**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-Q**

| x          | **QUARTERLY REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                 |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | **FOR THE QUARTERLY PERIOD ENDED  SEPTEMBER 30, 2005**                                                                                                                           |
| ** ** | **OR**                                                                                                                                                                                |
| o          | **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 000-21571**                                                                                                                                                 |

 

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**MONSTER WORLDWIDE, INC.**

(EXACT NAME OF REGISTRANTAS SPECIFIED IN ITS CHARTER)

| **DELAWARE**                     |   | **13-3906555**          |
|----------------------------------|--------|-------------------------|
| (STATE  OR OTHER JURISDICTION OF |   | (IRS  EMPLOYER          |
| INCORPORATION OR  ORGANIZATION)  |   | IDENTIFICATION  NUMBER) |

 

**622 Third Avenue, NewYork, New York 10017**

(ADDRESS OF PRINCIPALEXECUTIVE OFFICES)

**(212) 351-7000**

(REGISTRANT’S TELEPHONENUMBER, INCLUDING AREA CODE)

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports) and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

Indicate by checkmarkwhether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x  No o

Indicatethe number of shares outstanding of each of the issuer’s class of common stockas of October 31, 2005, the latest practicable date.

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| Class                     | ** ** | **Outstanding on  October 31, 2005** | ** **  |
|---------------------------|------------|-----------------------------------------------------|-------------|
| Common Stock              |       |                                                | 118,340,064 |   |   |
| Class B Common Stock |       |                                                | 4,762,000   |   |   |

 

 

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**MONSTER WORLDWIDE, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|             | ** ** | ** **                                                                                      | ** ** | **Page** | ** ** |
|-------------|------------|-------------------------------------------------------------------------------------------------|------------|----------|------------|
| ** **  | ** ** | ** **                                                                                      | ** ** | **No.**  | ** ** |
| ** **  | ** ** | **PART I—FINANCIAL INFORMATION**                                                      |       |     |       |   |   |
| **Item 1.** | ** ** | **Financial Statements:**                                                                       |       |     |       |   |   |
|        |       | Consolidated  statements of operations                                                          |       |     | 3          |   |   |
|        |       | Consolidated  balance sheets                                                                    |       |     | 4          |   |   |
|        |       | Consolidated  statements of cash flows                                                          |       |     | 5          |   |   |
|        |       | Notes  to consolidated financial statements                                                     |       |     | 6          |   |   |
|        |       | Report  of Independent Registered Public Accounting Firm                                        |       |     | 15         |   |   |
| **Item 2.** | ** ** | **Management’s Discussion and Analysis of  Financial Condition and Results of Operations** |       |     | 16         |   |   |
| **Item 3.** | ** ** | **Quantitative and Qualitative Disclosures about  Market Risk**                                 |       |     | 26         |   |   |
| **Item 4.** | ** ** | **Controls and Procedures**                                                                     |       |     | 26         |   |   |
| ** **  | ** ** | **PART II—OTHER INFORMATION**                                                         |       |     |       |   |   |
| **Item 6.** | ** ** | **Exhibits**                                                                                    |       |     | 27         |   |   |
|        | ** ** | **Signatures**                                                                                  |       |     | 28         |   |   |

 

(All other items on thisreport are inapplicable)

2

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**PART I—FINANCIAL INFORMATION**

**ITEM 1.**                FINANCIALSTATEMENTS

**MONSTERWORLDWIDE, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited)**
|                                                         | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended** | ** ** |
|---------------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                              | ** ** | **September 30,**           | ** **  | **September 30,**          | ** ** |
| ** **                                              | ** ** | **2005**                         | ** **  | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenue**                                             | ** ** | **$**                            | **249,288** | ** **                      | **$**      | **198,619** | ** ** | **$** | **720,320** | ** ** | **$** | **541,157** | ** ** |
| Salaries and  related                                   |       | 109,332                          |        | 92,124                          |       | 315,452 |   | 245,946 |   |
| Office and  general                                     |       | 45,931                           |        | 42,706                          |       | 139,175 |   | 116,454 |   |
| Marketing and  promotion                                |       | 46,296                           |        | 37,349                          |       | 142,434 |   | 113,280 |   |
| **Total  operating expenses**                           | ** ** | **201,559**                      | ** **  | **172,179**                     | ** ** | **597,061** | ** ** | **475,680** | ** ** |
| **Operating income**                                    | ** ** | **47,729**                       | ** **  | **26,440**                      | ** ** | **123,259** | ** ** | **65,477** | ** ** |
| Interest and other, net                                 |       | 715                              |        | (227                            | )          | 1,691 |   | (942 | ) |
| Income from continuing  operations before income taxes  |       | 48,444                           |        | 26,213                          |       | 124,950 |   | 64,535 |   |
| Income taxes                                            |       | 16,955                           |        | 8,532                           |       | 43,990 |   | 21,295 |   |
| Losses in equity  interests                             |       | (641                             | )           | —                          |       | (1,217 | ) | — |   |
| **Income from continuing  operations**                  | ** ** | **30,848**                       | ** **  | **17,681**                      | ** ** | **79,743** | ** ** | **43,240** | ** ** |
| Income (loss) from  discontinued operations, net of tax |       | (27                              | )           | 2,307                           |       | (8,776 | ) | 5,393 |   |
| **Net income**                                          | ** ** | **$**                            | **30,821**  | ** **                      | **$**      | **19,988** | ** ** | **$** | **70,967** | ** ** | **$** | **48,633** | ** ** |
| **Basic  earnings (loss) per share(1):**                |       |                             |        |                            |       |   |   |   |   |
| Income from  continuing operations                      |       | $                                | 0.25        |                            | $          | 0.15 |   | $ | 0.66 |   | $ | 0.37 |   |
| Income (loss)  from discontinued operations, net of tax |       | —                           |        | 0.02                            |       | (0.07 | ) | 0.05 |   |
| Net income                                              |       | $                                | 0.25        |                            | $          | 0.17 |   | $ | 0.59 |   | $ | 0.41 |   |
| **Diluted  earnings (loss) per share:**                 |       |                             |        |                            |       |   |   |   |   |
| Income from  continuing operations                      |       | $                                | 0.25        |                            | $          | 0.15 |   | $ | 0.64 |   | $ | 0.36 |   |
| Income (loss)  from discontinued operations, net of tax |       | —                           |        | 0.02                            |       | (0.07 | ) | 0.05 |   |
| Net income                                              |       | $                                | 0.25        |                            | $          | 0.17 |   | $ | 0.57 |   | $ | 0.41 |   |
| **Weighted  average shares outstanding:**               |       |                             |        |                            |       |   |   |   |   |
| Basic                                                   |       | 122,128                          |        | 118,584                         |       | 121,283 |   | 117,188 |   |
| Diluted                                                 |       | 124,757                          |        | 120,351                         |       | 123,798 |   | 119,392 |   |

 

(1)             Basic earnings per share for the nine months ended September 30,2004 do not add due to rounding.

*See**accompanying notes*.

3

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**MONSTERWORLDWIDE, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts)**

| ** **                                                                                                                                                            | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2005**               | ** **  | **2004**              | ** ** |
| ** **                                                                                                                                                            | ** ** | **(unaudited)**        | ** **  | ** **            | ** ** |
| **ASSETS**                                                                                                                                                            |       |                   |        |                  |       |   |   |   |   |
| Current assets:                                                                                                                                                       |       |                   |        |                  |       |   |   |   |   |
| Cash and cash  equivalents                                                                                                                                            |       |                   | $           | 313,709               |       |   |   | $ | 198,111 |   |   |
| Accounts  receivable, net of allowance for doubtful accounts of $16,810 and $12,551 in  2005 and 2004, respectively                                                   |       |                   | 321,243     |                  |       |   | 318,530 |   |   |
| Prepaid and other                                                                                                                                                     |       |                   | 53,704      |                  |       |   | 51,826 |   |   |
| Current assets of  discontinued operations                                                                                                                            |       |                   | —      |                  |       |   | 135,044 |   |   |
| **Total  current assets**                                                                                                                                             | ** ** | ** **             | **688,656** |                  | ** ** | ** ** | **703,511** |   |   |
| Property and  equipment, net                                                                                                                                          |       |                   | 84,542      |                  |       |   | 81,415 |   |   |
| Goodwill                                                                                                                                                              |       |                   | 589,981     |                  |       |   | 607,753 |   |   |
| Other  intangibles, net                                                                                                                                               |       |                   | 50,674      |                  |       |   | 56,985 |   |   |
| Investment in  unconsolidated affiliate                                                                                                                               |       |                   | 48,935      |                  |       |   | — |   |   |
| Other assets                                                                                                                                                          |       |                   | 26,447      |                  |       |   | 17,171 |   |   |
| Non-current  assets of discontinued operations                                                                                                                        |       |                   | —      |                  |       |   | 76,778 |   |   |
| **Total  assets**                                                                                                                                                     | ** ** | ** **             | **$**       | **1,489,235**         |       | ** ** | ** ** | **$** | **1,543,613** |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                        |       |                   |        |                  |       |   |   |   |   |
| Current liabilities:                                                                                                                                                  |       |                   |        |                  |       |   |   |   |   |
| Accounts payable                                                                                                                                                      |       |                   | $           | 120,125               |       |   |   | $ | 111,430 |   |   |
| Accrued expenses  and other current liabilities                                                                                                                       |       |                   | 220,179     |                  |       |   | 196,630 |   |   |
| Deferred revenue                                                                                                                                                      |       |                   | 248,063     |                  |       |   | 231,382 |   |   |
| Current portion  of long-term debt                                                                                                                                    |       |                   | 29,903      |                  |       |   | 29,262 |   |   |
| Current  liabilities of discontinued operations                                                                                                                       |       |                   | —      |                  |       |   | 162,039 |   |   |
| **Total  current liabilities**                                                                                                                                        | ** ** | ** **             | **618,270** |                  | ** ** | ** ** | **730,743** |   |   |
| Long-term  debt, less current portion                                                                                                                                 |       |                   | 14,805      |                  |       |   | 33,975 |   |   |
| Other long-term  liabilities                                                                                                                                          |       |                   | 37,578      |                  |       |   | 23,259 |   |   |
| Non-current  liabilities of discontinued operations                                                                                                                   |       |                   | —      |                  |       |   | 122 |   |   |
| **Total  liabilities**                                                                                                                                                | ** ** | ** **             | **670,653** |                  | ** ** | ** ** | **788,099** |   |   |
| Commitments and  contingencies                                                                                                                                        |       |                   |        |                  |       |   |   |   |   |
| Stockholders’ equity:                                                                                                                                            |       |                   |        |                  |       |   |   |   |   |
| Preferred stock,  $.001 par value, authorized 800 shares; issued and outstanding: none                                                                                |       |                   | —      |                  |       |   | — |   |   |
| Common stock,  $.001 par value, authorized 1,500,000 shares; issued: 118,986 and 116,697  shares, respectively; outstanding: 118,059 and 115,770 shares, respectively |       |                   | 119         |                  |       |   | 117 |   |   |
| Class B  common stock, $.001 par value, authorized 39,000 shares; issued and  outstanding: 4,762 shares                                                          |       |                   | 5           |                  |       |   | 5 |   |   |
| Additional paid-in  capital                                                                                                                                           |       |                   | 1,196,932   |                  |       |   | 1,146,708 |   |   |
| Accumulated other  comprehensive income                                                                                                                               |       |                   | 39,740      |                  |       |   | 98,027 |   |   |
| Unamortized  stock-based compensation                                                                                                                                 |       |                   | (2,441      | )                     |       |   | (2,603 | ) |   |
| Accumulated  deficit                                                                                                                                                  |       |                   | (415,773    | )                     |       |   | (486,740 | ) |   |
| **Total  stockholders’ equity**                                                                                                                                  | ** ** | ** **             | **818,582** |                  | ** ** | ** ** | **755,514** |   |   |
| **Total liabilities and  stockholders’ equity**                                                                                                                  | ** ** | ** **             | **$**       | **1,489,235**         |       | ** ** | ** ** | **$** | **1,543,613** |   |   |

 

*See accompanying notes.*

 

4

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**MONSTER WORLDWIDE, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)**

| ** **                                                                         | ** ** | **Nine Months Ended** | ** **  |
|------------------------------------------------------------------------------------|------------|---------------------------------|-------------|
| ** **                                                                         | ** ** | **September 30,**          | ** **  |
| ** **                                                                         | ** ** | **2005**                        | ** **  | **2004** | ** ** |
| Cash flows  provided by operating activities:                                      |       |                            |        |   |   |
| **Net income**                                                                     | ** ** | **$**                           | **70,967**  | ** ** | **$** | **48,633** | ** ** |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |        |   |   |
| (Income) loss from discontinued operations, net of  tax                            |       | 8,776                           |        | (5,393 | ) |
| Depreciation and amortization                                                      |       | 27,744                          |        | 24,806 |   |
| Provision for doubtful accounts                                                    |       | 7,976                           |        | 3,457 |   |
| Tax benefit on stock option exercises and stock-based  compensation                |       | 8,714                           |        | 1,688 |   |
| Non-cash compensation                                                              |       | 2,521                           |        | 2,083 |   |
| Common stock issued for matching contribution to  401(k) plan                 |       | 2,840                           |        | 3,676 |   |
| Deferred income taxes                                                              |       | 11,234                          |        | 14,634 |   |
| Minority interests and other                                                       |       | 1,428                           |        | 394 |   |
| Changes in assets  and liabilities, net of business combinations:                  |       |                            |        |   |   |
| Accounts receivable                                                                |       | (7,367                          | )           | (60,631 | ) |
| Prepaid and other                                                                  |       | (23,473                         | )           | 12,152 |   |
| Deferred revenue                                                                   |       | 12,692                          |        | 28,180 |   |
| Accounts payable, accrued liabilities and other                                    |       | 56,212                          |        | 17,970 |   |
| Net cash used for operating activities of  discontinued operations                 |       | (19,643                         | )           | (43,206 | ) |
| Total adjustments                                                                  |       | 89,654                          |        | (190 | ) |
| **Net cash provided by operating activities**                                      | ** ** | **160,621**                     | ** **  | **48,443** | ** ** |
| Cash flows used  for investing activities:                                         |       |                            |        |   |   |
| Capital expenditures                                                               |       | (24,096                         | )           | (13,826 | ) |
| Payments for acquisitions and intangible assets, net  of cash acquired             |       | (51,752                         | )           | (117,926 | ) |
| Investment in unconsolidated affiliate                                             |       | (50,137                         | )           | — |   |
| Sale of long-term investment                                                       |       | 2,003                           |        | — |   |
| Net proceeds from sales of businesses                                              |       | 49,091                          |        | — |   |
| Net cash used for investing activities of  discontinued operations                 |       | (710                            | )           | (8,870 | ) |
| **Net cash used for investing activities**                                         | ** ** | **(75,601**                     | **)**       | **(140,622** | **)** |
| Cash flows  provided by financing activities:                                      |       |                            |        |   |   |
| Payments on capital lease obligations                                              |       | (2,137                          | )           | (709 | ) |
| Proceeds from the issuance of common stock                                         |       | —                          |        | 55,673 |   |
| Proceeds from the exercise of employee stock options                               |       | 37,709                          |        | 11,743 |   |
| Repurchase of common stock                                                         |       | (1,398                          | )           | — |   |
| **Net cash provided by financing activities**                                      | ** ** | **34,174**                      | ** **  | **66,707** | ** ** |
| Effect of exchange rate changes on cash and cash  equivalents                      |       | (3,596                          | )           | 429 |   |
| Net increase (decrease) in cash and cash equivalents                               |       | 115,598                         |        | (25,043 | ) |
| Cash and cash equivalents, beginning of period                                     |       | 198,111                         |        | 142,255 |   |
| **Cash and cash equivalents, end of period**                                       | ** ** | **$**                           | **313,709** | ** ** | **$** | **117,212** | ** ** |
| **Supplemental  disclosures of cash flow information:**                            |       |                            |        |   |   |
| Cash paid  (received) during the period for:                                       |       |                            |        |   |   |
| Interest                                                                           |       | $                               | 2,575       |   | $ | 816 |   |
| Income taxes                                                                       |       | $                               | 2,463       |   | $ | (1,685 | ) |
| **Non-cash  financing and investing activities:**                                  |       |                            |        |   |   |
| Common stock issued in connection with business  combinations                      |       | $                               | —      |   | $ | 55,852 |   |
| Liabilities  created in connection with business combinations                      |       | $                               | 10,236      |   | $ | 52,762 |   |

 

*See accompanying notes.*

5

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**MONSTER WORLDWIDE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share amounts)(unaudited)**

**1.** DESCRIPTIONOF BUSINESS AND BASIS OF PRESENTATION

***Description of Business***

Monster Worldwide, Inc.(the “Company”) has continuing operations that consist of two operatingsegments: Monster and Advertising & Communications. Revenue in theCompany’s Monster segment is primarily earned from job postings placed on theCompany’s career websites; licensed access to the Company’s resume database;and the display of advertising on the Company’s online properties. Revenue inthe Company’s Advertising & Communications division is primarilyearned from selling and placing recruitment advertising, in print and onlinemedia, resume screening services and other recruitment related products. Theseservices are provided to customers in a variety of industries throughout NorthAmerica, Europe and the Asia-Pacific region.

***Basis ofPresentation***

The consolidated interimfinancial statements included herein are unaudited and have been prepared bythe Company pursuant to the rules and regulations of the Securities andExchange Commission. Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with accountingprinciples generally accepted in the United States have been omitted pursuantto such rules and regulations, although the Company believes that thedisclosures are adequate to make the information presented not misleading. Theconsolidated interim financial statements include the accounts of the Companyand all of its wholly-owned and majority-owned subsidiaries. Allsignificant inter-company accounts and transactions have been eliminatedin consolidation.

These statements reflectall normal recurring adjustments that, in the opinion of management, arenecessary for fair presentation of the information contained herein. Theseconsolidated interim financial statements should be read in conjunction withthe financial statements and notes thereto included in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2004. TheCompany adheres to the same accounting policies in preparation of interimfinancial statements. As permitted under generally accepted accountingprinciples, interim accounting for certain expenses, including income taxes arebased on full year assumptions. Such amounts are expensed in full in the yearincurred. For interim financial reporting purposes, income taxes are recordedbased upon estimated annual income tax rates.

For the period January 1,2004 through September 30, 2005, the Company completed five businesscombinations (see Note 3). Although none of the acquired businesses wasconsidered to be a significant subsidiary, either individually or in the aggregate,they do affect the comparability of results from period to period.

**2.** EARNINGSPER SHARE AND STOCK-BASED COMPENSATION

**Earnings Per Share**

Basic earnings per sharedoes not include the effects of potentially dilutive stock options and iscomputed by dividing income available to common shareholders by the weightedaverage number of common shares outstanding for the period. Diluted earningsper share reflects, in periods in which they have a dilutive effect,commitments to issue common stock and common stock issuable upon exercise ofstock options for periods in which the options’ exercise price is lower thanthe Company’s average share price for the period.

A reconciliation of sharesused in calculating basic and diluted earnings per common and Class Bcommon share follows. Certain stock options and stock issuable under employeecompensation plans were excluded

6

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fromthe computation of earnings per share due to their anti-dilutive effect. Theweighted average number of such common stock equivalents is approximately 5,214and 11,979 for the three months ended September 30, 2005 and 2004,respectively, and 6,218 and 8,893 for the nine months ended September 30,2005 and 2004, respectively.

| ** **                                                                                                | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                                | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Basic weighted  average shares outstanding                                                                |       | 122,128                          |       | 118,584                         |       | 121,283 |   | 117,188 |   |
| Effect of common  stock equivalents - stock options and stock issuable under employee  compensation plans |       | 2,629                            |       | 1,767                           |       | 2,515 |   | 2,204 |   |
| Diluted weighted average  shares outstanding                                                              |       | 124,757                          |       | 120,351                         |       | 123,798 |   | 119,392 |   |

 

**Stock-BasedCompensation**

The Company’s financial statements are presented inaccordance with Accounting Principles Board (“APB”) Opinion No. 25, *Accounting for Stock Issued to Employees*.Under APB 25, generally, no compensation expense is recognized in connectionwith the awarding of stock option grants to employees provided that, as of thegrant date, all terms associated with the award are fixed and the quoted marketprice of the stock is equal to or less than the amount an employee must pay toacquire the stock as defined. As the Company has only issued fixed termemployee stock option grants at or above the quoted market price on the date ofthe grant, there has been no compensation expense associated with stock optionsrecognized in the accompanying financial statements. The Company adopted thedisclosure only provisions of SFAS 123, *Accountingfor Stock-Based Compensation*, which requires certain financialstatement disclosures, including pro forma operating results had the Companyprepared its consolidated financial statements in accordance with the fairvalue based method of accounting for stock-based compensation.

The Black-Scholesoption-pricing model was developed for use in estimating the fair valueof traded options that have no restrictions and are fully transferable andnegotiable in a free trading market. Black-Scholes does not consider theemployment, transfer or vesting restrictions that are inherent in the Company’semployee options. Use of an option valuation model, as required bySFAS 123, includes highly subjective assumptions based on long-termpredictions, including the expected stock price volatility and average life ofeach option grant. Because the Company’s employee options have characteristicssignificantly different from those of freely traded options, and becausechanges in the subjective input assumptions can materially affect the Company’sestimate of the fair value of those options, in the Company’s opinion, theexisting valuation models, including Black-Scholes, are not reliablesingle measures and may misstate the fair value of the Company’s employeeoptions.

Thepro forma effects of stock-based compensation on net income and netincome per share have been estimated at the date of grant using the Black-Scholesoption-pricing model based on the following weighted average assumptions:

|                          | ** ** | **Three Month Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **               | ** ** | **September  30,**    | ** ** | **September 30,**          | ** ** |
| ** **               | ** ** | **2005**                        | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Risk-free  interest rate |       |                            | 4.2        | %                               |       |   | 4.1 | % |   |   | 4.2 | % |   |   | 4.1 | % |   |
| Volatility               |       |                            | 41.0       | %                               |       |   | 48.8 | % |   |   | 41.0 | % |   |   | 48.8 | % |   |
| Expected life (years)    |       |                            | 4.1        |                            |       |   | 5.0 |   |   |   | 4.1 |   |   |   | 5.0 |   |   |

 

7

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For purposes of pro formadisclosures, the estimated fair value of the options is assumed to be expensedover the options’ vesting periods. The pro forma effects of recognizingcompensation expense under the fair value method on the Company’s operatingresults and per share data are as follows:

| ** **                                                                                         | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                         | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                         | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income as  reported                                                                            |       | $                                | 30,821     |                            | $          | 19,988 |   | $ | 70,967 |   | $ | 48,633 |   |
| Add: Stock based  employee compensation expense included in reported net income, net of tax        |       | 351                              |       | 479                             |       | 1,327 |   | 1,354 |   |
| Deduct:  Compensation expense determined under fair value based method for all awards,  net of tax |       | (4,767                           | )          | (8,117                          | )          | (60,441 | ) | (23,422 | ) |
| Pro forma net  income                                                                              |       | $                                | 26,405     |                            | $          | 12,350 |   | $ | 11,853 |   | $ | 26,565 |   |
| **Basic  earnings per share:**                                                                     | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income -  as reported                                                                          |       | $                                | 0.25       |                            | $          | 0.17 |   | $ | 0.59 |   | $ | 0.41 |   |
| Net income -  pro forma                                                                            |       | 0.22                             |       | 0.10                            |       | 0.10 |   | 0.23 |   |
| **Diluted  earnings per share:**                                                                   |       |                             |       |                            |       |   |   |   |   |
| Net income -  as reported                                                                          |       | $                                | 0.25       |                            | $          | 0.17 |   | $ | 0.57 |   | $ | 0.41 |   |
| Net income - pro  forma                                                                            |       | 0.21                             |       | 0.10                            |       | 0.10 |   | 0.22 |   |

 

On December 28, 2004,the Company granted approximately 2,800,000 options to executives andemployees. Such options vested over the five-month period ending on May 31,2005 and the vested options generally become exercisable in four annualinstallments commencing December 28, 2005. For the nine months ended September 30,2005, the Company recognized approximately $22,229 of pro forma compensationexpense, net of tax, related to this grant.

On February 10, 2005 and May 4, 2005, thecompensation committee of the Company’s board of directors approved theacceleration of option vesting terms for approximately 134,000 and 2,600,000employee stock options, respectively. Exercise prices of the affected stockoptions were at or above the Company’s closing stock price on such dates. As aresult of the accelerated vesting terms, approximately $940 and $20,500,respectively, have been included in pro forma compensation expense, net of tax,for the nine months ended September 30, 2005. The decision to accelerate vesting of these options was made primarilyto avoid recognizing compensation expense in the consolidated statement ofoperations in the Company’s future financial statements upon the effectivenessof SFAS 123R.

As a result of theseaccelerations, it is estimated that approximately $24.0 million of pre-taxcompensation expense will be avoided upon implementation of SFAS 123R on January 1,2006.

**Share Based Payments**

In December 2004 the Financial AccountingStandards Board (“FASB”) issued Statement 123R (Revised 2004), *Share Based Payment*, which requires all companies to measurecompensation cost for all share-based payments, including employee stockoptions, at fair value. The Company is required to adopt the statementbeginning with the first quarter of 2006. Upon adoption, the Company will berequired to recognize compensation on all share-based grants made on or after January 1,2006, and for the unvested portion of share-based grants made prior to January 1,2006. Restatement of previously issued statements is permitted, but notrequired.

As a result ofSFAS 123R, the Company will be required to expense the fair value of ourstock option grants rather than disclose the impact on its consolidatedstatement of operations within the Company’s footnotes, as is current practice.Based on stock options currently outstanding and utilizing the Company’scurrent Black Scholes valuation model, share based payment expense isanticipated to be approximately $7,300 ($4,500, net of tax), in the year endingDecember 31, 2006.

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**3.** BUSINESSCOMBINATIONS

**Acquisitions**

Thefollowing table summarizes the Company’s business combinations completed from January 1,2004 through September 30, 2005:

| **Acquired  Business**                      | ** ** | **Acquisition  Date**  | ** ** | **Business  Segment/Region** |
|---------------------------------------------|------------|------------------------|------------|------------------------------|
| Military  Advantage, Inc.              |       | March 1, 2004     |       | Monster, North America       |
| jobpilot GmbH                               |       | April 22, 2004    |       | Monster, Europe              |
| Tickle Inc.                                 |       | May 21, 2004      |       | Monster, North America       |
| WebNeuron  Services Limited (JobsAhead.com) |       | June 18, 2004     |       | Monster, Asia/Pacific        |
| Emailjob.com SAS                            |       | February 11, 2005 |       | Monster, Europe              |

 

In February 2005, theCompany’s Monster division purchased Emailjob.com SAS, a leading onlinerecruiter in France. The acquisition of Emailjob.com SAS was made to helpestablish Monster’s leadership position in France and strengthen the Company’sposition in a key European market. Under the terms of the purchase agreement,the consideration for this acquisition was approximately $26,000 in cash, ofwhich $23,000 was paid on February 11, 2005. The remaining $3,000 ispayable over the twelve month period following the acquisition. As of September 30,2005, the Company has preliminarily recorded $21,229 of goodwill and assignedapproximately $4,700 to intangible assets. Noneof the goodwill recorded in connection with the acquisition is deductible fortax purposes.

During the year ended December 31,2004, the Company’s Monster division acquired WebNeuron Services Limited (“JobsAhead”),a leading job search website in India. The acquisition of JobsAhead was made toexpand Monster’s market share and geographic reach in the Asia-Pacific region.Consideration for the acquisition included $4,483 of net cash paid and 147,156shares of the Company’s common stock. None of the goodwill recorded inconnection with the acquisition is deductible for tax purposes.

In May 2004, theCompany’s Monster division purchased Tickle Inc. (“Tickle”), a marketleader in online career assessment testing. Initial consideration for thisacquisition included $24,454 of net cash paid, 1,000,000 shares of the Company’scommon stock and minimum cash payments of $13,332 per year, over a three-yearperiod following the acquisition date. Future minimum cash payments have beenrecorded as long-term debt, at their present values, in the accompanyingconsolidated balance sheet. Additional purchase price commitments are possible,subject to Tickle achieving certain agreed-upon financial thresholds for eachof the years ending December 31, 2005 and 2006. Such financial thresholdswere exceeded in 2004 and therefore an additional $798 was recorded in currentportion of long-term debt and goodwill as of December 31, 2004. None ofthe goodwill recorded in connection with the acquisition is deductible for taxpurposes.

In April 2004, theCompany’s Monster division purchased jobpilot GmbH (“jobpilot”), a leadingEuropean online career portal, from Adecco S.A. The acquisition of jobpilot wasmade to help establish Monster as one of the leaders in key European markets,particularly Germany. Consideration for the acquisition included $60,552 netcash paid and 1,000,000 shares of common stock. The Company has incurredcharges to integrate and restructure jobpilot’s operations and therefore hasrecorded additional costs to goodwill since the acquisition date, as describedin “Accrued Integration and Restructuring Costs” below. Goodwill recorded inconnection with the jobpilot acquisition is fully deductible for tax purposes.

In March 2004, theCompany’s Monster division purchased Military Advantage, Inc. as acomplementary business to Monster’s government product offerings. MilitaryAdvantage, Inc. offers its members access to information about benefitsand career opportunities in the military. Consideration for the acquisitionincluded $23,418 of net cash paid and $7,500 guaranteed cash payments in each of2005 and 2006, recorded at their present values in the accompanyingconsolidated balance sheet. None of the goodwill recorded in connection withthe acquisition is deductible for tax purposes.

None of the businesscombinations made by the Company in 2005 or 2004 were considered to besignificant subsidiaries, either individually or in the aggregate.

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**Unaudited Pro Forma Results**

Thefollowing unaudited pro forma financial information presents the combinedresults of operations of the Company and its purchase acquisitions as if theyhad occurred as of the beginning of the periods presented. The unaudited proforma financial information is not necessarily indicative of what the Company’sresults of operations would have been had the acquisitions been completed atthe beginning of each period. The unaudited pro forma financial informationdoes not attempt to project the future results of operations of the combinedcompany.

| ** **                                 | ** ** | **Three Months  Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                 | ** ** | **September 30,**       | ** ** | **September 30,**          | ** ** |
| ** **                                 | ** ** | **2004**                     | ** ** | **2005**                        | ** ** | **2004** | ** ** |
| Revenue                                    |       |                         | $          | 201,636                         |       |   | $ | 721,964 |   | $ | 579,918 |   |
| Income from continuing  operations         |       |                         | 18,405     |                            |       | 80,072 |   | 48,136 |   |
| Net income                                 |       |                         | 20,713     |                            |       | 71,296 |   | 53,529 |   |
| **Pro-forma  basic earnings per share:**   |       |                         |       |                            |       |   |   |   |   |
| Income from  continuing operations         |       |                         | $          | 0.15                            |       |   | $ | 0.66 |   | $ | 0.40 |   |
| Net income                                 |       |                         | $          | 0.17                            |       |   | $ | 0.59 |   | $ | 0.45 |   |
| **Pro-forma  diluted earnings per share:** |       |                         |       |                            |       |   |   |   |   |
| Income from  continuing operations         |       |                         | $          | 0.15                            |       |   | $ | 0.65 |   | $ | 0.40 |   |
| Net income                                 |       |                         | $          | 0.17                            |       |   | $ | 0.58 |   | $ | 0.44 |   |

 

The unaudited proforma financial information above reflects the following:

a.                  Interest expense, net of tax benefits, of approximately$17 for the three months ended September 30, 2004. For the nine monthsended September 30, 2005 and 2004, interest expense, net of tax benefitswas $8 and $430, respectively. Incremental interest expense has been recordedfor guaranteed deferred purchase price payable for acquired companies. Thedecrease in interest income relates to interest foregone on the aggregate cashpaid for the acquisitions.

b.                 Additional depreciation and amortization expense, netof tax benefits, of $301 for the three months ended September 30, 2004.For the nine months ended September 30, 2004, additional depreciation andamortization expense was $3,024. Additional depreciation and amortizationrelate to the estimated fair value of identifiable intangible assets andproprietary software from the purchase price allocation. Identifiableintangible assets are being amortized over their estimated useful lives over arange of 1 to 10 years and proprietary software is being depreciated overits estimated useful life of 6 years.

c.                  Additional weighted average sharesoutstanding of 2,147 for the three months ended September 30, 2004.Incremental shares reflect the amounts issued upon acquisition as beingoutstanding from the beginning of the periods presented.

**AccruedIntegration and Restructuring Costs**

The Company has formulated integration andrestructuring plans to eliminate redundant facilities, personnel and duplicateassets in connection with its business combinations. These costs wererecognized as liabilities assumed in connection with the Company’s business combinations.Accordingly, these costs are considered part of the purchase price of thebusiness combinations and have been recorded as increases to goodwill. Amountscharged to goodwill for the nine months ended September 30, 2005 primarilyrelate to the Company’s acquisitions of Emailjob.com and jobpilot.

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Thecomponents of the accrued integration and restructuring costs, reported as acomponent of accrued expenses and other current liabilities, are as follows:
|                                                                   | ** ** | **Liability at** | ** ** | **Charged to** | ** ** | **Change in** | ** ** | ** **      | ** ** | **Liability at** | ** **         |
|-------------------------------------------------------------------|------------|-----------------------|------------|---------------------|------------|--------------------|------------|-----------------|------------|-----------------------|--------------------|
| **Nine Months Ended September 30, 2005** | ** ** | **12/31/04**          | ** ** | **Goodwill**        | ** ** | **Estimate**       | ** ** | **Utilization** | ** ** | **9/30/05**           | ** **         |
| Assumed lease  obligations and office consolidation costs (a)     |       |                  | $          | 8,247               |       |               |       | $               | 1,465      |                  |               |   | $ | 460 |   |   |   | $ | (3,076 | ) |   |   | $ | 7,096 |   |   |
| Employee terminations  and other (b)                              |       |                  | 1,245      |                |       |               | 311        |            |       |                  | —   |   |   |   | (1,131 | ) |   |   | 425 |   |   |
| Total                                                             |       |                  | $          | 9,492               |       |               |       | $               | 1,776      |                  |               |   | $ | 460 |   |   |   | $ | (4,207 | ) |   |   | $ | 7,521 |   |   |

 

a)                 Accrued liabilities for assumed lease obligationsrepresent the present value of lease payments (net of expected sublease income)for office locations of acquired companies that are either under utilized priorto the acquisition date or closed by the Company in connection with acquisition-relatedrestructuring plans. Office consolidation costs represent charges to terminatecontracts in connection with software and computer systems, other contractualarrangements with third parties and above market lease costs.

b)                Costs associated with employee severance, benefits andrelocation and other miscellaneous costs associated with the integration ofacquired businesses.

Changes in the Company’sapproved restructuring plans or costs related to new restructuring initiativesmay be recorded in goodwill for up to one year following the acquisition dateand must be recorded in the Company’s operating results thereafter. Reductionsto integration and restructuring reserves established in connection withpurchase business combinations are recorded as a reduction to goodwill. Due tochanges in estimates and assumptions, the Company provided additional realestate provisions of $460 during the nine months ended September 30, 2005.The amount has been recorded in operating expenses in the 2005 periods.

**4.** INVESTMENTIN UNCONSOLIDATED AFFILIATE

In February 2005, the Company acquired a 40%interest in ChinaHR.com Holdings Ltd. (“ChinaHR”) for consideration of $50,000in cash. ChinaHR is a leading recruitment website in China and provides online recruiting,campus recruiting and other human resource solutions. As a result of thetransaction, the Company has the right to occupy three of sevenseats on ChinaHR’s Board of Directors. In addition, the Company also hascertain rights and obligations, the amount and likelihood of which are notcurrently determinable, to acquire a 51% or more interest in ChinaHR in theevent of an initial public offering or February 1, 2008, whichever comesfirst.

The Company accounts forits investment in ChinaHR under the equity method. As of September 30,2005, the carrying value of the investment was $48,935 and is recorded on theconsolidated balance sheet as an investment in unconsolidated affiliate. Inaddition, the Company accounts for its share in the earnings and losses ofChinaHR as an equity interest in the consolidated statements of operations. Forthe three and nine months ended September 30, 2005, the Company recorded aloss in equity interest of $641 and $1,217, respectively, which is 40% ofChinaHR’s results from the date the Company acquired its equity interest.

**5.** BUSINESSREORGANIZATION AND OTHER SPECIAL CHARGES

In thesecond quarter of 2002, the Company announced a reorganization initiative tostreamline its operations, lower its cost structure, integrate businessespreviously acquired and improve its return on capital. The reorganizationprogram included workforce reduction, consolidation of excess facilities,restructuring of certain business functions and other special charges,primarily for exiting activities that were no longer part of the Company’sstrategic plan. In the fourth quarter of 2002, the Company announced furtherreorganization efforts related to the spin-off of Hudson Highland Group, Inc.(“HH Group”). The additional charge consisted of further workforce reduction,office consolidation costs, 

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relatedasset write-offs, professional fees and other special charges. Substantiallyall of these charges were recorded in the fourth quarter of 2002 and firstquarter of 2003.
|                                     | ** ** | **Liability at**       | ** ** | **Change in** | ** ** | ** **      | ** ** | **Liability at**       | ** ** |
|-------------------------------------|------------|-----------------------------|------------|--------------------|------------|-----------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **Dec. 31, 2004** | ** ** | **Estimate**       | ** ** | **Utilization** | ** ** | **Sep. 30, 2005** | ** ** |
| Consolidation of  excess facilities |       |                        | $          | 21,177             |       |            |       | $                           | (460       | ) |   |   | $ | (3,362 | ) |   |   | $ | 17,355 |   |   |
| Other costs                         |       |                        | 418        |               |       |            | —     |                        |       |   | (315 | ) |   |   | 103 |   |   |
| Total                               |       |                        | $          | 21,595             |       |            |       | $                           | (460       | ) |   |   | $ | (3,677 | ) |   |   | $ | 17,458 |   |   |

 

Consolidation of excessfacilities includes property consolidation and abandonment costs (includingrelated professional fees) and disposal of property and equipment related tosuch properties. Property and equipment disposed of included leaseholdimprovements, computer equipment, software, and furniture and fixtures. Othercosts primarily relate to workforce reduction and professional fees. Due tochanges in estimates and assumptions, the Company reversed excess real estateprovisions during the nine months ended September 30, 2005. As a result,$460 has been recorded as a reduction to operating expenses in the 2005 period.

**6.** COMPREHENSIVEINCOME

TheCompany’s comprehensive income is as follows:
|                                                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                         | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                         |       | $                                | 30,821     |                            | $          | 19,988 |   | $ | 70,967 |   | $ | 48,633 |   |
| Foreign currency  translation adjustment and other |       | (527                             | )          | 8,609                           |       | (58,287 | ) | 5,441 |   |
| Comprehensive income                               |       | $                                | 30,294     |                            | $          | 28,597 |   | $ | 12,680 |   | $ | 54,074 |   |

 

**7.** DISCONTINUEDOPERATIONS

During the ninemonths ended September 30, 2005, the Company disposed of the following businessesthat collectively comprised substantially all of its Directional Marketingoperating segment. The results of operations of these businesses and theassociated disposal costs are reflected as discontinued operations in theconsolidated statements of operations for the three and nine months ended September 30,2005 and 2004:

·       OnJune 1, 2005, the Company sold substantially all of its DirectionalMarketing division to a private equity firm for net cash consideration of$49,586 ($80 million purchase price less working capital and other adjustmentsand $2,500 of cash placed in escrow for an 18 month period following thedisposition date) and a $7,000, 3% promissory note due to the Company after 7years. The sale included the Company’s Yellow Pages business in NorthAmerica and Japan along with its online relocation business. The Companyrecognized a loss on sale of these businesses of $10,729 ($1,803 net of taxbenefits) in the second quarter of 2005. In the third quarter of 2005, theCompany returned cash consideration of $657 upon final determination of workingcapital sold in connection with the disposition. The sale of the DirectionalMarketing business did not include the Company’s Directional Marketingoperations in the United Kingdom. The Company’s European Advertising &Communications management will continue to operate that business, andaccordingly, those results have been reclassified to our Advertising &Communications operating segment.

·       On May 2, 2005, theCompany sold its interests in TMP Direct, an order fulfillment business,formerly part of the Company’s Directional Marketing segment. The business waspurchased by GECKO Inc., an entity owned 65% by George Eisele, a director ofMonster Worldwide, for $2,500 cash, paid at closing plus an amount equal to 50%of TMP Direct’s working capital as of the closing 

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date payable on May 2,2006. George Eisele and another individual shareholder of GECKO Inc. personallyguaranteed the May 2, 2006 payment obligation of GECKO Inc. The sale wasnot considered material and did not include a significant amount of assets. TheCompany recognized a pre-tax and after tax loss on sale of this business of$551 in the second quarter of 2005.

During the yearended December 31, 2004, the Company disposed of the following businesses,which are reflected as discontinued operations in the consolidated statementsof operations for the three and nine months ended September 30, 2004:

·       In December 2004, theCompany sold and disposed of certain Advertising & Communications businessesin Continental Europe, in order to focus more fully on our Monster business.None of these dispositions were considered material or included a significantamount of assets. The Company recognized a loss on sale of these businesses of$7,055 ($6,234 net of tax) in the fourth quarter of 2004.

·       On October 5, 2004,the Company completed the sale of our wholly owned subsidiary US Motivation, Inc.,formerly part of our Directional Marketing segment, to General Yellow Pages Consultants, Inc.d/b/a The Marquette Group for $10,000 cash, subject to a post-closingadjustment. The Company recognized a pre-tax and after-tax gain on the sale ofUS Motivation of $7,413 in the fourth quarter of 2004.

Thefollowing amounts related to our dispositions in 2005 and 2004, as well asresidual costs related to our disposition of HH Group in 2003, have beensegregated from continuing operations and are reflected as discontinuedoperations in each period’s consolidated statement of operations:
|                                                             | ** ** | **Three Months  Ended** | ** ** | **Nine Months  Ended** | ** ** |
|-------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                  | ** ** | **September 30,**       | ** ** | **September 30,**      | ** ** |
| ** **                                                  | ** ** | **2005**                     | ** ** | **2004**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenue**                                                 |       | $                            | —     |                        | $          | 31,030 |   | $ | 23,402 |   | $ | 85,608 |   |
| Income (loss) before income taxes                           |       | $                            | (42        | )                           | $          | 4,827 |   | $ | (10,381 | ) | $ | 10,595 |   |
| Income tax  expense (benefit)                               |       | (15                          | )          | 2,520                       |       | (3,959 | ) | 5,202 |   |
| Net income (loss)  of discontinued operations               |       | (27                          | )          | 2,307                       |       | (6,422 | ) | 5,393 |   |
| Pre-tax loss on  sale of discontinued businesses            |       | —                       |       | —                      |       | (11,280 | ) | — |   |
| Income tax  benefit                                         |       | —                       |       | —                      |       | (8,926 | ) | — |   |
| Loss on sale of  businesses, net of tax                     |       | —                       |       | —                      |       | (2,354 | ) | — |   |
| **Income (loss) from discontinued  operations, net of tax** | ** ** | **$**                        | **(27**    | **)**                       | **$**      | **2,307** | ** ** | **$** | **(8,776** | **)** | **$** | **5,393** | ** ** |

 

**8.**   SEGMENT ANDGEOGRAPHIC DATA

The Company conducts business in two operatingsegments: Monster and Advertising & Communications. Corporateoperating expenses are not allocated to the Company’s operating segments. TheCompany’s Advertising & Communications division recognizes acommission on the sale of certain Monster products. Revenue recognized by theAdvertising & Communications segment for such sales was $6,750 and$3,107 for the three months ended September 30, 2005 and 2004,respectively and $15,364 and $7,935 for the nine months ended September 30,2005 and 2004, respectively.

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Thefollowing tables present the Company’s operations by business segment and bygeographic region, for the three and nine months ended September 30, 2005and 2004.

| ** **                             | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended** | ** ** |
|----------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                             | ** ** | **September 30,**           | ** **  | **September 30,**          | ** ** |
| **Revenue**                            | ** ** | **2005**                         | ** **  | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Monster                                |       | $                                | 206,834     |                            | $          | 157,679 |   | $ | 594,459 |   | $ | 421,745 |   |
| Advertising &  Communications |       | 42,454                           |        | 40,940                          |       | 125,861 |   | 119,412 |   |
| **Total revenue**                      | ** ** | **$**                            | **249,288** | ** **                      | **$**      | **198,619** | ** ** | **$** | **720,320** | ** ** | **$** | **541,157** |  |

 

| ** **                             | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                             | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| **Operating Income (Loss)**  | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| Monster                                |       | $                                | 54,585     |                            | $          | 34,642 |   | $ | 147,277 |   | $ | 87,876 |   |
| Advertising &  Communications |       | 4,447                            |       | 1,646                           |       | 7,649 |   | 4,292 |   |
| Corporate                              |       | (11,303                          | )          | (9,848                          | )          | (31,667 | ) | (26,691 | ) |
| **Total operating income**             | ** ** | **$**                            | **47,729** | ** **                      | **$**      | **26,440** | ** ** | **$** | **123,259** | ** ** | **$** | **65,477** | ** ** |

 

| ** **                                      | ** ** | **Three Months Ended** | ** **  | **Nine Months Ended** | ** ** |
|-------------------------------------------------|------------|----------------------------------|-------------|---------------------------------|------------|
| ** **                                      | ** ** | **September 30,**           | ** **  | **September 30,**          | ** ** |
| **Revenue by Geographic Region** | ** ** | **2005**                         | ** **  | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| United States                                   |       | $                                | 179,920     |                            | $          | 144,524 |   | $ | 513,723 |   | $ | 396,172 |   |
| United Kingdom                                  |       | 24,101                           |        | 25,048                          |       | 74,739 |   | 69,708 |   |
| Continental  Europe                             |       | 33,983                           |        | 21,858                          |       | 101,924 |   | 55,568 |   |
| Other (a)                                       |       | 11,284                           |        | 7,189                           |       | 29,934 |   | 19,709 |   |
| **Total**                                       | ** ** | **$**                            | **249,288** | ** **                      | **$**      | **198,619** | ** ** | **$** | **720,320** | ** ** | **$** | **541,157** | ** ** |

 

The following table reconciles each reportable segment’sassets to total assets reported on the Company’s consolidated balance sheets asof September 30, 2005 and December 31, 2004:

| ** **                             | ** ** | **September 30,** | ** **    | **December 31,** | ** ** |
|----------------------------------------|------------|------------------------|---------------|-----------------------|------------|
| **Total Assets**                  | ** ** | **2005**               | ** **    | **2004**              | ** ** |
| Monster                                |       | $                      | 816,902       |                  |       | $ | 747,066 |   |   |
| Advertising &  Communications |       | 300,781                |          |                  | 364,014    |   |   |
| Corporate                              |       | 324,909                |          |                  | 161,598    |   |   |
| Shared Assets (b)                      |       | 46,643                 |          |                  | 59,113     |   |   |
| Assets of  discontinued operations     |       | —                 |          |                  | 211,822    |   |   |
| **Total**                              | ** ** | **$**                  | **1,489,235** | ** **            | ** ** | **$** | **1,543,613** |   |   |

 

(a)             Includes Canada and the Asia-Pacific region.

(b)            Shared assets represent assets thatprovide economic benefit to all of the Company’s operating segments. Sharedassets are not allocated to operating segments for internal reporting ordecision-making purposes.

**9.**   SUBSEQUENT EVENT

In October 2005, the Company expanded its globalpresence with the acquisition of JobKorea (www.jobkorea.co.kr), an onlinerecruitment web site in South Korea. JobKorea serves more than three millionregistered users and utilizes an advanced online commerce system and postingmodel which emphasizes ease and self service. The aggregate cash purchase pricewas $94,000, net of cash and short-term investments acquired. The acquisitionof JobKorea gives the Company a leading presence in one of Asia’s largestonline markets.

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**Reportof Independent Registered Public Accounting Firm**

Board of Directors and StockholdersMonster Worldwide, Inc.New York, New York

We have reviewed the consolidated balance sheet ofMonster Worldwide, Inc. as of September 30, 2005, and the relatedconsolidated statements of operations for the three-month and nine-monthperiods ended September 30, 2005 and 2004, and cash flows for thenine-month periods ended September 30, 2005 and 2004 included in theaccompanying Securities and Exchange Commission Form 10-Q for theperiod ended September 30, 2005. These interim financial statements arethe responsibility of the Company’s management.

We conducted our reviews in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Areview of interim financial information consists principally of applyinganalytical procedures and making inquiries of persons responsible for financialand accounting matters. It is substantially less in scope than an auditconducted in accordance with the standards of the Public Company AccountingOversight Board, the objective of which is the expression of an opinionregarding the financial statements taken as a whole. Accordingly, we do notexpress such an opinion.

Based on our reviews, we are not aware of any materialmodifications that should be made to the consolidated financial statementsreferred to above for them to be in conformity with accounting principlesgenerally accepted in the United States.

We have previouslyaudited, in accordance with the standards of the Public Company AccountingOversight Board, the consolidated balance sheet of Monster Worldwide, Inc.as of December 31, 2004, and the related consolidated statements ofoperations, stockholders’ equity, and cash flows for the year then ended (notpresented herein); and in our report dated February 18, 2005, we expressedan unqualified opinion on those consolidated financial statements. In ouropinion, the information set forth in the accompanying consolidated balancesheet as of December 31, 2004 is fairly stated in all material respects inrelation to the consolidated balance sheet from which it has been derived.

/s/ BDO SEIDMAN, LLPBDO Seidman, LLP

New York, New YorkOctober 26, 2005

 

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**ITEM2.**   MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We make forward-looking statements in this report andin other reports and proxy statements that we file with the SEC. In addition,our senior management might make forward-looking statements. Broadly speaking,forward-looking statements include:

·                    projectionsof our revenues, income, earnings per share, capital expenditures, capitalstructure or other financial items;

·                    descriptionsof plans or objectives of our management for future operations, products orservices, including pending acquisitions and dispositions;

·                    forecastsof our future economic performance; and

·                    descriptionsof assumptions underlying or relating to the foregoing.

Forward-looking statements discuss matters that arenot historical facts. Because they discuss future events or conditions,forward-looking statements often include words such as “anticipate,” “believe,”“estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,”“should,” “will,” “would,” or similar expressions. Do not unduly rely onforward-looking statements. They give our expectations and are not guarantees.Forward-looking statements speak as of only the date they are made, and wemight not update them to reflect changes that occur after the date they aremade.

There are many factors—many beyond our control—thatcould cause results to differ significantly from our expectations. Some ofthese factors are described in “Item 1. Business Risk Factors” of our annualreport on Form 10-K for the year ended December 31, 2004.

**Overview**

Founded in 1967, Monster Worldwide, Inc. is theparent company of Monster, the leading global online careers property. We alsoown TMP Worldwide, one of the world’s largest recruitment advertising agencynetworks. Our clients range from Fortune 100 companies to small andmedium-sized enterprises and government agencies.

Monster is our flagship brand. Our Monster divisionoperates in 24 countries and accounted for 82.5% of our total revenue for thenine months ended September 30, 2005. Monster connects employers with jobseekers and offers innovative technology and services that give employers morecontrol over the recruiting process. We have been able to capitalize on Monster’sbrand and create worldwide awareness by offering online recruiting solutionsthat we believe are redefining the way employers and job seekers connect. Thesetools, which include searchable job postings, a resume database and careermanagement content and advice, provide users with more control over theemployment process. Monster’s job search, resume posting services and basicnetworking are free to the job seeker. Monster also offers premium careerservices at a fee to job seekers. Employers and human resources professionalspay to post jobs, search Monster’s resume database and use career site hostingand applicant tracking systems and other ancillary services.

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**Business Combinations**

Forthe period January 1, 2004 through September 30, 2005, we completedfive business combinations. Although none of the following acquired businesseswas considered to be a significant subsidiary, either individually or in theaggregate, they do affect the comparability of results from period to period.The acquisitions and the acquisition dates are as follows:

| **Acquired  Business**         | ** ** | **Acquisition Date**   | ** ** | **Business Segment/Region** |
|--------------------------------|------------|------------------------|------------|-----------------------------|
| Military  Advantage, Inc. |       | March 1, 2004     |       | Monster, North America      |
| jobpilot GmbH                  |       | April 22, 2004    |       | Monster, Europe             |
| Tickle Inc.                    |       | May 21, 2004      |       | Monster, North America      |
| WebNeuron  Services Limited    |       | June 18, 2004     |       | Monster, Asia/Pacific       |
| (JobsAhead.com)                |       |                   |       |                        |
| Emailjob.com SAS               |       | February 11, 2005 |       | Monster, Europe             |

 

**DiscontinuedOperations**

During the nine monthsended September 30, 2005, the Company disposed of the following businessesthat collectively comprised substantially all of its Directional Marketingoperating segment. The results of operations of these businesses and associateddisposal costs are reflected as discontinued operations in the consolidatedstatements of operations for the three and nine months ended September 30,2005 (dollar amounts in thousands):

·                    On June 1,2005, the Company sold substantially all of its Directional Marketing divisionto a private equity firm for net cash consideration of $49,586 ($80 millionpurchase price less working capital and other adjustments and $2,500 of cashplaced in escrow for an 18 month period following the disposition date) and a$7,000, 3% promissory note due to the Company after 7 years. The sale includedthe Company’s Yellow Pages business in North America and Japan along withits online relocation business. The Company recognized a loss on sale of thesebusinesses of $10,729 ($1,803 net of tax benefits) in the second quarter of2005. In the third quarter of 2005, the Company returned cash consideration of$657 upon final determination of working capital sold in connection with thedisposition. The sale of the Directional Marketing business did not include theCompany’s Directional Marketing operations in the United Kingdom. The Company’sEuropean Advertising & Communications management will continue tooperate that business, and accordingly, those results have been reclassified toour Advertising & Communications operating segment.

·                    On May 2, 2005, the Companysold its interests in TMP Direct, an order fulfillment business, formerly partof the Company’s Directional Marketing segment. The business was purchased byGECKO Inc, an entity owned 65% by George Eisele, a director of MonsterWorldwide, for $2,500 cash, paid at closing plus an amount equal to 50% of TMPDirect’s working capital as of the closing date payable on May 2, 2006.George Eisele and another individual shareholder of GECKO Inc. personallyguaranteed the May 2, 2006 payment obligation of GECKO Inc. The sale wasnot considered material and did not include a significant amount of assets. TheCompany recognized a pre-tax and after tax loss on sale of this business of$551 in the second quarter of 2005.

During the year ended December 31,2004, the Company disposed of the following businesses, which are reflected asdiscontinued operations in the consolidated statements of operations for thethree and nine months ended September 30, 2004:

·                    In December 2004, the Companysold and disposed of certain Advertising & Communications businessesin Continental Europe, in order to focus more fully on our Monster business.None of these dispositions were considered material or included a significantamount of assets. The Company recognized a loss on sale of these businesses of$7,055 ($6,234 net of tax) in the fourth quarter of 2004.

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·                    On October 5, 2004, theCompany completed the sale of our wholly owned subsidiary US Motivation, Inc.,formerly part of our Directional Marketing segment, to General Yellow Pages Consultants, Inc.d/b/a The Marquette Group for $10,000 cash, subject to a post-closingadjustment. The Company recognized a pre-tax and after-tax gain on the sale ofUS Motivation of $7,413 in the fourth quarter of 2004.

The following amountsrelated to our dispositions in 2005 and 2004, as well as residual costs relatedto our disposition of HH Group in 2003, have been segregated from continuingoperations and are reflected as discontinued operations in each period’sconsolidated statement of operations:

| ** **                                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                  | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                  | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenue**                                                 |       | $                                | —     |                            | $          | 31,030 |   | $ | 23,402 |   | $ | 85,608 |   |
| Income (loss) before income taxes                           |       | $                                | (42        | )                               | $          | 4,827 |   | $ | (10,381 | ) | $ | 10,595 |   |
| Income tax  expense (benefit)                               |       | (15                              | )          | 2,520                           |       | (3,959 | ) | 5,202 |   |
| Net income (loss)  of discontinued operations               |       | (27                              | )          | 2,307                           |       | (6,422 | ) | 5,393 |   |
| Pre-tax loss on  sale of discontinued businesses            |       | —                           |       | —                          |       | (11,280 | ) | — |   |
| Income tax  benefit                                         |       | —                           |       | —                          |       | (8,926 | ) | — |   |
| Loss on sale of  businesses, net of tax                     |       | —                           |       | —                          |       | (2,354 | ) | — |   |
| **Income (loss) from discontinued  operations, net of tax** | ** ** | **$**                            | **(27**    | **)**                           | **$**      | **2,307** | ** ** | **$** | **(8,776** | **)** | **$** | **5,393** | ** ** |

 

**CriticalAccounting Policies and Items Affecting Comparability**

Quality financialreporting relies on consistent application of Company accounting policies thatare based on accounting principles generally accepted in the United States. Thepolicies discussed below are considered by management to be critical tounderstanding our financial statements and often require management judgmentand estimates regarding matters that are inherently uncertain. When suchjudgments and estimates are required, all material developments and resolutionsare discussed with our audit committee.

***Revenue Recognition***

*Monster.**  *Our Monster division primarily earns revenuefrom the placement of job postings on the websites within the Monster network,access to the Monster network’s online resume database and other ancillaryservices. We recognize revenue at the time that job postings are displayed onthe Monster network websites. Revenue earned from subscriptions to the Monsternetwork’s resume database is recognized over the length of the underlyingsubscriptions, typically from two weeks to twelve months. Revenue associatedwith multiple element contracts is allocated based on the relative fair valueof the services included in the contract. Unearned revenues are reported on thebalance sheet as deferred revenue.

*Advertising &Communications.**  *OurAdvertising & Communications division derives revenue from jobadvertisements placed in newspapers, Internet career job boards such as Monsterand other media, plus associated fees for related services. Revenue is recordednet of media placement costs, which are passed on to the customer. Revenue isgenerally recognized upon placement date for newspapers and other print andoffline media. Online media revenue is recognized when services are purchased.

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***BusinessCombinations, Goodwill and Intangible Assets***

The purchase method ofaccounting requires that assets acquired and liabilities assumed be recorded attheir fair values on the date of a business acquisition. Our consolidatedfinancial statements and results of operations reflect an acquired businessfrom the completion date of an acquisition and are not restated. The costs toacquire a business, including transaction, integration and restructuring costs,are allocated to the fair value of net assets acquired upon acquisition. Anyexcess of the purchase price over the estimated fair values of the net assetsacquired is recorded as goodwill.

The judgments that we makein determining the estimated fair value assigned to each class of assetsacquired and liabilities assumed, as well as asset lives, can materially impactnet income in periods following a business combination. For purchaseacquisitions, we generally use independent valuation specialists to aid in ourconclusions of such fair values and asset lives. We evaluate our goodwillannually for impairment or more frequently if indicators of potentialimpairment exist. The determination of whether or not goodwill has becomeimpaired involves a significant level of judgment in the assumptions underlyingthe approach used to determine the value of our reporting units. Changes in ourstrategy and/or market conditions could significantly impact these judgmentsand require reductions to recorded amounts of intangible assets.

**Results of Operations**

Consolidated operatingresults as a percent of revenue follows:

| ** **                                              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                              | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                              | ** ** | **2005**                         | ** ** | **2004**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenue**                                             |       | 100.0                            | %          | 100.0                           | %          | 100.0 | % | 100.0 | % |
| Salaries and  related                                   |       | 43.9                             | %          | 46.4                            | %          | 43.8 | % | 45.4 | % |
| Office and  general                                     |       | 18.4                             | %          | 21.5                            | %          | 19.3 | % | 21.5 | % |
| Marketing and  promotion                                |       | 18.6                             | %          | 18.8                            | %          | 19.8 | % | 20.9 | % |
| **Total  operating expenses**                           |       | 80.9                             | %          | 86.7                            | %          | 82.9 | % | 87.9 | % |
| **Operating income**                                    |       | 19.1                             | %          | 13.3                            | %          | 17.1 | % | 12.1 | % |
| Interest and other, net                                 |       | 0.3                              | %          | -0.1                            | %          | 0.2 | % | -0.2 | % |
| Income from continuing  operations before income taxes  |       | 19.4                             | %          | 13.2                            | %          | 17.3 | % | 11.9 | % |
| Income taxes                                            |       | 6.8                              | %          | 4.3                             | %          | 6.1 | % | 3.9 | % |
| Losses in equity  interests                             |       | -0.3                             | %          | 0.0                             | %          | -0.2 | % | 0.0 | % |
| **Income from continuing  operations**                  |       | 12.4                             | %          | 8.9                             | %          | 11.1 | % | 8.0 | % |
| Income (loss) from discontinued  operations, net of tax |       | 0.0                              | %          | 1.2                             | %          | -1.2 | % | 1.0 | % |
| **Net income**                                          |       | 12.4                             | %          | 10.1                            | %          | 9.9 | % | 9.0 | % |

 

**TheThree Months Ended September 30, 2005 Compared to the Three Months Ended September 30,2004**

***Monster***

The operating results ofour Monster division for the three months ended September 30, 2005 and2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of   Revenue** | ** ** | **2004** | ** ** | **% of   Revenue** | ** ** | **Increase  (decrease)** | ** ** | **% Increase  (decrease)** | ** ** |
|--------------------------------------|------------|----------|------------|------------------------------|------------|----------|------------|------------------------------|------------|--------------------------|------------|---------------------------------|------------|
| Revenue                              |       | $        | 206,834    |                         |       | 100.0    |       |                         | $          | 157,679                  |       |                            | 100.0      |   |   |   | $ | 49,155 |   |   |   | 31.2 |   |   |
| Selling, general and administrative  |       | 144,936  |       |                         | 70.0       |     |       | 115,072                      |       |                     | 72.9       |                            |       |   | 29,864 |   |   |   | 26.0 |   |   |
| Depreciation and  amortization       |       | 7,313    |       |                         | 3.5        |     |       | 7,965                        |       |                     | 5.1        |                            |       |   | (652 | ) |   |   | -8.2 |   |   |
| Operating income                     |       | $        | 54,585     |                         |       | 26.4     |       |                         | $          | 34,642                   |       |                            | 22.0       |   |   |   | $ | 19,943 |   |   |   | 57.6 |   |   |

 

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Our Monster division benefited significantly from our2004 sales force expansion and an accelerating shift of recruitment advertisingto the Internet, particularly overseas. Monster’s international revenueincreased 45.7% over the prior year period and currently accounts for 21.7% ofthe Monster division’s revenue, compared to 19.5% in the 2004 period. Monster’slargest gains overseas were realized in its central European operations. On anorganic basis, which excludes the effects of currency exchange rates and theacquisitions that have not been owned the entire duration of each comparableperiod, international revenue increased $12.4 million, or 40.2%. Revenue in ourNorth American operations increased 27.7% over the 2004 period, as a result ofour focus on small and medium sized businesses, while sales in the enterprisemarket (those businesses that are among the top 1,500 globally, in terms ofemployees) showed modest growth. We continue to see greater demand for ourself-service eCommerce product which we believe is our most efficient saleschannel. eCommerce has been an excellent source of new customers, especially inthe small and medium sized business arena. We are also beginning to see clientdemand for eCommerce in our enterprise customer base.

Operating income at theMonster division increased due to the strong operating leverage in our NorthAmerican operations and the acceptance of our eCommerce product. North Americanoperating income was $56.6 million, a 61.9% increase over the prior yearperiod. Our international operations posted an operating loss in the thirdquarter of 2005 of $2.1 million, as we continued to invest in marketing and oursales infrastructure. Additionally, our international operations incurred $9.0million of marketing and promotion expense in the third quarter of 2005.

***Advertising & Communications***

The operating results ofour Advertising & Communications division for the three months ended September 30,2005 and 2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of  Revenue** | ** ** | **2004** | ** ** | **% of  Revenue** | ** ** | **Increase  (decrease)** | ** ** | **% Increase  (decrease)** | ** ** |
|--------------------------------------|------------|----------|------------|------------------------|------------|----------|------------|------------------------|------------|--------------------------|------------|---------------------------------|------------|
| Revenue                              |       | $        | 42,454     |                   |       | 100.0    |       |                   | $          | 40,940                   |       |                            | 100.0      |   |   |   | $ | 1,514 |   |   |   | 3.7 |   |   |
| Selling, general and administrative  |       | 36,329   |       |                   | 85.6       |     |       | 37,540                 |       |                     | 91.7       |                            |       |   | (1,211 | ) |   |   | -3.2 |   |   |
| Depreciation and  amortization       |       | 1,678    |       |                   | 4.0        |     |       | 1,754                  |       |                     | 4.3        |                            |       |   | (76 | ) |   |   | -4.3 |   |   |
| Operating income                     |       | $        | 4,447      |                   |       | 10.5     |       |                   | $          | 1,646                    |       |                            | 4.0        |   |   |   | $ | 2,801 |   |   |   | 170.2 |   |   |

 

Revenue at our Advertising & Communicationsdivision increased primarily due to a stronger recruitment advertising marketin North America, while international revenue declined 3.4% compared to thethird quarter of 2004. The division made strong progress in North America withrevenue growth of 11.7% compared to the same period last year. The growth inNorth America was mainly due to increased sales of interactive help-wantedadvertising and other on-line products, partially offset by decreasingcommissions earned from advertising placement in traditional media.

The division posted operating income in both NorthAmerica and internationally for the third quarter of 2005, as a result of aconcerted effort to maintain a disciplined cost structure and manage expensesto expected revenue levels.

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***Consolidated Operating Expenses and Operating Income***

Consolidatedoperating expenses and operating income for the three months ended September 30,2005 and 2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of  Revenue** | ** ** | **2004** | ** ** | **% of   Revenue** | ** ** | **Increase** | ** ** | **% Increase** | ** ** |
|--------------------------------------|------------|----------|------------|------------------------|------------|----------|------------|------------------------------|------------|--------------|------------|---------------------|------------|
| Salaries and related                 |       | $        | 109,332    |                   |       | 43.9     |       |                         | $          | 92,124       |       |                | 46.4       |   |   | $ | 17,208 |   |   | 18.7 |   |   |
| Office and general                   |       | 45,931   |       |                   | 18.4       |     |       | 42,706                       |       |         | 21.5       |                |       | 3,225 |   |   | 7.6 |   |   |
| Marketing and promotion              |       | 46,296   |       |                   | 18.6       |     |       | 37,349                       |       |         | 18.8       |                |       | 8,947 |   |   | 24.0 |   |   |
| Operating expenses                   |       | 201,559  |       |                   | 80.9       |     |       | 172,179                      |       |         | 86.7       |                |       | 29,380 |   |   | 17.1 |   |   |
| Operating income                     |       | $        | 47,729     |                   |       | 19.1     |       |                         | $          | 26,440       |       |                | 13.3       |   |   | $ | 21,289 |   |   | 80.5 |   |   |

 

Our Monster divisionaccounted for all of the year over year increase in total operating expenses,stemming mainly from hiring initiatives that we undertook in the 2004 period,acquisitions and increased marketing and promotion of the Monster brand. Costsassociated with our hiring initiatives mainly reflect increased commissions andthe addition of over 500 sales and support staff across the Monster divisionsince the second quarter of 2004. In addition, approximately $2.0 million ofthe increase in operating expenses is associated with the acquisition ofEmailjob.com SAS, which was acquired in February 2005. Compared with thethird quarter of 2004, the 2005 period also includes a $0.3 million increase inoperating expenses related to currency exchange rates and lower expenses in ourAdvertising and Communications division were offset by an increase in corporateexpenses.

***Income Taxes***

Incometaxes for the three months ended September 30, 2005 and 2004 are asfollows:

| ** **                                             | ** ** | **Three Months Ended  September 30,** | ** ** | **Increase** | ** ** |
|--------------------------------------------------------|------------|------------------------------------------------------|------------|--------------|------------|
| **(dollars in thousands)**                   | ** ** | **2005**                                             | ** ** | **2004**     | ** ** | **$** | ** ** | **%** | ** ** |
| Income from continuing  operations before income taxes |       | $                                                    | 48,444     |         | $          | 26,213 |   | 22,231 |   | 84.8 |   |
| Income taxes                                           |       | $                                                    | 16,955     |         | $          | 8,532 |   |     8,423 |   | 98.7 |   |
| Effective tax rate                                     |       | 35.0%                                                |       | 32.5%        |       |   |   |   |   |

 

Our effective tax ratesdiffer from the statutory rate due to the impact of state and local incometaxes, certain nondeductible expenses, foreign earnings taxed at different taxrates and valuation allowances. Our future effective tax rates could beadversely affected by earnings being lower than anticipated in countries wherewe have lower statutory rates, changes in the valuation of our deferred taxassets or liabilities, or changes in tax laws or interpretations thereof. Inaddition, our filed tax returns are subject to the examination by the InternalRevenue Service and other tax authorities. We regularly assess the likelihoodof adverse outcomes resulting from these examinations to determine the adequacyof our provision for income taxes.

***Earnings Per Share***

Diluted earnings per shareincreased 47% in the current period, even as diluted weighted average sharesoutstanding increased 4.4 million shares. The share increase is mainly theresult of incremental dilution associated with a higher average stock price inthe 2005 period, as well as additional share issuances for option exercises. Netincome was 12.4% of total revenue in the 2005 period, compared to 10.1% in the2004 period.

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**TheNine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30,2004**

***Monster***

Theoperating results of our Monster division for the nine months ended September 30,2005 and 2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of   Revenue** | ** ** | **2004** | ** ** | **% of   Revenue** | ** ** | **Increase** | ** ** | **% Increase** | ** ** |
|--------------------------------------|------------|----------|------------|------------------------------|------------|----------|------------|------------------------------|------------|--------------|------------|---------------------|------------|
| Revenue                              |       | $        | 594,459    |                         |       | 100.0    |       |                         | $          | 421,745      |       |                | 100.0      |   |   | $ | 172,714 |   |   | 41.0 |   |   |
| Selling, general  and administrative |       | 425,010  |       |                         | 71.5       |     |       | 315,155                      |       |         | 74.7       |                |       | 109,855 |   |   | 34.9 |   |   |
| Depreciation and  amortization       |       | 22,172   |       |                         | 3.7        |     |       | 18,714                       |       |         | 4.4        |                |       | 3,458 |   |   | 18.5 |   |   |
| Operating income                     |       | $        | 147,277    |                         |       | 24.8     |       |                         | $          | 87,876       |       |                | 20.8       |   |   | $ | 59,401 |   |   | 67.6 |   |   |

 

Our Monster division’s increase in revenue over theprior year period was primarily driven by our North American and Europeanoperations. North American revenue increased 33.0% and represents 77.8% of ourtotal Monster revenue. The increase in revenue is a direct result ofinvestments we made in our sales force in the latter half of 2004 and theintegration of acquired companies. In addition our eCommerce product, whichallows our clients to service their accounts online without assistance,continues to attract new customers and generate strong revenue across NorthAmerica. International revenue increased 78.4% over the 2004 period as our acquisitionsof jobpilot GmbH in Germany and Emailjob.com in France increased our presencein these two key European markets. Additional increases in internationalrevenue resulted from our continued investments in sales force expansion andmarketing efforts throughout Europe.

Our North Americanoperations accounted for the entire increase in total operating income over the2004 period. North American management has been diligently managing costs andkeeping expenses in line with revenues. Expenses increased across the divisionprimarily due to the addition of sales staff, our investments in marketing andadditional costs associated with businesses that we acquired. North Americanoperating income was $153.0 million for the nine months ended September 30,2005, a 71.2% increase over the prior year period. Our international operationsposted a $5.7 million operating loss in the first nine months of 2005, asinvestments in marketing and additional sales people negatively impactedoperating margins.

***Advertising & Communications***

Theoperating results of our Advertising & Communications division for thenine months ended September 30, 2005 and 2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of   Revenue** | ** ** | **2004** | ** ** | **% of   Revenue** | ** ** | **Increase  (decrease)** | ** ** | **% Increase  (decrease)** | ** ** |
|--------------------------------------|------------|----------|------------|-------------------------|------------|----------|------------|-------------------------|------------|--------------------------|------------|---------------------------------|------------|
| Revenue                              |       | $        | 125,861    |                    |       | 100.0    |       |                    | $          | 119,412                  |       |                            | 100.0      |   |   |   | $ | 6,449 |   |   |   | 5.4 |   |   |
| Selling, general  and administrative |       | 113,478  |       |                    | 90.2       |     |       | 109,856                 |       |                     | 92.0       |                            |       |   | 3,622 |   |   |   | 3.3 |   |   |
| Depreciation and  amortization       |       | 4,734    |       |                    | 3.8        |     |       | 5,264                   |       |                     | 4.4        |                            |       |   | (530 | ) |   |   | -10.1 |   |   |
| Operating income                     |       | $        | 7,649      |                    |       | 6.1      |       |                    | $          | 4,292                    |       |                            | 3.6        |   |   |   | $ | 3,357 |   |   |   | 78.2 |   |   |

 

Advertising & Communications’ revenueprimarily increased due to higher demand of online and print advertising,especially in North America. Our North American revenue increased 10.8% overthe 2004 period, while our international revenue was essentially flat, rising0.9% in the first nine months of 2005. Revenue increases were primarilyrealized in the higher commission online space, while commissions earned on thesales of traditional media have been in decline due to client losses andmigration to the Internet. For the nine months ended September 30, 2005,the division recognized approximately $15.4 

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million of revenue related to the sale of certainMonster products to customers, an increase of 93.6% over the $7.9 million ofrevenue the division recorded in the first nine months of 2004.

Operating income increased78.2% over the first nine months of 2004, primarily due to increased revenueand disciplined management of core operating expenses. Management iscontinually analyzing the cost structure of the business to ensure that costsare in line with revenues.

***Consolidated Operating Expenses and Operating Income***

Consolidatedoperating expenses and operating income for the nine months ended September 30,2005 and 2004 are as follows:

| **(dollars in thousands)** | ** ** | **2005** | ** ** | **% of   Revenue** | ** ** | **2004** | ** ** | **% of   Revenue** | ** ** | **Increase** | ** ** | **% Increase** | ** ** |
|--------------------------------------|------------|----------|------------|------------------------------|------------|----------|------------|------------------------------|------------|--------------|------------|---------------------|------------|
| Salaries and  related                |       | $        | 315,452    |                         |       | 43.8     |       |                         | $          | 245,946      |       |                | 45.4       |   |   | $ | 69,506 |   |   | 28.3 |   |   |
| Office and  general                  |       | 139,175  |       |                         | 19.3       |     |       | 116,454                      |       |         | 21.5       |                |       | 22,721 |   |   | 19.5 |   |   |
| Marketing and  promotion             |       | 142,434  |       |                         | 19.8       |     |       | 113,280                      |       |         | 20.9       |                |       | 29,154 |   |   | 25.7 |   |   |
| Operating  expenses                  |       | 597,061  |       |                         | 82.9       |     |       | 475,680                      |       |         | 87.9       |                |       | 121,381 |   |   | 25.5 |   |   |
| Operating income                     |       | $        | 123,259    |                         |       | 17.1     |       |                         | $          | 65,477       |       |                | 12.1       |   |   | $ | 57,782 |   |   | 88.2 |   |   |

 

Our Monster divisionaccounted for substantially all of the year over year increase in totaloperating expenses, stemming mainly from the hiring initiatives we undertook inthe latter half of 2004 and costs associated with acquisitions, particularlyTickle, jobpilot GmbH and Emailjob. Costs associated with our hiringinitiatives mainly reflect higher commissions paid to sales professionals andsales and support staff. In addition, we continue to invest in the Monsterbrand, both in North America and in key international markets. Our acquisitionof jobpilot GmbH increased our presence in several countries across Europe andhelped establish us as a leader in Germany. Our marketing and promotion in the2005 period also includes resources allocated to re-brand our jobpilot GmbHproperties. Corporate operating expenses increased $5.0 million over the 2004period mainly due to higher salary and related expenses and severance relatedto former executives, while currency translation had a $3.9 million effect. Weremain committed to analyzing our expense infrastructure to ensure that costsare in line with revenues, especially given the uneven employment market inNorth America and Europe.

***Income Taxes***

Incometaxes for the nine months ended September 30, 2005 and 2004 are as follows:

| ** **                                             | ** ** | **Nine Months Ended  September 30,** | ** ** | **Increase** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------|------------|
| **(dollars in thousands)**                   | ** ** | **2005**                                            | ** ** | **2004**     | ** ** | **$** | ** ** | **%** | ** ** |
| Income from  continuing operations before income taxes |       | $                                                   | 124,950    |         | $          | 64,535 |   |   60,415 |   | 93.6 |   |
| Income taxes                                           |       | $                                                   | 43,990     |         | $          | 21,295 |   |   22,695 |   | 106.6 |   |
| Effective tax rate                                     |       | 35.2%                                               |       | 33.0%        |       |   |   |   |   |

 

Our effective tax ratesdiffer from the statutory rate due to the impact of state and local incometaxes, certain nondeductible expenses, foreign earnings taxed at different taxrates and valuation allowances. Our future effective tax rates could beadversely affected by earnings being lower than anticipated in countries wherewe have lower statutory rates, changes in the valuation of our deferred taxassets or liabilities, or changes in tax laws or interpretations thereof. Inaddition, our filed tax returns are subject to the examination by the InternalRevenue Service and other tax authorities. We regularly assess the likelihoodof adverse outcomes resulting from these examinations to determine the adequacyof our provision for income taxes.

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***Earnings Per Share***

Diluted earnings per shareincreased 39% in the nine month 2005 period, even as diluted weighted averageshares outstanding increased 4.4 million shares, mainly as a result ofincremental dilution associated with a higher average stock price in the 2005period, as well as additional share issuances for option exercises. Net incomewas 9.9% of total revenue in the 2005 period, compared to 9.0% in the 2004period.

**Financial Condition**

| ** **                                                        | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **(in thousands)**                                           | ** ** | **2005**                                            | ** ** | **2004** | ** ** |
| Cash provided by  operating activities of continuing operations   |       | $                                                   | 180,264    |   | $ | 91,649 |   |
| Cash used for  investing activities of continuing operations      |       | (74,891                                             | )          | (131,752 | ) |
| Cash provided by  financing activities of continuing operations   |       | 34,174                                              |       | 66,707 |   |
| Cash used for  discontinued operations and business held for sale |       | (20,353                                             | )          | (52,076 | ) |
| Effect of exchange rate  changes on cash and cash equivalents     |       | (3,596                                              | )          | 429 |   |
|                                                                   |            |                                                     |            |  |  |  |  |

 

Ourprincipal capital requirements have been to fund (i) working capital, (ii) marketingand development of our Monster network, (iii) acquisitions (iv) capitalexpenditures and (v) the 2003 spin-off of Hudson Highland Group, Inc.Prior to the sale of our Directional Marketing segment in the second quarter of2005, our working capital requirements were generally higher in the first halfof each year, when payments to major Yellow Page directory publishers wereat their highest levels. In addition, because of recent business acquisitionsand our 2002 and 2003 reorganization initiatives, we have substantial cashcommitments over the next several years. These commitments as of September 30,2005 are as follows (amounts in thousands):

| ** **                                                      | ** ** | **Payments due by period** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                      | ** ** | ** **                                | ** ** | **Less than** | ** ** | ** ** | ** ** | ** ** | ** ** | **More than** | ** ** |
| **Contractual Obligations (in thousands)**       | ** ** | **Total**                                 | ** ** | **1 year** | ** ** | **1 - 3 years** | ** ** | **3-5 years** | ** ** | **5 years** | ** ** |
| Purchase  commitments—advertising contracts                |       | $                                         | 9,395      |   |   | $ | 7,895 |   |   |   | $ | 1,500 |   |   | $ | — |   | $ | — |   |
| Borrowings under  financing arrangement and other notes payable |       | 531                                       |       |   | 145 |   |   |   | 170 |   |   | 170 |   | 46 |   |
| Capital lease  obligations                                      |       | 462                                       |       |   | 334 |   |   |   | 128 |   |   | — |   | — |   |
| Operating lease  obligations                                    |       | 284,804                                   |       |   | 33,611 |   |   |   | 63,999 |   |   | 56,366 |   | 130,828 |   |
| Acquisition notes  payable                                      |       | 43,715                                    |       |   | 29,424 |   |   |   | 13,811 |   |   | 387 |   | — |   |
| Total                                                           |       | $                                         | 338,907    |   |   | $ | 71,409 |   |   |   | $ | 79,608 |   |   | $ | 56,923 |   | $ | 130,967 |   |

 

In addition to the cash commitments above, in October 2005,we paid approximately $94.0 million, net of cash and short term investmentsacquired, for our acquisition of JobKorea (www.jobkorea.co.kr), an onlinerecruitment web site in South Korea. The Company also has certain rights andobligations, the amount and likelihood of which are not currently determinable,to acquire a 51% or more interest in its equity investee, ChinaHR, in the eventof an initial public offering or February 1, 2008, whichever comes first.

Historically, we have relied on funds provided byoperating activities, equity offerings, short and long-term borrowings andseller-financed notes to meet our liquidity needs. We invest our excess cashpredominantly in money market funds, overnight deposits, and commercial paper eachhaving maturities of less than three months and in auction rate bonds, all ofwhich are highly liquid and are of high-quality investment grade with theintent to make such funds readily available for operating and strategiclong-term equity investment purposes.

As of September 30, 2005, we had cash and cashequivalents of $313.7 million, compared to $198.1 million as of December 31,2004. Our increase in cash of $115.6 million in the nine months ended September 30,

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2005, primarily relates to our operating and financingactivities offset by cash used for investing activities. Cash provided byoperating activities was $160.6 million for the nine months ended September 30,2005 and resulted from $79.7 million of income from continuing operations and$62.5 million of net non-cash items, increased by a $38.1 million change inworking capital. Increases in accounts payable and accrued expenses mainlyreflect timing of accounts payable and general accruals as well as increaseddeferred tax liabilities related to our continuing operations. Deferred revenuecontinued to increase in 2005 due to our success in driving more business toMonster,  in North America, Asia Pacificand Europe. Partially offsetting these sources of cash was a use for prepaidand other assets, which increased with the disposition of our DirectionalMarketing segment. As a result of the disposition, we recorded deferredconsideration receivable related to the sale as well as certain deferred taxassets.  In addition, cash flow fromoperating activities was decreased by $19.6 million from cash used in ourdiscontinued Directional Marketing businesses.

We used $75.6 million of cash for investing activitiesin the nine months ended September 30, 2005. The use of cash mainlyreflects our net cash purchase of Emailjob SAS for $20.7 million and our $50.1million cash investment for 40% of ChinaHR.com. We also paid $27.3 million ofindebtedness related to our purchases of Military Advantage Inc., QuickHire, Inc.,and Tickle Inc. These uses of cash were substantially offset by $49.1million of net cash received from the sale of our Directional Marketing andother businesses. Furthermore, we used $24.1 million of cash for capitalexpenditures in the first nine months of 2005.

Cash provided by financing activities consists of$37.7 million of cash received from employee stock option exercises, slightlyoffset by $2.1 million of payments on capitalized lease obligations. Inaddition, we used $1.4 million of cash to repurchase common stock that wasissued under a pre-existing employment agreement.

We believe that our current cash and cash equivalents,revolving credit facility and cash we anticipate to generate from operatingactivities will provide us with sufficient liquidity to satisfy our workingcapital needs, capital expenditures, investment requirements and commitmentsthrough at least the next twelve months. Our cash generated from operatingactivities is subject to fluctuations in the global economy and unemploymentrates.

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**ITEM 3.** QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risks include fluctuations ininterest rates, variability in interest rate spread relationships (i.e., primeto LIBOR spreads) and exchange rate variability. At September 30, 2005,the utilized portion of our three-year revolving credit agreement wasapproximately $3.5 million for standby letters of credit and approximately$96.5 million was unused. Interest on future outstanding loans under therevolving credit agreement shall be charged based on a variable interest raterelated to our choice of (1) the higher of (a) the prime rate or (b) theFederal Funds rate plus  1¤2of 1%, plus a margin determined by the ratio of our debt to earnings beforeinterest, taxes, depreciation and amortization (“EBITDA”) as defined in therevolving credit agreement or (2) the London Interbank Offered Rate(LIBOR) plus a margin determined by the ratio of our debt to EBITDA as definedin the revolving credit agreement. We use forward foreign exchange contracts ascash flow hedges to offset risks related to foreign currency transactions.These transactions primarily relate to non-functional currency denominatedinter-company funding loans. We do not trade derivative financialinstruments for speculative purposes.

We conduct operations in various foreign countries,including Australia, Belgium, Canada, France, Germany, Ireland, India, Italy,the Netherlands, New Zealand, Sweden, Spain, and the United Kingdom. For thethree and nine months ended September 30, 2005, approximately 27.8% and28.7%, respectively, of our revenue was earned outside the United States andcollected in local currency and related operating expenses were also paid insuch corresponding local currency. Accordingly, we are subject to risk ofexchange rate fluctuations between such local currencies and the dollar.

The financial statementsof our non-U.S. subsidiaries are translated into U.S. dollars using currentrates of exchange, with gains or losses included in the cumulative translationadjustment account, a component of stockholders’ equity. During the three andnine months ended September 30, 2005, we had a translation losses of$1.1 million and $58.9 million, respectively, primarily attributable tothe strengthening of the U.S. dollar against the Euro, the British Pound andthe Swedish Krona.

**ITEM 4.** CONTROLS ANDPROCEDURES

Monster Worldwide maintains “disclosure controls andprocedures,” as such term is defined under Securities Exchange Act Rule 13a-15(e),that are designed to ensure that information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to our management, including ourChief Executive Officer and Chief Financial Officer, as appropriate, to allowtimely decisions regarding required disclosures. In designing and evaluatingthe disclosure controls and procedures, Monster Worldwide’s management recognizedthat any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectivesand Monster Worldwide’s management necessarily was required to apply itsjudgment in evaluating the cost-benefit relationship of possible controls andprocedures. Monster Worldwide has carried out an evaluation, as of the end ofthe period covered by this report, under the supervision and with theparticipation of Monster Worldwide’s management, including Monster Worldwide’sChief Executive Officer and Chief Financial Officer, of the effectiveness ofthe design and operation of Monster Worldwide’s disclosure controls andprocedures. Based upon their evaluation and subject to the foregoing, the ChiefExecutive Officer and Chief Financial Officer concluded that Monster Worldwide’sdisclosure controls and procedures were effective in ensuring that materialinformation relating to Monster Worldwide is made known to the Chief ExecutiveOfficer and Chief Financial Officer by others within Monster Worldwide duringthe period in which this report was being prepared.

There have been no significant changes in MonsterWorldwide’s internal controls over financial reporting that occurred during ourmost recent fiscal quarter that have materially affected, or are reasonablylikely to materially affect, our internal controls over financial reporting.

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**PART II—OTHER INFORMATION**

**ITEM 6.**                EXHIBITS.

Thefollowing exhibits are filed as a part of this report:

|        | 15   |   | Letter from BDO Seidman, LLP regarding unaudited  interim financial information.                                                                                                   |
|--------|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 31.1 |   | Certification by Andrew J. McKelvey 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. |
|   | 31.2 |   | Certification by Charles Baker 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.       |
|   | 32.1 |   | Certification by Andrew J. McKelvey pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                          |
|   | 32.2 |   | Certification by Charles Baker 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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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities andExchange Act of 1934, the registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

|                               |   | MONSTER WORLDWIDE, INC. |
|-------------------------------|--------|------------------------------|
|                          |   | (Registrant)                 |
| Dated: November 3,  2005 |   | By:                          |   | /s/ ANDREW J. MCKELVEY |
|                          |   |                         |   | Andrew J.  McKelvey |
|                          |   |                         |   | Chairman of the  Board and Chief Executive Officer |
|                          |   |                         |   | (principal  executive officer) |
| Dated: November 3,  2005 |   | By:                          |   | /s/ CHARLES BAKER |
|                          |   |                         |   | Charles Baker |
|                          |   |                         |   | Chief Financial  Officer |
|                          |   |                         |   | (principal  financial officer) |
| Dated: November 3,  2005 |   | By:                          |   | /s/ JONATHAN TRUMBULL |
|                          |   |                         |   | Jonathan Trumbull |
|                          |   |                         |   | Chief Accounting  Officer and Global Controller |
|                          |   |                         |   | (principal  accounting officer) |

 

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