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MWW > SEC Filings for MWW > Form 10-K on 10-Feb-2014All Recent SEC Filings

Show all filings for MONSTER WORLDWIDE, INC.

Form 10-K for MONSTER WORLDWIDE, INC.


10-Feb-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We make forward-looking statements in this report and in other reports and proxy statements that we file with the 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; risks associated with cuts in government spending; risks relating to our foreign operations; risks relating to the European debt crisis and market perceptions concerning the instability of the euro; our ability to maintain and enhance the value of our brands, particularly Monster; competition; fluctuations in our quarterly operating results; our ability to adapt to rapid developments in technology; our ability to continue to develop and enhance our information technology systems; concerns related to our privacy policies and our compliance with applicable data protection laws and regulations; intrusions on our systems; interruptions, delays or failures in the provision of our services; our vulnerability to intellectual property infringement claims brought against us by others; our ability to protect our proprietary rights and maintain our rights to use key technologies of third parties; the risk that acquisitions or partnerships may not achieve the expected benefits to us; 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 this report.

OVERVIEW

Business

Monster Worldwide is the global leader in successfully connecting job opportunities and people. Monster uses the world's most advanced technology to help people Find Better®, matching people to job opportunities via digital, social and mobile solutions including monster.com®, our flagship website, and employers to the best talent using our vast array of products and services. As an Internet pioneer, more than 200 million people have registered on the Monster Worldwide network, with over 1 million new members registering each month. Today, with a local presence in more than 40 countries, we provide the broadest, most sophisticated job seeking, career management, recruitment and talent management capabilities globally, with the widest range of job opportunities across the employment spectrum as well as the most diverse talent to fill those positions. We offer our unique 6Sense® search technology to allow job seekers and employers to quickly find a precise match. Increasingly important, our Career Ad Network®, which is a recruitment-focused online advertising network, reaches, on average, over 110 million Internet users globally each month. Our services and solutions include: searchable job advertisements; resume database access; professional networking; recruitment media solutions through our advertising network and partnerships; and other career-related content. Job seekers can search our job advertisements and post their resumes for free on each of our career websites and mobile applications. Employers pay to: advertise available jobs and recruitment related services; search our resume database; and access other career-related services.

We operate in an industry and in markets that are continually evolving with the entrance of new competitors and the changing needs of seekers and employers. The Company adjusts its product offerings and makes new investments in its technology platform in order to meet the challenges presented by the market evolution. Our patented 6Sense semantic search and matching technology is the backbone of a growing family of products for both job seekers and employers. Our innovative and proprietary semantic resume search product, Power Resume Search® ("PRS") is available to customers in North America, Germany, the United Kingdom, France and the Netherlands. Our 6Sense technology transforms traditional keyword-based processes by assisting our customers in matching candidates to their required job specifications. For seekers, our 6Sense powered job search has changed how they explore, find and apply for jobs. We introduced our cloud-based search product SeeMore® in the third quarter of 2011, which allows our customers to utilize our patented semantic search technology on their own talent databases. Our Career Ad Network ("CAN") is a recruitment-focused online advertising network that distributes our customers' job advertisements across a broad array of targeted websites and is an effective way of expanding our customers' pool of active and passive seekers. On a global basis, nearly 20% of Monster's business is derived from our advanced and proprietary product offerings, including PRS, SeeMore and CAN, which continue to outperform our more traditional offerings.


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We operate a government solutions business, Monster Government Solutions ("MGS"), which sells software solutions to federal, state and local governments and educational institutions within the United States. In 2012, we expanded our MGS business to Europe and signed the largest international transaction in the Company's history with the United Kingdom Government for over $20 million. MGS provides recruitment solutions that engage seekers and employers online, enable MGS customers to attract qualified candidates, expedite time to hire and create online communities using innovative technologies and services. These services primarily include customized career sites hosted by MGS utilizing a "Software as a Service" ("SaaS") model. Additionally, we offer our customers applicant tracking services, diversity offerings and other ancillary services either directly or through alliances to meet the changing needs of our customers.

Our Internet Advertising & Fees business operates a network of websites that connect companies to highly targeted audiences at critical stages in their lives. Our goal is to offer compelling online services for the users of such websites through personalization, community features and enhanced content. We monetize this web traffic through display advertising and lead generation. We believe that these properties appeal to advertisers and other third parties as they deliver certain discrete demographics entirely online.

Recent Developments

In the fourth quarter of 2013, the Company sold a 49.99% interest in JobKorea Ltd. ("JobKorea"), its wholly owned subsidiary located in South Korea, to H&Q Korea for an aggregate purchase price of $90.0 million. H&Q Korea, an affiliate of H&Q Asia Pacific, a leading Asian private equity firm, is a pioneer in the development of Korea's private equity industry, and one of the top private equity managers in the country. The Company will retain a controlling interest in JobKorea and will leverage H&Q Korea's expertise and extensive Asia Pacific regional network to enhance and grow this profitable business. The net proceeds related to the sale were $86.5 million after taxes and transaction costs.

Additionally, in the fourth quarter of 2013, the Company entered into an agreement with Alma Media Corporation ("Alma Media"), a leading media company focusing on digital services and publishing, to expand our relationship beyond the existing joint venture company located in Finland. The transaction closed in the first quarter of 2014. Under the new agreement, Monster and Alma Media each contributed several additional entities and businesses in the Eastern European and Baltics region, with Monster contributing its wholly owned subsidiaries located in the Czech Republic, Poland and Hungary. Monster has an equity ownership of 15% of the new, larger joint venture with the opportunity to increase ownership up to 20%. Combining these assets creates the online career services leader in the region.

Restructuring Programs and Discontinued Operations

January 2012 Restructuring

On January 24, 2012, the Company committed to a plan to take a series of strategic restructuring actions. The Company's decision to adopt the strategic restructuring actions resulted from the Company's desire to provide the Company with more flexibility to invest in marketing and sales activities in order to improve its long-term growth prospects and profitability. In connection with this program, the Company notified approximately 325 associates, and approximately 60 associates voluntarily left the Company, reducing the Company's workforce by approximately 385 associates. The restructuring actions also included the consolidation of certain office facilities and the impairment of certain fixed assets.

The Company incurred $26.2 million of expenses associated with this restructuring since the program's inception, all of which was recognized in the year ended December 31, 2012. We completed all of the initiatives associated with this restructuring in the first quarter of 2013, and the Company will not incur any new charges in the future relating to this program.

November 2012 Restructuring

On November 8, 2012, the Company announced actions designed to concentrate resources on core businesses within North America and key European and Asian markets with increased spending in marketing and sales. The actions subsequently included (i) the sale of the Careers-China business, (ii) the exiting of business operations in Latin America and Turkey and (iii) a strategic restructuring inclusive of a reduction in force, office consolidations and impairment of certain assets. Please see Discontinued Operations below.

Through December 31, 2013, the Company has notified approximately 400 associates in North America and Europe (excluding discontinued operations) and has incurred $34.7 million of charges, $14.7 million of which was recorded in the fourth quarter of 2012. The Company does not expect to incur significant additional charges in future periods relating to this program.


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Discontinued Operations

During the third quarter of 2012, as part of the Company's review of strategic alternatives, the Company made the decision to sell its Careers-China business. The sale of the Careers-China business to Saongroup, Ltd. ("Saongroup") was completed on February 5, 2013. The Company received a 10% minority interest in the combined Chinese business of Saongroup. The Company's 10% minority interest does not provide the Company with representation on the board of directors, the Company is not entitled to any dividend or other forms of cash returns and the Company is not required to make any capital contributions in the future. The Company will carry the 10% interest as a cost basis investment with an estimated fair value of zero which is based on available information. Prior to the close of the sale of Careers-China, the Company incurred charges relating to severance benefits associated with terminated employees, retention benefits for employees who will remain with the combined operations and certain lease obligation costs. The Company recorded a loss from discontinued operations related to Careers-China, net of tax, of $1.7 million in the year ended December 31, 2013. The Company does not expect to incur significant additional charges in future periods relating to Careers-China.

During the fourth quarter of 2012, the Company made the strategic decision to discontinue operations in Latin America and Turkey. All of the Latin America and Turkey business operations were discontinued on or before December 31, 2012. The Company incurred approximately $8.0 million of costs associated with the shutdown of these businesses in the fourth quarter of 2012. For the year ended December 31, 2013, the Company recorded additional costs, net of tax, of $2.1 million. The Company does not expect to incur significant additional charges in future periods relating to Latin America or Turkey.

Operating results for Careers-China, Latin America and Turkey, which had previously been included in the Careers-International segment in the Company's Consolidated Statement of Operations, have now been reclassified as discontinued operations for all periods presented. Please see Note 6-Discontinued Operations in Notes to the Consolidated Financial Statements in Part II of this Form 10-K.

Constant Currency Presentation

Revenue from our international operations has historically represented, and we expect will continue to represent, a significant portion of our business. As a result, our revenue growth has been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For 2013, we have elected not to use a constant currency presentation because for the current period comparisons, foreign currency fluctuations were not material to the comparability of our results of operations. In 2012, in order to provide a framework for assessing how our consolidated and Careers-International operating results performed excluding the impact of foreign currency fluctuations, we additionally presented the year-over-year percentage change in revenue performance on a constant currency basis, which would assume no changes in the exchange rate from the prior-year period.


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RESULTS OF OPERATIONS

Consolidated operating results as a percent of revenue, excluding discontinued operations, for the years ended December 31, 2013, 2012 and 2011 are as follows:

                                                              Year ended December 31,
                                                       2013            2012            2011
Revenue                                                 100.0 %         100.0 %         100.0 %

Salaries and related                                     47.0 %          45.9 %          48.3 %
Office and general                                       25.4 %          25.4 %          22.6 %
Marketing and promotion                                  21.0 %          21.2 %          19.1 %
Restructuring and other special charges                   2.5 %           4.5 %           0.5 %
Recovery of restitution award from former
executive                                                 0.0 %          (0.6 %)          0.0 %

Total operating expenses                                 95.9 %          96.4 %          90.6 %

Operating income                                          4.1 %           3.6 %           9.4 %
Interest and other, net                                  (0.7 %)         (0.7 %)         (0.3 %)

Income before income taxes and loss in equity
interests                                                 3.4 %           3.0 %           9.1 %
(Provision for) benefit from income taxes                (2.8 %)          3.7 %          (2.4 %)
Loss in equity interests, net                            (0.1 %)         (0.1 %)         (0.1 %)

Income from continuing operations                         0.4 %           6.5 %           6.6 %

The following presentation of our segment results is prepared based on the criteria we use when evaluating the performance of our business units.

The Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Consolidated Revenue, Operating Expenses and Operating Income

Consolidated revenue, operating expenses and operating income for the years
ended December 31, 2013 and 2012 are as follows (excluding discontinued
operations) (dollars in thousands):



                                                                   The year ended December 31,
                                                     % of                         % of           Increase         % Increase
                                       2013        Revenue         2012         Revenue         (Decrease)        (Decrease)
Revenue                              $ 807,579        100.0 %    $ 890,392         100.0 %     $    (82,813 )            (9.3 %)

Salaries and related                   379,406         47.0 %      408,305          45.9 %          (28,899 )            (7.1 %)
Office and general                     205,397         25.4 %      226,601          25.4 %          (21,204 )            (9.4 %)
Marketing and promotion                169,590         21.0 %      188,326          21.2 %          (18,736 )            (9.9 %)
Restructuring and other special
charges                                 19,995          2.5 %       40,358           4.5 %          (20,363 )           (50.5 %)
Recovery of restitution award from
former executive                            -           0.0 %       (5,350 )        (0.6 %)           5,350             100.0 %

Total operating expenses               774,388         95.9 %      858,240          96.4 %          (83,852 )            (9.8 %)

Operating income                     $  33,191          4.1 %    $  32,152           3.6 %     $      1,039               3.2 %

Our consolidated revenue decreased by $82.8 million (9.3%) in 2013 compared to 2012. This decrease resulted primarily from our Careers-International segment with a $62.5 million (17.8%) reduction in revenue. The economic environment in Europe and Asia continued to be challenging in 2013 although we did see customer demand stabilize in certain countries in the fourth quarter, including Germany, the United Kingdom, Sweden and France. Although our Careers-North America segment experienced a $16.7 million (3.6%) decrease in revenue, the stability we saw in North America in the third quarter of 2013 continued in the fourth quarter of 2013 as customer sentiment and demand for our product offerings continues to improve. The Company's recent restructuring will allow us to concentrate our resources on our largest and most profitable core markets.

Salaries and related expenses decreased $28.9 million (7.1%) in 2013 compared 2012. This decrease in salaries and related expenses resulted primarily from decreased regular salary costs as a result of our restructuring programs and decreased variable compensation costs for the Company's sales force.

Office and general expenses decreased $21.2 million (9.4%) in 2013 compared to 2012. This decrease in office and general expenses resulted primarily from decreased travel expenses, professional fees and occupancy costs.


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Marketing and promotion expenses decreased $18.7 million (9.9%) in 2013 compared to 2012. Beginning in 2012, the Company evolved its marketing approach to efficiently drive improved site traffic which resulted in Monster emerging as the leader in U.S. traffic in the Career Services and Development category for the majority of 2012 and 2013.

For the year ended December 31, 2013, we incurred $20.0 million of restructuring and other special charges, comprised mainly of severance costs, facility charges, and impairment of certain assets as a result of our restructuring program which was announced in November 2012.

In the first quarter of 2012, the Company recorded $5.4 million from the United States Department of Justice ("DOJ") for partial restitution of damages caused to the Company in connection with the Company's historical stock option granting practices of which the Company's former Chief Operating Officer had been convicted of securities fraud in May 2009. This amount had been previously remitted to the DOJ by the Company's former Chief Operating Officer as a civil forfeiture to the United States Federal Government.

Careers-China, Latin America and Turkey, which had previously been included in the Company's Consolidated Statement of Operations, have now been reclassified as discontinued operations for all periods presented. Please see Note 6 -Discontinued Operations in Notes to the Consolidated Financial Statements in

Part II of this Form 10-K.

Our consolidated operating income, excluding discontinued operations, was $33.2 million in 2013, compared to an operating income of $32.2 million in 2012, as a result of the factors discussed above.

Careers-North America

The operating results of our Careers-North America segment for the years ended
December 31, 2013 and 2012 are as follows (dollars in thousands):



                                                                 The year ended December 31,
                                                    % of                        % of          Increase         % Increase
                                      2013        Revenue         2012        Revenue        (Decrease)        (Decrease)
Revenue                             $ 446,274        100.0 %    $ 462,962        100.0 %    $    (16,688 )            (3.6 %)

Salaries and related                  179,176         40.1 %      184,336         39.8 %          (5,160 )            (2.8 %)
Office and general                     97,791         21.9 %      103,206         22.3 %          (5,415 )            (5.2 %)
Marketing and promotion                94,761         21.2 %      111,764         24.1 %         (17,003 )           (15.2 %)
Restructuring and other special
charges                                 9,537          2.1 %       20,970          4.5 %         (11,433 )           (54.5 %)

Total operating expenses              381,265         85.4 %      420,276         90.8 %         (39,011 )            (9.3 %)

Operating income                    $  65,009         14.6 %    $  42,686          9.2 %    $     22,323              52.3 %

Our Careers-North America segment revenue experienced a $16.7 million (3.6%) decrease due to a reduction of revenue from our field sales customers, which was partially offset by increased business activity from our e-Commerce and government sectors. The stability we saw in North America in the third quarter of 2013 continued in the fourth quarter of 2013 as customer sentiment and demand for our product offerings continues to improve. Further, the growth in the e-Commerce sector is encouraging as this channel is often an early indicator of future activity.

Salaries and related expenses decreased $5.2 million (2.8%) in 2013 compared to 2012. This decrease in salaries and related expenses resulted primarily from $4.7 million of decreased regular salary and other headcount related costs as a result of our restructuring programs.

Office and general expenses decreased $5.4 million (5.2%) in 2013 compared to 2012. This decrease in office and general expenses resulted primarily from decreased travel expenses of $2.8 million, decreased occupancy costs of $1.0 million resulting from our restructuring programs and decreased amortization expense of $3.0 million resulting from the amortization period of certain intangible assets associated with a previous acquisition ending during the third quarter of 2013. These reductions were partially offset by increased consulting fees of $2.0 million related to our government business.

Marketing and promotion expenses decreased $17.0 million (15.2%) in 2013 compared to 2012. Beginning in 2012, the Company evolved its marketing approach to efficiently drive improved site traffic which resulted in Monster emerging as the leader in U.S. traffic in the Career Services and Development category for the majority of 2012 and 2013.


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The Company incurred $9.5 million of restructuring and other special charges in 2013, comprised primarily of costs associated with severance, exiting office facilities and other asset write downs.

Our Careers-North America operating income was $65.0 million in 2013, compared to operating income of $42.7 million in 2012, as a result of the factors described above.

Careers-International

The operating results of our Careers-International segment for the years ended
December 31, 2013 and 2012 are as follows (excluding discontinued operations)
(dollars in thousands):



                                                                  The year ended December 31,
                                                     % of                         % of          Increase         % Increase
                                      2013         Revenue          2012        Revenue        (Decrease)        (Decrease)
Revenue                             $ 288,623         100.0 %     $ 351,130        100.0 %    $    (62,507 )           (17.8 %)

Salaries and related                  151,371          52.4 %       163,716         46.6 %         (12,345 )            (7.5 %)
Office and general                     80,878          28.0 %        90,785         25.9 %          (9,907 )           (10.9 %)
Marketing and promotion                67,104          23.2 %        67,563         19.2 %            (459 )            (0.7 %)
Restructuring and other special
charges                                 7,866           2.7 %        15,990          4.6 %          (8,124 )           (50.8 %)

Total operating expenses              307,219         106.4 %       338,054         96.3 %         (30,835 )            (9.1 %)

Operating (loss) income             $ (18,596 )        (6.4 %)    $  13,076          3.7 %    $    (31,672 )          (242.2 %)

Our Careers-International segment revenue decreased $62.5 million (17.8%) in 2013 compared to 2012. The reduction in our Careers-International segment was primarily driven by decreases within Europe where revenue decreased 20.0% compared to 2012, principally in Germany, France, UK, Netherlands and Sweden. Our key Asian markets, Korea and India, also continue to be impacted by global economic uncertainty with revenue declines of 10.5% compared to 2012. The economic environment in Europe and Asia continued to be challenging in 2013 although we did see customer demand stabilize in certain countries in the fourth quarter, including Germany, the United Kingdom, Sweden and France.

Salaries and related expenses decreased $12.3 million (7.5%) in 2013 compared to 2012. This decrease in salaries and related expenses resulted primarily from $9.0 million in decreased regular salary and other headcount related costs due to our restructuring programs and $2.2 million of decreased variable compensation costs for the Company's sales force.

Office and general expenses decreased $9.9 million (10.9%) in 2013 compared to 2012. This decrease in office and general expenses resulted primarily from $6.5 million of decreased professional fees in the UK related to our government services, decreased travel expenses of $3.5 million, partially offset by increased depreciation expense of $0.7 million primarily related to capital expenditures made in 2012 associated with our UK government business.

Marketing and promotion decreased $0.5 million (0.7%) in 2013 compared to 2012. . . .

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