangement exists, service has been rendered, the sales price is fixed or determinable, and collection is probable. The Company recognizes revenue as follows for each of its reportable segments:
Careers (North America and International). Our Careers segments primarily earn revenue from the placement of job postings on the websites within the Monster network, access to Monsters network of online resume databases, Career Ad Network and other career-related services. We recognize revenue at the time that job postings or Career Ads are displayed on the Monster network websites, based upon customer usage patterns. Revenue earned from Monsters network of resume databases and other career-related services are recognized over the length of the contract, typically from two weeks to twelve months. Revenue associated with multiple element contracts is allocated based on the relative selling prices of the services included in the contract. Unearned revenues are reported on the balance sheet as deferred revenue.
Internet Advertising & Fees. Our Internet Advertising & Fees segment primarily earns revenue from the display of advertisements on the Monster network of websites, click-throughs on text based links, leads provided to advertisers and premium services. We recognize revenue for online advertising as impressions are delivered. An impression is delivered when an advertisement appears in pages viewed by our users. We recognize revenue from the display of click-throughs on text based links as click-throughs occur. A click-through occurs when a user clicks on an advertisers listing. Revenue from lead generation is recognized as leads are delivered to advertisers. In addition, we recognize revenue for premium services over the length of the contract. Unearned revenues are reported on the balance sheet as deferred revenue.
51
Business Combinations and Dispositions
We account for business combinations in accordance with ASC 805, Business Combinations. The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business combination. Our consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition. For the period January 1, 2009 through December 31, 2011, the Company completed three business combinations (see Note 3 to the consolidated financial statements).
The Company accounts for business dispositions in accordance with ASC 205-20, Discontinued Operations. ASC 205-20 requires the results of operations of business dispositions to be segregated from continuing operations and reflected as discontinued operations in current and prior periods.
Marketing and Promotion
Advertising production costs are recorded as expense the first time an advertisement appears. Costs of communicating advertising are recorded as expense as advertising space or airtime is used. All other advertising costs are expensed as incurred.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue and other current liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The Companys debt relates to borrowings under its credit facilities and term loan, which approximates fair value due to market interest rates.
Concentrations of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand. The Company also invests in short-term commercial paper rated P1 or better by Moodys or A1 or better by Standard & Poors. The Company performs continuing credit evaluations of its customers, maintains allowances for potential credit losses and does not require collateral. The Company makes judgments as to its ability to collect outstanding receivables based primarily on managements evaluation of the customers financial condition, past collection history and overall aging of the receivables. Historically, such losses have been within managements expectations. The Company has not experienced significant losses related to receivables from individual customers or groups of customers in any particular industry or geographic area.
Cash and Cash Equivalents
Cash and cash equivalents, which primarily consist of bank time deposits and commercial paper, are stated at cost, which approximates fair value. For financial statement presentation purposes, the Company considers all highly liquid investments having original maturities of three months or less to be cash equivalents. Outstanding checks in excess of account balances, typically payroll and other contractual obligations disbursed on or near the last day of a reporting period, are reported as current liabilities in the accompanying consolidated balance sheets.
Accounts Receivable
The Companys accounts receivable primarily consist of trade receivables. Management reviews accounts receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company includes any accounts receivable balances that are determined to be uncollectible in its allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of December 31, 2011 and 2010 are adequate. However, actual write-offs could exceed the recorded allowance. Activity in the allowance for doubtful accounts is as follows:
Year Ended | Beginning | Charged to | Write-Offs | Ending | ||||||||||||
December 31, |
Balance | Expense | and Other | Balance | ||||||||||||
2011 |
$ | 5,420 | $ | 3,329 | $ | (3,509 | ) | $ | 5,240 | |||||||
2010 |
$ | 12,660 | $ | 2,947 | $ | (10,187 | ) | $ | 5,420 | |||||||
2009 |
$ | 14,064 | $ | 10,154 | $ | (11,558 | ) | $ | 12,660 |
52
Property and Equipment
Computer and communications equipment, furniture and equipment and capitalized software costs are stated at cost and are depreciated using the straight line method over the estimated useful lives of the assets, generally three to ten years. Leasehold improvements are stated at cost and amortized using the straight-line method, over their estimated useful lives, or the lease term, whichever is shorter.
Internal Use Software and Website Development Costs
In accordance with ASC 350-40, Internal-Use Software, the Company capitalizes costs to purchase or internally develop software for internal use, as well as costs incurred to design, develop, test and implement enhancements to its website. These costs are included in property and equipment and the estimated useful life is five years. Costs capitalized were $27,020, $21,591 and $26,194 for the years ended December 31, 2011, 2010 and 2009, respectively.
Goodwill and Intangible Assets
The Company evaluates its long-lived assets for impairment in accordance with ASC 350-20, Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company performs an annual review in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill is impaired.
The first step of the impairment review process compares the fair value of the reporting unit in which the goodwill resides to the carrying value of that reporting unit. The Company has four reporting units: Careers North America, Careers International, Careers China and Internet Advertising & Fees. The second step of the impairment review measures the amount of impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with its carrying amount. The determination of whether or not goodwill has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of our reporting units. Changes in our strategy and/or market conditions could significantly impact these judgments and require reductions to recorded amounts of intangible assets.
For the annual goodwill impairment test performed in the fourth quarter of 2011, each of the Careers North America, Careers International and Internet Advertising & Fees reporting units had a fair value that substantially exceeded its carrying value. The recorded amount of goodwill for the Careers China reporting unit was $261,700 as of December 31, 2011. For the Careers China reporting unit, the Company calculated a fair value that was within approximately 10% of the carrying value, using a discount rate of 13.5% and a terminal growth rate of 5%. The Company believes these and the other underlying assumptions to be reasonable based upon the risk profile and long-term growth prospects of this reporting unit in light of industry market data. In assessing the reasonableness of the calculated fair value of the Careers China reporting unit, the Company determined that the discount rate used to determine fair value would need to be increased by approximately 1.5% before its calculated fair value would be less than its book value. The Company does not believe the resulting discount rate would be reasonable relative to the risks associated with the future cash flows of this business. The Company also determined that the terminal growth rate used to determine fair value would need to decline from 5% to below 3% before its calculated fair value would be less than its book value. This growth rate would not be reasonable given the expected growth of the Careers China reporting units business nor the industry expectations of the growth in the reporting units markets. Therefore, the Company believes the inputs and assumptions used in determining the fair value of the Careers China reporting unit are reasonable.
The Company recognizes during certain periods our market capitalization has been below our book value. Accordingly, we monitor changes in our share price between annual impairment tests to ensure that our market capitalization continues to exceed or is not significantly below the carrying value of our net assets. We consider a decline in our market capitalization that corresponds to an overall deterioration in stock market conditions to be less of an indicator of goodwill impairment than a unilateral decline in our market capitalization which would reflect adverse changes in our underlying operating performance, cash flows, financial condition and/or liquidity. In the event that our market capitalization does decline below its book value, we consider the length and severity of the decline and the reason for the decline when assessing whether a potential goodwill impairment exists. We believe that short-term fluctuations in share prices may not necessarily reflect underlying values. However, if a decline in our market capitalization below book value persists for an extended period of time, we would likely consider the decline to be indicative of a decline in the aggregate fair value at the reporting unit level.
Other intangible assets primarily consist of the value of customer relationships, trade names, resume databases, trademarks and internet domains. Amortizable intangible assets are primarily being amortized on a basis that approximates economic use, over periods ranging from two to ten years.
53
Long-Lived Assets
Long-lived assets, other than goodwill are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of these assets and their eventual disposition are less than their carrying amounts.
Intangible assets are primarily evaluated on an annual basis, generally in conjunction with the Companys evaluation of goodwill balances. Impairment, if any, is assessed by using internally developed discounted cash flows estimates, quoted market prices, when available, and independent appraisals to determine fair value. The determination of whether or not long-lived assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the estimated future cash flows expected to result from the use of those assets. Changes in the Companys strategy, assumptions and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of long-lived assets. As of December 31, 2011, there were no impairment indicators present.
Foreign Currency Translation and Transactions
The financial position and results of operations of the Companys foreign subsidiaries are determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in other comprehensive income (loss), a component of stockholders equity. Gains and losses resulting from other foreign currency transactions, including forward foreign exchange contracts, are included in other income (expense), net.
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Companys items of other comprehensive income are foreign currency translation adjustments, which relate to investments that are permanent in nature, net of applicable income taxes. To the extent that such amounts relate to investments that are permanent in nature, no adjustments for income taxes are made.
The Company uses forward foreign exchange contracts as cash flow hedges to offset risks related to foreign currency transactions. These transactions primarily relate to non-functional currency denominated inter-company funding loans and non-functional currency inter-company accounts receivable. As of December 31, 2011 and 2010, the notional value of these forward foreign exchange contracts was $52,373 and $62,902, respectively, and the corresponding accumulated unrealized gain was $215 and $666, respectively, which is included in other income (expense), net in the consolidated statement of operations for the years ended December 31, 2011 and 2010, respectively. The Company does not trade derivative financial instruments for speculative purposes.
Income Taxes
The Company utilizes the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances we consider projected future taxable income and the availability of tax planning strategies. When we determine that we are not able to realize our recorded deferred tax assets, an increase in the valuation allowance is recorded, decreasing earnings in the period in which such determination is made.
We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is 50% or less likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
54
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures. We use the Black-Scholes option-pricing model to determine the fair-value of stock option awards and measure non-vested stock awards using the fair market value of our common stock on the date the award is approved. For certain 2008 awards, which were market-based grants, we estimated the fair value of the award utilizing a Monte Carlo simulation model. We award stock options, non-vested stock, market-based non-vested stock and performance-based non-vested stock to employees, directors and executive officers.
Restructuring and Other Special Charges
During the year ended December 31, 2011, the Company recorded $5,173 of restructuring and other special charges comprised of severance of $3,261 and facility costs of $1,912. The accrued restructuring balance as of December 31, 2011 was $2,998. These restructuring and other special charges resulted from the Company no longer engaging in certain activities within the Internet Advertising & Fees segment, the decision to cease operations within one country in the Careers International segment as well as targeted headcount reductions within the Careers North America segment.
Operating Lease Obligations
We recognize a liability for costs to terminate an operating lease obligation before the end of its term if we no longer derive economic benefit from the lease. The liability is recognized and measured at its fair value when we determine that the cease use date has occurred and the fair value of the liability is determined based on the remaining lease rentals due, reduced by estimated sublease rental income that could be reasonably obtained for the property. The estimate of subsequent sublease rental income may change and require future changes to the fair value of the liabilities for the lease obligations.
Earnings Per Share
Basic earnings per share is calculated using the Companys weighted-average outstanding common shares. When the effects are dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares, participating securities and the dilutive effect of all other stock-based compensation awards as determined under the treasury stock method. Certain stock options and stock issuable under employee compensation plans were excluded from the computation of diluted earnings per share due to their anti-dilutive effect. A reconciliation of shares used in calculating basic and diluted earnings per share is as follows:
December 31, | ||||||||||||
(Thousands of shares) |
2011 | 2010 | 2009 | |||||||||
Basic weighted average shares outstanding |
122,002 | 120,608 | 119,359 | |||||||||
Effect of common stock equivalents stock options and non-vested stock under employee compensation plans |
1,921 | | 1,811 | |||||||||
|
|
|
|
|
|
|||||||
Diluted weighted average shares outstanding |
123,923 | 120,608 | 121,170 | |||||||||
|
|
|
|
|
|
|||||||
Weighted average anti-dilutive common stock equivalents (1) |
4,165 | 6,631 | 7,871 | |||||||||
|
|
|
|
|
|
(1) | For periods in which losses are presented, dilutive earnings per share calculations do not differ from basic earnings per share because the effects of any potential common stock equivalents are anti-dilutive and therefore not included in the calculation of dilutive earnings per share. For the year ended December 31, 2010, those potential shares totaled 2,108, which are included in the weighted average anti-dilutive common stock equivalents above, in addition to 4,523 of out of the money anti-dilutive common stock equivalents. |
Professional Fees and Expenses Related to the Stock Option Investigation
In May 2009, the Company agreed, without admitting or denying wrongdoing, to pay a $2,500 penalty to the United States Securities and Exchange Commission (SEC) to settle claims arising out of the SECs inquiry into the Companys historical stock option granting practices.
In September 2009, the Company entered into a Memorandum of Understanding with the plaintiffs in the last action pending against the Company in connection with its historical stock option granting practices (captioned as Taylor v. McKelvey, et al., 06 CV 8322 (S.D.N.Y)(AKH) (the ERISA Class Action)), and in November 2009, the Company entered into a Class Action Settlement Agreement (the Settlement Agreement) with the plaintiffs in the ERISA Class Action. On February 9, 2010, the Court granted final approval to the Settlement Agreement, pursuant to which the ERISA Class Action was settled and dismissed with prejudice for a payment of $4,250 (a substantial majority of which was paid by insurance and a contribution from another defendant).
55
With the conclusion of the settlement of the ERISA Class Action, all of the actions seeking recoveries from the Company as an outgrowth of the Companys historical stock option grant practices have been settled. As a result, in the year ended December 31, 2009, the Company reversed a previously recorded accrual of $6,850 relating to these matters.
Recently Issued Accounting Pronouncements
In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income Presentation of Comprehensive Income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of stockholders equity. It requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are currently evaluating the impact that the adoption will have on our consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments and will be applied retrospectively for all comparative periods presented. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company currently believes that this ASU will have no significant impact on its consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (VSOE) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company adopted ASU 2009-13 effective January 1, 2011. The adoption of ASU 2009-13 did not have an impact on our consolidated financial statements.
2. STOCK-BASED COMPENSATION
Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the vesting period, net of estimated forfeitures.
The Company awards non-vested stock to employees, directors and executive officers in the form of Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs), market-based RSAs and RSUs, stock options and performance-based RSAs and RSUs. The Compensation Committee of the Companys Board of Directors approves stock-based compensation awards for all employees and executive officers of the Company. The Corporate Governance and Nominating Committee of the Companys Board of Directors approves stock-based compensation awards for all non-employee directors of the Company. The Company uses the fair-market value of the Companys common stock on the date the award is approved to measure fair value for service-based awards, a Monte Carlo simulation model to determine both the fair value and requisite service period of market-based awards and the Black-Scholes option-pricing model to determine the fair value of stock option awards. The Company presents as a financing activity in the consolidated statement of cash flows the benefits of tax deductions in excess of the tax-effected compensation of the related stock-based awards for the options exercised and RSAs and RSUs vested. In accordance with ASC 718, the Companys forfeiture rate as of December 31, 2011 includes the impact of the restructuring program that the Company announced on January 26, 2012 (see note 17 for discussion of the Companys restructuring plan).
56
The Company recognized pre-tax compensation expense in the consolidated statement of operations related to stock-based compensation as follows:
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Non-vested stock, included in salaries and related |
$ | 42,084 | $ | 46,646 | $ | 39,306 | ||||||
Stock options, included in salaries and related |
439 | 545 | 615 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 42,523 | $ | 47,191 | $ | 39,921 | ||||||
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|
|
Certain accrued bonuses, with a fair value of $2,275, were paid for in common stock for the year ended December 31, 2009.
During the year ended December 31, 2011, the Company capitalized $2,128 of stock-based compensation associated with internally developed software for internal use and enhancements to our website.
As of December 31, 2011, the Company has issued the following types of equity awards under its 1999 Long Term Incentive Plan and the 2008 Equity Incentive Plan (the Company no longer issues new equity awards under the 1999 Long-Term Incentive Plan).
Restricted Stock
The Company, from time to time, enters into separate non-vested share-based payment arrangements with employees, executives and directors. The Company grants RSUs that are subject to continued employment and vesting conditions, but do not have dividend or voting rights. The Company also grants RSAs that are subject to continued employment and vesting conditions and have voting rights, but do not have dividend rights. Directors of the Company receive automatic RSAs which are measured using the fair market value of the Companys common stock on the date of the grant. The Company also grants market-based RSAs and RSUs that vest contingent on meeting certain stock price targets within five years of the grant date. The Company also grants performance-based RSAs and RSUs that vest contingent on meeting specific financial results within a specified time period.
The fair value of RSAs and RSUs is recognized as expense ratably over the requisite service period, net of estimated forfeitures.
Tax benefits recognized on the non-vested stock-based compensation expenses were $11,166, $13,076, and $12,386 for years ended December 31, 2011, 2010 and 2009, respectively.
2011 Restricted Stock. During 2011, the Company granted RSAs covering an aggregate of 769,000 shares and RSUs covering an aggregate of 200,000 shares to approximately 81 employees, executive officers and directors of the Company. The RSAs and RSUs vest in various increments on the anniversaries of the individual grant dates, through October 25, 2015, subject to the recipients continued employment or service through each applicable vesting date.
2010 Restricted Stock. During 2010, the Company granted RSAs covering an aggregate of 5,072,000 shares and RSUs covering an aggregate of 1,732,000 shares to approximately 3,900 employees, executive officers and directors of the Company. The RSAs and RSUs vest in various increments on the anniversaries of the individual grant dates, through December 15, 2014, subject to the recipients continued employment or service through each applicable vesting date.
2009 Restricted Stock. During 2009, the Company granted RSAs covering an aggregate of 2,993,000 shares and RSUs covering an aggregate of 1,103,000 shares to approximately 3,000 employees, executive officers and directors of the Company. The RSAs and RSUs vest in various increments on the anniversaries of the individual grant dates through December 15, 2013, subject to the recipients continued employment or service through each applicable vesting date.
As of December 31, 2011, the unrecognized compensation expense related to non-vested stock was $60,250, which is being amortized over the requisite service period on a straight-line basis. The remaining weighted average term over which the unamortized compensation expense will be recognized is 1.6 years. During the years ended December 31, 2011, 2010 and 2009, the fair value of shares vested was $47,513, $36,954 and $13,800, respectively.
57
The following table summarizes the activity of the Companys non-vested stock:
Years Ended December 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average Fair | Average Fair | Average Fair | ||||||||||||||||||||||
Value at | Value at | Value at Grant | ||||||||||||||||||||||
(Thousands of shares) |
Shares | Grant Date | Shares | Grant Date | Shares | Date | ||||||||||||||||||
Non-vested at beginning of period |
11,299 | $ | 14.65 | 7,744 | $ | 15.62 | 5,612 | $ | 24.57 | |||||||||||||||
Granted RSAs |
769 | 13.74 | 5,072 | 14.32 | 2,993 | 7.93 | ||||||||||||||||||
Granted RSUs |
200 | 14.67 | 1,732 | 14.78 | 1,103 | 6.93 | ||||||||||||||||||
Forfeited |
(1,672 | ) | 13.66 | (955 | ) | 17.95 | (782 | ) | 20.04 | |||||||||||||||
Vested |
(3,164 | ) | $ | 16.82 | (2,294 | ) | $ | 17.16 | (1,182 | ) | $ | 30.81 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Non-vested at end of period |
7,432 | $ | 13.85 | 11,299 | $ | 14.65 | 7,744 | $ | 15.62 | |||||||||||||||
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Stock Options
The Company has not granted any stock options subsequent to 2008. As of December 31, 2011, the unrecognized compensation expense for stock options, which is being amortized over the requisite service periods on a straight-line basis, was $35 and is expected to be recognized over a period of 0.2 years.
The following table summarizes the activity of the Companys stock options:
Years Ended December 31, | ||||||||||||||||||||||||
2011 | 2010 |