Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010
OR
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| o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM to
COMMISSION FILE NUMBER 001-34209
MONSTER WORLDWIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
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13-3906555
(I.R.S. EMPLOYER
IDENTIFICATION NO.) |
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622 Third Avenue, New York, New York
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
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10017
(ZIP CODE) |
(212) 351-7000
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
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.
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| Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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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). o Yes þ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date.
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Outstanding as of |
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October 26, 2010 |
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Common Stock |
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130,035,933 |
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MONSTER WORLDWIDE, INC.
TABLE OF CONTENTS
2
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONSTER WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unuadited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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Revenue |
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$ |
228,842 |
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$ |
214,533 |
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$ |
659,064 |
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$ |
691,993 |
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Salaries and related |
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119,297 |
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112,833 |
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362,713 |
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348,702 |
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Office and general |
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63,272 |
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59,841 |
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182,326 |
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181,816 |
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Marketing and promotion |
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51,661 |
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45,757 |
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158,167 |
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164,401 |
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Reversal of legal settlements, net |
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— |
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(6,850 |
) |
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— |
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(6,850 |
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Restructuring and other special charges |
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— |
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— |
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— |
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16,105 |
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Total operating expenses |
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234,230 |
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211,581 |
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703,206 |
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704,174 |
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Operating (loss) income |
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(5,388 |
) |
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2,952 |
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(44,142 |
) |
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(12,181 |
) |
Interest and other, net |
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(1,286 |
) |
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(48 |
) |
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(1,038 |
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1,231 |
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(Loss) income before income taxes and equity interests |
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(6,674 |
) |
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2,904 |
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(45,180 |
) |
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(10,950 |
) |
Benefit from income taxes |
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(1,823 |
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(30,891 |
) |
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(14,831 |
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(35,463 |
) |
Loss in equity interests, net |
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(873 |
) |
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(1,044 |
) |
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(2,511 |
) |
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(3,473 |
) |
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Net (loss) income |
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$ |
(5,724 |
) |
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$ |
32,751 |
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$ |
(32,860 |
) |
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$ |
21,040 |
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Basic (loss) income per share |
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$ |
(0.05 |
) |
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$ |
0.27 |
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$ |
(0.27 |
) |
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$ |
0.18 |
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Diluted (loss) income per share |
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$ |
(0.05 |
) |
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$ |
0.27 |
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$ |
(0.27 |
) |
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$ |
0.17 |
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Weighted average shares outstanding: |
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Basic |
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120,796 |
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119,473 |
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120,509 |
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119,206 |
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Diluted |
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120,796 |
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121,676 |
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120,509 |
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120,853 |
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See accompanying notes.
3
MONSTER WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
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September 30, |
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December 31, |
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2010 |
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2009 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
166,713 |
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$ |
275,447 |
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Marketable securities, current |
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— |
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9,259 |
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Accounts receivable, net of allowance for doubtful accounts of $6,753 and $12,660 |
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282,274 |
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287,698 |
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Prepaid and other |
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66,301 |
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73,089 |
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Total current assets |
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515,288 |
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645,493 |
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Marketable securities, non-current |
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4,094 |
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15,410 |
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Goodwill |
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1,123,834 |
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925,758 |
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Property and equipment, net |
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143,973 |
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143,727 |
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Intangibles, net |
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70,067 |
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43,863 |
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Investment in unconsolidated affiliates |
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745 |
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546 |
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Other assets |
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52,108 |
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52,393 |
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Total assets |
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$ |
1,910,109 |
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$ |
1,827,190 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
41,503 |
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$ |
32,066 |
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Accrued expenses and other current liabilities |
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159,897 |
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143,403 |
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Deferred revenue |
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312,952 |
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305,898 |
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Current portion of long-term debt and borrowings on revolving credit facility |
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95,000 |
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5,010 |
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Income taxes payable |
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12,162 |
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20,779 |
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Total current liabilities |
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621,514 |
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507,156 |
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Long-term income taxes payable |
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95,464 |
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87,343 |
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Deferred income taxes |
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24,222 |
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51,499 |
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Long-term debt, less current portion |
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40,000 |
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45,000 |
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Other long-term liabilities |
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3,176 |
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3,028 |
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Total liabilities |
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784,376 |
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694,026 |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $.001 par value, authorized 800 shares; issued and outstanding: none |
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— |
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— |
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Common stock, $.001 par value, authorized 1,500,000 shares; issued: 135,556 and 134,380
shares, respectively; outstanding: 120,834 and 119,659 shares, respectively |
|
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136 |
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134 |
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Class B common stock, $.001 par value, authorized 39,000 shares; issued and outstanding: none |
|
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— |
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— |
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Additional paid-in capital |
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1,416,547 |
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1,395,969 |
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Accumulated deficit |
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(359,966 |
) |
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(327,106 |
) |
Accumulated other comprehensive income |
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69,016 |
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64,167 |
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Total stockholders’ equity |
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1,125,733 |
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1,133,164 |
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Total liabilities and stockholders’ equity |
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$ |
1,910,109 |
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$ |
1,827,190 |
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See accompanying notes.
4
MONSTER WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Nine Months Ended September 30, |
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2010 |
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2009 |
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Cash flows provided by operating activities: |
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Net (loss) income |
|
$ |
(32,860 |
) |
|
$ |
21,040 |
|
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|
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|
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
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Depreciation and amortization |
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48,778 |
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|
50,684 |
|
Reversal of legal settlements, net |
|
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— |
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(6,850 |
) |
Provision for doubtful accounts |
|
|
2,036 |
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|
8,566 |
|
Non-cash compensation |
|
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34,677 |
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|
30,349 |
|
Deferred income taxes |
|
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(26,094 |
) |
|
|
5,739 |
|
Non-cash restructuring write-offs, accelerated amortization and loss on disposal of assets |
|
|
163 |
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|
4,744 |
|
Loss in equity interests, net |
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|
2,511 |
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|
3,473 |
|
Gains on auction rate securities |
|
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(2,415 |
) |
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|
— |
|
Changes in assets and liabilities, net of acquisitions: |
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Accounts receivable |
|
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13,279 |
|
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|
127,523 |
|
Prepaid and other |
|
|
108 |
|
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|
856 |
|
Deferred revenue |
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(2,586 |
) |
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(152,688 |
) |
Accounts payable, accrued liabilities and other |
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23,927 |
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(81,468 |
) |
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Total adjustments |
|
|
94,384 |
|
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(9,072 |
) |
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Net cash provided by operating activities |
|
|
61,524 |
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|
11,968 |
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Cash flows used for investing activities: |
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Capital expenditures |
|
|
(36,656 |
) |
|
|
(38,664 |
) |
Cash funded to equity investee |
|
|
(4,424 |
) |
|
|
(4,953 |
) |
Purchase of marketable securities |
|
|
— |
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|
(7,476 |
) |
Sales and maturities of marketable securities and other |
|
|
22,995 |
|
|
|
3,317 |
|
Payments for acquisitions and intangible assets |
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(225,000 |
) |
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|
(300 |
) |
Dividends received from unconsolidated investee |
|
|
220 |
|
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|
763 |
|
|
|
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Net cash used for investing activities |
|
|
(242,865 |
) |
|
|
(47,313 |
) |
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Cash flows provided by (used for) financing activities: |
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Proceeds from borrowings on revolving credit facility |
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90,000 |
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|
199,203 |
|
Payments on borrowings on term loan and revolving credit facility |
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(5,000 |
) |
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|
(256,196 |
) |
Proceeds from borrowings on term loan |
|
|
— |
|
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|
50,000 |
|
Excess tax benefits from equity compensation plans |
|
|
— |
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|
12 |
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Tax withholdings related to net share settlements of restricted stock awards and units |
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|
(9,804 |
) |
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|
(4,304 |
) |
Proceeds from the exercise of employee stock options |
|
|
66 |
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|
55 |
|
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|
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Net cash provided by (used for) financing activities |
|
|
75,262 |
|
|
|
(11,230 |
) |
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|
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Effects of exchange rates on cash |
|
|
(2,655 |
) |
|
|
11,792 |
|
Net decrease in cash and cash equivalents |
|
|
(108,734 |
) |
|
|
(34,783 |
) |
Cash and cash equivalents, beginning of period |
|
|
275,447 |
|
|
|
222,260 |
|
|
|
|
|
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Cash and cash equivalents, end of period |
|
$ |
166,713 |
|
|
$ |
187,477 |
|
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Supplemental disclosures of cash flow information: |
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Cash paid (refunded) for income taxes |
|
$ |
10,729 |
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$ |
(664 |
) |
Cash paid for interest |
|
$ |
4,195 |
|
|
$ |
4,722 |
|
Non-cash financing and investing activities: |
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Settlement of executive bonuses with common stock |
|
$ |
— |
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$ |
2,275 |
|
See accompanying notes.
5
MONSTER WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the “Company” or “Monster”)
has continuing operations that consist of three reportable segments: Careers — North America,
Careers — International and Internet Advertising & Fees. Revenue in the Company’s Careers segments
are primarily earned from the placement of job postings on the websites within the Monster network,
access to the Company’s resume databases, recruitment media services and other career-related
services. Revenue in the Company’s Internet Advertising & Fees segment is primarily earned from the
display of advertisements on the Monster network of websites, “click-throughs” on text based links
and leads provided to advertisers. The Company’s 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 interim financial statements included herein are unaudited and have been prepared
by the Company pursuant to the rules and regulations of the United States Securities and Exchange
Commission (the “SEC”). Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States have been omitted pursuant to such rules and regulations; however, the Company believes that
the disclosures are adequate to make the information presented not misleading. The consolidated
interim financial statements include the accounts of the Company and all of its wholly-owned and
majority-owned subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation.
These statements reflect all normal recurring adjustments that, in the opinion of management, are
necessary for fair presentation of the information contained herein. These consolidated interim
financial statements should be read in conjunction with the financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The
Company adheres to the same accounting policies in preparing interim financial statements. As
permitted under generally accepted accounting principles in the United States, interim accounting
for certain expenses, including income taxes, are based on full year assumptions. Such amounts are
expensed in full in the year incurred. For interim financial reporting purposes, income taxes are
recorded based upon estimated annual income tax rates.
Certain reclassifications of prior year amounts have been made for consistent presentation.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the
requirements for establishing separate units of accounting in a multiple element arrangement and
requires the allocation of arrangement consideration to each deliverable based on the relative
selling price. The selling price for each deliverable is based on vendor-specific objective
evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling
price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue
arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not
expect that the provisions of the new guidance will have a material effect on its consolidated
financial statements.
In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value
Measurements, which requires additional disclosures about the amounts of and reasons for
significant transfers in and out of Level 1 and Level 2 fair value measurements. This standard
also clarifies existing disclosure requirements related to the level of disaggregation of fair
value measurements for each class of assets and liabilities and disclosures about inputs and
valuation techniques used to measure fair value for both recurring and non-recurring Level 2 and
Level 3 measurements. Since this new accounting standard only required additional disclosure, the
adoption of the standard in the first quarter of 2010 did not impact the Company’s consolidated
financial statements. Additionally, effective for interim and annual periods beginning after
December 15, 2010, this standard will require additional disclosure and require an entity to
present disaggregated information about activity in Level 3 fair value measurements on a gross
basis, rather than one net amount.
6
3. EARNINGS PER SHARE
Basic earnings per share is calculated using the Company’s weighted-average outstanding common
shares. When the effects are dilutive, diluted earnings per share is calculated using the
weighted-average outstanding common shares, participating securities and the dilutive effect of all
other stock-based compensation awards as determined under the treasury stock method. Certain stock
options and stock issuable under employee compensation plans were excluded from the computation of
earnings per share due to their anti-dilutive effect. A reconciliation of shares used in
calculating basic and diluted earnings per share follows:
| |
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|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| (thousands of shares) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Basic weighted average shares outstanding |
|
|
120,796 |
|
|
|
119,473 |
|
|
|
120,509 |
|
|
|
119,206 |
|
Effect of common stock equivalents — stock options and
non-vested stock under employee compensation plans (1) |
|
|
— |
|
|
|
2,203 |
|
|
|
— |
|
|
|
1,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding (1) |
|
|
120,796 |
|
|
|
121,676 |
|
|
|
120,509 |
|
|
|
120,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average anti-dilutive common stock equivalents (1) |
|
|
10,259 |
|
|
|
7,614 |
|
|
|
7,097 |
|
|
|
8,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| (1) |
|
For periods in which losses are presented, dilutive earnings per share calculations do not
differ from basic earnings per share because the effects of any potential common stock
equivalents are anti-dilutive and therefore not included in the calculation of dilutive
earnings per share. For the three and nine months ended September 30, 2010, those potential
shares totaled 1,477 and 1,718, respectively, which are included in the weighted average
anti-dilutive common stock equivalents above, in addition to 8,782 and 5,379 of out of the
money anti-dilutive common stock equivalents for the three and nine months ended September 30,
2010, respectively. |
4. STOCK-BASED COMPENSATION
Stock-based compensation cost is measured at the grant date based on the fair value of the award
and is recognized as expense ratably over the requisite service period, which is generally the
vesting period, net of estimated forfeitures.
The Company awards non-vested stock to employees, directors and executive officers in the form of
Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”), market-based RSAs and RSUs,
stock options and performance-based RSAs and RSUs. The Compensation Committee of the Company’s
Board of Directors approves stock-based compensation awards for all employees and executive
officers of the Company. The Corporate Governance and Nominating Committee of the Company’s Board
of Directors approves stock-based compensation awards for all non-employee directors of the
Company. The Company uses the fair-market value of the Company’s common stock on the date the award
is approved to measure fair value for service-based awards, a Monte Carlo simulation model to
determine both the fair value and requisite service period of market-based awards and the
Black-Scholes option-pricing model to determine the fair value of stock option awards. The Company
does not capitalize stock-based compensation costs. The Company presents as a financing activity
in the consolidated statement of cash flows the benefits of tax deductions in excess of the
tax-effected compensation of the related stock-based awards for the options exercised and RSAs and
RSUs vested.
The Company recognized pre-tax compensation expense in the consolidated statement of operations
related to stock-based compensation as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Non-vested stock, included in salaries and related |
|
$ |
13,398 |
|
|
$ |
9,924 |
|
|
$ |
34,266 |
|
|
$ |
29,889 |
|
Stock options, included in salaries and related |
|
|
135 |
|
|
|
157 |
|
|
|
411 |
|
|
|
460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,533 |
|
|
$ |
10,081 |
|
|
$ |
34,677 |
|
|
$ |
30,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2009, certain accrued bonuses were paid with 339,550 shares of common
stock with a fair value of $2,275.
7
During the first nine months of 2010, the Company granted an aggregate of 5,011,845 RSAs and
1,612,673 RSUs to approximately 3,800 employees, executive officers and directors of the Company.
The RSAs and RSUs vest in various increments on the anniversaries of the individual grant dates,
through September 2014, subject to the recipient’s continued employment or service through each
applicable vesting date. The fair-market value of RSAs and RSUs vested during the nine months
ended September 30, 2010 is $26,477.
The Company’s non-vested stock activity for the nine months ended September 30, 2010 is as follows:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted |
|
| |
|
|
|
|
|
Average Fair |
|
| |
|
|
|
|
|
Value at Grant |
|
| (thousands of shares) |
|
Shares |
|
|
Date |
|
Non-vested at January 1, 2010 |
|
|
7,744 |
|
|
$ |
15.62 |
|
Granted |
|
|
6,625 |
|
|
|
14.22 |
|
Forfeited |
|
|
(594 |
) |
|
|
14.76 |
|
Vested |
|
|
(1,846 |
) |
|
|
18.33 |
|
|
|
|
|
|
|
|
|
Non-vested at September 30, 2010 |
|
|
11,929 |
|
|
$ |
14.47 |
|
|
|
|
|
|
|
|
|
As of September 30, 2010, the unrecognized compensation expense related to non-vested stock was
$134,188 which is being amortized over the requisite service periods on a straight-line basis.
The Company’s stock option activity for the nine months ended September 30, 2010 is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
| |
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
| |
|
|
|
|
|
Average |
|
|
Contractual |
|
|
Intrinsic |
|
| (thousands of shares) |
|
Shares |
|
|
Exercise Price |
|
|
Term (in years) |
|
|
Value |
|
Outstanding at January 1, 2010 |
|
|
2,716 |
|
|
$ |
29.16 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(7 |
) |
|
|
9.48 |
|
|
|
|
|
|
|
|
|
Forfeited/expired/cancelled |
|
|
(607 |
) |
|
|
34.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2010 |
|
|
2,102 |
|
|
$ |
26.75 |
|
|
|
2.72 |
|
|
$ |
1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at September 30, 2010 |
|
|
2,088 |
|
|
$ |
26.72 |
|
|
|
2.69 |
|
|
$ |
1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate intrinsic value is calculated as the difference between the closing market price of the
Company’s common stock as of September 30, 2010 and the exercise price of the underlying options.
During the nine months ended September 30, 2010 and 2009, the aggregate intrinsic value of options
exercised was $52 and $26, respectively. As of September 30, 2010, the unrecognized compensation
expense for stock options was $446 which is being amortized over the requisite service periods on a
straight-line basis.
5. BUSINESS COMBINATIONS
On August 24, 2010, pursuant to an Asset Purchase Agreement dated as of February 3, 2010 (the
“Asset Purchase Agreement”) by and between Monster and Yahoo! Inc. (“Yahoo!”), Monster completed
the acquisition of substantially all of the assets exclusive to Yahoo! HotJobs (the “HotJobs
Assets”) from Yahoo! The purchase price for the HotJobs Assets was $225,000. We acquired the
HotJobs Assets, among other objectives, to expand our business in the North American online
recruitment market. Accordingly, the business attributable to the HotJobs Assets has been included
in the Careers — North America segment and reporting unit. The results of operations attributable
to the HotJobs Assets have been included in our consolidated financial statements since August 24,
2010 and have contributed revenues of $5,947 and break-even operating income in the three and nine
months ended September 30, 2010, exclusive of acquisition and integration-related costs.
Concurrent with the closing of the acquisition, Monster and Yahoo! entered into a three year
commercial traffic agreement whereby Monster became Yahoo!’s exclusive provider of career and job
content on the Yahoo! homepage in the United States and Canada.
The Company funded the acquisition of the HotJobs Assets with available cash and proceeds from the
Company’s revolving credit facility (see Note 11). The Company used the acquisition method to
account for the acquisition in accordance with Accounting Standards Codification (“ASC”) 805,
Business Combinations. Under the acquisition method, the purchase price was allocated to, and we
have recognized the fair value of, the tangible and intangible assets acquired and liabilities
assumed. The excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired have been recorded as goodwill. In the three and nine months ended
September 30, 2010, the Company incurred $8,605 and $18,211, respectively, of acquisition and
integration-related costs associated with the acquisition of the HotJobs Assets, which were
expensed as incurred and are included in office and general expenses in the consolidated statement
of operations. These costs primarily relate to legal fees, professional fees and other integration
costs associated with the acquisition. We expect to continue to incur significant acquisition and
integration-related costs in 2010 and the first quarter of 2011 relating to the acquisition of the
HotJobs Assets.
8
The Company is responsible for determining the fair values of the assets acquired and liabilities
assumed in connection with the acquisition of the HotJobs Assets. These fair values were based on
estimates as of August 24, 2010, the closing date of the acquisition, and were based on a number of
factors, including valuations. Identified intangible assets acquired included existing customer
relationships, a resume database, trade names and a non-competition agreement. We used variations of
the income approach method to value the intangible assets. Under these methods, fair value is
estimated based upon the present value of cash flows that the applicable asset is expected to
generate. The valuation of the resume database and the trade names were based on the
relief-from-royalty method and the existing customer relationships were valued using the excess
earnings method. The royalty rates used in the relief from royalty method were based on both a
return-on-asset method and market comparable rates. Our estimates of fair value and resulting
allocation of purchase price are preliminary as of September 30, 2010.
The following table summarizes our preliminary allocation of the purchase consideration of the
HotJobs Assets:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Estimated |
|
| |
|
Amount |
|
|
Useful Lives |
|
Unbilled accounts receivable |
|
$ |
13,511 |
|
|
|
|
|
Identifiable intangible assets: |
|
|
|
|
|
|
|
|
Customer relationships |
|
|
11,900 |
|
|
3 years |
|
Trade names |
|
|
10,600 |
|
|
9 years |
|
Resume database |
|
|
10,000 |
|
|
3 years |
|
Non-competition agreement |
|
|
500 |
|
|
3 years |
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets |
|
|
33,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
(13,157 |
) |
|
|
|
|
All other net tangible assets (liabilities) |
|
|
(65 |
) |
|
|
|
|
Goodwill |
|
|
191,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
225,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Among the factors that contributed to the recognition of goodwill in this transaction was the
expansion of our market share in the North America online recruitment market, increased reach to
both active and passive job seekers, the addition of an assembled workforce and opportunities for
future synergies. This goodwill is deductible for tax purposes. The pro forma impact of the
acquisition of the HotJobs Assets is not material to the Company’s historical consolidated
operating results and therefore is not presented.
6. FAIR VALUE MEASUREMENT
The Company values its assets and liabilities using the methods of fair value as described in ASC
820, Fair Value Measurements and Disclosures. ASC 820 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. Level 1 is defined as
observable inputs, such as quoted prices in active markets; Level 2 is defined as inputs other than
quoted prices in active markets that are either directly or indirectly observable; and Level 3 is
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. There have been no transfers of assets or liabilities between the fair value measurement
classifications in the nine months ended September 30, 2010.
9
The Company has certain assets that are required to be recorded at fair value on a recurring basis
in accordance with accounting principles generally accepted in the United States. These assets
include cash equivalents and available-for-sale securities. The following table summarizes those
assets measured at fair value on a recurring basis as of September 30, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
1,150 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,150 |
|
Bank time deposits |
|
|
— |
|
|
|
46,622 |
|
|
|
— |
|
|
|
46,622 |
|
Commercial paper |
|
|
— |
|
|
|
62,592 |
|
|
|
— |
|
|
|
62,592 |
|
Government bonds — foreign |
|
|
— |
|
|
|
5,057 |
|
|
|
— |
|
|
|
5,057 |
|
Tax exempt auction rate securities (See Note 7) |
|
|
— |
|
|
|
— |
|
|
|
4,094 |
|
|
|
4,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,150 |
|
|
$ |
114,271 |
|
|
$ |
4,094 |
|
|
$ |
119,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has certain liabilities that are required to be recorded at fair value on a
non-recurring basis, summarized as follows as of September 30, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease exit liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,952 |
|
|
$ |
17,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,952 |
|
|
$ |
17,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The lease exit liabilities relate to vacated facilities associated with previously discontinued
operations and realignment activities of the Company and are recorded in accrued expenses and other
current liabilities in the consolidated balance sheet as of September 30, 2010. The fair value of
the Company’s lease exit liabilities within the Level 3 classification is based on a discounted
cash flow model applied over the remaining term of the leased property.
The changes in the fair value of the Level 3 assets and liabilities are as follows:
| |
|
|
|
|
| |
|
Tax Exempt |
|
| |
|
Auction Rate |
|
| |
|
Bonds |
|
Balance, December 31, 2009 |
|
$ |
23,560 |
|
Redemptions |
|
|
(20,600 |
) |
Realized and unrealized gain included in interest and other, net |
|
|
1,134 |
|
|
|
|
|
Balance, September 30, 2010 |
|
$ |
4,094 |
|
|
|
|
|
| |
|
|
|
|
| |
|
Lease Exit |
|
| |
|
Liability |
|
Balance, December 31, 2009 |
|
$ |
25,112 |
|
Expense |
|
|
700 |
|
Cash Payments |
|
|
(7,860 |
) |
|
|
|
|
Balance, September 30, 2010 |
|
$ |
17,952 |
|
|
|
|
|
The carrying value for cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses, deferred revenue and other current liabilities approximate fair value because of the
immediate or short-term maturity of these financial instruments. The Company’s debt relates to
borrowings under its revolving credit facility and term loan (see Note 11), which approximates fair value due
to market interest rates.
7. INVESTMENTS
Marketable Securities
As of September 30, 2010, the Company held $4,450 (at par and cost value) of investments in an
auction rate security. This security is a variable-rate debt instrument whose underlying agreement
has a contractual maturity in 24 years that has been issued by state-related higher-education
agency and is collateralized by student loans guaranteed by the U.S. Department of Education. Since
mid-February 2008, liquidity issues in the global credit markets have resulted in the failure of
auctions representing all of the Company’s 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, the issuers redeem their bonds or the bonds mature according to contractual terms.
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 its investments in auction rate bonds
as available-for-sale securities, which are recorded as non-current marketable securities (with the
exception of the $8,300 par value auction rate securities marketed and sold by UBS as of December
31, 2009, see below) in the consolidated balance sheets as of September 30, 2010 and December 31,
2009. Typically, when auctions are successful, the fair value of auction rate securities
approximates par value due to the frequent interest rate resets.
10
While the Company continues to earn interest on its auction rate security at the maximum
contractual rate (which was 0.47% at September 30, 2010) and there has been no payment default with
respect to such security, this investment is not currently trading and therefore does not currently
have a readily determinable market value. Accordingly, the estimated fair value of the auction rate
security no longer approximates par value. To estimate the fair value of its auction rate security,
the Company used third party valuation and other available market observables. Based on these
valuations, the auction rate security with an original par value and cost of $4,450 was recorded at
a fair value of $4,094 as of September 30, 2010. The impairment of this security was deemed to be
other-than-temporary in the fourth quarter of 2009 and resulted in an unrealized loss of $356
reported in interest and other, net, in the consolidated statement of operations for the fiscal
year ended December 31, 2009.
Included in the Company’s auction rate securities portfolio as of June 30, 2010 was approximately
$8,300 of auction rate securities which were marketed and sold by UBS. On November 11, 2008, the
Company accepted a settlement with UBS pursuant to which UBS issued to the Company Series C-2
Auction Rate Securities Rights (the “ARS Rights”). The ARS Rights provided the Company the right to
receive the par value of our UBS-brokered auction rate securities plus accrued but unpaid interest.
The settlement provided that the Company may require UBS to purchase its UBS-brokered auction rate
securities at par value at any time between June 30, 2010 and July 2, 2012. In the fiscal year
ended December 31, 2009, the Company recorded an other-than-temporary unrealized loss of $150
relating to the fair value adjustment of these UBS-brokered auction rate securities, which was
charged to interest and other, net, in the consolidated statement of operations. On June 30, 2010,
the Company exercised its option with UBS and required UBS to purchase its UBS-brokered auction
rate securities at par value on June 30, 2010. The Company received $8,300 from UBS on July 1,
2010. Accordingly, the Company reversed the previously recognized unrealized loss of $150 in the
second quarter of 2010. Additionally, the Company expensed the fair value of the put option
associated with the UBS-brokered auction rate securities of $139 in the second quarter of 2010,
which was originally recorded in the fiscal year ended December 31, 2009.
In the first nine months of 2010, excluding the UBS-brokered auction rate securities, the Company
received at par value $12,300 from issuer redemptions of auction rate securities. The redemption
of these auction rate securities resulted in a $984 benefit recorded in interest and other, net, in
the consolidated statement of operations for the nine months ended September 30, 2010 as the
Company previously recorded an other-than-temporary impairment on these auction rate securities in
the fourth quarter of 2009.
In November 2009, the Company entered into a settlement agreement with RBC Capital Markets
Corporation (“RBC”) with respect to auction rate securities purchased from RBC. Pursuant to the
terms of the settlement agreement, RBC immediately repurchased the subject auction rate securities
from the Company at a certain discount to their par value. The Company will receive certain
additional monies from RBC if, within a certain time period of the date of the execution of the
settlement agreement, any of the auction rate securities still held by RBC are redeemed or
refinanced by the issuer for sums higher than the amounts RBC paid the Company to repurchase such
auction rate securities. As part of the settlement agreement, the Company dismissed a lawsuit it
had filed against RBC in connection with, and released claims related to, RBC’s sale of the auction
rate securities to the Company. Accordingly, the Company recorded a realized loss of $4,824 in the
fourth quarter of 2009 relating to the settlement with RBC, which was reflected in interest and
other, net in the consolidated statement of operations for the fiscal year ended December 31, 2009.
In the nine months ended September 30, 2010, the Company received $1,420 from RBC relating to
auction rate securities which were redeemed by the issuer or sold by RBC for sums higher than the
amounts RBC paid the Company to repurchase such auction rate securities. The Company’s receipt of
$1,420 from RBC resulted in a $1,420 benefit recorded in interest and other, net, in the
consolidated statement of operations for the nine months ended September 30, 2010.
The Company’s available-for-sale investments reported as current and non-current marketable
securities as of September 30, 2010 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
| |
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
| |
|
Cost |
|
|
Losses |
|
|
Gains |
|
|
Fair Value |
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt auction rate bonds |
|
$ |
4,450 |
|
|
$ |
356 |
|
|
$ |
— |
|
|
$ |
4,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,450 |
|
|
$ |
356 |
|
|
$ |
— |
|
|
$ |
4,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company reviews impairments associated with the above to determine the classification of the
impairment as “temporary” or “other-than-temporary” in accordance with ASC 320, Investments — Debt
and Equity Securities.
Equity Investments
The Company accounts for investments through which a non-controlling interest is held using the
equity method of accounting, recording its owned percentage of the investment’s net results of
operations in loss in equity interests, net, in the Company’s consolidated statement of operations.
Such losses reduce the carrying value of the Company’s investment and gains increase the carrying
value of the Company’s investment. Dividends paid by the equity investee reduce the carrying amount
of the Company’s investment.
11
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 $220 in the first quarter of 2010
for this investment. Additionally, the Company received a dividend of $763 in the second quarter of
2009 for this investment. The carrying value of the investment was $330 as of September 30, 2010
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. In the nine months ended September 30, 2010 and 2009, the Company expended $4,424 and
$4,953, respectively, for additional working capital requirements relating to the Australian
investment. The carrying value of the investment was $415 as of September 30, 2010 and was recorded
on the consolidated balance sheet as a component of investment in unconsolidated affiliates.
Income and loss in equity interests, net, are based upon unaudited financial information and are as
follows (by equity investment):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Australia |
|
$ |
(969 |
) |
|
$ |
(1,085 |
) |
|
$ |
(2,837 |
) |
|
$ |
(3,615 |
) |
Finland |
|
|
96 |
|
|
|
41 |
|
|
|
326 |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss in equity interests, net |
|
$ |
(873 |
) |
|
$ |
(1,044 |
) |
|
$ |
(2,511 |
) |
|
$ |
(3,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Company’s
workforce by approximately 800 associates. Subsequent to the announcement of this plan, the Company
identified approximately 100 associates in the customer service function who would stay with the
Company. Through June 30, 2009, when all of the initiatives relating to the 2007 restructuring
program were complete, the Company had notified or terminated approximately 700 associates and
approximately 140 associates had voluntarily left the Company. These initiatives were implemented
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. Since the inception of the 2007 restructuring program through the completion of
the program in the second quarter of 2009, the Company incurred $49,109 of restructuring expenses.
The Company will not incur any new charges in the future relating to this program.
Restructuring and other special charges and related liability balances are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Cash |
|
|
Non-Cash |
|
|
|
|
| |
|
December 31, 2009 |
|
|
Expense |
|
|
Payments |
|
|
Utilization |
|
|
September 30, 2010 |
|
Workforce reduction |
|
$ |
1,876 |
|
|
$ |
— |
|
|
$ |
(1,019 |
) |
|
$ |
— |
|
|
$ |
857 |
|
Consolidation of office facilities |
|
|
1,982 |
|
|
|
— |
|
|
|
(1,149 |
) |
|
|
— |
|
|
|
833 |
|
Other costs and professional fees |
|
|
237 |
|
|
|
— |
|
|
|
(60 |
) |
|
|
— |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,095 |
|
|
$ |
— |
|
|
$ |
(2,228 |
) |
|
$ |
— |
|
|
$ |
1,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
9. PROPERTY AND EQUIPMENT, NET
The Company’s property and equipment balances net of accumulated depreciation are as follows:
| |
|
|
|
|
|
|
|
|
| |
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Capitalized software costs |
|
$ |
208,311 |
|
|
$ |
190,454 |
|
Furniture and equipment |
|
|
32,638 |
|
|
|
30,128 |
|
Leasehold improvements |
|
|
38,603 |
|
|
|
31,803 |
|
Computer and communications equipment |
|
|
186,942 |
|
|
|
173,720 |
|
|
|
|
|
|
|
|
|
|
|
466,494 |
|
|
|
426,105 |
|
Less: Accumulated depreciation |
|
|
322,521 |
|
|
|
282,378 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
143,973 |
|
|
$ |
143,727 |
|
|
|
|
|
|
|
|
Depreciation expense was $42,278 and $43,479 for the nine months ended September 30, 2010 and 2009,
respectively.
Additionally, during 2009, the Company recorded $3,848 of restructuring charges relating to
accelerated amortization associated with certain capitalized software costs which were abandoned in
the second quarter of 2009 as well as $873 of asset impairment write-offs associated with the
consolidation of office facilities.
10. FINANCIAL DERIVATIVE INSTRUMENTS
The Company uses forward foreign exchange contracts as cash flow hedges to offset risks related to
foreign currency transactions. These transactions primarily relate to non-functional currency
denominated inter-company funding loans and non-functional currency inter-company accounts
receivable.
The fair value gain position (recorded in interest and other, net, in the consolidated statements
of operations) of our derivatives at September 30, 2010 and December 31, 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2010 |
|
| |
|
Notional Balance |
|
|
Maturity Date |
|
|
Accrued Expenses |
|
Designated as Hedges under ASC 815 |
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Designated as Hedges under ASC 815 |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange forwards |
|
$52,848 consisting of 11
different currency pairs |
|
October 2010 |
|
|
335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivative Instruments |
|
|
|
|
|
|
|
|
|
$ |
335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31, 2009 |
|
| |
|
Notional Balance |
|
|
Maturity Date |
|
|
Prepaid Expenses |
|
Designated as Hedges under ASC 815 |
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Designated as Hedges under ASC 815 |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange forwards |
|
$21,864 consisting of 10
different currency pairs |
|
January — April 2010 |
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivative Instruments |
|
|
|
|
|
|
|
|
|
$ |
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2010 and September 30, 2009, net gains of $796 and net
losses of $640, respectively, from realized net gains and net losses and changes in the fair value
of our forward contracts, were recognized in other income in the consolidated statement of
operations.
11. FINANCING AGREEMENTS
In December 2007, the Company entered into a senior unsecured revolving credit facility that
provided for maximum borrowings of $250,000. On August 31, 2009 (the “Amendment Closing Date”),
with the objective of availing itself of the benefits of an improved credit market in an ongoing
unstable macroeconomic environment, the Company amended certain terms and increased its borrowing
capability under its existing credit agreement (the “Amended Credit Agreement”). The Amended Credit
Agreement maintained the Company’s existing $250,000 revolving credit facility and provided for a
new $50,000 term loan facility, for a total of $300,000 in credit available to the Company. The
revolving credit facility and the term loan facility each mature on December 21, 2012. The term
loan is subject to annual amortization of principal, with $5,000 payable on each anniversary of the
Amendment Closing Date and the remaining $35,000 due at maturity.
13
The Amended Credit Agreement provides for increases in the interest rates applicable to borrowings
and increases in certain fees. Borrowings under the Amended Credit Agreement will bear interest at
a rate equal to (i) LIBOR plus a margin ranging from 300 basis points to 400 basis points
depending, on the Company’s ratio of consolidated funded debt to trailing four-quarter consolidated
earnings before interest, taxes, depreciation and amortization (the “Consolidated Leverage Ratio”)
as defined in Amended Credit Agreement or (ii) for Dollar-denominated loans only, and upon the
Company’s election, the sum of (A) the highest of (1) the credit facility’s administrative agent’s
prime rate, (2) the sum of 0.50% plus the overnight federal funds rate on such day or (3) subject
to certain exceptions, the sum of 1.00% plus the 1-month LIBOR rate, plus (B) a margin ranging from
200 basis points to 300 basis points depending on the Company’s Consolidated Leverage Ratio. In
addition, the Company will be required to pay the following fees: (i) a fee on all outstanding
amounts of letters of credit at a rate per annum ranging from 300 basis points to 400 basis points
(depending on the Company’s Consolidated Leverage Ratio); and (ii) a commitment fee on the unused
portion of the revolving credit facility at a rate per annum ranging from 50 basis points to
75 basis points (depending on the Company’s Consolidated Leverage Ratio). The Company is no longer
required to pay a utilization fee on outstanding loans and letters of credit under any
circumstances.
The Amended Credit Agreement also increased the maximum permitted Consolidated Leverage Ratio to:
(a) 3.50:1.00 for the period beginning on August 31, 2009 and ending on September 29, 2010;
(b) 3.00:1.00 for the period beginning on September 30, 2010 and ending on September 29, 2011; and
(c) 2.75:1.00 beginning on September 30, 2011 and any time thereafter. The Company may repay
outstanding borrowings at any time during the term of the credit facility without any prepayment
penalty. The Amended Credit Agreement contains covenants which restrict, among other things, the
ability of the Company to borrow, create liens, pay dividends, repurchase its common stock, acquire
businesses and other investments, enter into new lines of business, dispose of property, guarantee
debts of others or, lend funds to affiliated companies and contains requirements regarding the
maintenance of certain financial statement amounts and ratios, all as provided in the Amended
Credit Agreement. In January 2010, the Company received a technical amendment to the permitted
investments section of the Amended Credit Agreement to accommodate the particular legal structure
of the acquisition of the HotJobs Assets (see Note 5). As of September 30, 2010, the Company was
in full compliance with its covenants.
Additionally, on the Amendment Closing Date the Company entered into the U.S. Pledge Agreement
which along with subsequent separate pledge agreements shall cause the Company’s obligations under
the Amended Credit Agreement to be secured by a pledge of: (a) all of the equity interests of the
Company’s domestic subsidiaries (other than certain specified inactive subsidiaries) and (b) 65% of
the equity interests of each first-tier material foreign subsidiary of the Company.
At September 30, 2010, the utilized portion of this credit facility was $45,000 in borrowings on
the term loan facility, $90,000 of borrowings on the revolving credit facility, primarily relating
to the funding of the acquisition of the HotJobs Assets, and $1,634 for standby letters of credit.
The portion of the borrowings on the term loan that is due within one year, which represents $5,000
of the total borrowings, is classified as short-term on the consolidated balance sheet as of
September 30, 2010 and the remaining borrowings on the term loan of $40,000 is classified as
long-term. As of September 30, 2010, $158,366 was unused on the Company’s revolving credit
facility, of which $87,710 is available to the Company to be used based on the maximum Consolidated
Leverage Ratio. At September 30, 2010, the one month US Dollar LIBOR rate, the credit facility’s
administrative agent’s prime rate, and the overnight federal funds rate were 0.26%, 3.25% and
0.15%, respectively. As of September 30, 2010, the Company used the one month US Dollar LIBOR rate
for the interest rate on these borrowings with an interest rate of 3.51%.
14
12. COMPREHENSIVE INCOME (LOSS)
The Company’s comprehensive income (loss) is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net (loss) income |
|
$ |
(5,724 |
) |
|
$ |
32,751 |
|
|
$ |
(32,860 |
) |
|
$ |
21,040 |
|
Foreign currency translation adjustment |
|
|
48,408 |
|
|
|
42,592 |
|
|
|
4,849 |
|
|
|
45,026 |
|
Net unrealized loss on available-for-sale securities |
|
|
— |
|
|
|
181 |
|
|
|
— |
|
|
|
306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
42,684 |
|
|
$ |
75,524 |
|
|
$ |
(28,011 |
) |
|
$ |
66,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. INCOME TAXES
The provision for income taxes consists of provisions for federal, state and foreign income taxes.
The Company operates globally with operations in various tax jurisdictions outside of the United
States. Accordingly, the effective income tax rate is a composite rate reflecting the earnings in
the various tax jurisdictions and the applicable rates. 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.
The Company is currently under examination by several domestic and international tax authorities,
including the United States Internal Revenue Service. Presently, no material adjustments have been
proposed. Significant judgment is required in evaluating our uncertain tax positions and
determining our provision for income taxes. The gross recorded liability for uncertain tax
positions (inclusive of estimated interest and penalties thereon) at September 30, 2010 and
December 31, 2009 is recorded as long-term taxes payable of $95,464 and $87,343, respectively.
Interest and penalties related to underpayment of income taxes are classified as a component of
income tax expense in the consolidated statement of operations. The Company estimates that it is
reasonably possible that unrecorded tax benefits may be reduced by as much as $25,000 in the next
twelve months due to expirations of statutes of limitations or settlement of tax examinations. The
tax matters concerned relate to the allocation of income among jurisdictions and the
characterization of certain intercompany loans.
Due to the expiration of the statute of limitations in the third quarter of 2009, the Company
reversed $30,599 of accrued tax attributable to uncertain tax positions in the three and nine
months ended September 30, 2009, of which $26,571 impacted the effective tax rate. The Company also
reversed accrued interest and penalties related to uncertain tax positions of $8,979 in the three
and nine months ended September 30, 2009, which on a net tax basis impacted the effective rate by
$5,687. The total benefit reflected in the third quarter of 2009 income tax provision due to the
reversal of tax and interest was $32,258. The tax matters primarily concerned tax characterization
issues, use of acquired tax attributes, and allocation of income among jurisdictions.
14. SEGMENT AND GEOGRAPHIC DATA
The Company conducts business in three reportable segments: Careers — North America, Careers —
International and Internet Advertising & Fees. Corporate operating expenses are not allocated to
the Company’s reportable segments.
Primarily resulting from the acquisition of ChinaHR, the Company’s Chief Operating Decision Maker
(as defined by ASC 280, Segments) began reviewing the operating results of ChinaHR and initiated
the process of making resource allocation decisions for ChinaHR separately from the Careers —
International operating segment (which ChinaHR was formerly a part of). Accordingly, beginning in
2009, the Company has the following four operating segments: Careers — North America, Careers —
International, Careers — China and Internet Advertising & Fees. Pursuant to ASC 280, Segments, due
to the economic similarities of both operating segments, the Company aggregates the Careers —
International and Careers — China operating segments into one reportable segment: Careers —
International. See Note 1 for a description of the Company’s reportable segments. The business
attributable to the acquisition of the HotJobs Assets has been assigned to our Careers — North
America segment (see Note 5).
15
The following tables present the Company’s operations by reportable segment and by geographic
region:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| Revenue |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Careers — North America |
|
$ |
107,229 |
|
|
$ |
95,204 |
|
|
$ |
301,134 |
|
|
$ |
316,187 |
|
Careers — International |
|
|
86,683 |
|
|
|
84,737 |
|
|
|
259,168 |
|
|
|
277,000 |
|
Internet Advertising & Fees |
|
|
34,930 |
|
|
|
34,592 |
|
|
|
98,762 |
|
|
|
98,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
228,842 |
|
|
$ |
214,533 |
|
|
$ |
659,064 |
|
|
$ |
691,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| Operating (Loss) Income |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Careers — North America |
|
$ |
18,773 |
|
|
$ |
6,057 |
|
|
$ |
32,455 |
|
|
$ |
17,804 |
|
Careers — International |
|
|
(5,882 |
) |
|
|
(2,181 |
) |
|
|
(23,830 |
) |
|
|
(4,871 |
) |
Internet Advertising & Fees |
|
|
1,880 |
|
|
|
5,091 |
|
|
|
3,662 |
|
|
|
13,574 |
|
Corporate expenses |
|
|
(20,159 |
) |
|
|
(6,015 |
) |
|
|
(56,429 |
) |
|
|
(38,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
$ |
(5,388 |
) |
|
$ |
2,952 |
|
|
$ |
(44,142 |
) |
|
$ |
(12,181 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| Depreciation and Amortization |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Careers — North America |
|
$ |
7,161 |
|
|
$ |
7,997 |
|
|
$ |
20,502 |
|
|
$ |
22,959 |
|
Careers — International |
|
|
7,087 |
|
|
|
7,391 |
|
|
|
21,501 |
|
|
|
22,082 |
|
Internet Advertising & Fees |
|
|
2,136 |
|
|
|
1,929 |
|
|
|
6,504 |
|
|
|
5,338 |
|
Corporate expenses |
|
|
98 |
|
|
|
102 |
|
|
|
271 |
|
|
|
305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
16,482 |
|
|
$ |
17,419 |
|
|
$ |
48,778 |
|
|
$ |
50,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| Restructuring and Other Special Charges |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Careers — North America |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,758 |
|
Careers — International |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,368 |
|
Internet Advertising & Fees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
616 |
|
Corporate expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other special charges |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| Revenue by Geographic Region (a) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
United States |
|
$ |
136,834 |
|
|
$ |
125,322 |
|
|
$ |
383,648 |
|
|
$ |
401,476 |
|
Germany |
|
|
18,343 |
|
|
|
16,423 |
|
|
|
50,642 |
|
|
|
56,322 |
|
Other foreign |
|
|
73,665 |
|
|
|
72,788 |
|
|
|
224,774 |
|
|
|
234,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
228,842 |
|
|
$ |
214,533 |
|
|
$ |
659,064 |
|
|
$ |
691,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The following table reconciles each reportable segment’s assets to total assets reported on the
Company’s consolidated balance sheets:
| |
|
|
|
|
|
|
|
|
| Total Assets by Segment |
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Careers — North America |
|
$ |
657,793 |
|
|
$ |
614,363 |
|
Careers — International |
|
|
870,063 |
|
|
|
717,574 |
|
Internet Advertising & Fees |
|
|
183,228 |
|
|
|
184,157 |
|
Corporate |
|
|
58,531 |
|
|
|
171,303 |
|
Shared assets (b) |
|
|
140,494 |
|
|
|
139,793 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,910,109 |
|
|
$ |
1,827,190 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Long-lived Assets by Geographic Region (c) |
|
June 30, 2010 |
|
|
December 31, 2009 |
|
United States |
|
$ |
105,222 |
|
|
$ |
107,004 |
|
International |
|
|
38,751 |
|
|
|
36,723 |
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
143,973 |
|
|
$ |
143,727 |
|
|
|
|
|
|
|
|
| |
|
|
| (a) |
|
Revenue by geographic region is generally based on the location of the Company’s subsidiary. |
| |
| (b) |
|
Shared assets represent assets that provide economic benefit to all of the Company’s
operating segments. Shared assets are not allocated to operating segments for internal
reporting or decision-making purposes. |
| |
| (c) |
|
Total long-lived assets include property and equipment, net. |
15. LEGAL MATTERS
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.
In May 2010, Site Update Solutions LLC filed suit against the Company for allegedly infringing a
patent relating to search engine databases. The lawsuit-entitled Site Update Solutions LLC v. Accor
North America, Inc., et al. (Civil Action No. 2:10-cv-151) is pending in the United States District
Court for the Eastern District of Texas, and there are 34 other defendants named in the plaintiff’s
original complaint. The plaintiff seeks monetary damages, attorney’s fees and other costs. The
Court has entered a schedule in the case which includes a final pre-trial conference set for March
2012. The Company intends to vigorously defend this matter and is currently unable to estimate any
potential losses.
17
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Monster Worldwide, Inc.
New York, New York
We have reviewed the consolidated balance sheet of Monster Worldwide, Inc. (the “Company”) as of
September 30, 2010, and the related consolidated statements of operations for the three and nine
month periods ended September 30, 2010 and 2009 and cash flows for the nine month periods ended
September 30, 2010 and 2009 included in the accompanying Securities and Exchange Commission Form
10-Q for the period ended September 30, 2010. These interim financial statements are the
responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight Board, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the
consolidated financial statements referred to above for them to be in conformity with the
accounting principles generally accepted in the United States.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board, the consolidated balance sheet of Monster Worldwide, Inc. as of December 31, 2009,
and the related consolidated statements of operations, stockholders’ equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 4, 2010, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 2009 is fairly stated in
all material respects in relation to the consolidated balance sheet from which it has been derived.
/s/ BDO USA, LLP
BDO USA, LLP
New York, New York
October 29, 2010
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the “Company,” “Monster
Worldwide,” “we,” “our” or “us”) makes forward-looking statements in this report and in other
reports and proxy statements that we file with the United States Securities and Exchange Commission
(the “SEC”). Except for historical information contained herein, the statements made in this report
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Such forward-looking statements involve certain risks and
uncertainties, including statements regarding our strategic direction, prospects and future
results. Certain factors, including factors outside of our control, may cause actual results to
differ materially from those contained in the forward-looking statements. These factors include,
among other things, the global economic and financial market environment; 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 or partners and the risk that
future acquisitions or partnerships may not achieve the expected benefits to us; 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, including senior
management; potential write-downs if our goodwill or amortizable intangible assets become impaired;
adverse determinations by domestic and/or international taxation authorities related to our
estimated tax liabilities; effects of anti-takeover provisions in our organizational documents that
could inhibit the acquisition of Monster Worldwide by others; volatility in our stock price; risks
associated with government regulation; the outcome of litigation we may become involved in from
time to time; and other risks and uncertainties set forth from time to time in our reports and
other filings made with the SEC, including under Part I, “Item 1A. Risk Factors” of our annual
report on Form 10-K for the year ended December 31, 2009.
Overview
Monster is the premier global online employment solution provider, inspiring people to improve
their lives, with a presence in approximately 55 countries around the world. We have built on
Monster’s brand and created worldwide awareness by offering online recruiting solutions that we
believe are redefining the way employers and job seekers connect. For employers, our goal is to
provide the most effective solutions and easiest to use technology to simplify the hiring process
and 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, resume databases, recruitment media
solutions throughout our network and other career-related content. Job seekers can search our job
postings and post their resumes for free on each of our career websites. Employers pay to post
jobs, search our resume database and access other career-related services.
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. We
recently launched our Monster Power Resume Search™ product to customers in the United States,
United Kingdom and France, which is our innovative and proprietary semantic resume and job search
database product based upon Trovix search technology. Our Power Resume Search product is the first
of several new employer products we expect to launch from our 6Sense® technology platform.
Our strategy has been to grow our business both organically and through strategic acquisitions and
alliances in which the perceived growth prospects fit our long-term strategic growth plan. On
August 24, 2010, the Company completed the acquisition of the HotJobs Assets (as defined below),
which we believe will expand our market share in the North America online recruitment market. We
believe the long-term growth opportunities overseas are significant and believe that we are
positioned to benefit from our expanded reach and increased brand recognition around the world. We
believe 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.
19
We also operate a network of websites that connect companies to highly targeted audiences at
critical stages in their lives. Our goal is to offer compelling online services for the users of
such websites through personalization, community features and enhanced content. We believe there
are significant opportunities to monetize this web traffic through lead generation, display
advertising and other consumer related products. We believe that these properties appeal to
advertisers and other third parties as they deliver certain discrete demographics entirely online.
Acquisition of the HotJobs Assets from Yahoo! Inc.
On August 24, 2010, pursuant to an Asset Purchase Agreement dated as of February 3, 2010 (the
“Asset Purchase Agreement”) by and between Monster and Yahoo! Inc. (“Yahoo!”), Monster completed
the acquisition of substantially all of the assets exclusive to Yahoo! HotJobs (the “HotJobs
Assets”) from Yahoo! The purchase price for the HotJobs Assets was $225.0 million. We acquired the
HotJobs Assets, among other objectives, to expand our business in the North American online
recruitment market. The results of operations attributable to the HotJobs Assets have been
included in our consolidated financial statements since August 24, 2010 and have contributed
revenues of $5.9 million and break-even operating income during the three and nine months ended
September 30, 2010, exclusive of acquisition and integration-related costs. Concurrent with the
closing of the acquisition, Monster and Yahoo! entered into a three year commercial traffic
agreement whereby Monster became Yahoo!’s exclusive provider of career and job content on the
Yahoo! homepage in the United States and Canada.
The Company funded the purchase of the HotJobs Assets with available cash and proceeds from the
Company’s revolving credit facility. In the three and nine months ended September 30, 2010, the
Company incurred $8.6 million and $18.2 million, respectively, of acquisition and
integration-related costs associated with the acquisition of the HotJobs Assets, which were
expensed as incurred and are included in office and general expenses in the consolidated statement
of operations. These costs primarily relate to legal fees, professional fees and other integration
costs associated with the acquisition. We expect to continue to incur significant acquisition and
integration-related costs in 2010 and the first quarter of 2011 relating to the acquisition of the
HotJobs Assets.
Restructuring Program
We have recorded significant charges and accruals in connection with our 2007 restructuring
initiatives and prior business reorganization programs. These accruals include estimates pertaining
to future lease obligations, employee separation costs and the settlements of contractual
obligations resulting from our actions. These initiatives were implemented to reduce the growth
rate of operating expenses in certain areas and to focus more of our resources on new product
development and innovation, enhanced technology, global advertising campaigns and selective sales
force expansion. Since the inception of the 2007 restructuring program, we incurred $49.1 million
of restructuring expenses. We completed all of the initiatives relating to the 2007 restructuring
program in the second quarter of 2009, and no new charges will be incurred in the future relating
to this program.
20
Results of Operations
Consolidated operating results as a percentage of revenue for the three and nine months ended
September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
52.1 |
% |
|
|
52.6 |
% |
|
|
55.0 |
% |
|
|
50.4 |
% |
Office and general |
|
|
27.6 |
% |
|
|
27.9 |
% |
|
|
27.7 |
% |
|
|
26.3 |
% |
Marketing and promotion |
|
|
22.6 |
% |
|
|
21.3 |
% |
|
|
24.0 |
% |
|
|
23.8 |
% |
Reversal of legal settlements, net |
|
|
0.0 |
% |
|
|
(3.2 |
)% |
|
|
0.0 |
% |
|
|
(1.0 |
)% |
Restructuring and other special charges |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
102.4 |
% |
|
|
98.6 |
% |
|
|
106.7 |
% |
|
|
101.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(2.4 |
)% |
|
|
1.4 |
% |
|
|
(6.7 |
)% |
|
|
(1.8 |
)% |
Interest and other, net |
|
|
(0.6 |
)% |
|
|
(0.0 |
)% |
|
|
(0.2 |
)% |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and loss in equity interests |
|
|
(2.9 |
)% |
|
|
1.4 |
% |
|
|
(6.9 |
)% |
|
|
(1.6 |
)% |
Benefit from income taxes |
|
|
(0.8 |
)% |
|
|
(14.4 |
)% |
|
|
(2.3 |
)% |
|
|
(5.1 |
)% |
Loss in equity interests, net |
|
|
(0.4 |
)% |
|
|
(0.5 |
)% |
|
|
(0.4 |
)% |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(2.5 |
)% |
|
|
15.3 |
% |
|
|
(5.0 |
)% |
|
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
Consolidated
Revenue, Operating Expenses and Operating (Loss) Income
Consolidated
revenue, operating expenses and operating (loss) income for the three months ended
September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
228,842 |
|
|
|
100.0 |
% |
|
$ |
214,533 |
|
|
|
100.0 |
% |
|
$ |
14,309 |
|
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
119,297 |
|
|
|
52.1 |
% |
|
|
112,833 |
|
|
|
52.6 |
% |
|
|
6,464 |
|
|
|
5.7 |
% |
Office and general |
|
|
63,272 |
|
|
|
27.6 |
% |
|
|
59,841 |
|
|
|
27.9 |
% |
|
|
3,431 |
|
|
|
5.7 |
% |
Marketing and promotion |
|
|
51,661 |
|
|
|
22.6 |
% |
|
|
45,757 |
|
|
|
21.3 |
% |
|
|
5,904 |
|
|
|
12.9 |
% |
Provision for legal settlements, net |
|
|
— |
|
|
|
0.0 |
% |
|
|
(6,850 |
) |
|
|
(3.2 |
)% |
|
|
6,850 |
|
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
234,230 |
|
|
|
102.4 |
% |
|
|
211,581 |
|
|
|
98.6 |
% |
|
|
22,649 |
|
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
$ |
(5,388 |
) |
|
|
(2.4 |
)% |
|
$ |
2,952 |
|
|
|
1.4 |
% |
|
$ |
(8,340 |
) |
|
|
(282.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our consolidated revenue increased $14.3 million, or 6.7%, in the third quarter of 2010 compared to
the same period of 2009, which includes $4.4 million of unfavorable foreign exchange impact and
$5.9 million of revenue attributable to the operations of the HotJobs Assets, which closed on
August 24, 2010. This increase in revenue represents the first year over year increase in revenue
since the third quarter of 2008. Our Careers — International segment experienced a 2.3% increase
in revenue and our Careers — North America segment experienced a 12.6% increase in revenue. Since
2008, both of the Company’s Careers’ segments have been negatively impacted by the global
recession, which reduced overall hiring demand and forced our customers to reduce their job posting
and resume database usage. However, we are continuing to see improvements in our global business
activity, with the third quarter of 2010 generating increased bookings (which represent the value
of contractual orders received during the relevant period) of 26% on a global basis compared to the
third quarter of 2009. This increase in bookings occurred in most sectors of the North American
market (particularly within our large enterprise, staffing and government customer sectors), most
countries within Europe (driven by strong bookings growth in central and southern Europe), as well
as in our Asian markets (particularly in Korea, India and China). We believe the increased bookings
in these areas are a result of the improvement in the global economy as well as the improvements
the Company has made in the customer value proposition. The Company has continued to invest in
technology to diversify its product offerings and provide customers a broad array of
technology-based solutions for their talent management strategy. For example, in the fourth quarter
of 2009, we launched our Power Resume Search product to customers within the United States, which
is the first of several new employer products we expect to launch from our 6Sense technology
platform. We believe the continued rollout of the Power Resume Search product in 2010, which
included the launch in the United Kingdom in the first quarter of 2010 and France in October 2010,
will drive new customer sales in resume search and some of our combined Career product packages.
Our Internet Advertising & Fees revenue remained relatively flat in the third quarter of 2010
compared to the same period of 2009.
21
Salary and related expenses increased $6.5 million, or 5.7%, in the third quarter of 2010 compared
to the same period of 2009, which includes $2.2 million of favorable foreign exchange impact and
$1.9 million of costs attributable to the operations of the HotJobs Assets. This increase in
salaries and related expenses resulted primarily from increased variable compensation costs for the
Company’s sales force resulting from increased booking activity in 2010, increased costs associated
with the reintroduction of certain employee incentive programs which were modified in 2009 and
increased stock-based compensation resulting from our broader equity and incentive programs. These
increases were partially offset by decreased regular salary costs primarily associated with reduced
headcount in 2010 compared to 2009 as well as decreased severance costs.
Office and general expenses increased $3.4 million, or 5.7%, in the third quarter of 2010 compared
to the same period of 2009, which includes $0.7 million of favorable foreign exchange impact, $8.6
million of acquisition and integration-related expenses associated with the acquisition of the
HotJobs Assets and $0.7 million of costs attributable to the operations of the HotJobs Assets.
This increase in office and general expenses resulted primarily from increased legal, professional
and other fees relating to acquisition and integration-related costs associated with the
acquisition of the HotJobs Assets, partially offset by decreased bad debt expense, occupancy costs
and depreciation expense. The Company does not allocate acquisition and integration-related
expenses to their reportable segments. Accordingly, the $8.6 million of acquisition and
integration-related expenses incurred in the three months ended September 30, 2010 associated with
the acquisition of the HotJobs Assets is recorded as a corporate expense.
Marketing and promotion expenses increased $5.9 million, or 12.9%, in the third quarter of 2010
compared to the same period of 2009, which includes $0.5 million of favorable foreign exchange
impact and $3.3 million of costs attributable to the operations of the HotJobs Assets. This
increase in marketing and promotion expenses in 2010 resulted primarily from our Careers —
International segment, where we have continued to invest in the Asian and European markets, as well
as increased online media costs in our Internet Advertising & Fees segment, primarily associated
with our lead generation business. Marketing and promotion expenses within the Careers — North
America segment also increased, primarily related to the traffic agreement with Yahoo!, which
became effective on August 24, 2010, whereby the Company became Yahoo!’s exclusive provider of
career and job content on the Yahoo! homepage in the United States and Canada.
In the third quarter of 2009, the Company reversed a previously recorded accrual of $6.9 million
relating to settlement of all actions seeking recoveries from the Company as an outgrowth of the
Company’s historical stock option grant practices.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the third quarter of 2010.
Our consolidated operating loss was $5.4 million in the third quarter of 2010, compared to
operating income of $3.0 million in the third quarter of 2009, as a result of the factors discussed
above.
Careers — North America
The operating results of our Careers — North America segment for the three months ended September
30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
107,229 |
|
|
|
100.0 |
% |
|
$ |
95,204 |
|
|
|
100.0 |
% |
|
$ |
12,025 |
|
|
|
12.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
48,062 |
|
|
|
44.8 |
% |
|
|
47,470 |
|
|
|
49.9 |
% |
|
|
592 |
|
|
|
1.2 |
% |
Office and general |
|
|
21,347 |
|
|
|
19.9 |
% |
|
|
23,599 |
|
|
|
24.8 |
% |
|
|
(2,252 |
) |
|
|
(9.5 |
)% |
Marketing and promotion |
|
|
19,047 |
|
|
|
17.8 |
% |
|
|
18,078 |
|
|
|
19.0 |
% |
|
|
969 |
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
88,456 |
|
|
|
82.5 |
% |
|
|
89,147 |
|
|
|
93.6 |
% |
|
|
(691 |
) |
|
|
(0.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
18,773 |
|
|
|
17.5 |
% |
|
$ |
6,057 |
|
|
|
6.4 |
% |
|
$ |
12,716 |
|
|
|
209.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in our Careers — North America segment increased $12.0 million, or 12.6%, in the third
quarter of 2010 compared to the same period of 2009, which includes $5.9 million of revenue
attributable to the operations of the HotJobs Assets. This increase in revenue represents the
first year over year increase since the fourth quarter of 2007. We are continuing to see
improvements in most business sectors within North America, including strong bookings growth in our
large enterprise, staffing and government customer sectors. We believe the increased bookings in
these areas are a result of the improvement in the economy in North America as well as the
improvements the Company has made in the customer value proposition. The Company has continued to
invest in technology to diversify its product offerings and provide customers a broad array of
technology-based solutions for their talent management strategy. For example, in the fourth quarter
of 2009, we launched our Power Resume Search product, powered by our 6Sense technology, to
customers within the United States and believe this new technology will continue to attract new
customers to Monster and drive future revenue in the form of customers paying a premium price for
the efficiency of filling positions.
22
Salary and related expenses increased by $0.6 million, or 1.2%, in the third quarter of 2010
compared to the same period of 2009, which includes $1.9 million of expenses attributable to the
operations of the HotJobs Assets. This increase in salaries and related expense resulted primarily
from $3.0 million of increased variable compensation costs for the Company’s sales force resulting
from increased booking activity in 2010, $1.5 million of increased costs associated with the
reintroduction of certain employee incentive programs which were modified in 2009 and $1.0 million
of increased stock-based compensation resulting from our broader equity and incentive programs.
These increased costs are partially offset by decreased regular salary costs of $1.9 million,
primarily associated with reduced headcount in 2010 compared to 2009, and decreased severance costs
of $2.8 million.
Office and general expenses decreased by $2.3 million, or 9.5%, in the third quarter of 2010
compared to the same period of 2009, which includes $0.7 million of expenses attributable to the
operations of the HotJobs Assets. This decrease in office and general expenses resulted primarily
from $1.5 million of decreased depreciation expense in 2010, resulting from certain assets that
were abandoned and fully expensed in 2009, and $0.6 million of decreased bad debt expense in 2010
primarily associated with increased bad debt charges recorded in 2009 relating to customers
negatively impacted by the global recession. These decreases were partially offset by increased
amortization expense of $0.6 million associated with the acquisition of the HotJobs Assets.
Marketing and promotion expenses increased $1.0 million, or 5.4%, in the third quarter of 2010
compared to the same period of 2009, which includes $3.3 million of expenses attributable to the
operations of the HotJobs Assets. The increase in marketing and promotion expenses resulted
primarily from the traffic agreement the Company entered into with Yahoo!, which became effective
on August 24, 2010, whereby the Company became Yahoo!’s exclusive provider of career and job
content on the Yahoo! homepage in the United States and Canada. The Company has reduced costs in
other areas of marketing and promotion, including our decision not to renew certain sponsorships,
the reduction of the number of Keep America Working events, the refinement of our alliance
partnership arrangements and the continued focus on the efficiency of our media investments.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the third quarter of 2010.
Our Careers — North America operating income was $18.8 million in the third quarter of 2010,
compared to operating income of $6.1 million in the third quarter of 2009, as a result of the
factors described above.
Careers — International
The operating results of our Careers — International segment for the three months ended September
30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
86,683 |
|
|
|
100.0 |
% |
|
$ |
84,737 |
|
|
|
100.0 |
% |
|
$ |
1,946 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
50,600 |
|
|
|
58.4 |
% |
|
|
45,915 |
|
|
|
54.2 |
% |
|
|
4,685 |
|
|
|
10.2 |
% |
Office and general |
|
|
23,887 |
|
|
|
27.6 |
% |
|
|
25,373 |
|
|
|
29.9 |
% |
|
|
(1,486 |
) |
|
|
(5.9 |
)% |
Marketing and promotion |
|
|
18,078 |
|
|
|
20.9 |
% |
|
|
15,630 |
|
|
|
18.4 |
% |
|
|
2,448 |
|
|
|
15.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
92,565 |
|
|
|
106.8 |
% |
|
|
86,918 |
|
|
|
102.6 |
% |
|
|
5,647 |
|
|
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
$ |
(5,882 |
) |
|
|
(6.8 |
)% |
|
$ |
(2,181 |
) |
|
|
(2.6 |
)% |
|
$ |
(3,701 |
) |
|
|
169.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Careers — International segment revenue increased $1.9 million, or 2.3%, in the third quarter
of 2010 compared to the same period of 2009, which includes $4.6 million of unfavorable foreign
exchange impact. This increase in revenue represents the first year over year increase in our
Careers — International segment since the third quarter of 2008. We are continuing to see
improvements in bookings in Asia (particularly in Korea, India and China) as well as in most
countries within Europe, with particularly strong growth within central and southern Europe. We
believe the increased bookings in these areas are a result of the improvement in the global economy
as well as the improvements the Company has made in the customer value proposition. We believe
that the roll-out of Power Resume Search to certain European countries in 2010, which included the
launch within the United Kingdom in the first quarter of 2010 and in France in October 2010, will
drive new customer sales in resume search and some of our combined Career product packages.
23
Salary and related expenses increased $4.7 million, or 10.2%, in the third quarter of 2010 compared
to the same period of 2009, which includes $2.2 million of favorable foreign exchange impact. This
increase in salaries and related expenses resulted primarily from $2.9 million of increased regular
salary costs in 2010, primarily relating to 2009 including a benefit associated with a change in
actuarial assumptions related to a statutory pension plan, $1.0 million of increased variable
compensation costs for the Company’s sales force relating to increased booking activity in 2010 as
well as $1.0 million of increased stock based compensation resulting from our broader equity and
incentive programs, partially offset by $1.6 million of decreased severance costs in 2010.
Office and general expenses decreased $1.5 million, or 5.9%, in the third quarter of 2010 compared
to the same period of 2009, which includes $0.5 million of favorable foreign exchange impact. This
decrease in office and general expenses resulted primarily from $1.0 million of decreased bad debt
expense, primarily associated with increased bad debt charges recorded in 2009 relating to
customers negatively impacted by the global recession, as well as $1.0 of decreased occupancy costs
in 2010, partially offset by $0.5 million of increased legal fees.
Marketing and promotion expenses increased $2.4 million, or 15.7%, in the third quarter of 2010
compared to the same period of 2009, which includes $0.6 million of favorable foreign exchange
impact. This increase in marketing and promotion expenses in 2010 results primarily from our
continued expansion of our investments in Asia, particularly in China, as well as increased online
marketing activities in Europe.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the third quarter of 2010.
Our Careers — International operating loss was $5.9 million in the third quarter of 2010, compared
to an operating loss of $2.2 million in the third quarter of 2009, as a result of the factors
discussed above.
Internet Advertising & Fees
The operating results of our Internet Advertising & Fees segment for the three months ended
September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
34,930 |
|
|
|
100.0 |
% |
|
$ |
34,592 |
|
|
|
100.0 |
% |
|
$ |
338 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
12,406 |
|
|
|
35.5 |
% |
|
|
11,516 |
|
|
|
33.3 |
% |
|
|
890 |
|
|
|
7.7 |
% |
Office and general |
|
|
6,291 |
|
|
|
18.0 |
% |
|
|
6,064 |
|
|
|
17.5 |
% |
|
|
227 |
|
|
|
3.7 |
% |
Marketing and promotion |
|
|
14,353 |
|
|
|
41.1 |
% |
|
|
11,921 |
|
|
|
34.5 |
% |
|
|
2,432 |
|
|
|
20.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
33,050 |
|
|
|
94.6 |
% |
|
|
29,501 |
|
|
|
85.3 |
% |
|
|
3,549 |
|
|
|
12.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
1,880 |
|
|
|
5.4 |
% |
|
$ |
5,091 |
|
|
|
14.7 |
% |
|
$ |
(3,211 |
) |
|
|
(63.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in our Internet Advertising & Fees segment increased $0.3 million, or 1.0%, in the third
quarter of 2010 compared to the same period of 2009, resulting primarily from modest growth in our
lead generation business. We continue to concentrate our resources on revenues from lead
generation and online display advertising, innovation of new product and increased audience reach.
Operating expenses increased $3.5 million, or 12.0%, in the third quarter of 2010 compared to the
same period in 2009. This increase in operating expenses primarily resulted from $2.4 million of
increased marketing and promotion costs, primarily associated with growing the lead generation
business particularly within the education channel, and increased salary and related costs of $0.9
million, primarily relating to the reintroduction of certain employee incentive programs which were
modified in 2009.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the third quarter of 2010.
Our Internet Advertising & Fees operating income was $1.9 million in the third quarter of 2010,
compared to operating income of $5.1 million in the third quarter of 2009, as a result of the
factors discussed above.
24
Interest and Other, net
Interest and other, net, for the three months ended September 30, 2010 and 2009 resulted in an
expense of $1.3 million and $0.0 million, respectively. Interest and other, net, primarily relates
to interest expense on the Company’s outstanding debt, interest income associated with the
Company’s various investments, foreign currency gains or losses and gains or losses on the
Company’s auction rate securities. The increased expense in interest and other, net, of $1.3
million resulted primarily from higher credit facility borrowing costs, resulting from the funding
of the acquisition of the HotJobs Assets, higher unused fees, increased amortization costs
associated with capitalized deferred financing costs and foreign currency losses in 2010 resulting
mainly from losses on intercompany settlements and hedging activity.
Income Taxes
Income taxes for the three months ended September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Loss (income) before income taxes |
|
$ |
(6,674 |
) |
|
$ |
2,904 |
|
|
$ |
(9,578 |
) |
|
|
(329.8 |
)% |
Income taxes |
|
|
(1,823 |
) |
|
|
(30,891 |
) |
|
|
29,068 |
|
|
|
94.1 |
% |
Effective tax rate |
|
|
27.3 |
% |
|
|
-1,063.7 |
% |
|
|
|
|
|
|
|
|
Our effective tax rates differ from the statutory rate due to the impact of state and local income
taxes, tax exempt interest income, certain nondeductible expenses, foreign earnings taxed at
different tax rates, valuation allowances and accrual of interest on accrued tax liabilities. 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 examination by the United States Internal Revenue Service and other tax
authorities. We regularly assess the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of our provision for income taxes.
The Company is currently under examination in several domestic and international tax jurisdictions.
Presently, no material adjustments have been proposed. The Company estimates that it is reasonably
possible that unrecorded tax benefits may be reduced by as much as $25.0 million in the next twelve
months due to the expiration of the statute of limitations or settlement of examinations. The tax
matters concerned relate to the allocation of income among jurisdictions and the characterization
of certain intercompany loans.
Due to the expiration of the statute of limitations in the third quarter of 2009, the Company
reversed $30.6 million of accrued tax attributable to uncertain tax positions in the three and nine
months ended September 30, 2009, of which $26.6 million impacted the effective tax rate. The
Company also reversed accrued interest and penalties related to uncertain tax positions of $9.0
million in the three and nine months ended September 30, 2009, which on a net tax basis impacted
the effective rate by $5.7 million. The total benefit reflected in the third quarter of 2009 income
tax provision due to the reversal of tax and interest was $32.3 million. There were no reversals of
uncertain tax positions in the third quarter of 2010 which impacted the tax provision.
Loss in Equity Interests, Net
Loss in equity interests, net, for the three months ended September 30, 2010 and 2009 was $0.9
million and $1.0 million, respectively. The Company’s equity investments consist of a 50% equity
interest in a company located in Australia and a 25% investment in a company located in Finland.
Net (Loss) Income
Our consolidated net loss was $5.7 million in the third quarter of 2010, compared to net income of
$32.8 million in the third quarter of 2009, as a result of the factors discussed above.
Diluted
(Loss) Income Per Share
Diluted loss per share in the third quarter of 2010 was $0.05 compared to diluted income per share
of $0.27 in the third quarter of 2009. Diluted weighted average shares outstanding for the three
months ended September 30, 2010 and 2009 was 120.8 million shares and 121.7 million shares,
respectively. For periods in which losses are presented, dilutive earnings per share calculations
do not differ from basic earnings per share because the effects of any potential common stock
equivalents are anti-dilutive and therefore not included in the calculation of dilutive earnings
per share.
25
The Nine months Ended September 30, 2010 Compared to the Nine months Ended September 30, 2009
Consolidated Revenue, Operating Expenses and Operating Loss
Consolidated revenue, operating expenses and operating loss for the nine months ended September 30,
2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
659,064 |
|
|
|
100.0 |
% |
|
$ |
691,993 |
|
|
|
100.0 |
% |
|
$ |
(32,929 |
) |
|
|
(4.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
362,713 |
|
|
|
55.0 |
% |
|
|
348,702 |
|
|
|
50.4 |
% |
|
|
14,011 |
|
|
|
4.0 |
% |
Office and general |
|
|
182,326 |
|
|
|
27.7 |
% |
|
|
181,816 |
|
|
|
26.3 |
% |
|
|
510 |
|
|
|
0.3 |
% |
Marketing and promotion |
|
|
158,167 |
|
|
|
24.0 |
% |
|
|
164,401 |
|
|
|
23.8 |
% |
|
|
(6,234 |
) |
|
|
(3.8 |
)% |
Provision for legal settlements, net |
|
|
— |
|
|
|
0.0 |
% |
|
|
(6,850 |
) |
|
|
(1.0 |
)% |
|
|
6,850 |
|
|
|
(100.0 |
)% |
Restructuring and other special charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
16,105 |
|
|
|
2.3 |
% |
|
|
(16,105 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
703,206 |
|
|
|
106.7 |
% |
|
|
704,174 |
|
|
|
101.8 |
% |
|
|
(968 |
) |
|
|
(0.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
$ |
(44,142 |
) |
|
|
(6.7 |
)% |
|
$ |
(12,181 |
) |
|
|
(1.8 |
)% |
|
$ |
(31,961 |
) |
|
|
262.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our consolidated revenue decreased $32.9 million, or 4.8%, in the first nine months of 2010
compared to the same period of 2009, which includes $2.0 million of favorable foreign exchange
impact and $5.9 million of revenue attributable to the operations of the HotJobs Assets, which
closed on August 24, 2010. Our Careers — International segment experienced a 6.4% decrease in
revenue and our Careers — North America segment experienced a 4.8% decrease in revenue. The
deferred revenue balance at the beginning of 2009 was $414.3 million, or $108.4 million higher than
the deferred revenue balance at the beginning of 2010 of $305.9 million. As such, revenue
recognized in the first nine months of 2010 was negatively impacted by the lower beginning deferred
revenue balance when compared to the first nine months of 2009. We are continuing to see
improvements in our global business activity, with the first nine months of 2010 generating
increased bookings of 21% on a global basis compared to the first nine months of 2009. This
increase in bookings occurred in most sectors of the North American market (particularly within our
large enterprise, staffing, e-commerce and government customer sectors), most countries within
Europe (driven by strong bookings growth in central and southern Europe), as well as in our Asian
markets (particularly in Korea, India and China). We believe the increased bookings in these areas
are a result of the improvement in the global economy as well as the improvements the Company has
made in the customer value proposition. The Company has continued to invest in technology to
diversify its product offerings and provide customers a broad array of technology-based solutions
for their talent management strategy. For example, in the fourth quarter of 2009, we launched our
Power Resume Search product to customers within the United States, which is the first of several
new employer products we expect to launch from our 6Sense technology platform. We believe the
continued rollout of the Power Resume Search product in 2010, which included the launch in the
United Kingdom in the first quarter of 2010 and France in
October 2010, will drive new customer
sales in resume search and some of our combined Career product packages. Our Internet Advertising
& Fees revenue remained relatively flat in first nine months of 2010 compared to the same period of
2009.
Salary and related expenses increased $14.0 million, or 4.0%, in the first nine months of 2010
compared to the same period of 2009, which includes $1.6 million of unfavorable foreign exchange
impact and $1.9 million of costs attributable to the operations of the HotJobs Assets. This
increase in salaries and related expenses resulted primarily from increased costs associated with
the reintroduction of certain employee incentive programs which were modified in 2009, increased
variable compensation costs for the Company’s sales force resulting from increased booking activity
in 2010, and increased stock-based compensation resulting from our broader equity and incentive
programs. These increases were partially offset by decreased regular salary costs primarily
associated with reduced headcount in 2010 compared to 2009.
Office and general expenses increased $0.5 million, or 0.3%, in the first nine months of 2010
compared to the same period of 2009, which included $0.7 million of unfavorable foreign exchange
impact, $18.2 million of acquisition and integration-related expenses associated with the
acquisition of the HotJobs Assets and $0.7 million of costs attributable to the operations of the
HotJobs Assets. This increase in office and general expenses resulted primarily from increased
legal, professional and other fees relating to acquisition and integration-related costs associated
with the acquisition of the HotJobs Assets, partially offset by decreased bad debt expense,
decreased occupancy costs and decreased legal fees in 2010 due to the completion of the
investigation of our historical stock option grant practices. The Company does not allocate
acquisition and integration-related expenses to their reportable segments. Accordingly, the $18.2
million of acquisition and integration-related expenses incurred in the nine months ended September
30, 2010 associated with the acquisition of the HotJobs Assets is recorded as a corporate expense.
26
Marketing and promotion expenses decreased $6.2 million, or 3.8%, in the first nine months of 2010
compared to the same period of 2009, which includes $0.6 million of unfavorable foreign exchange
impact and $3.3 million of costs attributable to the operations of the HotJobs Assets. The
reduction in marketing and promotion expenses resulted primarily from a more focused spending
program in the first quarter of 2010, which included significant reductions in all categories of
marketing and promotion and concentration on effective and productive investments. These reductions
in the first quarter of 2010 were partially offset by increased investment in the second and third
quarter of 2010 in our Careers — International segment, increased online media costs in our
Internet Advertising & Fees segment, primarily related to our lead generation business, and
increased costs within our Careers — North America segment primarily related to the traffic
agreement with Yahoo!, which became effective on August 24, 2010.
In the third quarter of 2009, the Company reversed a previously recorded accrual of $6.9 million
relating to settlement of all actions seeking recoveries from the Company as an outgrowth of the
Company’s historical stock option grant practices.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the first nine months of 2010.
Our consolidated operating loss was $44.1 million in the first nine months of 2010, compared to an
operating loss of $12.2 million in the first nine months of 2009, as a result of the factors
discussed above.
Careers — North America
The operating results of our Careers — North America segment for the nine months ended September
30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
301,134 |
|
|
|
100.0 |
% |
|
$ |
316,187 |
|
|
|
100.0 |
% |
|
$ |
(15,053 |
) |
|
|
(4.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
143,373 |
|
|
|
47.6 |
% |
|
|
145,606 |
|
|
|
46.1 |
% |
|
|
(2,233 |
) |
|
|
(1.5 |
)% |
Office and general |
|
|
60,821 |
|
|
|
20.2 |
% |
|
|
69,467 |
|
|
|
22.0 |
% |
|
|
(8,646 |
) |
|
|
(12.4 |
)% |
Marketing and promotion |
|
|
64,485 |
|
|
|
21.4 |
% |
|
|
79,552 |
|
|
|
25.2 |
% |
|
|
(15,067 |
) |
|
|
(18.9 |
)% |
Restructuring and other special charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
3,758 |
|
|
|
1.2 |
% |
|
|
(3,758 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
268,679 |
|
|
|
89.2 |
% |
|
|
298,383 |
|
|
|
94.4 |
% |
|
|
(29,704 |
) |
|
|
(10.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
32,455 |
|
|
|
10.8 |
% |
|
$ |
17,804 |
|
|
|
5.6 |
% |
|
$ |
14,651 |
|
|
|
82.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in our Careers — North America segment decreased $15.1 million, or 4.8%, in the first nine
months of 2010 compared to the same period of 2009, which includes $1.7 million of favorable
foreign exchange impact and $5.9 million of revenue attributable to the operations of the HotJobs
Assets. Revenue recognized in the first nine months of 2010 was negatively impacted by the lower
beginning deferred revenue balance when compared to the first nine months of 2009. We are
continuing to see improvements in most business sectors within North America, including strong
bookings growth in our large enterprise, e-commerce, government and staffing customer sectors. We
believe the increased bookings in these areas are a result of the
improvement in the economy in North America
as well as the improvements the Company has made in the customer value proposition. The Company has
continued to invest in technology to diversify its product offerings and provide customers a broad
array of technology-based solutions for their talent management strategy. For example, in the
fourth quarter of 2009, we launched our Power Resume Search product to customers within the United
States and believe this new technology will continue to attract new customers to Monster and drive
future revenue in the form of customers paying a premium price for the efficiency of filling
positions.
Salary and related expenses decreased $2.2 million, or 1.5%, in the first nine months of 2010
compared to the same period of 2009, which includes $1.1 million of unfavorable foreign exchange
impact and $1.9 million of expenses attributable to the operations of the HotJobs Assets. This
decrease in salaries and related expense resulted primarily from decreased regular salary costs of
$12.3 million, resulting from reduced headcount in 2010 compared to 2009. These decreases were
partially offset by $4.8 million of increased costs associated with the reintroduction of certain
employee incentive programs which were modified in 2009, $4.5 million of increased variable
compensation costs for the Company’s sales force resulting from increased booking activity in 2010
and $1.1 million of increased stock-based compensation resulting from our broader equity and
incentive programs.
27
Office and general expenses decreased by $8.6 million, or 12.4%, in the first nine months of 2010
compared to the same period of 2009, which includes $0.7 million of expenses attributable to the
operations of the HotJobs Assets. This decrease in office and general expenses resulted primarily
from $4.2 million of decreased bad debt expense in 2010, primarily associated with increased bad
debt charges recorded in 2009 relating to customers negatively impacted by the global recession, as
well as $3.1 million of decreased depreciation expense in 2010 resulting from certain assets that
were abandoned and fully expensed in 2009. These decreases were partially offset by increased
travel related expenses of $1.0 million and increased amortization expense of $0.6 million
associated with the acquisition of the HotJobs Assets.
Marketing and promotion expenses decreased $15.1 million, or 18.9%, in the first nine months of
2010 compared to the same period of 2009, which includes $0.3 million of unfavorable foreign
exchange impact and $3.3 million of expenses attributable to the operations of the HotJobs Assets.
The reduction in marketing and promotion expenses resulted primarily from a more focused spending
program in the first nine months of 2010, which included significant reductions in all categories
of marketing and promotion, including the reduced number of Keep America Working tour events, the
decision not to renew certain sponsorship agreements and the significant reduction in offline
marketing costs incurred in the first quarter of 2009 to support the redesigned seeker website and
employer product. This was partially offset by increased costs in the third quarter of 2010
resulting from the traffic agreement the Company entered into with Yahoo!, which became effective
on August 24, 2010, whereby the Company became Yahoo!’s exclusive provider of career and job
content on the Yahoo! homepage in the United States and Canada.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the first nine months of 2010.
Our Careers — North America operating income was $32.5 million in the first nine months of 2010,
compared to $17.8 million in the first nine months of 2009, as a result of the factors discussed
above.
Careers — International
The operating results of our Careers — International segment for the nine months ended September
30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
259,168 |
|
|
|
100.0 |
% |
|
$ |
277,000 |
|
|
|
100.0 |
% |
|
$ |
(17,832 |
) |
|
|
(6.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
157,094 |
|
|
|
60.6 |
% |
|
|
144,449 |
|
|
|
52.1 |
% |
|
|
12,645 |
|
|
|
8.8 |
% |
Office and general |
|
|
71,484 |
|
|
|
27.6 |
% |
|
|
75,208 |
|
|
|
27.2 |
% |
|
|
(3,724 |
) |
|
|
(5.0 |
)% |
Marketing and promotion |
|
|
54,420 |
|
|
|
21.0 |
% |
|
|
51,846 |
|
|
|
18.7 |
% |
|
|
2,574 |
|
|
|
5.0 |
% |
Restructuring and other special charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
10,368 |
|
|
|
3.7 |
% |
|
|
(10,368 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
282,998 |
|
|
|
109.2 |
% |
|
|
281,871 |
|
|
|
101.8 |
% |
|
|
1,127 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
$ |
(23,830 |
) |
|
|
(9.2 |
)% |
|
$ |
(4,871 |
) |
|
|
(1.8 |
)% |
|
$ |
(18,959 |
) |
|
|
389.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Careers — International segment revenue decreased $17.8 million, or 6.4%, in the first nine
months of 2010 compared to the same period of 2009, which includes $0.3 million of favorable
foreign exchange impact, with revenue recognized in the first nine months of 2010 negatively
impacted by the lower beginning deferred revenue balance when compared to the first nine months of
2009. We are continuing to see improvements in bookings in Asia (particularly Korea, India and
China) as well as most countries within Europe, with particularly strong growth in central and
southern Europe. We believe the increased bookings in these areas are a result of the improvement
in the global economy as well as the improvements the Company has made in the customer value
proposition. We believe that the roll-out of Power Resume Search to certain European countries in
2010, which included the launch in the United Kingdom in the first quarter of 2010 and in France in
October 2010, will drive new customer sales in resume search and some of our combined Career
product packages.
Salary and related expenses increased $12.6 million, or 8.8%, in the first nine months of 2010
compared to the same period of 2009, which includes $0.5 million of unfavorable foreign exchange
impact. This increase in salaries and related expenses resulted primarily from $4.9 million of
increased regular salary costs in 2010, primarily relating to 2009 including a benefit associated
with a change in actuarial assumptions related to a statutory pension plan, $3.5 million of
increased variable compensation costs for the Company’s sales force relating to increased bookings
activity in 2010, $1.6 million of increased severance costs associated with our targeted global
headcount reductions, $1.5 million of increased stock based compensation resulting from our broader
equity and incentive programs and $1.1 of increased costs associated with the reintroduction of
certain employee incentive programs which were modified in 2009. These increases were partially
offset by decreased costs for temporary labor of $1.4 million.
28
Office and general expenses decreased $3.7 million, or 5.0%, in the first nine months of 2010
compared to the same period of 2009, which includes $0.6 million of unfavorable foreign exchange
impact. This decrease in office and general expenses resulted primarily from $2.7 million of
decreased bad debt expense, primarily associated with certain bad debt charges recorded in 2009
relating to customers negatively impacted by the global recession, decreased occupancy costs of
$0.9 million and $0.6 million of decreased travel related expenses, partially offset by increased
legal costs of $0.9 million.
Marketing and promotion expenses increased $2.6 million, or 5.0%, in the first nine months of 2010
compared to the same period of 2009, which includes $0.3 million of unfavorable foreign exchange
impact. This increase in marketing and promotion expenses in 2010 results primarily from our
continued expansion of our investments in Asia, particularly in China, as well as increased online
marketing activities in Europe, partially offset by decreased costs in the first quarter of 2010.
The 2007 restructuring program was completed in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the first nine months of 2010.
Our Careers — International operating loss was $23.8 million in the first nine months of 2010,
compared to an operating loss of $4.9 million in the first nine months of 2009, as a result of the
factors discussed above.
Internet Advertising & Fees
The operating results of our Internet Advertising & Fees segment for the nine months ended
September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
| (dollars in thousands) |
|
2010 |
|
|
Revenue |
|
|
2009 |
|
|
Revenue |
|
|
(Decrease) |
|
|
(Decrease) |
|
Revenue |
|
$ |
98,762 |
|
|
|
100.0 |
% |
|
$ |
98,806 |
|
|
|
100.0 |
% |
|
$ |
(44 |
) |
|
|
(0.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and related |
|
|
37,152 |
|
|
|
37.6 |
% |
|
|
34,674 |
|
|
|
35.1 |
% |
|
|
2,478 |
|
|
|
7.1 |
% |
Office and general |
|
|
19,201 |
|
|
|
19.4 |
% |
|
|
17,670 |
|
|
|
17.9 |
% |
|
|
1,531 |
|
|
|
8.7 |
% |
Marketing and promotion |
|
|
38,747 |
|
|
|
39.2 |
% |
|
|
32,272 |
|
|
|
32.7 |
% |
|
|
6,475 |
|
|
|
20.1 |
% |
Restructuring and other special charges |
|
|
— |
|
|
|
0.0 |
% |
|
|
616 |
|
|
|
0.6 |
% |
|
|
(616 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
95,100 |
|
|
|
96.3 |
% |
|
|
85,232 |
|
|
|
86.3 |
% |
|
|
9,868 |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
3,662 |
|
|
|
3.7 |
% |
|
$ |
13,574 |
|
|
|
13.7 |
% |
|
$ |
(9,912 |
) |
|
|
(73.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in our Internet Advertising & Fees segment remained flat at $98.8 million. In the first
nine months of 2010, we experienced a decrease in offline display advertising revenues which were
offset by an increase in revenue associated with lead generation. We continue to concentrate our
resources on revenues from lead generation and online display advertising, innovation of new products and increased audience reach.
Operating expenses increased $9.9 million, or 11.6%, in the first nine months of 2010 compared to
the same period in 2009. This increase in operating expenses primarily resulted from $6.5 million
of increased marketing and promotion costs, primarily associated with expanding our reach and
growing the lead generation business and $1.6 million of increased costs associated with the
reintroduction of certain employee incentive programs which were modified in 2009.
The 2007 restructuring program was complete in the second quarter of 2009 and, accordingly, no
restructuring charges were recorded in the first nine months of 2010.
Our Internet Advertising & Fees operating income was $3.7 million in the first nine months of 2010,
compared to operating income of $13.6 million in the first nine months of 2009, as a result of the
factors discussed above.
Interest and Other, net
Interest and other, net, for the nine months ended September 30, 2010 and 2009 resulted in an
expense of $1.0 million and income of $1.2 million, respectively. Interest and other, net,
primarily related to interest expense on the Company’s outstanding debt, interest income associated
with the Company’s various investments, foreign currency gains or losses and gains or losses on the
Company’s auction rate securities. The decrease in interest and other, net, of $2.2 million
resulted primarily from decreased interest income, primarily associated with the significant
decline in investment interest rates experienced during 2010, higher credit facility borrowing
costs, higher unused fees, higher amortization costs associated with capitalized deferred financing
fees and foreign currency losses in 2010 resulting mainly from losses on intercompany settlements
and hedging activity. These reductions in interest and other, net were partially offset by funds
received in 2010 from RBC related to auction rate security contingent settlements and gains from
auction rate security redemptions.
29
Income Taxes
Income taxes for the nine months ended September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Loss before income taxes |
|
$ |
(45,180 |
) |
|
$ |
(10,950 |
) |
|
$ |
(34,230 |
) |
|
|
(312.6 |
)% |
Income taxes |
|
|
(14,831 |
) |
|
|
(35,463 |
) |
|
|
20,632 |
|
|
|
58.2 |
% |
Effective tax rate |
|
|
32.8 |
% |
|
|
323.9 |
% |
|
|
|
|
|
|
|
|
Our effective tax rates differ from the statutory rate due to the impact of state and local income
taxes, tax exempt interest income, certain nondeductible expenses, foreign earnings taxed at
different tax rates, valuation allowances and accrual of interest on accrued tax liabilities. 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 United States Internal Revenue Service and other tax
authorities. We regularly assess the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of our provision for income taxes.
The Company is currently under examination in several domestic and international tax jurisdictions.
Presently, no material adjustments have been proposed. The Company estimates that it is reasonably
possible that unrecorded tax benefits may be reduced by as much as $25.0 million in the next twelve
months due to the expiration of the statute of limitations or
settlement of examinations. The tax matters concerned relate to
the allocation of income among jurisdictions and the characterization of certain intercompany
loans.
Due to the expiration of the statute of limitations in the third quarter of 2009, the Company
reversed $30.6 million of accrued tax attributable to uncertain tax positions in the three and nine
months ended September 30, 2009, of which $26.6 million impacted the effective tax rate. The
Company also reversed accrued interest and penalties related to uncertain tax positions of $9.0 in
the three and nine months ended September 30, 2009, which on a net tax basis impacted the effective
rate by $5.7 million. The total benefit reflected in the third quarter of 2009 income tax provision
due to the reversal of tax and interest was $32.3 million. There were no reversals of uncertain tax
positions in the nine months ended September 30, 2010 which impacted the tax provision.
Loss in Equity Interests, Net
Loss in equity interests, net, for the nine months ended September 30, 2010 and 2009 was $2.5
million and $3.5 million, respectively. The Company’s equity investments consist of a 50% equity
interest in a company located in Australia and a 25% investment in a company located in Finland.
This decreased loss in the first nine months of 2010 primarily related to our Australian equity
investment, which recorded a decreased loss from operations in 2010.
Net (Loss) Income
Our consolidated net loss was $32.9 million in the first nine months of 2010, compared to net
income of $21.0 million in the first nine months of 2009, as a result of the factors discussed
above.
Diluted (Loss) Income Per Share
Diluted loss per share in the first nine months of 2010 was $0.27 compared to diluted income per
share of $0.17 in the first nine months of 2009. Diluted weighted average shares outstanding for
the nine months ended September 30, 2010 and 2009 was 120.5 million shares and 120.9 million
shares, respectively. For periods in which losses are presented, dilutive earnings per share
calculations do not differ from basic earnings per share because the effects of any potential
common stock equivalents are anti-dilutive and therefore not included in the calculation of
dilutive earnings per share.
30
Financial Condition
The following tables detail our cash and cash equivalents and marketable securities:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, |
|
|
December 31, |
|
|
Change |
|
| (dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
Cash and cash equivalents |
|
$ |
166,713 |
|
|
$ |
275,447 |
|
|
$ |
(108,734 |
) |
|
|
(39.5 |
)% |
Marketable securities (current and non-current) |
|
|
4,094 |
|
|
|
24,669 |
|
|
|
(20,575 |
) |
|
|
(83.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and marketable securities |
|
$ |
170,807 |
|
|
$ |
300,116 |
|
|
$ |
(129,309 |
) |
|
|
(43.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total assets |
|
|
8.9 |
% |
|
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
Consolidated cash flows for the nine months ended September 30, 2010 and 2009 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, |
|
|
September 30, |
|
|
Change |
|
| (dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
|
$ |
61,524 |
|
|
$ |
11,968 |
|
|
$ |
49,556 |
|
|
|
414.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for investing activities |
|
|
(242,865 |
) |
|
|
(47,313 |
) |
|
|
(195,552 |
) |
|
|
413.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) financing activities |
|
|
75,262 |
|
|
|
(11,230 |
) |
|
|
86,492 |
|
|
|
(770.2 |
)% |
Effect of exchange rates on cash |
|
|
(2,655 |
) |
|
|
11,792 |
|
|
|
(14,447 |
) |
|
|
(122.5 |
)% |
As of September 30, 2010, we had cash, cash equivalents and total marketable securities of $170.8
million, compared to $300.1 million as of December 31, 2009. Our decrease in cash, cash equivalents
and total marketable securities of $129.3 million in the first nine months of 2010 primarily
resulted from the acquisition of the HotJobs Assets. The payment to Yahoo! of $225.0 million was
funded by utilizing existing cash of $135.0 million and the remaining $90.0 million was funded from
borrowings under the revolving credit facility.
Cash provided by operating activities was $61.5 million for the nine months ended September 30,
2010, an increase of $49.6 million from the $12.0 million of cash provided by operating activities
for the nine months ended September 30, 2009. This increase in cash provided by operating
activities resulted primarily from increased cash flows provided by working capital items in 2010
of $140.5 million, primarily resulting from changes in accounts receivable, deferred revenue and
accounts payable, accrued liabilities and other. These increases were partially offset by $53.9
million of reduced cash flows provided by operating activities in 2010 due to a net loss in 2010 of
$32.9 million compared to net income in 2009 of $21.0 million, as well as the reduced operating
cash flows provided by deferred income taxes in 2010 of $31.8 million.
Cash used for investing activities was $242.9 million for the nine months ended September 30, 2010,
an increase of $195.6 million from cash used for investing activities of $47.3 million for the nine
months ended September 30, 2009. This increase is primarily a result of the acquisition of the
HotJobs Assets in the third quarter of 2010 for $225.0 million, partially offset by decreased
purchases of marketable securities of $7.5 million and increased sales and maturities of marketable
securities of $19.7 million.
Cash provided by financing activities was $75.3 million for the nine months ended September 30,
2010, an increase of $86.5 million from cash used for financing activities of $11.2 million for the
nine months ended September 30, 2009. This increase is primarily a result of the Company utilizing
$90.0 million of the revolving credit facility to partially fund the acquisition of the HotJobs
Assets.
Liquidity and Capital Resources
Our principal capital requirements have been to fund (i) working capital, (ii) marketing and
development of our Monster network, (iii) acquisitions, (iv) capital expenditures and (v) share
repurchases.
Historically, we have relied on funds provided by operating activities, equity offerings, short and
long-term borrowings and seller-financed notes to meet our liquidity needs. We invest our excess
cash predominantly in bank time deposits, U.S. treasury bills, money market funds and commercial
paper that matures within three months of its origination date and marketable securities. Due to
the current state of the financial markets, we have redeployed our excess cash during 2009 and 2010
in conservative investment vehicles such as money market funds that invest solely in U.S.
treasuries, top foreign sovereign regional, national and supra-national bank debt obligations and
bank deposits at prime money center banks. We actively monitor the third-party depository
institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of
principal while secondarily on maximizing yield on those funds. We can provide no assurances that
access to our invested cash and cash equivalents will not be impacted by adverse conditions in the
financial markets.
31
At any point in time we have funds in our operating accounts and customer accounts that are with
third party financial institutions. These balances in the United States may exceed the Federal
Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating
accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the
underlying financial institutions fail or could be subject to other adverse conditions in the
financial markets.
As of September 30, 2010, the Company held $4.5 million (at par and cost value) of investments in
an auction rate security. This security is a variable-rate debt instrument whose underlying
agreement has a contractual maturity in 24 years that has been issued by a state-related
higher-education agency and is collateralized by student loans guaranteed by the U.S. Department of
Education. While the Company continues to earn interest on its auction rate securities at the
maximum contractual rate (which was a blended rate of 0.47% at September 30, 2010) 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. Based on
third party valuations and other market observable inputs, the auction rate securities with an
original par value and cost of $4.5 million were recorded at a fair value of $4.1 million as of
September 30, 2010.
We believe that our current cash and cash equivalents, revolving credit facility and cash we
anticipate generating from operating activities will provide us with sufficient liquidity to
satisfy our working capital needs, capital expenditures and meet our investment requirements and
commitments through at least the next twelve months. Our cash generated from operating activities
is subject to fluctuations in the global economy and overall hiring demand.
Credit Facility
Borrowings under our credit facility were $135.0 million as of September 30, 2010 and $50.0 million
as of December 31, 2009.
In December 2007, the Company entered into a senior unsecured revolving credit facility that
provided for maximum borrowings of $250.0 million. On August 31, 2009 (the “Amendment Closing
Date”), with the objective of availing itself of the benefits of an improved credit market in an
ongoing unstable macroeconomic environment, the Company amended certain terms and increased its
borrowing capability under its existing credit agreement (the “Amended Credit Agreement”). The
Amended Credit Agreement maintained the Company’s existing $250.0 million revolving credit facility
and provided for a new $50.0 million term loan facility, for a total of $300.0 million in credit
available to the Company. The revolving credit facility and the term loan facility each mature on
December 21, 2012. The term loan is subject to annual amortization of principal, with $5.0 million
payable on each anniversary of the Amendment Closing Date and the remaining $35.0 million due at
maturity.
The Amended Credit Agreement provides for increases in the interest rates applicable to borrowings
and increases in certain fees. Borrowings under the Amended Credit Agreement will bear interest at
a rate equal to (i) LIBOR plus a margin ranging from 300 basis points to 400 basis points
depending, on the Company’s ratio of consolidated funded debt to trailing four-quarter consolidated
earnings before interest, taxes, depreciation and amortization (the “Consolidated Leverage Ratio”)
as defined in Amended Credit Agreement or (ii) for Dollar-denominated loans only, and upon the
Company’s election, the sum of (A) the highest of (1) the credit facility’s administrative agent’s
prime rate, (2) the sum of 0.50% plus the overnight federal funds rate on such day or (3) subject
to certain exceptions, the sum of 1.00% plus the 1-month LIBOR rate, plus (B) a margin ranging from
200 basis points to 300 basis points depending on the Company’s Consolidated Leverage Ratio. In
addition, the Company will be required to pay the following fees: (i) a fee on all outstanding
amounts of letters of credit at a rate per annum ranging from 300 basis points to 400 basis points
(depending on the Company’s Consolidated Leverage Ratio); and (ii) a commitment fee on the unused
portion of the revolving credit facility at a rate per annum ranging from 50 basis points to
75 basis points (depending on the Company’s Consolidated Leverage Ratio). The Company is no longer
required to pay a utilization fee on outstanding loans and letters of credit under any
circumstances.
32
The Amended Credit Agreement also increased the maximum permitted Consolidated Leverage Ratio to:
(a) 3.50:1.00 for the period beginning on August 31, 2009 and ending on September 29, 2010;
(b) 3.00:1.00 for the period beginning on September 30, 2010 and ending on September 29, 2011; and
(c) 2.75:1.00 beginning on September 30, 2011 and any time thereafter. The Company may repay
outstanding borrowings at any time during the term of the credit facility without any prepayment
penalty. The Amended Credit Agreement contains covenants which restrict, among other things, the
ability of the Company to borrow, create liens, pay dividends, repurchase its common stock, acquire
businesses and other investments, enter into new lines of business, dispose of property, guarantee
debts of others or, lend funds to affiliated companies and contains requirements regarding the
maintenance of certain financial statement amounts and ratios, all as provided in the Amended
Credit Agreement. In January 2010, the Company received a technical amendment to the permitted
investments section of the Amended Credit Agreement to accommodate the particular legal structure
of the acquisition of the HotJobs Assets (see Note 5). As of September 30, 2010, the Company was
in full compliance with its covenants.
Additionally, on the Amendment Closing Date the Company entered into the U.S. Pledge Agreement
which along with subsequent separate pledge agreements shall cause the Company’s obligations under
the Amended Credit Agreement to be secured by a pledge of: (a) all of the equity interests of the
Company’s domestic subsidiaries (other than certain specified inactive subsidiaries) and (b) 65% of
the equity interests of each first-tier material foreign subsidiary of the Company.
At September 30, 2010, the utilized portion of this credit facility was $45.0 million in borrowings
on the term loan facility, $90.0 million of borrowings on the revolving credit facility, primarily
relating to the funding of the acquisition of the HotJobs Assets, and $1.6 million for standby
letters of credit. The portion of the borrowings on the term loan that is due within one year,
which represents $5.0 million of the total borrowings, is classified as short-term on the
consolidated balance sheet as of September 30, 2010 and the remaining borrowings on the term loan
of $40.0 million is classified as long-term. As of September 30, 2010, $158.4 million was unused on
the Company’s revolving credit facility, of which $87.7 million is available to the Company to be
used based on the maximum Consolidated Leverage Ratio. At September 30, 2010, the one month
US Dollar LIBOR rate, the credit facility’s administrative agent’s prime rate, and the overnight
federal funds rate were 0.26%, 3.25% and 0.15%, respectively. As of September 30, 2010, the Company
used the one month US Dollar LIBOR rate for the interest rate on these borrowings with an interest
rate of 3.51%.
Acquisition of the HotJobs Assets from Yahoo! Inc.
On August 24, 2010, the Company completed the acquisition of HotJobs Assets for a purchase price of
$225.0 million. Concurrent with the closing of the acquisition, Monster and Yahoo! entered into a
three year commercial traffic agreement whereby Monster became Yahoo!’s exclusive provider of
career and job content on the Yahoo! homepage in the United States and Canada. The Company funded
the purchase of the HotJobs Assets with available cash and proceeds from the Company’s revolving
credit facility. In the three and nine months ended September 30, 2010, the Company incurred $8.6
million and $18.2 million, respectively, of acquisition and integration-related costs associated
with the acquisition of the HotJobs Assets, which were expensed as incurred. These costs primarily
relate to legal fees, professional fees and other integration costs associated with the
acquisition. We expect to continue to incur significant acquisition and integration-related costs
in 2010 and the first quarter of 2011 relating to the acquisition of the HotJobs Assets.
Income Taxes
Thus far in 2010, we have incurred tax losses and have not paid significant taxes in the United
States. We expect to carry any 2010 tax losses forward to future years. We continue to have
taxable income in certain foreign tax jurisdictions in which we pay taxes on a quarterly basis.
Restructuring Activities
We have recorded significant charges and accruals in connection with our 2007 restructuring
initiatives, prior business reorganization plans and discontinued operations. 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. As of June 30, 2009,
the Company had completed all of the initiatives relating to the 2007 restructuring program and no
new charges will be incurred in the future relating to this program.
Operating Lease Obligations
We have recorded significant charges and accruals relating to terminating certain operating lease
obligations before the end of their terms once the Company no longer derives economic benefit from
the lease. The liability is recognized and measured at its fair value when we determine that the
cease use date has occurred and the fair value of the liability is determined based on the
remaining lease rentals due, reduced by estimated sublease rental income that could be reasonably
obtained for the property. The estimate of subsequent sublease rental income may change and require
future changes to the fair value of the liabilities for the lease obligations.
33
Share Repurchase Plan
As of September 30, 2010, we have no authorization to purchase shares of our Common Stock under any
share repurchase plan.
Fair Value Measurement
The Company values its assets and liabilities using the methods of fair value as described in ASC
820, Fair Value Measurements and Disclosures. ASC 820 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. Level 1 is defined as
observable inputs, such as quoted prices in active markets; Level 2 is defined as inputs other than
quoted prices in active markets that are either directly or indirectly observable; and Level 3 is
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. There have been no transfers of assets or liabilities between the fair value measurement
classifications in the nine months ended September 30, 2010.
The Company has certain assets that are required to be recorded at fair value on a recurring basis
in accordance with accounting principles generally accepted in the United States. These assets
include cash equivalents and available-for-sale securities. The following table summarizes those
assets measured at fair value on a recurring basis as of September 30, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
1,150 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,150 |
|
Bank time deposits |
|
|
— |
|
|
|
46,622 |
|
|
|
— |
|
|
|
46,622 |
|
Commercial paper |
|
|
— |
|
|
|
62,592 |
|
|
|
— |
|
|
|
62,592 |
|
Government bonds — U.S. |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Government bonds — foreign |
|
|
— |
|
|
|
5,057 |
|
|
|
— |
|
|
|
5,057 |
|
Tax exempt auction rate securities |
|
|
— |
|
|
|
— |
|
|
|
4,094 |
|
|
|
4,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,150 |
|
|
$ |
114,271 |
|
|
$ |
4,094 |
|
|
$ |
119,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has certain liabilities that are required to be recorded at fair value on a
non-recurring basis, summarized as follows as of September 30, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease exit liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,952 |
|
|
$ |
17,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,952 |
|
|
$ |
17,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The lease exit liabilities relate to vacated facilities associated with previously discontinued
operations and realignment activities of the Company and are recorded as accrued expenses and other
current liabilities in the consolidated balance sheet as of September 30, 2010. The fair value of
the Company’s lease exit liabilities within the Level 3 classification is based on a discounted
cash flow model applied over the remaining term of the leased property.
The changes in the fair value of the Level 3 assets and liabilities are as follows:
| |
|
|
|
|
| |
|
Tax Exempt |
|
| |
|
Auction Rate |
|
| |
|
Bonds |
|
Balance, December 31, 2009 |
|
$ |
23,560 |
|
Redemptions |
|
|
(20,600 |
) |
Realized and unrealized gain included in interest and other, net |
|
|
1,134 |
|
|
|
|
|
Balance, September 30, 2010 |
|
$ |
4,094 |
|
|
|
|
|
| |
|
|
|
|
| |
|
Lease Exit |
|
| |
|
Liability |
|
Balance, December 31, 2009 |
|
$ |
25,112 |
|
Expense |
|
|
700 |
|
Cash Payments |
|
|
(7,860 |
) |
|
|
|
|
Balance, September 30, 2010 |
|
$ |
17,952 |
|
|
|
|
|
34
The carrying value for cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses, deferred revenue and other current liabilities approximate fair value because of the
immediate or short-term maturity of these financial instruments. The Company’s debt relates to
borrowings under its revolving credit facility and term loan, which approximates fair value due to market
interest rates.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). In connection with the preparation of our
financial statements, we are required to make assumptions and estimates about future events, and
apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the
related disclosures. We base our assumptions, estimates and judgments on historical experience,
current trends and other factors that management believes to be relevant at the time our
consolidated financial statements are prepared. On a regular basis, management reviews the
accounting policies, assumptions, estimates and judgments to ensure that our financial statements
are presented fairly and in accordance with GAAP. However, because future events and their effects
cannot be determined with certainty, actual results could differ from our assumptions and
estimates, and such differences could be material.
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 our 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 management’s most difficult,
subjective or complex judgments, resulting from the need to make estimates about the effect of
matters that are inherently uncertain. Management has reviewed these critical accounting estimates
and related disclosures with the Audit Committee of our Board of Directors.
Revenue Recognition and Accounts Receivable
The Company recognizes revenue on agreements in accordance with ASC 605, Revenue Recognition.
Careers — North America and Careers — International. Our Careers — North America and Careers —
International segments primarily earn revenue from the placement of job postings on the websites
within the Monster network, access to the Monster network’s 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 network’s resume database and other career-related services are recognized over the
length of the underlying subscriptions, typically from two weeks to twelve months. Revenue
associated with multiple element contracts is allocated based on the relative 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 advertiser’s listing. Revenue from lead generation is recognized as leads are
delivered to advertisers. In addition, we recognize revenue for certain subscription products
ratably over the length of the subscription. We review accounts receivable for those that may
potentially be uncollectible and any accounts receivable balances that are determined to be
uncollectible are included in our allowance for doubtful accounts. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance.
Fair Value Measurements
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents,
accounts receivable, accounts payable and accrued expense and other current liabilities approximate
fair value because of the immediate or short-term maturity of these financial instruments. Our debt
consists of borrowings under our credit facility, which approximates fair value due to market
interest rates.
35
Asset Impairment
Business Combinations, Goodwill and Intangible Assets. We account for business combinations in
accordance with ASC 805, Business Combinations. The acquisition method of accounting requires that
assets acquired and liabilities assumed be recorded at their fair values on the date of a business
acquisition. Our consolidated financial statements and results of operations reflect an acquired
business from the completion date of an acquisition.
The judgments that we make in determining the estimated fair value assigned to each class of assets
acquired and liabilities assumed, as well as asset lives, can materially impact net income in
periods following a business combination. We generally use either the income, cost or market
approach to aid in our conclusions of such fair values and asset lives. The income approach
presumes that the value of an asset can be estimated by the net economic benefit to be received
over the life of the asset, discounted to present value. The cost approach presumes that an
investor would pay no more for an asset than its replacement or reproduction cost. The market
approach estimates value based on what other participants in the market have paid for reasonably
similar assets. Although each valuation approach is considered in valuing the assets acquired, the
approach ultimately selected is based on the characteristics of the asset and the availability of
information.
We evaluate our goodwill for impairment annually or more frequently if indicators of potential
impairment exist. The first step of the impairment review process compares the fair value of the
reporting unit in which the goodwill resides to the carrying value of that reporting unit. The
second step of the impairment review measures the amount of impairment loss, if any, by comparing
the implied fair value of the reporting unit goodwill with its carrying amount. The determination
of whether or not goodwill has become impaired involves a significant level of judgment in the
assumptions underlying the approach used to determine the value of our reporting units. Changes in
our strategy and/or market conditions could significantly impact these judgments and require
reductions to recorded amounts of intangible assets. As of September 30, 2010, none of our
reporting units with significant goodwill were at risk of failing step one of the goodwill
impairment test.
Long-lived assets. We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. Determining
whether an impairment has occurred typically requires various estimates and assumptions, including
determining which cash flows are directly related to the potentially impaired asset, the useful
life over which cash flows will occur, their amount and the asset’s residual value, if any. In
turn, measurement of an impairment loss requires a determination of fair value, which is based on
the best information available. We use internal discounted cash flows estimates, quoted market
prices when available and independent appraisals, as appropriate, to determine fair value. We
derive the required cash flow estimates from our historical experience and our internal business
plans and apply an appropriate discount rate.
Income Taxes
We utilize the liability method of accounting for income taxes as set forth in ASC 740, Income
Taxes. Under the liability method, deferred taxes are determined based on the temporary differences
between the financial statement and tax basis of assets and liabilities using tax rates expected to
be in effect during the years in which the basis differences reverse. A valuation allowance is
recorded when it is more likely than not that some of the deferred tax assets will not be realized.
In 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 be
recorded, decreasing earnings in the period in which such determination is made.
We assess our income tax positions and record tax benefits for all years subject to examination
based upon our evaluation of the facts, circumstances and information available at the reporting
date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will
be sustained, we have recorded the largest amount of tax benefit that may potentially be realized
upon ultimate settlement with a taxing authority that has full knowledge of all relevant
information. For those income tax positions where there is a 50% or less likelihood that a tax
benefit will be sustained, no tax benefit has been recognized in the financial statements.
36
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC 718, Stock Compensation. Under the fair value recognition provisions of ASC
718, stock-based compensation cost is measured at the grant date based on the fair value of the
award and is recognized as expense ratably over the requisite service period, net of estimated
forfeitures. We use the Black-Scholes option-pricing model to determine the fair value of stock
option awards and measure non-vested stock awards using the fair market value of our common stock
on the date the award is approved. For certain 2008 awards, which were market-based grants, we
estimated the fair value of the award utilizing a Monte Carlo simulation model. We award stock
options, non-vested stock, market-based non-vested stock and performance-based non-vested stock to
employees, directors and executive officers.
Restructuring and Other Operating Lease Obligations
We recognize a liability for costs to terminate an operating lease obligation before the end of its
term when we no longer derive economic benefit from the lease. The liability is recognized and
measured at its fair value when we determine that the cease use date has occurred and the fair
value of the liability is determined based on the remaining lease rentals due, reduced by estimated
sublease rental income that could be reasonably obtained for the property. The estimate of
subsequent sublease rental income may change and require future changes to the fair value of the
liabilities for the lease obligations.
Equity Investments
Gains and losses in equity interest for the three months ended September 30, 2010, resulting from
our equity method investments in businesses in Finland and Australia, are based on unaudited
financial information of those businesses. Although we do not anticipate material differences,
audited results may differ.
Recently Issued Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the
requirements for establishing separate units of accounting in a multiple element arrangement and
requires the allocation of arrangement consideration to each deliverable based on the relative
selling price. The selling price for each deliverable is based on vendor-specific objective
evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling
price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue
arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not
expect that the provisions of the new guidance will have a material effect on its consolidated
financial statements.
In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value
Measurements, which requires additional disclosures about the amounts of and reasons for
significant transfers in and out of Level 1 and Level 2 fair value measurements. This standard
also clarifies existing disclosure requirements related to the level of disaggregation of fair
value measurements for each class of assets and liabilities and disclosures about inputs and
valuation techniques used to measure fair value for both recurring and non-recurring Level 2 and
Level 3 measurements. Since this new accounting standard only required additional disclosure, the
adoption of the standard in the first quarter of 2010 did not impact the Company’s consolidated
financial statements. Additionally, effective for interim and annual periods beginning after
December 15, 2010, this standard will require additional disclosure and require an entity to
present disaggregated information about activity in Level 3 fair value measurements on a gross
basis, rather than one net amount.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information in this section should be read in connection with the information on financial
market risk related to non-U.S. currency exchange rates, changes in interest rates and other
financial market risks in Part II, Item 7A, “ Quantitative and Qualitative Disclosures About Market
Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2009.
Foreign Exchange Risk
During the three and nine months ended September 30, 2010, revenue from our international
operations accounted for 40.2% and 41.8%, respectively, 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, British
Pounds and Czech Korunas. 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
strengthening U.S. dollar in the three months ended September 30, 2010 negatively impacted reported
revenue and operating income by approximately $4.4 million and $1.0 million, respectively, compared
to the corresponding 2009 period. The effect of the weakening U.S. dollar in the nine months ended
September 30, 2010 favorably impacted reported revenue by approximately $2.0 million and negatively
impacted reported operating income by approximately $0.7 million, compared to the corresponding
2009 period.
37
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 September 30, 2010 of
$150 million, an assumed 5%, 10% and 20% negative currency movement would result in fair value
declines of $7.5 million, $15.0 million and $29.9 million, respectively.
We use forward foreign exchange contracts as cash flow hedges to offset risks related to certain
foreign currency transactions. These transactions primarily relate to non-functional currency
denominated inter-company funding loans, non-functional currency denominated accounts receivable
and non-functional currency denominated accounts payable. We do not enter into derivative financial
instruments for trading purposes.
The financial statements of our non-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 three and nine months ended September 30,
2010, our cumulative translation adjustment account increased $48.4 million and $4.8 million,
respectively, primarily attributable to the foreign currency movements of the U.S. dollar against
the Euro, British Pound, Swedish Krona and Korean Won.
Interest Rate Risk
Credit Facility
As of September 30, 2010, our debt was comprised primarily of borrowings under our credit facility.
The interest rates under our credit facility may be reset due to fluctuation in a market-based
index, such as the federal funds rate, the 1-month LIBOR rate or the credit facility’s
administrative agent’s prime rate. Assuming the amount of borrowings available under our credit
facility was fully drawn during the third quarter of 2010, we would have had $295.0 million
outstanding under such facility, and a hypothetical 1.00% (100 basis-point) change in the interest
rate of our credit facility would have changed our quarterly pre-tax earnings by approximately
$0.7 million for the three months ended September 30, 2010. Assuming the amount of borrowings under
our credit facility was equal to the amount of outstanding borrowings on September 30, 2010, we
would have had $137.6 million of total usage and a hypothetical 1.00% (100 basis-point) change in
the interest rate of our credit facility would have changed our pre-tax earnings by approximately
$0.3 million for the three months ended September 30, 2010. We do not manage the interest rate risk
on our debt through the use of derivative instruments.
Investment Portfolio
Our investment portfolio is comprised primarily of cash and cash equivalents and investments in a
variety of debt instruments of high quality issuers, money market funds which invest in U.S
Treasuries, top sovereign, regional, national and supra-national bank commercial paper, bank time
deposits and government bonds that mature within nine months of their origination date, as well as
auction rate securities. A hypothetical 1.00% (100 basis-point) change in interest rates applicable
to our investment portfolio would have changed our quarterly pretax earnings by approximately
$0.4 million for the three months ended September 30, 2010.
Other Market Risks
Investments in Auction Rate Securities
As of
September 30, 2010, the Company held $4.5 million (at par
and cost value) of an investment in
an auction rate security. Given current conditions in the auction rate securities market as
described in Note 7, Investments, of the Notes to Consolidated Financial Statements in this
Quarterly Report on Form 10-Q, the auction rate security with the original par value and cost of
$4.5 million was written down to an estimated fair value of $4.1 million. We may incur additional
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 investment. A hypothetical 1.00% (100-basis-point)
loss from the par value of this investment would have resulted in a minimal impairment as of
September 30, 2010.
38
ITEM 4. CONTROLS AND PROCEDURES
Monster maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
of Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls and procedures, Monster’s
management recognized that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives, and Monster’s
management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Monster has carried out an evaluation, as of the
end of the period covered by this report, under the supervision and with the participation of
Monster’s management, including its Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of Monster’s disclosure controls and procedures. Based
upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial
Officer concluded that Monster’s disclosure controls and procedures were effective.
There have been no significant changes in Monster’s internal controls over financial reporting that
occurred during the fiscal quarter ended September 30, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. 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.
In May 2010, Site Update Solutions LLC filed suit against the Company for allegedly infringing a
patent relating to search engine databases. The lawsuit-entitled Site Update Solutions LLC v. Accor
North America, Inc., et al. (Civil Action No. 2:10-cv-151) is pending in the United States District
Court for the Eastern District of Texas, and there are 34 other defendants named in the plaintiff’s
original complaint. The plaintiff seeks monetary damages, attorney’s fees and other costs. The
Court has entered a schedule in the case which includes a final pre-trial conference set for March
2012. The Company intends to vigorously defend this matter.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the
factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2009, which could materially affect our business, financial
position and results of operations. There are no material changes from the risk factors set forth
in Part I, “Item 1A., Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009.
ITEM 6. EXHIBITS
The following exhibits are filed as a part of this report:
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| Exhibit |
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| Number |
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Description |
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15.1 |
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Letter from BDO USA, LLP regarding unaudited interim financial information. |
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31.1 |
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Certification by Salvatore Iannuzzi pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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|
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|
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31.2 |
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Certification by Timothy T. Yates pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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|
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32.1 |
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Certification by Salvatore Iannuzzi pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
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|
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32.2 |
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Certification by Timothy T. Yates pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MONSTER WORLDWIDE, INC. (Registrant)
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| Dated: October 29, 2010 |
By: |
/s/ SALVATORE IANNUZZI
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Salvatore Iannuzzi |
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Chairman, President and Chief Executive Officer
(principal executive officer) |
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| Dated: October 29, 2010 |
By: |
/s/ TIMOTHY T. YATES
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Timothy T. Yates |
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Executive Vice President and Chief Financial Officer
(principal financial officer) |
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| Dated: October 29, 2010 |
By: |
/s/ JAMES M. LANGROCK
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James M. Langrock |
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Senior Vice President, Finance and Chief Accounting Officer
(principal accounting officer) |
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40
EXHIBIT INDEX
| |
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| Exhibit |
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| Number |
|
Description |
| |
|
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|
|
| |
15.1 |
|
|
Letter from BDO USA, LLP regarding unaudited interim financial information. |
| |
|
|
|
|
| |
31.1 |
|
|
Certification by Salvatore Iannuzzi pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
|
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31.2 |
|
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Certification by Timothy T. Yates pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
|
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32.1 |
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Certification by Salvatore Iannuzzi pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
|
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32.2 |
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Certification by Timothy T. Yates pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
41