10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM TO
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COMMISSION FILE NUMBER
001-34209
MONSTER WORLDWIDE,
INC.
(EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER)
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DELAWARE
(STATE OR OTHER JURISDICTION
OF
INCORPORATION OR ORGANIZATION)
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13-3906555
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
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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:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $.001 per share
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New York Stock Exchange
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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 þ No o
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 o No þ
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 þ No o
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. þ
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):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
Company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of common stock held by
non-affiliates of the registrant was approximately
$2,544,998,191 as of June 30, 2008, the last business day
of the registrants second fiscal quarter of 2008.
As of February 2, 2009, there were 123,198,405 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 2009 Annual Meeting of
Stockholders are incorporated by reference into Part III of
this report.
Special
Note About Forward-Looking Statements
We 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 crisis; 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 identify future
acquisition opportunities; our ability to manage future growth;
the ability of our divested businesses to satisfy obligations
related to their operations; risks related to our foreign
operations; our ability to expand our operations in
international markets; our ability to attract and retain
talented employees; 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; volatility in our stock price; risks associated
with government regulation; risks related to the investigations
and the litigation associated with our historical stock option
grant practices; the outcome of pending litigation; 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.
ii
PART I
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 local presence in
key markets in North America, Europe and Asia, Monster works by
connecting employers with quality job seekers at all levels and
by providing personalized career advice to consumers globally.
Through online media sites and services, Monster Worldwide
delivers highly targeted audiences to advertisers. The Company
is a member of the S&P 500 Index.
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://corporate.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 practical 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 streamlining and reorganizing our business
operations on a global basis and controlling the growth of
operating expenses.
Monster focuses on the needs of its customers, both employers
and job seekers. We have created and introduced new products and
services to improve the seeker experience while also developing
deeper relationships with our employer customers. Through
innovative products and a newly rebuilt website, we offer
greater value to all job seekers who look to manage their
career, even those seekers who are not currently actively
engaged in a job search. The improvements we have made to 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 employers. For employers, we have
introduced tools and features that allow them to more
efficiently and effectively attract the most relevant candidates
for their job openings.
Our investments in our technology platform have allowed us to
deliver these innovative products and services on time and on a
global basis. We have consolidated several technology systems
and have created a platform that is more secure, scalable and
redundant. Additionally, 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 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. Through our recent new product introduction and the
multiple alliances we share with other companies that serve the
human resources community, we have increased the number of
products we now provide customers beyond the core job postings
and resume database offerings. We now offer our customers online
recruitment media solutions throughout our network, 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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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 post jobs and access the resume database without
sales force involvement. We have recently integrated our field
and telesales forces in the United States and aligned our sales
resources into seven regions so we can operate more efficiently
and provide a high touch, consultative service to customers. In
addition, this past year, we have expanded the number of sales
representatives in the United States to effectively extend our
geographic sales coverage and increase the penetration of
existing customers.
In order to support our new product launch and our expanded
sales resources, we have invested in our customer service
capabilities on a global basis. We are in the process of
in-sourcing, centralizing and standardizing our global call
center operations to create a customer focused, proactive value
added model.
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 growth strategy includes global geographic expansion. We
believe there is a large opportunity to extend our penetration
in existing markets in Europe, Asia and Latin 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 China. We
believe there exists a significant opportunity to further
develop the Greater China market over time. Additionally, in
November 2008 the Company acquired a 50% equity interest in a
company that provides online employment solutions in Australia.
We are also committed to entering adjacent markets. Our
acquisition in January 2008 of Affinity Labs Inc.
(Affinity Labs) provides an opportunity to provide
highly relevant content to our seekers through a portfolio of
professional and vocational communities. It will also provide
employers access to a large, hard-to-reach pool of
job candidates and allow us to expand our core product more
aggressively.
Our
Services
We operate in three business segments: Careers North
America, Careers International and Internet
Advertising & Fees. For the year ended
December 31, 2008, these operating segments represented
approximately 47%, 43% and 10% of our consolidated revenue,
respectively. During the second quarter of 2008, we discontinued
the operations of Tickle Inc., an online property within the
Internet Advertising & Fees segment, which no longer
fit the Companys long term growth plans. During the year
ended December 31, 2006, we disposed of our global
Advertising & Communications business to focus our
resources on building the Monster franchise and expanding the
content of our online businesses. See Note 16 to our
consolidated financial statements 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 50 countries around the world. With a
local presence in key markets in North America, Europe and Asia,
Monster works by connecting employers with quality job seekers
at all levels and by providing searchable jobs and career
management resources. 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, a
resume database, recruitment media solutions throughout our
network and other career related content. Job seekers can search
our job postings and
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post their resumes on each of our career websites. Monster also
offers premium career services at a fee to job seekers, such as
resume writing and priority resume listing. Employers and human
resources companies pay to post jobs, search our resume
database, and utilize career site hosting and other services.
Monster targets the enterprise market, or those businesses that
we consider to be among the 1,500 largest organizations
globally. Additionally, we also concentrate our efforts on
expanding our reach 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 that extend 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. Our
network of online properties appeals to advertisers and other
third parties as these sites cost-effectively deliver certain
discrete demographic groups in a relevant and engaging online
environment. 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.
Our sites are constantly evolving to integrate new and
innovative features, in order to provide the relevant content
that connects with our users.
Revenue for the Internet Advertising & Fees segment is
derived primarily from three types of services: lead generation,
display advertising and products sold to consumers for a fee.
Lead generation is a highly scalable direct response business in
which marketers pay for connections to consumers whose
demographics and interests match the requirements of specific
business offerings. Our large database of users and ongoing
collection of numerous points of data allows us to provide our
clients with targeted and valuable leads. 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 promotion of products and services as consumers
are actively looking for new ideas and solutions. Premium
content and services comprise the final source of revenue for
the Internet Advertising & Fees segment, as consumers
pay for access to information and tools that provide greater
support in the development of their educational and career
opportunities.
Our largest customer categories are employers, schools, and
consumer products and services. Employers use our media
solutions to attract job seekers to job postings and to help job
seekers better understand what it is like to work for a
particular employer. Schools find our advertising and lead
generation services to be effective tools in attracting students
to investigate enrollment in higher education programs.
Marketers of a variety of consumer products and services
categories, including automotive, telecommunications, apparel
and entertainment, have come to us to provide cost-effective and
highly targeted solutions to connect with specific consumer
segments.
Sales and
Marketing
The Companys sales resources consist of field sales,
telesales, and a self service eCommerce channel. Our sales
activities are geared toward 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 has recently been
regionalized to better serve our existing 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
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available to all customer groups and is most heavily used by
smaller employers today. 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. We have implemented a rigorous training program for
the new sales representatives who joined the expanded
U.S. sales force during the year.
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 to incorporate new capabilities
and technologies. We face competition from a number of sources.
These sources include other employment-related websites, general
classified advertising websites, professional networking and
social networking 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 such that new competitors continuously arise.
Low-cost and free classified advertising websites are gaining
increased acceptance with employers. Professional networking
websites have also made significant strides in attracting
employers who in the past had focused on traditional media and
large job boards. Additionally, over the past several years many
niche career websites have been launched targeted at specific
industry verticals.
Many of our competitors or potential competitors have long
operating histories, and some 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 our Internet sites. A degree of
uncertainty exists concerning the application and enforcement of
copyright and trade dress 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 and copyright 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
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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. In addition, there can be no
assurance that third parties will not bring claims of patent,
copyright or trademark infringement against us. 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 or
prevent us from using important technologies or methods, any of
which could significantly harm our business, financial condition
and operating results.
Employees
As of February 1, 2009, we employed approximately
6,950 people worldwide, an increase over the prior year
primarily resulting from the addition of approximately 1,450 new
employees through acquisitions in 2008. Generally, our employees
are not represented by a labor union or collective bargaining
agreements except that our employees located in France, Italy
and Spain are covered by collective bargaining agreements that
are generally prescribed by local labor law. We regard the
relationships with our employees as satisfactory.
Executive
Officers
As of February 1, 2009, our executive officers were as
follows:
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Name
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Position
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Salvatore Iannuzzi
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55
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Chairman of the Board, President and Chief Executive Officer
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Timothy T. Yates
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61
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Executive Vice President and Chief Financial Officer
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Darko Dejanovic
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Executive Vice President, Global Chief Information Officer and
Head of Product
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James M. Langrock
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Senior Vice President, Finance and Chief Accounting Officer
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Lise Poulos
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50
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Executive Vice President and Chief Administrative Officer
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Salvatore Iannuzzi has been Chairman of the Board,
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
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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
Chief Financial Officer of the Company since June 2007. 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.
Darko Dejanovic has been Executive Vice President, Global
Chief Information Officer and Head of Product since November
2007. Previously, he had served as Executive Vice President and
Global Chief Information Officer since July 2007, and as Senior
Vice President and Global Chief Information Officer since April
2007. Prior to joining the Company, Mr. Dejanovic served as
Senior Vice President and Chief Technology Officer for Tribune
Company, a publicly traded media company, from December 2004
until March 2007. During that same period,
Mr. Dejanovic also served as Vice President and Chief
Technology Officer of Tribune Publishing Company, a subsidiary
of the Tribune Company, a position he held since 2002. Before
joining the Tribune Company, Mr. Dejanovic had technology
leadership roles for the Education Management Group, a provider
of post-secondary education, and for the European Community
Monitor Mission, an international public policy organization.
James M. Langrock has been Senior Vice President, Finance
and Chief Accounting Officer since May 2008. Prior to
joining the Company, Mr. Langrock was Vice President,
Finance of Motorola, Inc.s Enterprise Mobility business
since January 2007. 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.
6
ITEM 1A. RISK
FACTORS
The
global financial crisis has had, and may continue to have, an
impact on our business and financial condition.
The ongoing global financial crisis affecting the banking system
and financial markets has led to a worldwide downturn in
economic activity that has negatively affected our business.
Many companies hire fewer employees when economic activity
slows. As a result, demand for our services has been reduced,
which has led to lower sales. If the current economic downturn
continues or worsens, 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 ongoing global financial crisis 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 global financial crisis and current economic
downturn continue or worsen, our business, results of operations
and financial condition could be materially and adversely
affected.
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 greater 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:
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reduce prices;
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incorporate new capabilities and technologies; and
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accelerate hiring timelines.
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Furthermore, we face competition from a number of sources. These
sources include:
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other employment-related websites, including large national and
international competitors as well as niche career websites
targeted at specific industry verticals;
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general classified advertising websites, some of which offer a
low-cost or free alternative to our offerings;
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professional networking and social networking websites;
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traditional media companies, including newspapers; and
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Internet portals, search engines and general-interest websites
such as blogs.
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Low-cost and free classified advertising websites are gaining
increased acceptance with employers. Professional networking
websites have also made significant strides in attracting
employers who in the past had focused on traditional media and
large job boards. Additionally, over the past several years many
niche career websites have been launched targeted at specific
industry verticals.
Many of our competitors or potential competitors have long
operating histories, and some 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 less 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 which 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:
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the timing and amount of existing clients subscription
renewals;
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entering new markets;
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enhancements to existing services;
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the hiring cycles of employers;
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changes in general economic conditions, such as recessions, that
could, among other things, affect recruiting efforts generally
and online recruiting efforts in particular;
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the magnitude and timing of marketing initiatives;
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the maintenance and development of our strategic relationships;
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our ability to manage our anticipated growth and expansion;
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our ability to attract and retain customers;
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technical difficulties or system downtime affecting the Internet
generally or the operation of our products and services
specifically;
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enhancements to technology to safeguard against security
breaches; and
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the timing and integration of our acquisitions.
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We face
risks relating to developing technology, including the
Internet.
The market for Internet 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 our continuous improvement in the
performance, features and reliability of our Internet 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 Internet technologies or standards could require
us to make substantial expenditures to modify or adapt our
websites and services. This could harm our business, financial
condition and operating results.
The online recruiting market continues to evolve. The adoption
of online recruiting and job seeking services, particularly
among those companies that have historically relied upon
traditional recruiting methods, requires the acceptance of a new
way of conducting business, exchanging information, advertising
and applying for jobs. Many of our potential customers,
particularly smaller companies, have not utilized the Internet
as a recruiting tool, and not all segments of the job-seeking
population use the Internet to look for jobs. Companies may not
continue to allocate portions of their budgets to Internet-based
recruiting and job seekers may not use online job seeking
methods. As a result, we may not be able to effectively compete
with traditional recruiting and job seeking methods. If
Internet-based recruiting does not remain widely accepted or if
we are not able to anticipate changes in the online recruiting
market, our business, financial condition and operating results
could be significantly harmed.
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:
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rapidly changing technology in online recruiting;
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evolving industry standards relating to online recruiting;
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developments and changes relating to the Internet;
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evolving government regulations;
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competing products and services that offer increased
functionality;
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changes in employer and job seeker requirements; and
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customer privacy protection concerning transactions conducted
over the Internet.
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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 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 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, each
of which could adversely affect our business. 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.
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 pretend to be Monster 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 them.
Moreover, negative publicity arising from any intrusion is
damaging to our reputation and may adversely impact traffic to
our sites.
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 capacity 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.
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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.
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.
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.
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 to expand product
offerings and acquire new technology, we frequently engage in
discussions 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 agreement with such
third parties, there could be a material adverse effect on our
business, growth rates and results of operations.
11
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:
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the difficulty of integrating the operations and personnel of
our acquired companies into our operations;
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the potential disruption of our ongoing business and distraction
of management;
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the difficulty of integrating acquired technology and rights
into our services and unanticipated expenses related to such
integration;
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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;
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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 companys
accounting, management information, human resources and other
administrative systems;
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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
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the impact of known potential liabilities or unknown liabilities
associated with the acquired companies.
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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 harm our business generally.
We have
had and may face future difficulties managing growth.
Our business has grown rapidly, 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 continues to grow
rapidly, 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 harmed.
If our
divested businesses fail to satisfy obligations relating to
their operations, we could face third-party claims seeking to
hold us liable for those obligations.
In 2003, we completed the spin-off of Hudson Highland Group,
Inc. to our stockholders. In June 2005, we sold our Directional
Marketing business, and during 2006 we disposed of our global
Advertising & Communications business in five separate
transactions. We remain contingently liable to third parties for
some obligations of these divested businesses, such as for real
estate leases assumed by the divested businesses, if the
divested businesses fail to meet their obligations. Our
financial condition and results of operations could be
significantly harmed if we receive third-party claims relating
to liabilities of our divested businesses.
We face
risks relating to our foreign operations.
We have a presence in approximately 50 countries around the
world. We earned 45%, 39% and 30% of our total revenue outside
of the United States in the years ended December 31, 2008,
2007 and 2006, 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.
12
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:
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general political uncertainty;
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difficulties in staffing and managing foreign operations;
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competition from local recruiting services;
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operational issues such as longer customer payment cycles and
greater difficulties in collecting accounts receivable;
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seasonal reductions in business activity;
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language and cultural differences;
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taxation issues;
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complex legal and regulatory requirements that may be uncertain
and may change; and
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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
U.S. 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.
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 50 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 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 our Chief Executive Officer, Chief
Financial Officer and Global Chief Information Officer and Head
of Product. The loss of any of these individuals could harm our
business. Our business is also dependent on our ability to
retain, hire and motivate 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
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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, 2008, our goodwill and amortizable
intangible assets were $946.9 million.
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:
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discourage potential acquisition proposals;
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delay or prevent a change in control; and
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limit the price that investors might be willing to pay in the
future for shares of our Common Stock.
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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. 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
14
growth potential and future financial performance. 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.
The market price of our Common Stock may react negatively to
further updates and announcements regarding the government
investigations and the litigation proceedings related to our
historical stock option grant practices.
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 and
various state legislative bodies 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 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.
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.
The
outcomes of the investigations and the litigation proceedings
relating to stock option matters could have a negative effect on
the price of our securities, liquidity and business.
On June 12, 2006, we announced that a committee of
independent directors of the Board of Directors (the
Special Committee) was conducting an independent
investigation to review the Companys historical stock
option grant practices and related accounting. The Special
Committee subsequently determined that the exercise price for a
substantial number of stock option grants during the periods
between 1997 through March 31, 2003 differed from the fair
market value of the underlying shares on the measurement date.
Accordingly, the Company announced that its previously filed
financial statements should no longer be relied upon; and the
Company filed an amended annual report on
Form 10-K/A
with restated financial statements. In connection with the
investigation conducted by the United States Attorneys
office for the Southern District of New York (USAO)
and the SEC, (a) the Companys former General Counsel
pleaded guilty to two felony counts and settled a civil action
brought against him by the SEC, (b) the Companys
former Chairman and Chief Executive Officer entered into a
deferred prosecution agreement with the USAO and settled an
action brought against him by the SEC (he is since deceased),
(c) a former senior executive of the Company and member of
the Companys Board of Directors was indicted for
securities fraud and conspiracy for which he is expected to
stand trial in the near future, and a civil action has been
commenced against him by the SEC, and (d) a civil action
has been commenced by the SEC against the Companys former
Controller. In addition, a putative class action on behalf of
participants in the Companys 401(k) Plan alleging
violations of the
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Employee Retirement Income Security Act of 1974
(ERISA) against certain current and former officers
is pending in the United States District Court for the Southern
District of New York. This lawsuit is described more fully in
Item 3. Legal Proceedings.
These investigations imposed, and the ongoing related litigation
may continue to impose, significant costs on us, both monetarily
and in requiring attention by our management team. While we are
unable to estimate the costs that we may incur in the future
with respect to any litigation or investigation, these are
likely to include:
|
|
|
|
|
professional fees in connection with the defense of any such
matter;
|
|
|
|
potential damages, fines, penalties or settlement costs; and
|
|
|
|
pursuant to our indemnification obligations, payments to, or on
behalf of, our current and former employees, officers and
directors for the costs and expenses incurred by them in
connection with the litigations which they are a party to (in
certain circumstances these indemnification payments are
recoverable if it is determined that the officer or director at
issue acted improperly, but there is no assurance that we will
be able to recover such payments). It is not clear the extent to
which we will be able to recover these expenditures from our
insurance carriers.
|
Furthermore, it is possible that additional issues may be raised
as a result of our historical stock option practices. Adverse
developments in any pending legal proceeding arising out of our
historical stock option granting practices or any other matter
raised could generate negative publicity for us and have an
adverse impact on our business and our stock price, including
increased stock volatility, and could also harm our ability to
raise additional capital or engage in transactions in the future.
Other
legal proceedings may significantly harm our business.
From time to time, we may become involved in other 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.
Our principal executive offices are located in New York, New
York, where we occupy approximately 26,000 square feet of
leased space. Our largest office space is located in Maynard,
Massachusetts, where we occupy approximately 264,000 square
feet of leased space. We also lease additional facilities in the
United States in Atlanta, Georgia; Bedford, Massachusetts;
Carmel, Indiana; 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; and Washington, D.C. 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, Canada, China, Czech Republic, England, France,
Germany, Hong Kong, Hungary, India, Ireland, Italy, Luxembourg,
Malaysia, Mexico, the Netherlands, Norway, Poland, Russia,
Scotland, Singapore, South Korea, Spain, Sweden, Switzerland and
Turkey. 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.
16
|
|
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 or results of operations.
Stock
Option Investigations and Related Litigation
In connection with the investigation conducted by the USAO and
the SEC, (a) the Companys former General Counsel
pleaded guilty to two felony counts and settled a civil action
brought against him by the SEC, (b) the Companys
former Chairman and Chief Executive Officer entered into a
deferred prosecution agreement with the USAO and settled an
action brought against him by the SEC (he is since deceased),
(c) a former senior executive of the Company and member of
the Companys Board of Directors was indicted for
securities fraud and conspiracy for which he is expected to
stand trial in the near future, and a civil action has been
commenced against him by the SEC, and (d) a civil action
has been commenced by the SEC against the Companys former
Controller.
The Company has settled both the shareholder class action and
the derivative actions filed in connection with its historical
stock option grant practices. In connection with the settlement
of (a) the derivative action, (i) the Company received
approximately $10.0 million in cash from various individual
defendants ($8.0 million of which was received from the
Companys former Chairman and Chief Executive Officer) and
(ii) the Companys former Chairman and Chief Executive
Officer converted 4,762,000 shares of Class B Common
Stock owned by him into an equal number of shares of Common
Stock, and (b) the shareholder class action, a payment of
approximately $47.5 million was made by the defendants in
full settlement of the claims asserted therein (the
Companys cost was approximately $25.0 million, net of
insurance and contribution from another defendant).
The Company is currently party to one civil action pending
against it in connection with its historical stock option grant
practices. That action, which also names certain current and
former officers and directors of the Company, was filed as a
putative class action litigation in the United States District
Court for the Southern District of New York in October 2006. The
complaint, as amended in February 2007, was purportedly brought
on behalf of all participants in the Companys 401(k) Plan
(the Plan). On December 14, 2007, the Court
granted the defendants motions to dismiss. On
February 15, 2008, plaintiff (joined by three new proposed
class representatives) filed a second amended complaint
(SAC) against the Company, three of the individuals
who had been defendants in the amended complaint and three new
defendants who are former employees of the Company. The SAC
alleges that the defendants breached their fiduciary obligations
to Plan participants under Sections 404, 405, 409 and 502
of ERISA by allowing Plan participants to purchase and to hold
and maintain Company stock in their Plan accounts without
disclosing to those Plan participants the historical stock
option practices. The SAC seeks, among other relief, equitable
restitution, attorneys fees and an order enjoining
defendants from violations of ERISA. On July 8, 2008, the
Court denied defendants motions to dismiss the SAC.
Discovery has commenced.
The Company may become subject to additional private or
government actions relating to its historical stock option grant
practices. The expense of defending such litigation may be
significant. In addition, an unfavorable outcome in such
litigation could have a material adverse effect on the
Companys business and results of operations. The Company
may also be obligated under the terms of its bylaws to advance
litigation costs for directors and officers named in litigation
relating to their roles at the Company.
Litigation
Relating to the Companys Discontinued Tickle
Business
In July 2006, a putative class action entitled Ed
Oshaben v. Tickle Inc., Emode.com, Inc. and Monster
Worldwide, Inc. (Case
No. CGC-06-454538)
was filed against the Company and its Tickle Inc. subsidiary in
California State Court. An amended complaint was subsequently
filed. The amended complaint alleges that Tickle engaged in
deceptive consumer practices and purports to be a class action
representing all users who purchased a test report from Tickle
and received unauthorized charges. The amended
complaint alleges
17
various violations of the California consumer and unfair
business practice statutes and seeks, among other things,
unspecified restitution for the class, disgorgement of revenues,
compensatory damages, punitive damages, attorneys fees and
equitable relief. On January 21, 2009, the parties executed
a definitive written Settlement Agreement, which is subject to
court approval and has been accrued for as of December 31,
2008.
In May 2008, Fotomedia Technologies, LLC filed suit against the
Companys Tickle business for allegedly infringing three
patents by operating photo sharing services on a website
operated by Tickle. The lawsuit entitled Fotomedia
Technologies, LLC v. Fujifilm U.S.A., Inc., et al. (Civil
Action
No. 2:08-cv-203)
is pending in the United States District Court for the Eastern
District of Texas and there are 23 other named defendants. The
plaintiff seeks a permanent injunction and monetary relief. The
Court has not yet entered a schedule in the case. The Company
took down the website accused of infringement for reasons
unrelated to the lawsuit and intends to vigorously defend this
matter.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
No matters were submitted to a vote of the Companys
security holders during the last quarter of its fiscal year
ended December 31, 2008.
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
The Common Stock of the Company is listed on the New York Stock
Exchange under the symbol MWW. The Company
transferred the listing of its Common Stock from the NASDAQ
Global Select Market to the New York Stock Exchange on
November 10, 2008. The Companys Common Stock was
first traded on the NASDAQ National Market on December 13,
1996, the day after the underwritten initial public offering of
shares of the Companys Common Stock. Prior to the offering
there was no established public trading market for the
Companys shares.
As of February 2, 2009, there were 2,239 stockholders of
record of our Common Stock, although we believe that there are a
significantly larger number of beneficial owners. As of
February 2, 2009, the last reported sale price of our
Common Stock as reported by the New York Stock Exchange was
$8.57.
We have never declared or paid any cash dividends on our stock.
We currently anticipate that all future earnings will be
retained by the Company to support our growth strategy.
Accordingly, we do not anticipate paying periodic cash dividends
on our stock for the foreseeable future. The payment of any
future dividends 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
current financing agreement entered into on December 21,
2007, restricts, in certain circumstances, the payment of
dividends on our stock.
The information regarding the high and low sales prices for our
Common Stock for each full quarterly period within the two most
recent fiscal years may be found in Financial
Information by Quarter (Unaudited) in Item 8 of
this
Form 10-K.
Issuer
Purchases of Equity Securities
As of December 31, 2008, the Company had a stock repurchase
plan in place that allowed it to purchase shares of its Common
Stock on the open market or otherwise from time to time as
conditions warranted. The
18
plan expired on January 30, 2009. A summary of the
Companys repurchase activity for the three months ended
December 31, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
as Part of
|
|
|
Value of Shares
|
|
|
|
|
|
|
|
|
|
Publicly
|
|
|
That May Yet be
|
|
|
|
|
|
|
Average
|
|
|
Announced
|
|
|
Purchased
|
|
|
|
Total Number of
|
|
|
Price Paid
|
|
|
Plans or
|
|
|
Under the Plans
|
|
Period
|
|
Shares Repurchased
|
|
|
per Share
|
|
|
Programs
|
|
|
or Programs
|
|
|
Nine months ended September 30, 2008
|
|
|
5,454,316
|
|
|
$
|
23.25
|
|
|
|
5,454,316
|
|
|
$
|
126,422,704
|
|
October 1 October 31
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
$
|
126,422,704
|
|
November 1 November 30
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
$
|
126,422,704
|
|
December 1 December 31
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
$
|
126,422,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fourth Quarter 2008
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
$
|
126,422,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
5,454,316
|
|
|
$
|
23.25
|
|
|
|
5,454,316
|
|
|
$
|
126,422,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares repurchased under plan
|
|
|
13,794,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Unregistered Securities
None.
Equity
Compensation Plan Information
The following table sets forth information as of
December 31, 2008 with respect to the Companys equity
compensation plans which have been approved by its stockholders.
The Company does not have any equity compensation plans that
were not approved by its stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
|
|
|
|
|
|
|
|
|
|
Under Equity
|
|
|
|
|
|
|
|
|
|
Compensation Plans
|
|
|
|
Number of Securities to
|
|
|
Weighted-Average
|
|
|
(Excluding Securities
|
|
|
|
be Issued Upon
|
|
|
Exercise Price of
|
|
|
to be Issued Upon
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Exercise of Outstanding
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
and Rights )
|
|
|
Equity compensation plans approved by security holders
|
|
|
6,290,443
|
|
|
$
|
30.58
|
|
|
|
3,677,360
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,290,443
|
|
|
$
|
30.58
|
|
|
|
3,677,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
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, 2003 to December 31, 2008, 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,
2003 and assumes that all dividends were reinvested. 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
20
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following tables present selected financial data for the
five years ended December 31, 2008. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations, found in
Item 7 of this report, for information regarding business
acquisitions, discontinued operations, critical accounting
policies and items affecting comparability of the amounts below.
STATEMENTS
OF OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share amounts)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenue
|
|
$
|
1,343,627
|
|
|
$
|
1,323,804
|
|
|
$
|
1,080,187
|
|
|
$
|
791,746
|
|
|
$
|
575,145
|
|
Salaries & related, office & general and
marketing & promotion
|
|
|
1,110,375
|
|
|
|
1,082,274
|
|
|
|
846,109
|
|
|
|
641,707
|
|
|
|
497,490
|
|
Provision for legal settlements, net
|
|
|
40,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other special charges
|
|
|
16,407
|
|
|
|
16,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
|
6,790
|
|
|
|
5,701
|
|
|
|
7,670
|
|
|
|
8,375
|
|
|
|
5,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,173,672
|
|
|
|
1,104,572
|
|
|
|
853,779
|
|
|
|
650,082
|
|
|
|
502,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
169,955
|
|
|
$
|
219,232
|
|
|
$
|
226,408
|
|
|
$
|
141,664
|
|
|
$
|
72,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
114,489
|
|
|
$
|
150,095
|
|
|
$
|
151,836
|
|
|
$
|
91,646
|
|
|
$
|
45,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
124,793
|
|
|
$
|
146,399
|
|
|
$
|
37,137
|
|
|
$
|
98,194
|
|
|
$
|
58,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.95
|
|
|
$
|
1.17
|
|
|
$
|
1.19
|
|
|
$
|
0.75
|
|
|
$
|
0.38
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
0.09
|
|
|
|
(0.03
|
)
|
|
|
(0.90
|
)
|
|
|
0.05
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.04
|
|
|
$
|
1.14
|
|
|
$
|
0.29
|
|
|
$
|
0.80
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.94
|
|
|
$
|
1.15
|
|
|
$
|
1.16
|
|
|
$
|
0.73
|
|
|
$
|
0.38
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
0.09
|
|
|
|
(0.03
|
)
|
|
|
(0.87
|
)
|
|
|
0.05
|
|
|
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.03
|
|
|
$
|
1.12
|
|
|
$
|
0.28
|
|
|
$
|
0.79
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Earnings per share may not add in certain periods due to
rounding. |
BALANCE
SHEET DATA(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Current assets
|
|
$
|
682,821
|
|
|
$
|
1,184,965
|
|
|
$
|
1,123,808
|
|
|
$
|
773,059
|
|
|
$
|
703,511
|
|
Current liabilities
|
|
|
723,708
|
|
|
|
828,660
|
|
|
|
826,244
|
|
|
|
705,945
|
|
|
|
740,101
|
|
Total assets
|
|
|
1,916,590
|
|
|
|
2,077,810
|
|
|
|
1,969,803
|
|
|
|
1,678,715
|
|
|
|
1,554,953
|
|
Long-term liabilities
|
|
|
145,609
|
|
|
|
132,649
|
|
|
|
33,874
|
|
|
|
39,430
|
|
|
|
35,237
|
|
Total stockholders equity
|
|
|
1,047,273
|
|
|
|
1,116,501
|
|
|
|
1,109,685
|
|
|
|
933,340
|
|
|
|
779,615
|
|
|
|
|
(a) |
|
Years 2004 through 2007 include assets and liabilities of
discontinued operations. |
21
|
|
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 and
Section 21E of the Exchange Act. Such forward-looking
statements involve certain risks and uncertainties, including
statements regarding the Companys 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 crisis; 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
identify future acquisition opportunities; our ability to manage
future growth; the ability of our divested businesses to satisfy
obligations related to their operations; risks related to our
foreign operations; our ability to expand our operations in
international markets; our ability to attract and retain
talented employees; 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; volatility in our stock price; risks associated
with government regulation; risks related to the investigations
and the litigation associated with our historical stock option
grant practices; the outcome of pending litigation; 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 Worldwide is the premier global online employment
solution, inspiring people to improve their lives, with a
presence in approximately 50 countries around the world. 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 employers, 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 help improve their
careers by providing work-related content, services and advice.
Our services and solutions include searchable job postings, a
resume database, recruitment media solutions throughout our
network and other career related content. Users can search our
job postings and post their resumes for free on each of our
career websites. Employers pay to post jobs, search the resume
database and access other career related services.
Our strategy has been to grow our business both organically and
through strategic acquisitions and alliances where the perceived
growth prospects fit our plan. Despite the worsening global
economy, we believe the long term growth opportunities overseas
are particularly large and believe that we are positioned to
benefit from our expanded reach and increased brand recognition
around the world. Our international revenue is now 45% of our
consolidated revenue for the year ended December 31, 2008
and increased 17.8% over the comparable 2007 period. We are
positioned to benefit from the continued secular shift towards
online recruiting. In addition, through a balanced mix of
investment, strategic acquisitions and disciplined operating
focus and execution, we believe we can take advantage of this
online migration to significantly grow our international
business over the next several years.
We also operate a network of websites that connect companies to
highly targeted audiences at critical stages in their life. Our
goal is to offer compelling online services for the users
through personalization, community features and enhanced
content. We believe that there are significant opportunities to
monetize this
22
web traffic through lead generation, display advertising and
other consumer related products. We believe that these
properties are appealing to advertisers and other third parties
as they deliver certain discrete demographics entirely online.
Financial
Summary
Monster Worldwide has three operating segments:
Careers North America, Careers
International and Internet Advertising & Fees. In
2008, we had essentially flat revenue growth of 1.5% over the
2007 period. This was the result of the Careers
International growth of 17.9% being offset by a decline in
Careers North America of 9.8%. Our income from
continuing operations and diluted earnings per share from
continuing operations decreased 23.7% and 18.3%, respectively,
as compared to the 2007 period due to (i) the provision for
legal settlements of $40.1 million, net of reimbursements,
(ii) increases in depreciation and amortization of
$14.1 million and (iii) increased stock-based
compensation as we are providing equity and incentive
compensation opportunities to a broader section of our
associates designed to reward increased productivity. These
costs were partially offset by $15.8 million of severance
recorded in 2007 related to the departure of three former
executive officers and reduced expenses from the security breach
that occurred in August 2007 of $9.0 million. Our cash and
available for sale securities balance decreased to
$314.0 million as of December 31, 2008, compared to
$578.4 million as of December 31, 2007, as a result of
$292.8 million in acquisitions, $128.2 million of
share repurchases, $29.9 million in payments related to
legal settlements, net of insurance reimbursements, and
$93.6 million in capital expenditures representing our
commitments to strengthen our infrastructure, invest in key
talent and fund projects intended to position us for long-term
growth. This decrease in our cash and available for sale
securities balance was partially offset by strong operating cash
flows, excluding the payments for legal settlements, of
$255.7 million, our net borrowings from short-term credit
facilities of $54.1 million and net sales of securities of
$355.4 million.
Careers North America delivered a 27.5% operating
margin on $638.1 million of revenue in 2008, as the weaker
U.S. economy impacted overall hiring demand as customers
became more deliberate with their recruiting decisions. Despite
the continued deterioration of the global economy, particularly
in the fourth quarter of 2008, we were encouraged by the
performance of our Careers International segment as
the business generated an increase in operating margin to 14.7%
in 2008 compared to 10.7% in 2007, despite increased investments
in sales and marketing. Our Internet Advertising &
Fees segment revenue grew slightly by 1.5% as compared to 2007.
During 2008, we decided to wind-down the operations of Tickle,
an online property within the Internet Advertising &
Fees segment, and have classified the results of Tickle as a
discontinued operation.
In July 2007, we announced a strategic restructuring plan
intended to position us for sustainable long-term growth in the
rapidly evolving global online recruitment and advertising
industry. The restructuring plan was originally designed to
reduce our workforce by approximately 800 associates. Subsequent
to the announcement of this plan, we made a strategic decision
to in-source customer service and therefore the current
reduction will be approximately 700 associates. Through
December 31, 2008, we have notified or terminated
approximately 500 associates and approximately 140 associates
have voluntarily left the Company. Cumulative expense for the
program since inception is $33.0 million. We anticipate
that these initiatives will reduce the growth rate of operating
expenses and provide funding for investments in new product
development and innovation, enhanced technology, global
advertising campaigns and selective sales force expansion. The
majority of the initiatives of the restructuring plan have been
completed as of December 31, 2008; however, we will
continue to incur charges in the first half of 2009 to complete
the plan.
Business
Combinations
For the period January 1, 2006 through December 31,
2008, we completed the following business combinations. Although
none of the following acquisitions was considered to be
significant, either individually
23
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
|
|
China HR.com Holdings Ltd.
|
|
October 8, 2008
|
|
Careers International
|
Trovix Inc.
|
|
July 31, 2008
|
|
Careers North America
|
Affinity Labs Inc.
|
|
January 3, 2008
|
|
Internet Advertising & Fees
|
Arbeidskamerater AS (Norway)
|
|
January 10, 2007
|
|
Careers International
|
PWP, LLC (Education.org)
|
|
May 2, 2006
|
|
Internet Advertising & Fees
|
Discontinued
Operations
During the second quarter of 2008, we decided to wind-down the
operations of Tickle, an online property within the Internet
Advertising & Fees segment, and have classified the
historical results of Tickle as a component of discontinued
operations. Our decision was based upon Tickles non-core
offerings, which no longer fit our long-term strategic growth
plans, and Tickles lack of profitability. Tickles
discontinued operations for the year ended December 31,
2008 included the write-down of $13.2 million of long-lived
assets, an income tax benefit of $29.8 million and a net
loss of $6.3 million from its operations, which included
the proposed settlement amount related to the Tickle class
action which is subject to court approval. The income tax
benefit included $26.0 million of current tax benefits for
current period operating losses and tax losses incurred upon
Tickles discontinuance and $3.8 million of deferred
tax benefits for the reversal of deferred tax liabilities on
long-term assets. We incurred losses net of tax related to
Tickle of $2.9 million for the year ended December 31,
2007 and a gain net of tax of $1.8 million for the year
ended December 31, 2006.
During the year ended December 31, 2006, we disposed of
businesses that primarily comprised the former
Advertising & Communications operating segment, in
order to focus more resources to support the growth of the
Monster franchise on a global basis. We incurred losses net of
tax related to these disposals of $0.8 million and
$116.5 million for the years ended December 31, 2007
and 2006, respectively.
The operations of our disposed businesses have been segregated
from continuing operations and reflected as discontinued
operations in each periods consolidated statement of
operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(Dollars in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenue
|
|
$
|
6,470
|
|
|
$
|
27,505
|
|
|
$
|
111,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(6,331
|
)
|
|
|
(6,027
|
)
|
|
|
7,972
|
|
Income tax (benefit) expense
|
|
|
(2,501
|
)
|
|
|
(2,331
|
)
|
|
|
3,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations, net of tax
|
|
|
(3,830
|
)
|
|
|
(3,696
|
)
|
|
|
4,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss on sale or disposal of discontinued operations
|
|
|
(13,201
|
)
|
|
|
|
|
|
|
(123,203
|
)
|
Income tax benefit
|
|
|
(27,335
|
)
|
|
|
|
|
|
|
(3,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale or disposal of business, net of tax
|
|
|
14,134
|
|
|
|
|
|
|
|
(119,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
10,304
|
|
|
$
|
(3,696
|
)
|
|
$
|
(114,699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes reported in discontinued
operations differs from the tax benefit computed at our federal
statutory income tax rate primarily as a result of the loss in
investment for the year ended December 31, 2008 and of
non-deductible goodwill and other expenses for the year ended
December 31, 2006.
24
Stock
Option Investigation
In the second quarter of 2008, we recorded a $40.1 million
provision for legal settlements, net for the settlement of the
class action and related lawsuits. We paid $29.9 million,
net of insurance reimbursement related to the settlement in
2008. This provision included $22.4 million in recoveries
from insurance and certain former officers. Additionally, in
2008, 2007 and 2006, we recorded $4.4 million (net of
reimbursements of $12.4 million primarily from former
associates), $19.1 million (net of reimbursements of
$4.5 million primarily from insurance carriers), and
$13.3 million, respectively, of professional fees as a
direct result of the investigation into our stock option grant
practices and related accounting. These costs and reimbursements
were recorded as a component of office and general
expenses and primarily relate to professional services for
legal, accounting and tax guidance relating to litigation, the
informal investigation by the SEC, the investigation by the USAO
and the preparation and review of our restated consolidated
financial statements. In addition, in the fourth quarter of
2006, we recorded a $5.0 million charge, as a component of
salaries and related expenses to compensate
optionees whose options expired during the period that our
equity compensation programs were suspended. In exchange for
payment, we received a release of any liability.
We expect to continue to incur professional fees related to our
historical stock option practices. While we cannot quantify or
estimate the timing of these costs throughout 2009 and into the
future, they primarily relate to legal fees paid on behalf of
former employees and former members of senior management, fees
paid in defense of the civil litigation and potential fines or
settlements.
RESULTS
OF OPERATIONS
Consolidated operating results as a percent of revenue for the
years ended December 31, 2008, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
STATEMENT OF OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
|
|
|
40.4
|
%
|
|
|
39.6
|
%
|
|
|
37.7
|
%
|
Office and general
|
|
|
21.0
|
%
|
|
|
20.3
|
%
|
|
|
18.1
|
%
|
Marketing and promotion
|
|
|
21.7
|
%
|
|
|
22.2
|
%
|
|
|
23.3
|
%
|
Provision for legal settlements, net
|
|
|
3.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Restructuring and other special charges
|
|
|
1.2
|
%
|
|
|
1.3
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
87.4
|
%
|
|
|
83.4
|
%
|
|
|
79.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
12.6
|
%
|
|
|
16.6
|
%
|
|
|
21.0
|
%
|
Interest and other, net
|
|
|
1.3
|
%
|
|
|
1.9
|
%
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and loss
in equity interests, net
|
|
|
13.9
|
%
|
|
|
18.5
|
%
|
|
|
22.7
|
%
|
Income taxes
|
|
|
4.8
|
%
|
|
|
6.5
|
%
|
|
|
8.0
|
%
|
Loss in equity interests, net
|
|
|
(0.6
|
)%
|
|
|
(0.6
|
)%
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
8.5
|
%
|
|
|
11.3
|
%
|
|
|
14.1
|
%
|
Income (loss) from discontinued operations, net of tax
|
|
|
0.8
|
%
|
|
|
(0.3
|
)%
|
|
|
(10.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
9.3
|
%
|
|
|
11.1
|
%
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following presentation of our segment results is prepared
based on the criteria we use when evaluating the performance of
our business units. For these purposes, management views certain
non-cash expenses, such as depreciation expense, amortization of
intangibles and amortization of stock-based compensation, as a
separate component of operating profit. We believe that this
presentation provides important indicators of our operating
strength and is useful to investors when evaluating our
operating performance.
25
The Year
Ended December 31, 2008 Compared to the Year Ended
December 31, 2007
Consolidated
Revenue, Operating Expenses and Operating Income
Consolidated revenue, operating expenses and operating income
for the years ended December 31, 2008 and 2007 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2008
|
|
|
% of Revenue
|
|
|
2007
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
1,343,627
|
|
|
|
100.0
|
%
|
|
$
|
1,323,804
|
|
|
|
100.0
|
%
|
|
$
|
19,823
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
|
|
|
543,268
|
|
|
|
40.4
|
%
|
|
|
524,652
|
|
|
|
39.6
|
%
|
|
|
18,616
|
|
|
|
3.5
|
%
|
Office and general
|
|
|
282,699
|
|
|
|
21.0
|
%
|
|
|
268,843
|
|
|
|
20.3
|
%
|
|
|
13,856
|
|
|
|
5.2
|
%
|
Marketing and promotion
|
|
|
291,198
|
|
|
|
21.7
|
%
|
|
|
294,480
|
|
|
|
22.2
|
%
|
|
|
(3,282
|
)
|
|
|
(1.1
|
)%
|
Provision for legal settlements, net
|
|
|
40,100
|
|
|
|
3.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
40,100
|
|
|
|
N/A
|
|
Restructuring and other special charges
|
|
|
16,407
|
|
|
|
1.2
|
%
|
|
|
16,597
|
|
|
|
1.3
|
%
|
|
|
(190
|
)
|
|
|
(1.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
1,173,672
|
|
|
|
87.4
|
%
|
|
$
|
1,104,572
|
|
|
|
83.4
|
%
|
|
$
|
69,100
|
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
169,955
|
|
|
|
12.6
|
%
|
|
$
|
219,232
|
|
|
|
16.6
|
%
|
|
$
|
(49,277
|
)
|
|
|
(22.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our consolidated revenue grew 1.5% in 2008 compared to 2007. The
effect of the weakening U.S. dollar in the earlier months
of 2008 contributed approximately $13.5 million to reported
revenue. Careers International experienced strong
revenue growth throughout continental Europe and in the Asia
Pacific region. Careers North America revenue
decreased 9.8%.
Salaries and related expense increased $18.6 million in
2008, compared to 2007, resulting primarily from increased
regular salary due to higher headcount in 2008. Partially
offsetting the increase in regular salary is a decrease in
variable compensation expenses of $7.3 million as a result
of lower sales than had been targeted. Stock-based compensation
was $28.7 million in 2008, compared to $15.4 million
for 2007 (excluding $12.8 million of accelerated
stock-based expense related to former key employees in 2007), as
we are providing equity and incentive compensation opportunities
to a broader number of our associates designed to reward
increased productivity. Overall headcount is up significantly to
approximately 6,950, as we added approximately 1,450 in 2008 due
to acquisitions. Excluding the impact of acquisitions, headcount
increased approximately 9% in 2008 from 2007, driven largely by
increased headcount in customer service, sales and technology
staffs which were partially offset by the reductions from the
restructuring plan.
Office and general expense increased $13.9 million in 2008
primarily resulting from a $14.1 million increase in
depreciation and amortization expense and an increase of
$11.4 million in occupancy costs associated with running
our new and existing facilities. These were partially offset by
a decrease in professional fees of $23.3 million, net of
reimbursements, primarily associated with a net decrease of
$14.7 million from the stock option investigation. Included
in professional fees and expenses were reimbursements from
former officers and employees of $12.4 million and
$4.5 million in 2008 and 2007, respectively.
Marketing and promotion expenses decreased $3.3 million,
resulting from a more focused online and offline media spending
program in 2008, primarily offset by incremental marketing
expenses associated with media placement and production costs
for the global brand re-launch in the first quarter of 2008. The
Company made a strategic decision to reinvigorate and promote
the Monster brand, on a global basis, and to launch our newly
redesigned seeker website and employer product in early 2009,
accompanied by additional advertising spending that we believe
will benefit future quarters and years.
Our consolidated operating margin was 12.6% in 2008, compared to
16.6% in 2007. Operating income decreased $49.3 million in
2008 compared to the same period in 2007, primarily from the
inclusion in 2008 of $40.1 million for the provision for
net legal settlements and the other operating cost increases
described above
26
as compared to 2007. The effect of the weakening
U.S. dollar in the earlier months of 2008 contributed
approximately $1.6 million to reported operating income.
Careers
North America
The operating results of our Careers North America
segment for the years ended December 31, 2008 and 2007 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2008
|
|
|
% of Revenue
|
|
|
2007
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
638,118
|
|
|
|
100.0
|
%
|
|
$
|
707,384
|
|
|
|
100.0
|
%
|
|
|
(69,266
|
)
|
|
|
(9.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
431,083
|
|
|
|
67.6
|
%
|
|
|
458,721
|
|
|
|
64.8
|
%
|
|
|
(27,638
|
)
|
|
|
(6.0
|
)%
|
Depreciation and amortization(b)
|
|
|
31,780
|
|
|
|
5.0
|
%
|
|
|
23,801
|
|
|
|
3.4
|
%
|
|
|
7,979
|
|
|
|
33.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
175,255
|
|
|
|
27.5
|
%
|
|
$
|
224,862
|
|
|
|
31.8
|
%
|
|
|
(49,607
|
)
|
|
|
(22.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes $224 and $4,842 of costs for security breach
remediation in 2008 and 2007, respectively; $38 and $5,335 for
restructuring and other special charges in 2008 and 2007,
respectively; and $3,695 and $1,330 for non-cash write-offs in
2008 and 2007, respectively. |
|
(b) |
|
Includes $7,239 and $4,395 of amortization of stock-based
compensation in 2008 and 2007, respectively; and restructuring
and other special charges in 2008 of $1,162 for non-cash stock
based compensation. |
Our Careers North America segment revenue decreased
9.8% in 2008 and now represents 47.5% of our consolidated
revenue, down from 53.4% of total revenue in 2007. The weaker
U.S. economy impacted overall hiring demand as customers
became more deliberate with their recruiting decisions. In
addition, our business was negatively impacted in the financial
services and housing sectors, reflecting the overall weakness in
these industries, as well as associated industries such as
construction and manufacturing. Partially offsetting this was
growth in our government, newspaper and Canadian businesses.
Our Careers North America segment operating costs
decreased 4.1% in 2008 compared to the 2007 period as a result
of a number of actions taken to prevent income and margin
decreases due to revenue declines in 2008. Salary and related
expenses decreased by $3.0 million resulting from
$9.6 million of decreased variable compensation expense due
to declining sales. These decreases were partially offset by
headcount additions in 2008 for the opening of our new customer
service center and sales force expansion, as well as an increase
of $2.8 million in stock-based compensation, (excluding
restructuring expense of $1.2 million in 2008), consistent
with a broader associate segment receiving equity and incentive
compensation opportunities. Technology infrastructure costs
increased by approximately $13.9 million, as we remained
committed to investing in our product, new technology and other
assets in order to sustain long-term profitability.
Restructuring expenses, including write-offs and non-cash stock
based compensation charges were $4.9 million and
$6.7 million for 2008 and 2007, respectively. Marketing and
promotion expenditures decreased $18.2 million in 2008
compared to 2007 as a result of a more focused online and
offline media spending program, partially offset by the brand
relaunch in 2008.
Our Careers North America segment generated an
operating margin of 27.5% in 2008, compared to 31.8% reported in
2007. Operating income in our Careers North America
segment decreased $49.6 million or 22.1% in 2008 compared
to 2007. The decrease was primarily the result of the decrease
in revenue, partially offset by the lower operating costs noted
above.
We continued to invest in our infrastructure and product
innovation throughout 2008 to improve the customer experience
and drive future incremental revenue growth. In early 2009, we
rolled out our newly redesigned seeker website and employer
product with expanded capabilities for employers and candidates.
We are also continuing our work to reduce the growth rate of our
operating expenses while increasing our spending in customer
facing initiatives and innovation. While we remain committed to
investing for long-term growth, we will closely monitor the
operating expense base in line with our revenue expectations.
27
Careers
International
The operating results of our Careers International
segment for the years ended December 31, 2008 and 2007 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
(Dollars in thousands)
|
|
2008
|
|
|
% of Revenue
|
|
|
2007
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
575,182
|
|
|
|
100.0
|
%
|
|
$
|
488,038
|
|
|
|
100.0
|
%
|
|
$
|
87,144
|
|
|
|
17.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
455,267
|
|
|
|
79.2
|
%
|
|
|
415,206
|
|
|
|
85.1
|
%
|
|
|
40,061
|
|
|
|
9.6
|
%
|
Depreciation and amortization(b)
|
|
|
35,188
|
|
|
|
6.1
|
%
|
|
|
20,719
|
|
|
|
4.2
|
%
|
|
|
14,469
|
|
|
|
69.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
84,727
|
|
|
|
14.7
|
%
|
|
$
|
52,113
|
|
|
|
10.7
|
%
|
|
$
|
32,614
|
|
|
|
62.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes costs for restructuring and special charges of $9,313
and $7,067 in 2008 and 2007, respectively and; $186 and $3,124
for security breach remediation in 2008 and 2007, respectively. |
|
(b) |
|
Includes $8,638 and $2,549 of amortization of stock based
compensation in 2008 and 2007, respectively. |
Our Careers International segment revenue grew
$87.1 million or 17.9% in 2008, of which $13.4 million
can be attributed to a weaker U.S. dollar during 2008 as
compared to 2007 and $8.9 million can be attributed to
acquisitions. The growth primarily occurred in the first nine
months of 2008 as revenue declined $20.5 million in the
fourth quarter of 2008 compared to the same period in 2007, due
to the effects of the deteriorating global economy. Our
Careers International revenue accounted for 42.8% of
consolidated revenue in 2008, compared to 36.9% in 2007. We
experienced strong revenue growth throughout continental Europe
benefiting from our leading position in large geographic markets
and the ongoing secular shift from print to online; however,
during the last half of 2008 we experienced a slowdown in
customer activity reflecting the uncertain economic environment.
We also continued to experience strong revenue growth in the
Asia Pacific region, although we have experienced some effects
of the global economic slowdown in the fourth quarter of 2008.
We acquired the remaining 55.6% of the equity in ChinaHR that we
did not already own in October 2008 and consolidated their
results starting in the fourth quarter of 2008. ChinaHR reported
$8.9 million in revenues subsequent to their acquisition
and an operating loss of $7.1 million, for the period of
October 9, 2008 through December 31, 2008. We are
being affected by the weakening global economy significantly
impacting hiring demand in almost all of the regions where we
operate. The effect of the weak U.S. dollar, during a
substantial portion of the year, contributed approximately
$13 million to revenue, or approximately 3% of the growth.
In the fourth quarter of 2008, the U.S. dollar strengthened
against most major currencies.
Our Careers International segment operating expenses
increased $54.5 million or 12.5% in 2008, compared to 2007,
primarily resulting from increased technology infrastructure
costs of $9.2 million as we remain committed to investing
in our product, new technology and operating platforms in order
to sustain long-term profitability. In addition, we incurred
higher salary and related expenses of $28.5 million,
primarily due to increased compensation, including variable
compensation expense related to sales, $5.9 million for the
inclusion of ChinaHR and a broader level of associates
participating in our equity compensation plan. We also incurred
higher expenses for depreciation and amortization of
$8.4 million, occupancy costs of $4.3 million, travel
expenses of $4.2 million and bad debt expense of
$3.1 million. The effect of the weakening U.S. dollar
contributed approximately $10 million to operating expense
in 2008 compared to 2007. Marketing and promotion costs were
essentially flat in 2008 when compared to 2007, as the costs of
the brand relaunch were offset by a more focused online and
offline media spending program.
Our Careers International segment generated an
operating margin of 14.7% in 2008, an increase from 10.7%
reported in 2007. Operating income in our Careers
International segment increased $32.6 million
or 62.6% in 2008 compared to 2007. The increase was primarily
the result of an increase in revenues of $87.1 million,
partially offset by higher expenses noted above and the effects
of the acquisition of ChinaHR in the fourth quarter of 2008. The
effect of the weaker U.S. dollar contributed approximately
$3 million to our reported operating income. Although
operating income for our Career-International segment increased
in 2008,
28
the segment experienced a decrease in operating income of
$11.8 million in the fourth quarter of 2008 compared to the
fourth quarter of 2007 on a weakening global economy and a
strengthening U.S. dollar.
We aggressively increased our investments overseas through a
refined mix of acquisitions, marketing, sales and product
enhancements. Marketing expenses decreased in 2008 approximately
0.7% over the 2007 period as expenses were reduced in the last
half of the year after the global brand re-launch in the first
quarter of 2008, which included approximately $13 million
of incremental marketing costs. We are committed to growing our
business overseas, while still mindful of profitability and the
cost structure. Our Careers International segment
headcount increased by approximately 1,300 associates in 2008,
primarily as a result of the acquisition of ChinaHR.
Internet
Advertising & Fees
During the second quarter of 2008, we decided to wind-down the
operations of Tickle, an online property within the Internet
Advertising & Fees segment, and have classified the
results of Tickle as a discontinued operation. The operating
results of our Internet Advertising & Fees segment for
the years ended December 31, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2008
|
|
|
% of Revenue
|
|
|
2007
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
130,327
|
|
|
|
100.0
|
%
|
|
$
|
128,382
|
|
|
|
100.0
|
%
|
|
$
|
1,945
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
108,309
|
|
|
|
83.1
|
%
|
|
|
105,040
|
|
|
|
81.8
|
%
|
|
|
3,269
|
|
|
|
3.1
|
%
|
Depreciation and amortization(b)
|
|
|
10,352
|
|
|
|
7.9
|
%
|
|
|
6,731
|
|
|
|
5.2
|
%
|
|
|
3,621
|
|
|
|
53.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
11,666
|
|
|
|
9.0
|
%
|
|
$
|
16,611
|
|
|
|
12.9
|
%
|
|
$
|
(4,945
|
)
|
|
|
(29.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes costs for restructuring and other special charges of
$1,400 and $2,115 for 2008 and 2007, respectively and; for
security breach remediation of $41 and $1,077 in 2008 and 2007,
respectively. |
|
(b) |
|
Includes $4,053 and $1,310 of amortization of stock based
compensation in 2008 and 2007, respectively. |
Revenue of our Internet Advertising & Fees segment was
essentially flat with an increase of 1.5% in 2008 compared to
2007. Growth in revenue from our Military.com website and our
acquisition of Affinity Labs was mostly offset by our strategic
decision in 2007 to remove interstitial advertisements and
student loan advertising, which negatively impacted comparable
results. We also experienced lower demand from financial
services customers. We acquired Affinity Labs in January 2008 as
part of our strategy to access the significant opportunities to
expand our presence in online vertical communities.
Operating costs at our Internet Advertising & Fees
segment increased $6.9 million, or 6.2% in 2008 compared to
2007. Marketing and promotion costs increased
$13.6 million, primarily from the acquisition of Affinity
Labs and additional online advertising expenses and
$0.7 million in incremental costs for the global brand
re-launch. Stock based compensation increased $2.7 million
due to a broader number of associates participating in our
equity compensation plan. These increases were partially offset
by decreases in expenses for technology infrastructure of
$4.1 million; other compensation expenses of
$4.2 million and professional fees of $1.7 million.
Restructuring expenses decreased $0.7 million in 2008
compared to 2007.
Our Internet Advertising & Fees segment generated an
operating margin of 9.0% in 2008, a decrease from 12.9% in 2007.
Our Internet Advertising & Fees segment posted
operating income of $11.7 million in 2008, a decline from
operating income of $16.7 million in 2007, as a result of
increased costs and flat revenues.
29
Income
Taxes
Income taxes for the years ended December 31, 2008 and 2007
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
(Dollars in thousands)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
Income from continuing operations before income taxes and loss
in equity interests
|
|
$
|
187,238
|
|
|
$
|
244,854
|
|
|
$
|
(57,616
|
)
|
|
|
(23.5
|
)%
|
Income taxes
|
|
$
|
64,910
|
|
|
$
|
86,461
|
|
|
$
|
(21,551
|
)
|
|
|
(24.9
|
)%
|
Effective tax rate
|
|
|
34.67
|
%
|
|
|
35.31
|
%
|
|
|
|
|
|
|
|
|
The largest factor affecting our effective tax rate continues to
be the geographical mix of income among an array of tax
jurisdictions with varying tax rates. The majority of our income
is taxed in the United States, which has an average tax rate of
approximately 40%, including the effect of state income taxes,
while the tax rates in the foreign jurisdictions vary from 18%
to 35%. Other items affecting the effective tax rate were
tax-exempt interest income, accrual of interest on accrued tax
liabilities and other non-deductible expense items.
Our future effective tax rates could be adversely affected by
earnings being lower than anticipated in countries where we have
lower statutory rates, changes in the valuation of our deferred
tax assets or liabilities, or changes in tax laws or
interpretations thereof. In addition, our filed tax returns are
subject to the examination by the Internal Revenue Service (the
IRS) 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. We paid approximately $29.1 million of
U.S. federal, state and foreign income tax during 2008 and
we expect to pay approximately $8 million in 2009 for the
remaining balance of the 2008 tax liabilities.
Discontinued
Operations, Net of Tax
During 2008, the Company discontinued its Tickle subsidiary and
recorded a write-down of $13.2 million of long-lived
assets, an income tax benefit of $29.8 million and a net
pre-tax loss of $6.3 million from its operations, which
includes the proposed settlement amount related to the Tickle
class action to discontinued operations. The 2007 loss on
discontinued operations of $3.7 million, net of tax was
primarily related to $2.9 million for the operations of
Tickle and $0.8 million related to the disposed businesses
that collectively comprised the former Advertising &
Communications operating segment.
Earnings
Per Share
Diluted earnings per share from continuing operations was $0.94
for the year ended December 31, 2008, lower by $0.21 or
18.3% when compared to $1.15 for the year ended
December 31, 2007. The decrease was primarily a result of
lower operating income, as a result of the inclusion of
$40.1 million in a provision for net legal settlements,
partially offset by a lower tax provision of $21.5 million
and lower diluted average shares outstanding. Diluted weighted
average shares outstanding decreased approximately
9.6 million shares, primarily as a result of the repurchase
of 8.3 million shares of Common Stock since October 2007
and a lower average share price. Our diluted loss per share from
discontinued operations increased to a gain of $0.09 in 2008,
compared to a loss of $0.03 in 2007, which was primarily related
to the 2008 wind-down of the Tickle operations.
30
The Year
Ended December 31, 2007 Compared to the Year Ended
December 31, 2006
Consolidated
Revenue, Operating Expenses and Operating Income
Consolidated revenue, operating expenses and operating income
for the years ended December 31, 2007 and 2006 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2007
|
|
|
% of Revenue
|
|
|
2006
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
1,323,804
|
|
|
|
100.0
|
%
|
|
$
|
1,080,187
|
|
|
|
100.0
|
%
|
|
$
|
243,617
|
|
|
|
22.6
|
%
|
Salaries and related
|
|
|
524,652
|
|
|
|
39.6
|
%
|
|
|
407,013
|
|
|
|
37.7
|
%
|
|
|
117,639
|
|
|
|
28.9
|
%
|
Office and general
|
|
|
268,843
|
|
|
|
20.3
|
%
|
|
|
195,155
|
|
|
|
18.1
|
%
|
|
|
73,688
|
|
|
|
37.8
|
%
|
Marketing and promotion
|
|
|
294,480
|
|
|
|
22.2
|
%
|
|
|
251,611
|
|
|
|
23.3
|
%
|
|
|
42,869
|
|
|
|
17.0
|
%
|
Restructuring and other special charges
|
|
|
16,597
|
|
|
|
1.3
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
16,597
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
1,104,572
|
|
|
|
83.4
|
%
|
|
$
|
853,779
|
|
|
|
79.0
|
%
|
|
$
|
250,793
|
|
|
|
29.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
219,232
|
|
|
|
16.6
|
%
|
|
$
|
226,408
|
|
|
|
21.0
|
%
|
|
$
|
(7,176
|
)
|
|
|
(3.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our revenue increased 22.6% in 2007 compared to 2006, primarily
from significant growth in our Careers International
segment of 59.3%, which included a 10.1% favorable effect from
changes in currency.
Our consolidated operating expenses grew 29.4% in 2007 compared
to 2006. In the second half of 2007, we incurred restructuring
and other special charges of $16.6 million related to the
strategic restructuring initiatives that we announced on
July 30, 2007. We increased our global headcount by
approximately 6% over the 2006 period, primarily for sales and
support in our Careers segments. As a result, we incurred higher
salary, benefits and commission costs. Included in salaries and
related is approximately $15.8 million of severance related
to the departure of three former executive officers in the
second quarter of 2007. Of that amount, approximately
$12.8 million is non-cash and relates to the accelerated
vesting of equity awards. Office and general expenses increased
37.8% as a direct result of investments in our infrastructure,
additional headcount and technology costs. Included within the
office and general expenses for 2007 is approximately
$19.1 million of professional fees related to the stock
option investigation and $9.0 million for the remediation
of the August 2007 security breach of our resume database. We
also increased marketing and promotion expenditures by
$42.9 million as a result of increasing promotional
activities particularly in the fourth quarter, in anticipation
of the brand re-launch in January 2008.
Careers
North America
The operating results of our Careers North America
segment for the years ended December 31, 2007 and 2006 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2007
|
|
|
% of Revenue
|
|
|
2006
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
707,384
|
|
|
|
100.0
|
%
|
|
$
|
658,051
|
|
|
|
100.0
|
%
|
|
$
|
49,333
|
|
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
458,721
|
|
|
|
64.8
|
%
|
|
|
410,964
|
|
|
|
62.5
|
%
|
|
|
47,757
|
|
|
|
11.6
|
%
|
Depreciation and amortization(b)
|
|
|
23,801
|
|
|
|
3.4
|
%
|
|
|
19,885
|
|
|
|
3.0
|
%
|
|
|
3,916
|
|
|
|
19.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
224,862
|
|
|
|
31.8
|
%
|
|
$
|
227,202
|
|
|
|
34.5
|
%
|
|
$
|
(2,340
|
)
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes $11,507 costs for restructuring and other special
charges and security breach remediation in 2007. |
|
(b) |
|
Includes $4,395 and $2,453 of amortization of stock based
compensation in 2007 and 2006, respectively. |
Our Careers North America segment grew revenue 7.5%
in 2007 representing 53.4% of our consolidated revenue, down
from 60.9% of total revenue in 2006. Sluggish economic trends
within the labor markets across the United States contributed to
moderating revenue growth throughout 2007. We also experienced
31
decreasing demand across our small-to-medium sized customer base
whose pace of hiring slowed as a result of the overall
macro-economic environment. Our global enterprise accounts
continued to perform well in 2007, reflecting the global nature
of our business and the breath of our product lines. We continue
to benefit from a secular shift from print to online
advertising, and we believe that we continue to maintain market
share within the recruitment advertising industry.
The Careers North America segment generated an
operating margin of 31.8% in 2007 down from 34.5% reported in
2006. Total operating expense grew 12.0% compared to revenue
growth of 7.5%. Total operating expenses included
$11.5 million related to the security breach and
restructuring plan. We have made substantial progress to slow
our expense growth rate through our restructuring efforts in the
third and fourth quarters. We reduced our workforce by
approximately 12% during 2007, primarily related to non-sales
force employees and we continue to monitor our revenue per
employee. The operating expense growth rate has slowed even as
we have continued to make investments in marketing, technology
and product innovation.
Careers
International
The operating results of our Careers International
segment for the years ended December 31, 2007 and 2006 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
(Dollars in thousands)
|
|
2007
|
|
|
% of Revenue
|
|
|
2006
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
488,038
|
|
|
|
100.0
|
%
|
|
$
|
306,280
|
|
|
|
100.0
|
%
|
|
$
|
181,758
|
|
|
|
59.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
415,206
|
|
|
|
85.1
|
%
|
|
|
273,243
|
|
|
|
89.2
|
%
|
|
|
141,963
|
|
|
|
52.0
|
%
|
Depreciation and amortization(b)
|
|
|
20,719
|
|
|
|
4.2
|
%
|
|
|
15,614
|
|
|
|
5.1
|
%
|
|
|
5,105
|
|
|
|
32.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
52,113
|
|
|
|
10.7
|
%
|
|
$
|
17,423
|
|
|
|
5.7
|
%
|
|
$
|
34,690
|
|
|
|
199.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes $10,191 costs for restructuring and other special
charges and security breach remediation in 2007. |
|
(b) |
|
Includes $2,549 and $1,048 of amortization of stock based
compensation in 2007 and 2006, respectively. |
Our Careers International segment demonstrated
significant revenue growth of 59.3% in 2007, mainly driven by
investments in key European and Asian countries, coupled with
increased production from a growing sales force and a 10.1%
favorable effect from foreign exchange rates. We continued to
see strong revenue gains in our top European countries,
particularly the United Kingdom, France, Germany and the
Netherlands, which contributed approximately 66.3% of total
Careers International revenue. Outside these four
countries, our smaller markets also posted solid revenue growth.
In Asia, we saw strong year-over-year increases in all countries
where we operate, and we believe that our strategy to capture
market share while aggressively investing in the business will
position Monster firmly in the region for significant future
revenue growth.
Our considerable investments in marketing and sales in the major
countries across Continental Europe and Asia led to an organic
revenue growth rate of 48.5% for 2007 as compared to 2006,
excluding the effects of currency exchange rates and the results
of businesses acquired within the last year.
We aggressively increased our investments overseas through a
refined mix of marketing, sales and product enhancements in
2007. Marketing expenses increased approximately 32% in 2007 as
compared to 2006 as we invested to increase our brand awareness,
drive job seeker traffic to our websites and expand our reach,
both to the job seeker and to the employer. Those investments,
combined with the addition of sales and support staff during the
first half of 2007, have helped us achieve a significant portion
of our overall revenue growth and gain market share in key
European and Asian countries. In 2007, the segment increased
total operating expenses by 50.9%, including a 9.5% impact from
foreign exchange rates, while expanding its operating margin to
10.7%. Although our headcount increased by approximately 400
associates in 2007, the overall expense growth rate slowed in
the second half of the year due to our restructuring initiatives.
32
Internet
Advertising & Fees
The operating results of our Internet Advertising &
Fees segment for the years ended December 31, 2007 and 2006
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
(Dollars in thousands)
|
|
2007
|
|
|
% of Revenue
|
|
|
2006
|
|
|
% of Revenue
|
|
|
$
|
|
|
%
|
|
|
Revenue
|
|
$
|
128,382
|
|
|
|
100.0
|
%
|
|
$
|
115,856
|
|
|
|
100.0
|
%
|
|
$
|
12,526
|
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(a)
|
|
|
105,040
|
|
|
|
81.8
|
%
|
|
|
70,468
|
|
|
|
60.8
|
%
|
|
|
34,572
|
|
|
|
49.1
|
%
|
Depreciation and amortization(b)
|
|
|
6,731
|
|
|
|
5.2
|
%
|
|
|
3,782
|
|
|
|
3.3
|
%
|
|
|
2,949
|
|
|
|
78.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
16,611
|
|
|
|
12.9
|
%
|
|
$
|
41,606
|
|
|
|
35.9
|
%
|
|
$
|
(24,995
|
)
|
|
|
(60.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes $3,192 costs for restructuring and other special
charges and security breach remediation in 2007. |
|
(b) |
|
Includes $1,310 and $509 of amortization of stock based
compensation in 2007 and 2006, respectively. |
Our Internet Advertising & Fees segment posted revenue
growth of 10.8% in 2007 when compared to 2006. The second half
of 2007 was particularly impacted by our decision to reduce the
placement of certain interstitial advertisements on the
Monster.com website and a reevaluation of our relationship with
certain clients engaged in student loan advertising. Although
the decision to reduce placements had the effect of reducing
revenue in the second half of 2007 and continued into 2008, we
believe it was the appropriate action to take to improve the
quality of the job seeker experience on the Monster.com site. We
continue to believe that online advertising represents a
significant growth opportunity for us, as our audience is
appealing to both brand and remnant advertisers. We posted an
operating margin of 12.9% for 2007, a sharp decline from the
35.9% operating margin reported in the same period in 2006 as
our expense base grew at a faster rate than our revenue. The
expenses increased in 2007 for almost all expense categories,
especially compensation and related expenses and marketing. We
invested in our business model by adding sales capacity,
increasing product and technology expenditures and initiating
infrastructure build-outs during the first half of the year.
Marketing expenses increased 53% over the 2006 period as we
invested in our websites and expanded their recognition among
users.
Income
Taxes
Income taxes for the years ended December 31, 2007 and 2006
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
(Dollars in thousands)
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
Income from continuing operations before income taxes and loss
in equity interests
|
|
$
|
244,854
|
|
|
$
|
245,451
|
|
|
$
|
(597
|
)
|
|
|
(0.2
|
)%
|
Income taxes
|
|
$
|
86,461
|
|
|
$
|
86,519
|
|
|
$
|
(58
|
)
|
|
|
(0.1
|
)%
|
Effective tax rate
|
|
|
35.31
|
%
|
|
|
35.25
|
%
|
|
|
|
|
|
|
|
|
During 2006, we absorbed the remainder of our U.S. federal
tax loss carry-forwards, with the exception of certain acquired
losses whose utilization is subject to an annual limitation. We
paid approximately $54.8 million of U.S. federal and
state income tax during 2007 and paid the remainder of our 2007
U.S. federal and state income tax liability of
$10.0 million in March 2008. We paid approximately
$14.8 million in foreign income taxes in 2007.
Earnings
Per Share
Diluted earnings per share from continuing operations was $1.15
for the year ended December 31, 2007, lower by $0.01 or
approximately 1% when compared to $1.16 for the year ended
December 31, 2006, primarily as a result of higher pre-tax
expenses including $16.6 million in restructuring and other
special charges, $15.8 million of one-time compensation
expenses related to former executive offices and
$9.0 million of expenses related to the third quarter
security breach, partially offset by higher operating results.
Our diluted loss per share from discontinued operations
decreased to a loss of $0.03 in 2007, compared to a loss of
$0.87
33
in 2006, which was primarily related to the 2006 disposition of
our Advertising & Communications business in North
America. Our average diluted shares outstanding decreased 0.4%
from the prior year period, mainly as a result of our stock
buyback transactions and lower dilutive effects from potential
Common Stock equivalents.
Financial
Condition
The following table details our cash and cash equivalents,
marketable securities and cash flow components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(Dollars in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash and cash equivalents
|
|
$
|
222,260
|
|
|
$
|
129,744
|
|
|
$
|
58,680
|
|
Marketable securities
|
|
|
91,772
|
|
|
|
448,703
|
|
|
|
537,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and marketable securities
|
|
$
|
314,032
|
|
|
$
|
578,447
|
|
|
$
|
596,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total assets
|
|
|
16.4
|
%
|
|
|
27.8
|
%
|
|
|
30.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities of continuing operations
|
|
$
|
232,683
|
|
|
$
|
276,629
|
|
|
$
|
243,891
|
|
Cash (used in) provided by investing activities of continuing
operations
|
|
$
|
(36,500
|
)
|
|
$
|
12,841
|
|
|
$
|
(448,862
|
)
|
Cash (used in) provided by financing activities of continuing
operations
|
|
$
|
(71,794
|
)
|
|
$
|
(217,268
|
)
|
|
$
|
43,327
|
|
Cash (used in) provided by discontinued operations
|
|
$
|
(6,849
|
)
|
|
$
|
(7,705
|
)
|
|
$
|
20,108
|
|
Effect of exchange rates on cash
|
|
$
|
(25,024
|
)
|
|
$
|
6,567
|
|
|
$
|
3,619
|
|
Liquidity
and Capital Resources
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, money market
funds and commercial paper that matures within three months of
its origination date and in marketable securities, which are
usually highly liquid and are of high-quality investment grade
with the intent to make such funds readily available for
operating and strategic long-term investment purposes. Due to
the current state of the financial markets, we have redeployed
our excess cash during 2008 in conservative investment vehicles
such as money market funds that invest solely in
U.S. treasuries, top foreign sovereign debt obligations,
bank deposits at prime money center banks and municipal bonds.
We are actively monitoring the third-party depository
institutions that hold our cash and cash equivalents. Our
emphasis is primarily on safety of principal while secondarily
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 U.S. may exceed the
Federal Deposit Insurance Corporation insurance limits. While we
monitor the cash balances in our operating accounts and adjusts
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 have available-for-sale marketable securities primarily
invested in tax-exempt auction rate bonds. As a result of
persistent failed auctions beginning in February 2008, and the
uncertainty of when these investments could be successfully
liquidated at par, we have classified all of these investments
in auction rate bonds as a component of available-for-sale
marketable securities, non-current.
We believe that our current cash and cash equivalents, revolving
credit facilities and cash we anticipate to generate 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
34
months. Our cash generated from operating activities is subject
to fluctuations in the global economy and unemployment rates.
In December 2007, the Company entered into a senior unsecured
revolving credit facility that provides for maximum borrowings
of $250.0 million. The credit facility expires
December 21, 2012 and is available for ongoing working
capital requirements and other corporate purposes. Under the
credit facility, loans bear interest, at the Companys
option, at either (i) the higher of (a) the Bank of
America prime rate or (b) the overnight federal funds rate
plus 1/2 of 1% or (ii) LIBOR plus a margin ranging from
30 basis points to 77.5 basis points depending on the
Companys ratio of consolidated funded debt to consolidated
earnings before interest, taxes, depreciation and amortization
(EBITDA) as defined in the revolving credit
agreement. The Company may repay outstanding borrowings at any
time during the term of the credit facility without any
prepayment penalty. The 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 and lend funds to affiliated companies, entering into new
lines of business and contains criteria on the maintenance of
certain financial statement amounts and ratios, all as defined
in the agreement. As of December 31, 2008, the Company was
in full compliance with its covenants.
At December 31, 2008, the utilized portion of this credit
facility was $50.0 million in borrowings and
$1.7 million for standby letters of credit and
$198.3 million was unused. At December 31, 2008, the
one month US Dollar LIBOR rate, overnight federal funds
rate, and Bank of America prime rate were 0.44%, 0.14% and
3.25%, respectively. As of December 31, 2008, the Company
used the one month US Dollar LIBOR rate for the interest
rate on these borrowings with a blended interest rate of 0.90%.
Subsequent to December 31, 2008, we borrowed an additional
$197.0 million under our senior unsecured revolving credit
facility. As a result, the Company now has $1.3 million
unutilized on the credit facility.
The Companys ChinaHR subsidiary has entered into an
unsecured uncommitted revolving credit facility, guaranteed by
the Company that provides for maximum borrowings of
$5.0 million. The ChinaHR credit facility has a maximum
tenure of one year and the lender can terminate the facility at
any time and demand immediate payment. The Company may repay
these loans and accrued interest 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, 2008, the
Company was in full compliance with its covenants. As of
December 31, 2008, the interest rate on these borrowings
was 7.83% and the utilized portion of this credit facility was
$5.0 million. Subsequent to December 31, 2008, the
Companys ChinaHR subsidiary entered into another unsecured
uncommitted revolving credit facility guaranteed by the Company
that provides maximum borrowings of $9.8 million, of which
$2.2 million has been utilized.
In the second quarter of 2008, we recorded a $40.1 million
provision for legal settlements, net for the settlement of the
class action and related lawsuits. We paid $29.9 million,
net of insurance reimbursement related to the settlement in
2008. This provision included $22.4 million in recoveries
from insurance and certain former officers. Additionally, in
2008, 2007 and 2006, we recorded $4.4 million (net of
reimbursements of $12.4 million primarily from former
associates), $19.1 million (net of reimbursements of
$4.5 million primarily from insurance carriers), and
$13.3 million, respectively, of professional fees as a
direct result of the investigation into our stock option grant
practices and related accounting. These costs and reimbursements
were recorded as a component of office and general
expenses and primarily relate to professional services for
legal, accounting and tax guidance relating to litigation, the
informal investigation by the SEC, the investigation by the USAO
and the preparation and review of our restated consolidated
financial statements. In addition, in the fourth quarter of
2006, we recorded a $5.0 million charge, as a component of
salaries and related expenses to compensate
optionees whose options expired during the period that our
equity compensation programs were suspended. In exchange for
payment, we received a release of any liability.
35
We expect to continue to incur professional fees related to our
historical stock option practices. While we cannot quantify or
estimate the timing of these costs throughout 2009 and into the
future, they primarily relate to legal fees paid on behalf of
current and former employees, fees paid in defense of
shareholder litigation and potential fines or settlements.
We paid approximately $29.1 million of U.S. federal,
state and foreign income tax during 2008 and expect to pay
approximately $8.0 million in 2009 for the remaining 2008
tax liabilities. In 2009, we expect to pay income tax on a
quarterly basis and continue to utilize tax losses in foreign
tax jurisdictions to reduce our cash tax liability. We have
absorbed all of our U.S. federal tax loss carry-forwards,
with the exception of approximately $32 million of certain
losses whose utilization is subject to an annual limitation.
In July 2007, we announced a strategic restructuring plan
intended to position us for sustainable long-term growth in the
rapidly evolving global online recruitment and advertising
industry. The restructuring plan was originally designed to
reduce our workforce by approximately 800 associates. Subsequent
to the announcement of this plan, we made a strategic decision
to in-source customer service and therefore the current
reduction will be approximately 700 associates. Through
December 31, 2008, we have notified or terminated
approximately 500 associates and approximately 140 associates
have voluntarily left the Company. Cumulative expense for the
program since inception is $33.0 million. We anticipate
that these initiatives will reduce the growth rate of operating
expenses and provide funding for investments in new product
development and innovation, enhanced technology, global
advertising campaigns and selective sales force expansion. The
majority of the initiatives of the restructuring plan have been
completed as of December 31, 2008; however, we will
continue to incur charges in the first half of 2009 to complete
the plan.
Cash
Flows
As of December 31, 2008, we had cash and cash equivalents
and marketable securities of $314.0 million, compared to
$578.4 million as of December 31, 2007. Our decrease
in cash and marketable securities of $264.4 million in the
twelve months ended December 31, 2008, primarily relates to
our acquisitions of ChinaHR, Affinity Labs and Trovix, the
repurchase of Common Stock and capital expenditures, offsetting
cash generated by our operating activities, net sales of
marketable securities and borrowings under the credit facility.
Cash provided by operating activities was $225.8 million
for the year ended December 31, 2008 and resulted from
$114.5 million of income from continuing operations and
$133.5 million of net non-cash adjustments. Cash flows from
working capital items decreased $54.6 million primarily
from changes in deferred revenue and accrued and other
liabilities, partially offset by an increase in accounts
receivable. Cash flows provided by operating activities
decreased $43.3 million in 2008 compared to 2007.
We used $36.5 million of cash for investing activities for
the year ended December 31, 2008. We acquired businesses
for $292.8 million, net of cash acquired, and had capital
expenditures of $93.6 million. These were partially offset
by our net sales of marketable securities of
$355.4 million. Cash used in investing activities increased
$49.1 million primarily from higher payments for
acquisitions and capital expenditures, net of sales of
marketable securities.
We used cash for financing activities in 2008 of
$71.8 million, including $126.9 million to repurchase
5,454,316 shares of Common Stock in open market
transactions and $1.3 million for other share repurchases.
These were partially offset by $54.1 million of cash from
net borrowings under short-term credit facilities borrowings.
Share
Repurchase Plan
On November 10, 2005, the Board approved a share repurchase
plan, authorizing us to purchase up to $100 million of
shares of our Common Stock. The November 2005 share
repurchase plan was utilized fully during 2007. On
September 4, 2007, the Board approved a share repurchase
plan, authorizing the Company to purchase up to an additional
$250 million of shares of its Common Stock. On
October 23, 2007, the Board authorized the Company to
purchase an additional $100 million of shares of its Common
Stock under the
36
share repurchase program. On January 30, 2008, the Board
authorized the Company to purchase an additional
$100 million of shares of its Common Stock under the share
repurchase plan. As of December 31, 2007, we have purchased
13,794,012 shares under these authorizations for
$423.6 million. All current repurchase plan authorizations
expired on January 30, 2009.
Contractual
Obligations
Our principal capital requirements have been to fund
(i) working capital, (ii) marketing our Monster brand,
(iii) acquisitions and (iv) capital expenditures. The
commitments as of December 31, 2008 related to our
continuing operations are as follows:
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|
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|
Payment Due by Period
|
|
|
|
|
|
|
Less Than
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|
|
|
|
|
|
More Than
|
|
Contractual Obligations (Dollars in thousands)
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Operating leases
|
|
$
|
209,002
|
|
|
$
|
40,922
|
|
|
$
|
56,245
|
|
|
$
|
41,680
|
|
|
$
|
70,155
|
|
Purchase commitments advertising contracts
|
|
|
16,700
|
|
|
|
6,100
|
|
|
|
10,600
|
|
|
|
|
|
|
|
|
|
Payables related to disposed businesses(a)
|
|
|
9,299
|
|
|
|
3,822
|
|
|
|
3,539
|
|
|
|
1,292
|
|
|
|
646
|
|
Capital leases
|
|
|
28
|
|
|
|
18
|
|
|
|
10
|
|
|
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|
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|
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|
|
|
|
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|
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|
Total
|
|
$
|
235,029
|
|
|
$
|
50,862
|
|
|
$
|
70,394
|
|
|
$
|
42,972
|
|
|
$
|
70,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(a) |
|
Primarily related to operating lease obligations and contractual
closing costs. |
In addition to the cash commitments above, we also have
$120.0 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 13 to
the consolidated financial statements for further discussion of
information related to long-term income taxes payable.
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.
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
SEC Staff Accounting Bulletin No. 104, Revenue
Recognition and Financial Accounting Standards Boards
(FASB) Emerging Issues Task Force (EITF)
issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables.
37
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 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 is
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 fair value 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.
Asset
Impairment
Business Combinations, Goodwill and Intangible
Assets. The Company accounts for business
combinations in accordance with FASB Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations (SFAS 141).
The purchase 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 costs to acquire a business, including transaction,
integration and restructuring costs, are allocated to the fair
value of net assets acquired upon acquisition. Any excess of the
purchase price over the estimated fair values of the net
tangible and intangible assets acquired is recorded as goodwill.
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.
We evaluate our goodwill annually for impairment or more
frequently if indicators of potential impairment exist. 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.
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
38
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.
Stock-Based
Compensation
We account for stock-based compensation in accordance with
SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS 123R). Under the fair value
recognition provisions of SFAS 123R, 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. We use the
Black-Scholes option-pricing model to determine the fair-value
of stock option awards. We 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 and market-based and performance-based non-vested stock to
employees, directors and executive officers.
Income
Taxes
We utilize the liability method of accounting for income taxes
as set forth in SFAS No. 109, Accounting for 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.
If, in the future we determine that we would not be able to
realize our recorded deferred tax assets, an increase in the
valuation allowance would decrease 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 it is more likely
than not that a tax benefit will be sustained, we have recorded
the largest amount of tax benefit with a greater than 50%
likelihood of being realized upon ultimate settlement with a
taxing authority that has full knowledge of all relevant
information. For those income tax positions where it is not more
likely than not that a tax benefit will be sustained, no tax
benefit has been recognized in the financial statements.
Prior to 2007 the Company determined its tax contingencies in
accordance with SFAS No. 5, Accounting for
Contingencies. The Company recorded estimated tax liabilities to
the extent the contingencies were probable and could be
reasonably estimated.
Equity
Method Investments
Losses in equity interest for the year ended December 31,
2008, are from our equity method investments in Finland,
Australia and ChinaHR and are based on unaudited financial
information. Although we do not anticipate material differences,
audited results may differ. ChinaHRs results are included
in loss in equity interests until we acquired the remaining
equity interest on October 8, 2008, at which time we began
consolidating ChinaHRs results.
Restructuring
and Other Special Charges
We have recorded significant charges and accruals in connection
with our 2007 restructuring initiatives and prior business
reorganization plans. These accruals include estimates
pertaining to future lease obligations, employee separation
costs and the settlements of contractual obligations resulting
from our actions. Although we do not anticipate significant
changes, the actual costs may differ from these estimates.
39
Recent
Accounting Pronouncements
In April 2008, the FASB issued Staff Position (FSP)
No. 142-3
(FSP 142-3),
Determination of the Useful Life of Intangible
Assets.
FSP 142-3
amends the factors an entity should consider in developing
renewal or extension assumptions used in determining the useful
life of recognized intangible assets under FASB Statement
No. 142, Goodwill and Other Intangible Assets.
This new guidance applies prospectively to intangible assets
that are acquired individually or with a group of other assets
in business combinations and asset acquisitions.
FSP 142-3
is effective for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008.
Early adoption is prohibited. Since this guidance will be
applied prospectively, on adoption, there will be no impact to
our current consolidated financial statements.
In June 2008, the FASB issued FSP
EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities. FSP
EITF 03-6-1
clarifies that share-based payment awards that entitle their
holders to receive nonforfeitable dividends or dividend
equivalents before vesting should be considered participating
securities. We have grants of non-vested stock that contain
non-forfeitable rights to dividends and will be considered
participating securities upon adoption of FSP
EITF 03-6-1.
As participating securities, we will be required to include
these instruments in the calculation of earnings per share
(EPS), and will need to calculate EPS using the
two-class method. The two-class method of computing
EPS is an earnings allocation formula that determines EPS for
each class of Common Stock and participating security according
to dividends declared (or accumulated) and participation rights
in undistributed earnings. FSP
EITF 03-6-1
is effective for fiscal years beginning after December 15,
2008 on a retrospective basis and will be adopted by us in the
first quarter of fiscal 2009. We are currently evaluating the
potential impact, if any, the adoption of FSP
EITF 03-6-1
could have on its calculation of EPS. As of December 31,
2008, we have never declared a cash dividend.
Effective January 1, 2008, the Company adopted
SFAS No. 157, Fair Value Measurements
(SFAS 157) for financial assets and
liabilities and any other assets and liabilities carried at fair
value. This pronouncement defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. On November 14, 2007, the FASB
agreed to a one-year deferral for the implementation of
SFAS 157 for other non-financial assets and liabilities.
The Companys adoption of SFAS 157 did not have a
material effect on the Companys consolidated financial
statements for financial assets and liabilities and any other
assets and liabilities carried at fair value.
In October 2008, the FASB issued
FSP 157-3
(FSP 157-3),
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active.
FSP 157-3
clarifies the application of SFAS 157 in a market that is
not active and addresses application issues such as the use of
internal assumptions when relevant observable data does not
exist, the use of observable market information when the market
is not active and the use of market quotes when assessing the
relevance of observable and unobservable data.
FSP 157-3
is effective for all periods presented in accordance with
SFAS No. 157. The guidance in
FSP 157-3
is effective immediately and did not have an impact on the
Company upon adoption. See Note 6 for information and
related disclosures regarding the Companys fair value
measurements.
On December 4, 2007, the FASB issued SFAS 141(R),
Business Combinations (SFAS 141R).
SFAS 141R replaces SFAS 141, Business Combinations
and applies to all transactions or other events in which an
entity obtains control of one or more businesses. SFAS 141R
requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired
and liabilities assumed; and requires the acquirer to disclose
additional information needed to evaluate and understand the
nature and financial effect of the business combination.
SFAS 141R is effective prospectively for fiscal years
beginning after December 15, 2008 and may not be applied
before that date. The Company is currently evaluating the
impact, if any, that the adoption of SFAS 141R will have on
its consolidated results of operations and financial condition.
On December 4, 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS 160). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the
noncontrolling interest (or minority interests) in a subsidiary
and for the deconsolidation of a subsidiary by
40
requiring all noncontrolling interests in subsidiaries be
reported in the same way, as equity in the consolidated
financial statements and eliminates the diversity in accounting
for transactions between an entity and noncontrolling interests
by requiring they be treated as equity transactions.
SFAS 160 is effective prospectively for fiscal years
beginning after December 15, 2008 and may not be applied
before that date. The Company is currently evaluating the
impact, if any, that the adoption of SFAS 160 will have on
its consolidated results of operations and financial condition.
On March 19, 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities, an amendment of SFAS No. 133
(SFAS 161). SFAS 161 requires enhanced
disclosures about an entitys derivative and hedging
activities and is effective for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently
evaluating the additional disclosures required by SFAS 161.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Foreign
Exchange Risk
During 2008, revenue from our international operations accounted
for 45% of our consolidated revenue. Revenue and related
expenses generated from our international websites are generally
denominated in the functional currencies of the local countries.
Our primary foreign currencies are Euros and British Pounds. 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 U.S. dollar in the earlier months of 2008
contributed approximately $13.5 million to reported revenue
and approximately $1.6 million to reported operating income
during 2008.
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, 2008 of $209 million, an assumed 5%, 10%
and 20% negative currency movement would result in fair value
declines of $10 million, $21 million and
$42 million, respectively.
We use 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, 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-U.S. subsidiaries
are translated into U.S. 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, 2008, our cumulative translation adjustment
account decreased $91.0 million, primarily attributable to
the strengthening of the U.S. dollar against the Swedish
Krona, Korean Won and the British Pound.
Interest
Rate Risk
Credit
Facilities
As of December 31, 2008, our short-term and long-term debt
was comprised primarily of borrowings under our senior unsecured
revolving credit facility and borrowings of our ChinaHR
subsidiary under an unsecured uncommitted revolving credit
facility 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 Bank of America prime rate or the
Peoples Bank of China rate. Assuming the amount of
borrowings available under our credit facilities were fully
drawn during 2008, we would have had $255 million
outstanding under such facilities, and a hypothetical 1.00% (100
basis-point) change in the interest rates of our credit
facilities would have changed our pre-tax earnings by
approximately $2.6 million for the fiscal year ended
December 31, 2008. Assuming the amount of borrowings under
our credit facility was equal to the
41
amount of outstanding borrowings on December 31, 2008, we
would have had $56.7 million of total usage and a
hypothetical 1.00% (100 basis-point) change in the interest
rates of our credit facilities would have changed our pre-tax
earnings by approximately $0.6 million for the fiscal year
ended December 31, 2008. 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, primarily bank deposits, auction-rate
bonds, sovereign commercial paper and money market funds. A
hypothetical 1.00% (100 basis-point) change in interest rates
would have changed our annual pretax earnings by approximately
$3.0 million for the fiscal year ended December 31,
2008.
Other
Market Risks
Investments
in Auction-Rate Bonds
As of December 31, 2008, the Company held
$92.0 million (at par and cost value) of investments in
auction rate securities. Given current conditions in the
auction-rate bond market as described in Note 7,
Investments, of the Notes to Condensed Consolidated Financial
Statements in this Annual Report on
Form 10-K,
the auction rate bonds with the original par value and cost of
$92.0 million were written down to an estimated fair value
of $90.4 million, resulting in an unrealized loss of
$1.6 million. This loss is deemed to be a temporary
impairment and has been reflected in accumulated other
comprehensive income, a component of stockholders equity.
We may incur additional temporary unrealized losses or
other-than-temporary realized losses in the future if market
conditions persist and we are unable to recover the cost of our
auction rate bond investments. A hypothetical 100-basis-point
loss from the par value of these investments would have resulted
in a $0.9 million impairment as of December 31, 2008.
42
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The following are the consolidated financial statements and
exhibits of Monster Worldwide, Inc. and its consolidated
subsidiaries, which are filed as part of this report.
MONSTER
WORLDWIDE, INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
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43
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, 2008 and 2007 and the related consolidated
statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended
December 31, 2008. 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, 2008
and 2007, and the results of its operations and its cash flows
for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles
generally accepted in the United States.
As discussed in Note 13 to the consolidated financial
statements, effective January 1, 2007 the Company adopted
FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an Interpretation of FASB
No. 109.
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, 2008, 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 February 10, 2009 expressed an unqualified opinion
thereon.
/s/ BDO SEIDMAN, LLP
New York, New York
February 10, 2009
44
MONSTER
WORLDWIDE, INC.
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
222,260
|
|
|
$
|
129,744
|
|
Available-for-sale
securities
|
|
|
1,425
|
|
|
|
448,703
|
|
Accounts receivable, net of allowance for doubtful accounts of
$14,064 and $15,613 in 2008 and 2007, respectively
|
|
|
376,720
|
|
|
|
499,854
|
|
Prepaid and other
|
|
|
82,416
|
|
|
|
106,664
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
682,821
|
|
|
|
1,184,965
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities, non-current
|
|
|
90,347
|
|
|
|
|
|
Goodwill
|
|
|
894,546
|
|
|
|
615,334
|
|
Property and equipment, net
|
|
|
161,282
|
|
|
|
123,397
|
|
Intangibles, net
|
|
|
52,335
|
|
|
|
35,351
|
|
Investment in unconsolidated affiliates
|
|
|
1,843
|
|
|
|
50,871
|
|
Other assets
|
|
|
33,416
|
|
|
|
53,162
|
|
Non-current assets of discontinued operations
|
|
|
|
|
|
|
14,730
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,916,590
|
|
|
$
|
2,077,810
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
41,524
|
|
|
$
|
57,334
|
|
Accrued expenses and other current liabilities
|
|
|
205,005
|
|
|
|
233,611
|
|
Deferred revenue
|
|
|
414,312
|
|
|
|
524,331
|
|
Borrowings under credit facilities
|
|
|
54,971
|
|
|
|
|
|
Income taxes payable
|
|
|
7,896
|
|
|
|
13,384
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
723,708
|
|
|
|
828,660
|
|
|
|
|
|
|
|
|
|
|
Long-term income taxes payable
|
|
|
119,951
|
|
|
|
111,108
|
|
Deferred income taxes
|
|
|
24,658
|
|
|
|
14,878
|
|
Other long-term liabilities
|
|
|
1,000
|
|
|
|
2,387
|
|
Non-current liabilities of discontinued operations
|
|
|
|
|
|
|
4,276
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
869,317
|
|
|
|
961,309
|
|
|
|
|
|
|
|
|
|
|
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: 133,335 and 128,280 shares,
respectively; outstanding: 118,614 and 119,013 shares,
respectively
|
|
|
133
|
|
|
|
128
|
|
Class B common stock, $.001 par value, authorized
39,000 shares; issued and outstanding: 0 and
4,762 shares, respectively
|
|
|
|
|
|
|
5
|
|
Additional paid-in capital
|
|
|
1,367,373
|
|
|
|
1,468,808
|
|
Accumulated other comprehensive income, net
|
|
|
25,801
|
|
|
|
118,387
|
|
Accumulated deficit
|
|
|
(346,034
|
)
|
|
|
(470,827
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,047,273
|
|
|
|
1,116,501
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,916,590
|
|
|
$
|
2,077,810
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
45
MONSTER
WORLDWIDE, INC.
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenue
|
|
$
|
1,343,627
|
|
|
$
|
1,323,804
|
|
|
$
|
1,080,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
|
|
|
543,268
|
|
|
|
524,652
|
|
|
|
407,013
|
|
Office and general
|
|
|
282,699
|
|
|
|
268,843
|
|
|
|
195,155
|
|
Marketing and promotion
|
|
|
291,198
|
|
|
|
294,480
|
|
|
|
251,611
|
|
Provision for legal settlements, net
|
|
|
40,100
|
|
|
|
|
|
|
|
|
|
Restructuring and other special charges
|
|
|
16,407
|
|
|
|
16,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,173,672
|
|
|
|
1,104,572
|
|
|
|
853,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
169,955
|
|
|
|
219,232
|
|
|
|
226,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
14,315
|
|
|
|
25,833
|
|
|
|
17,107
|
|
Other income (expense), net
|
|
|
2,968
|
|
|
|
(211
|
)
|
|
|
1,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other, net
|
|
|
17,283
|
|
|
|
25,622
|
|
|
|
19,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and loss
in equity interests
|
|
|
187,238
|
|
|
|
244,854
|
|
|
|
245,451
|
|
Income taxes
|
|
|
64,910
|
|
|
|
86,461
|
|
|
|
86,519
|
|
Loss in equity interests, net
|
|
|
(7,839
|
)
|
|
|
(8,298
|
)
|
|
|
(7,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
114,489
|
|
|
|
150,095
|
|
|
|
151,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
10,304
|
|
|
|
(3,696
|
)
|
|
|
(114,699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
124,793
|
|
|
$
|
146,399
|
|
|
$
|
37,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.95
|
|
|
$
|
1.17
|
|
|
$
|
1.19
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
0.09
|
|
|
|
(0.03
|
)
|
|
|
(0.90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.04
|
|
|
$
|
1.14
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:*
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.94
|
|
|
$
|
1.15
|
|
|
$
|
1.16
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
0.09
|
|
|
|
(0.03
|
)
|
|
|
(0.87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.03
|
|
|
$
|
1.12
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Earnings per share may not add in certain periods
due to rounding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
120,557
|
|
|
|
128,785
|
|
|
|
128,077
|
|
Diluted
|
|
|
121,167
|
|
|
|
130,755
|
|
|
|
131,247
|
|
See accompanying notes.
46
MONSTER
WORLDWIDE, INC.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Stock and
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares of
|
|
|
Class B
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Balance, January 1, 2006
|
|
|
121,830
|
|
|
|
4,762
|
|
|
$
|
1,549,063
|
|
|
$
|
(651,238
|
)
|
|
$
|
35,515
|
|
|
$
|
933,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,137
|
|
|
|
|
|
|
|
37,137
|
|
Net unrealized gain on forward foreign exchange contracts and
other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
82
|
|
Change in cumulative foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,035
|
|
|
|
52,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
89,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with business combinations
|
|
|
20
|
|
|
|
|
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
|
1,164
|
|
Issuance of common stock for stock option exercises, 401(k)
match and other
|
|
|
3,776
|
|
|
|
|
|
|
|
94,628
|
|
|
|
|
|
|
|
|
|
|
|
94,628
|
|
Tax benefit of stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
17,972
|
|
|
|
|
|
|
|
|
|
|
|
17,972
|
|
Repurchase of common stock
|
|
|
(7
|
)
|
|
|
|
|
|
|
(37,492
|
)
|
|
|
|
|
|
|
|
|
|
|
(37,492
|
)
|
Stock based compensation restricted stock
|
|
|
105
|
|
|
|
|
|
|
|
10,819
|
|
|
|
|
|
|
|
|
|
|
|
10,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
125,724
|
|
|
|
4,762
|
|
|
|
1,636,154
|
|
|
|
(614,101
|
)
|
|
|
87,632
|
|
|
|
1,109,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,399
|
|
|
|
|
|
|
|
146,399
|
|
Net unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149
|
|
|
|
149
|
|
Change in cumulative foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,606
|
|
|
|
30,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
177,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,125
|
)
|
|
|
|
|
|
|
(3,125
|
)
|
Repurchase of common stock
|
|
|
(251
|
)
|
|
|
|
|
|
|
(262,495
|
)
|
|
|
|
|
|
|
|
|
|
|
(262,495
|
)
|
Issuance of common stock for stock option exercises
|
|
|
2,136
|
|
|
|
|
|
|
|
54,890
|
|
|
|
|
|
|
|
|
|
|
|
54,890
|
|
Tax benefit of stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
11,744
|
|
|
|
|
|
|
|
|
|
|
|
11,744
|
|
Stock based compensation restricted stock
|
|
|
661
|
|
|
|
|
|
|
|
27,739
|
|
|
|
|
|
|
|
|
|
|
|
27,739
|
|
Stock based compensation stock options
|
|
|
|
|
|
|
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
442
|
|
Stock bonus award
|
|
|
10
|
|
|
|
|
|
|
|
467
|
|
|
|
|
|
|
|
|
|
|
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
128,280
|
|
|
|
4,762
|
|
|
|
1,468,941
|
|
|
|
(470,827
|
)
|
|
|
118,387
|
|
|
|
1,116,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,793
|
|
|
|
|
|
|
|
124,793
|
|
Net unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,603
|
)
|
|
|
(1,603
|
)
|
Change in cumulative foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90,983
|
)
|
|
|
(90,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Class B Common Stock to Common Stock
|
|
|
4,762
|
|
|
|
(4,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(59
|
)
|
|
|
|
|
|
|
(128,165
|
)
|
|
|
|
|
|
|
|
|
|
|
(128,165
|
)
|
Issuance of common stock for stock option exercises
|
|
|
90
|
|
|
|
|
|
|
|
1,461
|
|
|
|
|
|
|
|
|
|
|
|
1,461
|
|
Tax provision for stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(4,804
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,804
|
)
|
Stock based compensation restricted stock
|
|
|
254
|
|
|
|
|
|
|
|
29,202
|
|
|
|
|
|
|
|
|
|
|
|
29,202
|
|
Stock based compensation stock options
|
|
|
|
|
|
|
|
|
|
|
651
|
|
|
|
|
|
|
|
|
|
|
|
651
|
|
Stock bonus award
|
|
|
8
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
133,335
|
|
|
|
|
|
|
$
|
1,367,506
|
|
|
$
|
(346,034
|
)
|
|
$
|
25,801
|
|
|
$
|
1,047,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
47
MONSTER
WORLDWIDE, INC.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flows provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
124,793
|
|
|
$
|
146,399
|
|
|
$
|
37,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from discontinued operations, net of tax
|
|
|
(10,304
|
)
|
|
|
3,696
|
|
|
|
114,699
|
|
Depreciation and amortization
|
|
|
58,020
|
|
|
|
43,908
|
|
|
|
36,428
|
|
Provision for legal settlements, net
|
|
|
40,100
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
16,231
|
|
|
|
12,906
|
|
|
|
9,055
|
|
Non-cash compensation
|
|
|
29,853
|
|
|
|
28,181
|
|
|
|
10,819
|
|
Loss in equity interests
|
|
|
7,839
|
|
|
|
8,298
|
|
|
|
7,096
|
|
Loss on net disposal of assets
|
|
|
3,933
|
|
|
|
665
|
|
|
|
|
|
Deferred income taxes
|
|
|
7,430
|
|
|
|
(5,459
|
)
|
|
|
10,781
|
|
Common stock issued for matching contribution to 401(k) plan
|
|
|
|
|
|
|
|
|
|
|
1,854
|
|
Changes in assets and liabilities, net of purchase transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
112,520
|
|
|
|
(67,778
|
)
|
|
|
(171,312
|
)
|
Prepaid and other
|
|
|
23,168
|
|
|
|
(26,213
|
)
|
|
|
(21,817
|
)
|
Deferred revenue
|
|
|
(118,299
|
)
|
|
|
80,186
|
|
|
|
116,556
|
|
Payments for legal settlements, net
|
|
|
(29,887
|
)
|
|
|
|
|
|
|
|
|
Accounts payable, accrued liabilities and other
|
|
|
(32,714
|
)
|
|
|
51,840
|
|
|
|
92,595
|
|
Net cash (used for) provided by operating activities of
discontinued operations
|
|
|
(6,849
|
)
|
|
|
(7,450
|
)
|
|
|
24,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
101,041
|
|
|
|
122,780
|
|
|
|
231,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
225,834
|
|
|
|
269,179
|
|
|
|
268,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows (used for) provided by investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(93,627
|
)
|
|
|
(63,800
|
)
|
|
|
(54,334
|
)
|
Payments for acquisitions and intangible assets, net of cash
acquired
|
|
|
(292,836
|
)
|
|
|
(2,549
|
)
|
|
|
(19,601
|
)
|
Purchase of marketable securities
|
|
|
(183,932
|
)
|
|
|
(1,424,861
|
)
|
|
|
(1,722,425
|
)
|
Sales and maturities of marketable securities
|
|
|
539,286
|
|
|
|
1,514,051
|
|
|
|
1,308,279
|
|
Cash funded to equity investee
|
|
|
(6,402
|
)
|
|
|
(10,000
|
)
|
|
|
(10,000
|
)
|
Dividends received from unconsolidated investee
|
|
|
1,011
|
|
|
|
|
|
|
|
|
|
Net proceeds from sale of businesses
|
|
|
|
|
|
|
|
|
|
|
69,155
|
|
Investment in unconsolidated affiliate
|
|
|
|
|
|
|
|
|
|
|
(19,936
|
)
|
Net cash used for investing activities of discontinued operations
|
|
|
|
|
|
|
(255
|
)
|
|
|
(4,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided by investing activities
|
|
|
(36,500
|
)
|
|
|
12,586
|
|
|
|
(453,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows (used in) provided by financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on credit facilities short-term
|
|
|
251,971
|
|
|
|
|
|
|
|
|
|
Payments on borrowings on credit facilities short-term
|
|
|
(197,893
|
)
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(128,165
|
)
|
|
|
(262,495
|
)
|
|
|
(14,734
|
)
|
Cash received from the exercise of employee stock options
|
|
|
1,461
|
|
|
|
54,890
|
|
|
|
92,263
|
|
Excess tax benefits from stock-based compensation
|
|
|
1,003
|
|
|
|
13,799
|
|
|
|
17,972
|
|
Payments on capitalized leases and other debt obligations
|
|
|
(171
|
)
|
|
|
(100
|
)
|
|
|
(171
|
)
|
Payments on acquisition debt
|
|
|
|
|
|
|
(23,362
|
)
|
|
|
(29,245
|
)
|
Structured stock repurchase
|
|
|
|
|
|
|
|
|
|
|
(22,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(71,794
|
)
|
|
|
(217,268
|
)
|
|
|
43,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rates changes on cash
|
|
|
(25,024
|
)
|
|
|
6,567
|
|
|
|
3,619
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
92,516
|
|
|
|
71,064
|
|
|
|
(137,917
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
129,744
|
|
|
|
58,680
|
|
|
|
196,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
222,260
|
|
|
$
|
129,744
|
|
|
$
|
58,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
48
MONSTER
WORLDWIDE, INC.
(Dollars in thousands, except shares and per share
amounts)
|
|
1.
|
BASIS OF
PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
The
Company
Monster Worldwide, Inc. (together with its consolidated
subsidiaries, the Company) has continuing 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
postings on the websites within the Monster network, access to
the Companys resume databases 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, leads provided to
advertisers and subscriptions to premium services. The
Companys Careers segments provide online services to
customers in a variety of industries throughout North America,
Europe 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 significant
inter-company accounts and transactions have been eliminated in
consolidation.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. 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 and
revenue recognition. Actual results could differ from those
estimates.
Certain reclassifications of prior year amounts have been made
for consistent presentation.
Revenue
Recognition
The Company recognizes revenue on agreements in accordance with
Securities and Exchange Commission (SEC) Staff
Accounting Bulletin No. 104, Revenue Recognition and
Financial Accounting Standards Boards (FASB)
Emerging Issues Task Force (EITF) issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables.
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). The
Companys Careers segments predominately 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. The Company
recognizes revenue at the time that job postings are displayed
on the Monster network of websites, based upon customer usage
patterns. Revenue earned from subscriptions to the Monster
networks resume database is recognized over the length of
the underlying subscriptions, typically from two weeks to twelve
months. Revenue associated with multiple
49
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
element contracts is allocated based on the relative fair value
of the services included in the contract. Unearned revenues are
reported on the balance sheet as deferred revenue.
Internet Advertising & Fees. The
Companys 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. The Company recognizes
revenue for online advertising as impressions are
delivered. An impression is delivered when an
advertisement appears in pages viewed by users. The Company
recognizes 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, the Company recognizes revenue for certain
subscription products, which are recognized ratably over the
length of the subscription. Unearned revenues are reported on
the balance sheet as deferred revenue.
Business
Combinations and Dispositions
The Company accounts for business combinations in accordance
with FASB Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations
(SFAS 141). The purchase method of
accounting requires that assets acquired and liabilities assumed
be recorded at their fair values on the date of a business
acquisition. Therefore, the consolidated financial statements
reflect the results of operations of an acquired business from
the completion date of an acquisition. The costs to acquire a
business, including transaction costs, are allocated to the fair
value of net assets acquired upon acquisition. Any excess of the
purchase price over the estimated fair values of the net assets
acquired is recorded as goodwill.
For the period January 1, 2006 through December 31,
2008, the Company completed five business combinations.
Note 3 to the consolidated financial statements contains a
full discussion of the Companys business combinations
completed from January 1, 2006 through December 31,
2008.
The Company accounts for business dispositions in accordance
with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144).
SFAS 144 requires the results of operations of business
dispositions to be segregated from continuing operations and
reflected as discontinued operations in current and prior
periods. The results of the Companys continuing operations
have been restated to reflect such dispositions in each period
presented. See Note 9 to the financial statements for
further discussion of the Companys disposition
transactions.
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 and accrued expense and other current liabilities
approximate fair value because of the immediate or short-term
maturity of these financial instruments. The Companys debt
consists of borrowings under credit facilities, 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, marketable securities 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
50
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
invests in short-term commercial paper rated P1 by Moodys
or A1 by Standard & Poors or better. As of
December 31, 2008, the Company held
available-for-sale
investments with a fair value of $91,772. These investments are
subject to fluctuations based on changes in interest rates and
market prices.
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 and Marketable Securities
Cash and cash equivalents, which primarily consist of commercial
paper, bank time deposits and money-market funds, 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 a current liability in the accompanying consolidated
balance sheets.
The Companys marketable securities are classified as
available-for-sale
investments and are reported at fair value, with unrealized
gains and losses recorded as a component of accumulated other
comprehensive income. Realized gains or losses and declines in
value judged to be other than temporary, if any, are reported in
other income, net in the statements of operations. The Company
evaluates its investments periodically for possible impairment
and reviews factors such as the length of time and extent to
which fair value has been below cost basis and the
Companys ability and intent to hold the investment for a
period of time which may be sufficient for anticipated recovery
in market value. Marketable securities as of December 31,
2008 primarily consisted of auction rate bonds, which are
classified as non-current.
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, 2008 and 2007 are adequate. However, actual
write-offs could exceed the recorded allowance. Activity in the
allowance for doubtful accounts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Charged to Costs
|
|
|
Write-Offs
|
|
|
Ending
|
|
Year Ended December 31,
|
|
Balance
|
|
|
and Expenses
|
|
|
and Other
|
|
|
Balance
|
|
|
2008
|
|
$
|
15,613
|
|
|
$
|
16,231
|
|
|
$
|
(17,780
|
)
|
|
$
|
14,064
|
|
2007
|
|
$
|
11,924
|
|
|
$
|
12,906
|
|
|
$
|
(9,217
|
)
|
|
$
|
15,613
|
|
2006
|
|
$
|
11,049
|
|
|
$
|
9,055
|
|
|
$
|
(8,180
|
)
|
|
$
|
11,924
|
|
Property
and Equipment
Computer and communications equipment, furniture and fixtures
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.
51
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Internal
Use Software and Website Development Costs
In accordance with American Institute of Certified Public
Accountants Statement of Position
No. 98-1,
Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use, 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 $39,732, $14,391 and $11,113 for
the years ended December 31, 2008, 2007 and 2006,
respectively.
Goodwill
and Intangible Assets
The Company evaluates its long-lived assets for impairment in
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS 142). 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
impairment review process compares the fair value of the
reporting unit in which goodwill resides to its carrying value.
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 the
Companys reporting units. Changes in the Companys
strategy
and/or
market conditions could significantly impact these judgments and
require adjustments to recorded amounts of intangible assets.
Based on impairment tests performed, no impairment of goodwill
has been identified for the years ended December 31, 2008,
2007 and 2006.
Other intangible assets primarily consist of the value of
customer relationships, non-compete agreements, acquired
technology, trademarks and internet domains. Amortizable
intangible assets are primarily being amortized on a basis that
approximates economic use, over periods ranging from two to
thirty years.
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 its eventual disposition are less
than its carrying amount.
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, 2008, 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, a component of stockholders equity.
Gains
52
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and losses resulting from other foreign currency transactions,
including forward foreign exchange contracts, are included in
other income, 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 and unrealized gains and unrealized losses related to the
Companys
available-for-sale
securities, 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 accounts receivable and non-functional currency
indebtedness. As of December 31, 2008, the notional value
of these forward foreign exchange contracts was approximately
$33,200 and the corresponding accumulated unrealized loss was
approximately $100, which is included in other expense, net. 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 SFAS No. 109,
Accounting for Income Taxes (SFAS 109).
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.
On January 1, 2007 the Company adopted the provisions of
FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes An Interpretation of FASB Statement
No. 109 (FIN 48), which have been
applied to all income tax positions commencing from that date.
FIN 48 provides detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain
tax positions recognized in an enterprises financial
statements in accordance with SFAS 109. Income tax
positions must meet a more-likely-than-not recognition threshold
at the effective date to be recognized upon the adoption of
FIN 48 and in subsequent periods. The Company recognizes
potential accrued interest and penalties related to unrecognized
tax benefits within operations as income tax expense. Upon
adoption, the Company increased its existing liabilities for
uncertain tax positions by $3,125 and this cumulative effect of
applying the provisions of FIN 48 have been reported as an
adjustment to the opening balance of the Companys
accumulated deficit as of January 1, 2007. The Company also
reclassified a portion of previously accrued income tax
liabilities from current to non-current because payment of cash
was not anticipated within one year of the balance sheet date.
The Company recognizes potential accrued interest and penalties
related to unrecognized tax benefits on the income statement as
a component of income tax expense.
Prior to 2007, the Company determined its income tax
contingencies in accordance with SFAS No. 5,
Accounting for Contingencies. The Company recorded
estimated tax liabilities to the extent the contingencies were
probable and could be reasonably estimated.
Stock-Based
Compensation
The Company accounts for stock-based compensation in accordance
with SFAS No. 123 (revised 2004), Share-Based
Payment (SFAS 123R). Under the fair value
recognition provisions of SFAS 123R, 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.
The Company uses the Black-Scholes option-pricing model to
determine the fair-value of stock option awards. The Company
measures non-
53
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
vested stock awards using the fair market value of the
Companys common stock on the date the award is approved.
For certain 2008 awards, which were market-based grants, the
Company estimated the fair value of the award utilizing a Monte
Carlo simulation model. The Company awards 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
The Company has recorded significant charges and accruals in
connection with its 2007 restructuring initiatives and prior
business reorganization plans. These accruals include estimates
pertaining to future lease obligations, employee separation
costs and the settlements of contractual obligations resulting
from its actions. Although the Company does not anticipate
significant changes, the actual costs may differ from these
estimates.
Earnings
Per Share
Basic earnings per share does not include the effects of
potentially dilutive stock options and restricted stock bonus
awards and is computed by dividing income available to common
stockholders by the weighted average number of shares of common
stock outstanding for the period. Diluted earnings per share
reflects, in periods in which they have a dilutive effect,
commitments to issue common stock and common stock issuable upon
exercise of stock options for periods in which the options
exercise price is lower than the Companys average share
price for the period.
Certain stock options and stock issuable under employee
compensation plans were excluded from the computation of
earnings per share due to their anti-dilutive effect. The
weighted average number of such common stock equivalents is
approximately 8,881,000, 1,153,000 and 1,280,000 for the years
ended December 31, 2008, 2007, and 2006, respectively. A
reconciliation of shares used in calculating basic and diluted
earnings per common and Class B common share follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Thousands of shares)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Basic weighted average shares outstanding
|
|
|
120,557
|
|
|
|
128,785
|
|
|
|
128,077
|
|
Effect of common stock equivalents stock options and
stock issuable under employee compensation plans
|
|
|
610
|
|
|
|
1,970
|
|
|
|
3,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
121,167
|
|
|
|
130,755
|
|
|
|
131,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Fees and Expenses Related to the Stock Option
Investigation
Certain stock options which were granted on a discounted basis
(exercise price is less than the fair market value of the stock
on the date of grant) are subject to Internal Revenue Code
section 409A (409A). The provisions of 409A
impose adverse consequences upon the individuals who receive
such options including excise tax, additional interest charges
and accelerated inclusion in income. In January 2007, the Board
of Directors approved a tender offer plan to amend certain stock
options granted to approximately 60 individuals who received
stock options that are subject to 409A in order to correct the
options such that they are no longer subject to this provision.
The correction is made by increasing the exercise price to the
same value used in connection with the financial statement
restatement. For individuals who agreed to the modification, the
Company compensated them for the increase in the exercise price
by paying an amount equal to the difference in the exercise
price for each option. In January 2008, the Company paid
approximately $300 to these individuals.
54
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the second quarter of 2008, the Company recorded a $40,100
provision for legal settlements, net for the settlement of the
class action and related lawsuits. The Company paid $29,887, net
of insurance reimbursement related to the settlement in 2008.
This provision included $22,400 in recoveries from insurance and
certain former officers. Additionally, in 2008, 2007 and 2006,
the Company recorded costs of approximately $4,400 (net of
reimbursements of $12,400 primarily from former associates),
$19,100 (net of reimbursements of $4,500 primarily from
insurance carriers), and $13,300, respectively, of professional
fees as a direct result of the investigation into its stock
option grant practices and related accounting. These costs and
reimbursements were recorded as a component of office and
general expenses and primarily relate to professional
services for legal, accounting and tax guidance relating to
litigation, the informal investigation by the SEC, the
investigation by the United States Attorney for the Southern
District of New York (USAO) and the preparation and
review of the Companys restated consolidated financial
statements. Additionally, in the fourth quarter of 2006, the
Company recorded $5,000, as a component of salaries and
related expenses to compensate optionees whose options
expired during the period that the Companys equity
compensation programs were suspended. In exchange for payment,
the Company received a release of any liability.
The Company expects to continue to incur professional fees
related to its historical stock option grant practices. While
the Company cannot quantify or estimate the amount or timing of
these costs throughout 2009 and into the future, they will
primarily relate to legal fees on behalf of former employees and
former members of senior management, fees paid in defense of
shareholder lawsuits and potential fines or settlements. See
Note 17 for further discussion.
Effect
of Recently Issued Accounting Standards
In April 2008, the FASB issued FASB Staff Position
(FSP)
No. 142-3
(FSP 142-3),
Determination of the Useful Life of Intangible
Assets.
FSP 142-3
amends the factors an entity should consider in developing
renewal or extension assumptions used in determining the useful
life of recognized intangible assets under FASB Statement
No. 142, Goodwill and Other Intangible Assets.
This new guidance applies prospectively to intangible assets
that are acquired individually or with a group of other assets
in business combinations and asset acquisitions.
FSP 142-3
is effective for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008.
Early adoption is prohibited. Since this guidance will be
applied prospectively, on adoption, there will be no impact to
the Companys current consolidated financial statements.
In June 2008, the FASB issued FSP EITF
03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities. FSP
EITF 03-6-1
clarifies that share-based payment awards that entitle their
holders to receive nonforfeitable dividends or dividend
equivalents before vesting should be considered participating
securities. The Company has grants of non-vested stock that
contain non-forfeitable rights to dividends and will be
considered participating securities upon adoption of FSP
EITF 03-6-1.
As participating securities, the Company will be required to
include these instruments in the calculation of earnings per
share (EPS), and will need to calculate EPS using
the two-class method. The two-class method of
computing EPS is an earnings allocation formula that determines
EPS for each class of common stock and participating security
according to dividends declared (or accumulated) and
participation rights in undistributed earnings. FSP
EITF 03-6-1
is effective for fiscal years beginning after December 15,
2008 on a retrospective basis and will be adopted by us in the
first quarter of fiscal 2009. The Company is currently
evaluating the potential impact, if any, the adoption of FSP
EITF 03-6-1
could have on its calculation of EPS. As of December 31,
2008, the Company has never declared a cash dividend.
Effective January 1, 2008, the Company adopted
SFAS No. 157, Fair Value Measurements
(SFAS 157) for financial assets and
liabilities. This pronouncement defines fair value, establishes
a framework for measuring fair value and expands disclosures
about fair value measurements. On November 14, 2007, the
FASB agreed to a one-year deferral for the implementation of
SFAS 157 for other non-financial assets and
55
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
liabilities. The Companys adoption of SFAS 157 did
not have a material effect on the Companys consolidated
financial statements for financial assets and liabilities and
any other assets and liabilities carried at fair value.
In October 2008, the FASB issued
FSP 157-3
(FSP 157-3),
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active.
FSP 157-3
clarifies the application of SFAS 157 in a market that is
not active and addresses application issues such as the use of
internal assumptions when relevant observable data does not
exist, the use of observable market information when the market
is not active and the use of market quotes when assessing the
relevance of observable and unobservable data.
FSP 157-3
is effective for all periods presented in accordance with
SFAS No. 157. The guidance in
FSP 157-3
is effective immediately and did not have an impact on the
Company financial statements upon adoption. See
Note 6 for information and related disclosures regarding
the Companys fair value measurements.
On December 4, 2007, the FASB issued SFAS 141(R),
Business Combinations (SFAS 141R).
SFAS 141R replaces SFAS 141, Business Combinations
and applies to all transactions or other events in which an
entity obtains control of one or more businesses. SFAS 141R
requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired
and liabilities assumed; and requires the acquirer to disclose
additional information needed to evaluate and understand the
nature and financial effect of the business combination.
SFAS 141R is effective prospectively for fiscal years
beginning after December 15, 2008 and may not be applied
before that date. The Company is currently evaluating the
impact, if any, that the adoption of SFAS 141R will have on
its consolidated results of operations and financial condition.
On December 4, 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS 160). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the
noncontrolling interest (or minority interests) in a subsidiary
and for the deconsolidation of a subsidiary by requiring all
noncontrolling interests in subsidiaries be reported in the same
way, as equity in the consolidated financial statements and
eliminates the diversity in accounting for transactions between
an entity and noncontrolling interests by requiring they be
treated as equity transactions. SFAS 160 is effective
prospectively for fiscal years beginning after December 15,
2008 and may not be applied before that date. The Company is
currently evaluating the impact, if any, that the adoption of
SFAS 160 will have on its consolidated results of
operations and financial condition.
On March 19, 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities, an amendment of SFAS No. 133
(SFAS 161). SFAS 161 requires enhanced
disclosures about an entitys derivative and hedging
activities and is effective for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently
evaluating the additional disclosures required by SFAS 161.
|
|
2.
|
STOCK-BASED
COMPENSATION
|
The Company accounts for stock based compensation in accordance
with SFAS 123R. Under the fair-value recognition provisions
of SFAS 123R, 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 uses the Black-Scholes option-pricing
model to determine the fair-value of stock option awards. The
Company measures non-vested stock awards using the fair-market
value of the Companys common stock on the date of the
grant. For certain 2008 awards, which are market-based grants,
the Company estimated the fair value and the requisite service
period of the award utilizing a Monte Carlo simulation model.
The Company awards stock options and non-vested stock, in the
form of Restricted Stock Awards (RSA) and Restricted
Stock Units (RSU), market-based RSA and RSU and
performance-based RSA and RSU to employees, directors and
executive officers. The Compensation Committee of the
Companys Board of Directors (the Compensation
Committee) approves all stock-based
56
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compensation awards. In accordance with SFAS 123R, the
Company has presented excess tax benefits from the exercise of
stock options as a financing activity in the consolidated
statement of cash flows. Excess tax benefits are realized
benefits from tax deductions for exercised options in excess of
the deferred tax asset attributable to stock-based compensation
costs for such options. These awards are being amortized over
the requisite service period on a straight-line basis, net of
estimated forfeitures. The Company does not capitalize
stock-based compensation costs.
The Company recognized pre-tax compensation expense in the
consolidated statement of operations related to stock-based
compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Non-vested stock, included in salaries and related
|
|
$
|
28,040
|
|
|
$
|
27,739
|
|
|
$
|
10,671
|
|
Non-vested stock, included in restructuring and other special
charges
|
|
|
1,162
|
|
|
|
|
|
|
|
|
|
Stock options, included in salaries and related
|
|
|
651
|
|
|
|
442
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,853
|
|
|
$
|
28,181
|
|
|
$
|
10,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the 2007 salaries and related for non-vested stock
was approximately $12,800 related to the accelerated vesting of
RSA and RSU awards related to two former executive officers in
accordance with their severance agreements. Certain accrued
bonuses are paid for in common stock and for the years ended
December 31, 2008 and 2007 those payments fair values were
$220 and $467, respectively.
As of December 31, 2008, the Company has issued the
following types of equity awards under the Companys 1999
Long Term Incentive Plan, which the Company no longer uses for
new equity awards, and the 2008 Equity 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 RSU that are subject to continued
employment and vesting conditions, but do not have dividend or
voting rights. The Company also grants RSA that are subject to
continued employment and vesting conditions and have dividend
and voting rights. Directors of the Company receive automatic
RSA and such awards are measured using the fair market value of
the Companys common stock on the date of the automatic
grant. The Company also grants market-based RSA and RSU that
vest contingent on meeting certain stock price targets within
five years of the grant date. The market-based RSA and RSU vest
in three equal tranches of 33.3% of each award if, and when,
certain stock price targets are achieved and maintained for
specific number of days in a consecutive specified period. The
Company also grants performance-based RSA and RSU that vest
contingent on meeting specific financial results within a
specified time period.
The fair value of RSA and RSU awards 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 $8,375, $9,981 and $3,947 for years
ended December 31, 2008, 2007 and 2006, respectively.
2008 Restricted Stock. During 2008, the
Company granted RSA of 2,927,000 shares and RSU of
985,000 shares to approximately 2,000 employees,
executive officers and directors that vest in various increments
on the anniversaries of the individual grant dates through
December 16, 2012, subject to the recipients
continued employment or service through each applicable vesting
date. The Company also granted market-based RSA of
1,095,000 shares and market-based RSU of 50,000 shares
that will vest contingent on
57
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
meeting certain stock price targets within five years of the
grant date. The market-based shares vest in three tranches of
33.3% each of the award if, and when, certain stock price
targets of $21.00, $28.00 and $35.00 are achieved and maintained
for 15 days in a consecutive 30 day period and the
tranches are being amortized over their requisite service period
of twenty one, thirty and thirty seven month periods,
respectively.
2007 Restricted Stock. During 2007, the
Company granted 1,505,823 RSA and 126,017 RSU that vest in
various increments on the anniversaries of the individual grant
dates through December 12, 2011, subject to the
recipients continued employment or service through each
applicable vesting date. The Company also granted 789,090 RSU to
approximately 740 employees, subject to certain specified
performance-based conditions, with an aggregate grant value of
$37,183. The Company did not meet the 2007 RSU pre-determined
performance-based conditions and as a result, 561,760 RSU grants
with an aggregate value of $26,414 were forfeited and an
additional 227,330 were forfeited prior to December 31,
2007.
2006 Restricted Stock. In 2006, the Company
granted 681,300 RSU to approximately 350 employees, subject
to certain specified performance-based conditions. In February
2007, the performance-based conditions were certified by the
Compensation Committee. Accordingly, individuals are entitled to
their award provided that the recipient is continuously employed
by the Company or any of its affiliates on each applicable
vesting date.
As of December 31, 2008, there was approximately $109,030
of unrecognized compensation cost related to the RSU, RSA and
market-based awards that is expected to be recognized over a
period of 4.0 years. During the years ended
December 31, 2008, 2007 and 2006, the fair value of shares
vested was $5,783, $28,107 and $4,801, respectively.
The following table summarizes the activity for non-vested stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average Fair
|
|
|
|
|
|
Average Fair
|
|
|
|
|
|
Average Fair
|
|
|
|
|
|
|
Value at Grant
|
|
|
|
|
|
Value at Grant
|
|
|
|
|
|
Value at Grant
|
|
(Share amounts in thousands)
|
|
Shares
|
|
|
Date
|
|
|
Shares
|
|
|
Date
|
|
|
Shares
|
|
|
Date
|
|
|
Non-vested at beginning of period
|
|
|
1,671
|
|
|
$
|
39.67
|
|
|
|
969
|
|
|
$
|
44.53
|
|
|
|
241
|
|
|
$
|
29.64
|
|
Granted Restricted Stock Units
|
|
|
1,035
|
|
|
|
26.95
|
|
|
|
915
|
|
|
|
47.17
|
|
|
|
681
|
|
|
|
48.48
|
|
Granted Restricted Stock
|
|
|
4,022
|
|
|
|
20.51
|
|
|
|
1,506
|
|
|
|
38.26
|
|
|
|
363
|
|
|
|
44.16
|
|
Forfeited and 2007 Performance Adjusted
|
|
|
(862
|
)
|
|
|
33.28
|
|
|
|
(1,048
|
)
|
|
|
46.17
|
|
|
|
(211
|
)
|
|
|
48.19
|
|
Vested
|
|
|
(254
|
)
|
|
|
41.86
|
|
|
|
(671
|
)
|
|
|
42.40
|
|
|
|
(105
|
)
|
|
|
27.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at end of period
|
|
|
5,612
|
|
|
$
|
24.57
|
|
|
|
1,671
|
|
|
$
|
39.67
|
|
|
|
969
|
|
|
$
|
44.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
The following were the weighted average assumptions used to
determine the fair value of stock options and have been
estimated at the date of grant using the Black-Scholes
option-pricing model (no stock options were granted in 2006,
therefore no weighted average assumptions are included in this
table):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free interest rate
|
|
|
2.7
|
%
|
|
|
5.0
|
%
|
Volatility
|
|
|
40.9
|
%
|
|
|
50.7
|
%
|
Expected life (years)
|
|
|
3.7
|
|
|
|
3.3
|
|
Employee Stock Options. In 2008 and 2007, the
Company awarded options to purchase 137,980 and
82,897 shares of Common Stock, respectively, to certain
employees in France. Under the terms of the awards, the 2008
grants vest 25% annually over four years with the first 25%
vesting commencing on the first anniversary date of the award.
The 2007 grants vest with 66,147 stock options vesting 25% over
four years
58
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
with the first 25% vesting commencing on the first anniversary
date of the award and 16,750 stock options vesting 25%
immediately and the remaining 75% will vest 25% on the next
three anniversary dates of the award. As of December 31,
2008, the unrecognized compensation expense for stock options
was $1,801 and is expected to be recognized over a period of
3.2 years.
Also during 2008, the Company in accordance with the legal
settlement related to the stock option investigations, revalued
479,381 options held by former employees. Before the revaluation
the average exercise price of the options was $24.88 and after
the revaluation the average exercise price was $51.54.
The following table summarizes the activity of the
Companys employee stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
(Share amounts in thousands)
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
6,876
|
|
|
$
|
29.13
|
|
|
|
9,573
|
|
|
$
|
28.97
|
|
|
|
13,673
|
|
|
$
|
27.94
|
|
Granted
|
|
|
138
|
|
|
|
27.77
|
|
|
|
83
|
|
|
|
46.70
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(89
|
)
|
|
|
16.34
|
|
|
|
(2,136
|
)
|
|
|
25.70
|
|
|
|
(3,725
|
)
|
|
|
24.77
|
|
Forfeited/expired/cancelled
|
|
|
(635
|
)
|
|
|
35.83
|
|
|
|
(644
|
)
|
|
|
38.89
|
|
|
|
(375
|
)
|
|
|
31.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at year-end
|
|
|
6,290
|
|
|
$
|
30.58
|
|
|
|
6,876
|
|
|
$
|
29.13
|
|
|
|
9,573
|
|
|
$
|
28.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
5,980
|
|
|
$
|
30.54
|
|
|
|
5,696
|
|
|
$
|
28.90
|
|
|
|
6,925
|
|
|
$
|
29.01
|
|
Aggregate intrinsic value of options exercised during the year
|
|
$
|
546
|
|
|
|
|
|
|
$
|
48,794
|
|
|
|
|
|
|
$
|
93,613
|
|
|
|
|
|
The aggregate intrinsic value is calculated as the difference
between the market price of the Companys common stock as
of the end of the period and the exercise price of the
underlying options. The weighted average grant date fair value
of options granted during the years 2008 and 2007 was $9.48 and
$23.14, respectively.
The following table summarizes information about the
Companys stock options outstanding as of December 31,
2008 (share amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
|
|
|
Weighted
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Average
|
|
|
Intrinsic
|
|
|
Contractual
|
|
|
Number
|
|
|
Average
|
|
|
Intrinsic
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Exercise Price
|
|
|
Value
|
|
|
Life (Years)
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
Value
|
|
|
$0.00 to $20.00
|
|
|
701
|
|
|
$
|
10.35
|
|
|
$
|
1,222
|
|
|
|
3.8
|
|
|
|
701
|
|
|
$
|
10.35
|
|
|
$
|
1,222
|
|
20.01 to 26.00
|
|
|
2,047
|
|
|
|
23.97
|
|
|
|
|
|
|
|
4.1
|
|
|
|
2,036
|
|
|
|
23.97
|
|
|
|
|
|
26.01 to 32.00
|
|
|
607
|
|
|
|
28.80
|
|
|
|
|
|
|
|
6.1
|
|
|
|
360
|
|
|
|
29.07
|
|
|
|
|
|
32.01 to 50.00
|
|
|
2,396
|
|
|
|
36.36
|
|
|
|
|
|
|
|
4.8
|
|
|
|
2,344
|
|
|
|
36.13
|
|
|
|
|
|
50.01 to 97.34
|
|
|
539
|
|
|
|
58.23
|
|
|
|
|
|
|
|
1.4
|
|
|
|
539
|
|
|
|
58.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,290
|
|
|
$
|
30.58
|
|
|
$
|
1,222
|
|
|
|
4.3
|
|
|
|
5,980
|
|
|
$
|
30.54
|
|
|
$
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the Companys business
combinations completed from January 1, 2006 through
December 31, 2008. Although none of the following
acquisitions were considered to be a significant
59
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subsidiary, either individually or in the aggregate, they do
affect the comparability of results from period to period. The
acquisitions are as follows:
|
|
|
|
|
Acquired Business
|
|
Acquisition Date
|
|
Business Segment
|
|
China HR.com Holdings Ltd.
|
|
October 8, 2008
|
|
Careers International
|
Trovix Inc.
|
|
July 31, 2008
|
|
Careers North America
|
Affinity Labs Inc.
|
|
January 3, 2008
|
|
Internet Advertising & Fees
|
Arbeidskamerater AS (Norway)
|
|
January 10, 2007
|
|
Careers International
|
PWP, LLC (Education.org)
|
|
May 2, 2006
|
|
Internet Advertising & Fees
|
On October 8, 2008, the Companys Careers
International segment completed its acquisition of the remaining
55.6% ownership interest in China HR.com Holdings Ltd. (together
with its subsidiaries, ChinaHR) not already owned by
the Company. ChinaHR is a leading recruitment website in China
and provides online recruiting, campus recruiting and other
human resource solutions. Consideration for the acquisition was
approximately $166,641 in cash, net of cash acquired. The
Company recorded $236,483 of goodwill (on a preliminary basis),
$16,456 of intangible assets, $4,568 of property and equipment,
$4,192 of receivables, $1,074 of other assets, $1,055 of
deferred tax assets, net, $8,281 of deferred revenue, $21,171
for transactional and acquired liabilities and $893 of
short-term credit facility debt. The Company also consolidated
its ChinaHR related assets of $41,588 in investment in
unconsolidated affiliates and $25,254 in notes and interest
receivable (recorded in Other Assets prior to consolidation of
ChinaHR) into the purchase accounting for ChinaHR. The goodwill
recorded in connection with the acquisition will not be
deductible for tax purposes.
On July 31, 2008, the Companys Careers
North America segment purchased 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. Consideration for the
acquisition was approximately $64,290 in cash, net of cash
acquired. The Company recorded $56,725 of goodwill, $2,659 of
deferred tax assets, $1,421 of receivables, $6,475 of purchased
technology, $545 of property and equipment, $115 of other assets
and $3,650 for transactional and acquired liabilities. The
goodwill recorded in connection with the acquisition will not be
deductible for tax purposes. The Company also placed $3,437 into
escrow related to future compensation for the former owners.
On January 3, 2008, the Companys Internet
Advertising & Fees segment purchased Affinity Labs
Inc., a business that operates a portfolio of professional and
vocational communities for people entering, advancing and
networking in certain occupations including law enforcement,
healthcare, education, government and technology. Consideration
for the acquisition was $61,567 in cash, net of cash acquired.
The Company recorded $58,032 of goodwill, $1,251 of receivables,
$2,000 of intangible assets, $500 of purchased technology, $183
of property and equipment, $22 of other assets and $421 of
liabilities. The goodwill recorded in connection with the
acquisition will not be deductible for tax purposes.
On January 10, 2007, the Companys Careers
International segment purchased Arbeidskamerater AS
(AAS), a Norwegian online career sales company,
founded in 2004 as a sales agent for Monster in Norway. The
acquisition of AAS has enabled Monster to expand within the
growing Norwegian online career market. Consideration for the
acquisition was $1,654, net of cash acquired, and the Company
recorded $1,777 of goodwill. None of the goodwill recorded in
connection with the acquisition is deductible for tax purposes.
On May 2, 2006, the Companys Internet
Advertising & Fees segment purchased PWP, LLC
(Education.org), a leading publisher of
education-related directory websites and owner of thousands of
education-related domain names. The addition of Education.org
was made to integrate alongside the Companys online media
and education-related properties and generate additional
high-quality lead generation volume to the Companys
growing client base. Consideration for the acquisition was
$20,000 cash and 20,000 shares of common stock valued at
$1,164. Under the terms of the agreement, the Company paid
60
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$17,000 upon closing and $3,000 in 2007. On the acquisition
date, the Company recorded $19,205 of goodwill, however purchase
price adjustments reduced goodwill to $17,793, which is
deductible for tax purposes.
The Company is not including pro forma financial information as
acquisitions completed during the years 2006 through 2008 were
not considered to be significant subsidiaries, either
individually or in the aggregate.
Accrued
Integration Costs
The Company has formulated integration plans to eliminate
redundant facilities, personnel and duplicate assets in
connection with its business combinations. These costs were
recognized as liabilities assumed in connection with the
Companys business combinations. Accordingly, these costs
are considered part of the purchase price of the business
combinations and have been recorded as increases to goodwill.
For the year ended December 31, 2008, $928 was charged to
goodwill related to the current year acquisitions. No such
amounts were charged to goodwill for the year ended
December 31, 2007. Reductions to integration liabilities
established in connection with business combinations were
recorded as reductions to goodwill. As of December 31, 2008
and 2007, accrued integration liabilities were $4,290 and
$5,193, respectively and are recorded as a component of accrued
expenses and other current liabilities.
|
|
4.
|
GOODWILL
AND INTANGIBLE ASSETS
|
A summary of changes in goodwill by operating segment are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Careers-North
|
|
|
Careers-
|
|
|
Internet Advertising
|
|
|
|
|
|
|
America
|
|
|
International
|
|
|
and Fees
|
|
|
Total
|
|
|
January 1, 2007
|
|
$
|
346,505
|
|
|
$
|
147,802
|
|
|
$
|
94,734
|
|
|
$
|
589,041
|
|
Additions and adjustments
|
|
|
|
|
|
|
1,777
|
|
|
|
|
|
|
|
1,777
|
|
Currency translation
|
|
|
|
|
|
|
24,516
|
|
|
|
|
|
|
|
24,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
346,505
|
|
|
|
174,095
|
|
|
|
94,734
|
|
|
|
615,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions and adjustments
|
|
|
56,725
|
|
|
|
236,483
|
|
|
|
58,370
|
|
|
|
351,578
|
|
Currency translation
|
|
|
|
|
|
|
(72,353
|
)
|
|
|
(13
|
)
|
|
|
(72,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
$
|
403,230
|
|
|
$
|
338,225
|
|
|
$
|
153,091
|
|
|
$
|
894,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Amortization
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Period (Years)
|
|
|
Trademarks/Internet domains
|
|
$
|
13,332
|
|
|
$
|
|
|
|
$
|
12,788
|
|
|
$
|
|
|
|
|
Indefinite lived
|
|
Customer relationships
|
|
|
54,524
|
|
|
|
27,900
|
|
|
|
41,058
|
|
|
|
21,783
|
|
|
|
5 to 30
|
|
Acquired technology
|
|
|
6,975
|
|
|
|
640
|
|
|
|
|
|
|
|
|
|
|
|
3 to 5
|
|
Non-compete agreements
|
|
|
4,355
|
|
|
|
575
|
|
|
|
4,732
|
|
|
|
1,660
|
|
|
|
2 to 6
|
|
Other
|
|
|
6,156
|
|
|
|
3,892
|
|
|
|
4,666
|
|
|
|
4,450
|
|
|
|
4 to 10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
85,342
|
|
|
$
|
33,007
|
|
|
$
|
63,244
|
|
|
$
|
27,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded amortization expense of $6,790, $5,701 and
$7,670 on its intangible assets for the years ended
December 31, 2008, 2007 and 2006, respectively. Based on
the carrying value of identified
61
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
intangible assets recorded as of December 31, 2008, and
assuming no subsequent impairment of the underlying assets, the
estimated annual amortization expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Estimated amortization expense
|
|
$
|
11,500
|
|
|
$
|
9,200
|
|
|
$
|
6,900
|
|
|
$
|
6,500
|
|
|
$
|
4,600
|
|
|
|
5.
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Capitalized software costs
|
|
$
|
169,497
|
|
|
$
|
135,935
|
|
Furniture and equipment
|
|
|
30,500
|
|
|
|
32,573
|
|
Leasehold improvements
|
|
|
30,265
|
|
|
|
27,272
|
|
Computer and communications equipment
|
|
|
165,198
|
|
|
|
137,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
395,460
|
|
|
|
333,413
|
|
Less: accumulated depreciation
|
|
|
234,178
|
|
|
|
210,016
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
161,282
|
|
|
$
|
123,397
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008 and 2007, property and equipment
included equipment financed with capital leases with a cost of
$19,401 and $19,476, respectively, and accumulated depreciation
of $19,116 and $18,669, respectively. Depreciation expense was
$51,230, $38,207 and $28,758 for the years ended
December 31, 2008, 2007 and 2006, respectively.
|
|
6.
|
FAIR
VALUE MEASUREMENT
|
On January 1, 2008, the Company adopted the methods of fair
value as described in SFAS 157 to value its financial
assets and liabilities. SFAS 157 establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in
measuring fair value. These tiers include: Level 1, defined
as observable inputs such as quoted prices in active markets;
Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an
entity to develop its own assumptions. 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, as well as
considering counter-party credit risk in its assessment of fair
value. Financial assets (cash equivalents and available-for-sale
securities) carried at fair value as of December 31, 2008
are classified in one of the three categories as follows
(excluding cash of $83,127):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
U.S. treasury money market funds
|
|
$
|
5,866
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,866
|
|
Bank time deposits
|
|
|
|
|
|
|
53,836
|
|
|
|
|
|
|
|
53,836
|
|
Municipal bonds
|
|
|
|
|
|
|
1,425
|
|
|
|
|
|
|
|
1,425
|
|
Sovereign commercial paper
|
|
|
|
|
|
|
77,225
|
|
|
|
|
|
|
|
77,225
|
|
U.S. and foreign government obligations
|
|
|
|
|
|
|
2,206
|
|
|
|
|
|
|
|
2,206
|
|
Tax exempt auction rate bonds (Note 7)
|
|
|
|
|
|
|
|
|
|
|
90,347
|
|
|
|
90,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,866
|
|
|
$
|
134,692
|
|
|
$
|
90,347
|
|
|
$
|
230,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The changes in the fair value of the Level 3 tax exempt
auction rate bonds financial assets are as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2008
|
|
|
Balance beginning of period
|
|
$
|
|
|
Transfer in
|
|
|
357,228
|
|
Unrealized loss included in other comprehensive income
|
|
|
(1,603
|
)
|
Net settlements
|
|
|
(265,278
|
)
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
$
|
90,347
|
|
|
|
|
|
|
The carrying value 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.
The Companys debt is borrowings under credit facilities,
which approximates fair value due to market interest rates.
Marketable
Securities
As of December 31, 2008, the Company held $91,950 (at par
and cost value) of investments in auction rate securities. These
securities are variable-rate debt instruments whose underlying
agreements have contractual maturities of up to 35 years.
The majority of these securities have been issued by
state-related higher-education agencies and are collateralized
by student loans guaranteed by the U.S. Department of
Education. These auction rate securities are intended to provide
liquidity via an auction process that resets the applicable
interest rate at predetermined calendar intervals, usually every
35 days, allowing investors to either roll over their
holdings or gain immediate liquidity by selling such interests
at par. Since mid-February 2008, liquidity issues in the global
credit markets have resulted in the failure of auctions
representing substantially all of the Companys auction
rate securities, as the amount of securities submitted for sale
in those auctions exceeded the amount of bids. The funds
associated with failed auctions will not be accessible until a
successful auction occurs, a buyer is found outside of the
auction process or the issuers redeem their bonds. The Company
currently has the ability and intent to hold these auction rate
securities until a recovery of the auction process, until
maturity or until these investments can be otherwise liquidated
at par. As a result of the persistent failed auctions, and the
uncertainty of when these investments could be successfully
liquidated at par, the Company has classified all of its
investments in auction rate bonds as a component of
available-for-sale marketable securities, non-current as of
December 31, 2008. Typically, when auctions are successful,
the fair value of auction rate securities approximate par value
due to the frequent interest rate resets.
While the Company continues to earn interest on its auction rate
securities at the maximum contractual rate (which was a blended
rate of 2.14% at December 31, 2008) and there has been
no payment default with respect to such securities, these
investments are not currently trading and therefore do not
currently have a readily determinable market value. Accordingly,
the estimated fair value of these auction rate securities no
longer approximates par value. The Company uses third party
valuation and other available market observables that
considered, among other factors, i) the credit quality of
the underlying collateral (typically student loans);
ii) the financial strength of the counterparties (typically
state related higher education agencies) and the guarantors
(including the U.S. Department of Education); iii) an
estimate of when the next successful auction date will occur;
and iv) the formula applicable to each security which
defines the interest rate paid to investors in the event of a
failed auction, forward projections of the interest rate
benchmarks specified in such formulas, a tax exempt discount
margin for the cash flow discount and all applicable embedded
options such as the put, call and sinking fund features.
63
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company also used available data sources for market
observables, which were primarily derived from third party
research provided by or available from well-recognized research
entities and sources. To the extent market observables were not
available as of the valuation date, a statistical model was used
to project the variables based on the historical data and in
cases where historical data was not available comparable
securities or a benchmark index was identified and used for
estimation. When comparables were not available, industrial
averages were used or standard assumptions based on industry
practices were used.
Based on these valuations, the auction rate securities with the
original par value and cost of $91,950 were written down to an
estimated fair value of $90,347, resulting in an unrealized loss
of $1,603. This loss is deemed to be a temporary impairment and
has been reflected in accumulated other comprehensive income, a
component of stockholders equity.
The instability in the credit markets may affect the
Companys ability to liquidate these auction rate bonds in
the short term. The Company believes that the failed auctions
experienced to date are not a result of the deterioration of the
underlying credit quality of the securities and the Company
believes that it will ultimately recover all amounts invested in
these securities. The Company will continue to evaluate the fair
value of its investments in auction rate securities each
reporting period for a potential other-than-temporary impairment.
Of the Companys auction rate securities portfolio,
approximately $8,300 was marketed and sold by UBS AG and its
affiliates (collectively, UBS). On November 11,
2008, the Company accepted a settlement with UBS pursuant to
which UBS issued to us
Series C-2
Auction Rate Securities Rights (the ARS Rights). The
ARS Rights provide us the right to receive the par value of the
Companys UBS-brokered ARS plus accrued but unpaid
interest. The settlement provides that the Company may require
UBS to purchase its UBS-brokered ARS at par value at any time
between June 30, 2010 and July 2, 2012. The ARS Rights
are not transferable, tradable or marginable, and will not be
listed or quoted on any securities exchange or any electronic
communications network. As part of the settlement, UBS agrees to
provide loans through June 30, 2010 up to 100% of the par
value of the UBS-brokered ARS that the Company will pledge as
collateral. The interest rates for such UBS loans will be
equivalent to the interest rate the Company earns on its
UBS-brokered ARS.
The Companys available-for-sale investments reported as
current and non-current marketable securities as of
December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Losses
|
|
|
Gains
|
|
|
Fair Value
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
1,425
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,425
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt auction rate bonds
|
|
$
|
91,950
|
|
|
$
|
1,603
|
|
|
$
|
|
|
|
$
|
90,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
91,950
|
|
|
$
|
1,603
|
|
|
$
|
|
|
|
$
|
90,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value of the Companys marketable
securities as of December 31, 2007 approximated the gross
amortized cost value. The Company believes that it did not have
any unrealized losses as of December 31, 2007, as the
Company sold or rolled over at par more than 95% of the
securities held at December 31, 2007.
The Company reviews impairments associated with its marketable
securities to determine the classification of the impairment as
temporary or other-than-temporary in
accordance with FASB Staff Position Nos.
SFAS 115-1
and 124-1,
The Meaning of Other-Than-Temporary-Impairment and Its
Application to Certain
64
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Investments. A temporary impairment charge results in an
unrealized loss being recorded in other comprehensive income, a
component of stockholders equity. Such an unrealized loss
does not reduce net income for the applicable accounting period
because the loss is not viewed as other-than-temporary. As of
December 31, 2008, the Company believes that all of the
impairment of its auction rate securities investments is
temporary. The factors evaluated to differentiate between
temporary and other-than-temporary include the projected future
cash flows, credit ratings actions, and assessment of the credit
quality of the underlying collateral. While the recent auction
failures may limit the Companys future ability to
liquidate these investments, the Company does not believe the
auction failures will materially impact its ability to fund its
working capital needs, capital expenditures, stock repurchases,
acquisitions or other business requirements.
Equity
Investments
The Company accounts for investments with non-controlling
interests using the equity method of accounting, recording its
owned percentage of the investments net results of
operations in loss in equity interests, net, in the
Companys consolidated statement of operations. Such losses
reduce the carrying value of the Companys investment and
gains increase the carrying value of the Companys
investment. Dividends paid by the equity investee reduce the
carrying amount of the Companys investment.
In February 2005, the Company acquired a 40% interest in ChinaHR
for consideration of $50,000 in cash. In March 2006, the Company
increased its ownership interest in ChinaHR to 44.4% by
acquiring an additional 4.4% interest from ChinaHR shareholders,
for cash consideration of $19,936. ChinaHR is a leading
recruitment website in China and provides online recruiting,
campus recruiting and other human resource solutions. As a
result of its investment, the Company had the right to occupy
three of seven seats on ChinaHRs Board of Directors.
In March 2006, the Company entered into a loan agreement with
ChinaHR, whereby the Company had agreed to advance ChinaHR up to
an aggregate of $20,000. Interest on the loans were assessed at
the average one-month U.S. Dollar LIBOR rate plus 1% and
was payable quarterly, in arrears. The credit facility provided
that any advances were due and payable in full on the maturity
date, which was the earliest of March 2011 or the consummation
of an initial public offering of securities by ChinaHR. At
December 31, 2007, the total amount outstanding under the
credit facility was $20,000 and was recorded in other assets on
the consolidated balance sheet. On January 30, 2008, the
Company entered into a separate loan agreement with ChinaHR,
whereby the Company had agreed to advance ChinaHR up to an
aggregate of $5,000 immediately and up to an additional $2,000
upon the receipt of consolidated financial statements as of and
for the year ended December 31, 2007. Prior to
October 8, 2008, the Company advanced an additional $5,000
to ChinaHR bringing the total amount outstanding under the
credit facilities to $25,000, which was recorded as a component
of other assets on the consolidated balance.
On October 8, 2008, the Company completed its acquisition
of the remaining 55.6% ownership interest in ChinaHR not already
owned for $174,000 in cash ($166,641, net of cash acquired) and
the conversion of the $25,000 credit facility noted above into
ChinaHR equity. See Note 3 for additional details on the
ChinaHR business combination. Accordingly, as of October 8,
2008, the Company has consolidated ChinaHRs results.
The Company has a 25% equity investment in a company located in
Finland related to a business combination completed in 2001. The
Company received a dividend of $1,011 in the second quarter of
2008 for this investment. The carrying value of the investment
was $859 as of December 31, 2008 and was recorded on the
consolidated balance sheet as a component of investment in
unconsolidated affiliates.
In the fourth quarter of 2008, the Company acquired a 50% equity
interest in a company located in Australia. The total investment
made during the fourth quarter of 2008 was $1,414. The carrying
value of the investment was $984 as of December 31, 2008
and was recorded on the consolidated balance sheet as a
component of investment in unconsolidated affiliates.
65
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income and loss in equity interests, net are based upon
unaudited financial information and are as follows by equity
investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
ChinaHR (until acquired October 8, 2008)
|
|
$
|
(8,337
|
)
|
|
$
|
(9,627
|
)
|
|
$
|
(7,096
|
)
|
Finland
|
|
|
928
|
|
|
|
1,329
|
|
|
|
|
|
Australia
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(7,839
|
)
|
|
$
|
(8,298
|
)
|
|
$
|
(7,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
RESTRUCTURING
AND OTHER SPECIAL CHARGES
|
On July 30, 2007, the Company announced a strategic
restructuring plan intended to position the Company for
sustainable long-term growth in the rapidly evolving global
online recruitment and advertising industry. The restructuring
plan was originally designed to reduce the Companys
workforce by approximately 800 associates. Subsequent to the
announcement of this plan, the Company made a strategic decision
to in-source customer service and therefore the current
reduction will be approximately 700 associates. Through
December 31, 2008, the Company has notified or terminated
approximately 500 associates and approximately 140 associates
have voluntarily left the Company. Cumulative expense for the
program since inception is $33,004. These initiatives were
introduced to reduce the growth rate of operating expenses and
provide funding for investments in new product development and
innovation, enhanced technology, global advertising campaigns
and selective sales force expansion in 2008. The majority of the
initiatives of the restructuring plan have been completed as of
December 31, 2008; however, the Company will continue to
incur charges in the first half of 2009 to complete the plan.
Restructuring and other special charges and related liability
balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce
|
|
|
Fixed Asset
|
|
|
Consolidation of
|
|
|
Other Costs and
|
|
|
|
|
|
|
Reduction
|
|
|
Write-Offs
|
|
|
Office Facilities
|
|
|
Professional Fees
|
|
|
Total
|
|
|
2007 expense
|
|
$
|
14,067
|
|
|
$
|
1,330
|
|
|
$
|
555
|
|
|
$
|
645
|
|
|
$
|
16,597
|
|
Cash payments
|
|
|
(7,841
|
)
|
|
|
|
|
|
|
(96
|
)
|
|
|
(140
|
)
|
|
|
(8,077
|
)
|
Non-cash payments
|
|
|
|
|
|
|
(1,330
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
6,226
|
|
|
|
|
|
|
|
459
|
|
|
|
505
|
|
|
|
7,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 expense
|
|
|
11,079
|
|
|
|
3,695
|
|
|
|
1,130
|
|
|
|
503
|
|
|
|
16,407
|
|
Cash payments
|
|
|
(13,394
|
)
|
|
|
|
|
|
|
(720
|
)
|
|
|
(907
|
)
|
|
|
(15,021
|
)
|
Non-cash payments
|
|
|
(1,162
|
)
|
|
|
(3,695
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
$
|
2,749
|
|
|
$
|
|
|
|
$
|
869
|
|
|
$
|
101
|
|
|
$
|
3,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
DISCONTINUED
OPERATIONS
|
During the second quarter of 2008, the Company decided to
wind-down the operations of Tickle, an online property within
the Internet Advertising & Fees segment, and have
classified the historical results of Tickle as a component of
discontinued operations. The Companys decision was based
upon Tickles product offerings, which no longer fit the
Companys long-term strategic growth plans, and
Tickles lack of profitability. Tickles results for
the year ended December 31, 2008 included the write-down of
$13,201 of long-lived assets, an income tax benefit of $29,836
and a net loss of $6,331 from its operations, which included the
proposed settlement amount related to the Tickle class action
which is subject to court approval. The income tax benefit
included $25,981 of current tax benefits for current period
operating losses and tax losses incurred upon Tickles
discontinuance and $3,855 of deferred tax benefits for the
reversal of deferred
66
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
tax liabilities on long-term assets. The Company incurred losses
net of tax related to Tickle of $2,935 for the year ended
December 31, 2007 and a gain net of tax of $1,751 for the
year ended December 31, 2006.
During the year ended December 31, 2006, the Company
disposed of businesses that primarily comprised its former
Advertising & Communications operating segment, in
order to focus more resources to support the growth of the
Monster franchise on a global basis. The Company incurred losses
net of tax primarily related to these disposals of $761 and
$116,450 for the years ended December 31, 2007 and 2006,
respectively.
The operations of the Companys disposed businesses have
been segregated from continuing operations and are reflected as
discontinued operations in each periods consolidated
statement of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenue
|
|
$
|
6,470
|
|
|
$
|
27,505
|
|
|
$
|
111,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(6,331
|
)
|
|
|
(6,027
|
)
|
|
|
7,972
|
|
Income tax (benefit) expense
|
|
|
(2,501
|
)
|
|
|
(2,331
|
)
|
|
|
3,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain from discontinued operations, net of tax
|
|
|
(3,830
|
)
|
|
|
(3,696
|
)
|
|
|
4,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss on sale or disposal of discontinued operations
|
|
|
(13,201
|
)
|
|
|
|
|
|
|
(123,203
|
)
|
Income tax benefit
|
|
|
(27,335
|
)
|
|
|
|
|
|
|
(3,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale or disposal of business, net of tax
|
|
|
14,134
|
|
|
|
|
|
|
|
(119,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
10,304
|
|
|
$
|
(3,696
|
)
|
|
$
|
(114,699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes reported in discontinued
operations differs for the years ended December 31, 2008,
2007 and 2006 from the tax benefit computed at the
Companys federal statutory income tax rate primarily as a
result of the loss on investment for the year ended
December 31, 2008 and of non-deductible goodwill and other
expenses for the year ended December 31, 2006.
In December 2007, the Company entered into a senior unsecured
revolving credit facility that provides for maximum borrowings
of $250,000. The credit facility expires December 21, 2012
and is available for ongoing working capital requirements and
other corporate purposes. Under the credit facility, loans bear
interest, at the Companys option, at either (i) the
higher of (a) the Bank of America prime rate or
(b) the overnight federal funds rate plus 1/2 of 1% or
(ii) LIBOR plus a margin ranging from 30 basis points
to 77.5 basis points depending on the Companys ratio
of consolidated funded debt to consolidated earnings before
interest, taxes, depreciation and amortization
(EBITDA) as defined in the revolving credit
agreement. The Company may repay outstanding borrowings at any
time during the term of the credit facility without any
prepayment penalty. The 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 and lend funds to affiliated companies, entering into new
lines of business and contains criteria on the maintenance of
certain financial statement amounts and ratios, all as defined
in the agreement. As of December 31, 2008, the Company was
in full compliance with its covenants.
At December 31, 2008, the utilized portion of this credit
facility was $50,000 in borrowings and $1,749 for standby
letters of credit and $198,251 was unused. At December 31,
2008, the one month US Dollar LIBOR rate, overnight federal
funds rate, and Bank of America prime rate were 0.44%, 0.14% and
3.25%, respectively. As of December 31, 2008, the Company
used the one month US Dollar LIBOR rate for the interest
rate on these borrowings with a blended interest rate of 0.90%.
Subsequent to December 31, 2008, the
67
MONSTER
WORLDWIDE, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company borrowed an additional $197,000 under its senior
unsecured revolving credit facility. As a result, the Company
now has $1,251 unutilized on the credit facility.
The Companys ChinaHR subsidiary has entered into an
unsecured uncommitted revolving credit facility, guaranteed by
the Company that provides for maximum borrowings of $5,000. The
ChinaHR credit facility has a maximum tenure of one year and the
lender can terminate the facility at any time and demand
immediate payment. The Company may repay these loans and accrued
interest 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