**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 MARCH 31,  2006**                                                                |
| ** ** | **OR**                                                                                                                 |
| o          | **TRANSITION REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**FORTHE TRANSITION PERIODFROM             to            **

**COMMISSIONFILE NUMBER 000-21571**

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**MONSTER WORLDWIDE, INC.**

(EXACT NAME OFREGISTRANT AS SPECIFIED IN ITS CHARTER)

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

 

**622 Third Avenue, New York, New York 10017**(ADDRESSOF PRINCIPAL EXECUTIVE OFFICES)

**(212)351-7000**(REGISTRANT’STELEPHONE NUMBER, INCLUDING AREA CODE)

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Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past90 days. Yes x  No o

Indicate by checkmarkwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

| Large Accelerated Filer x |   | Accelerated Filer   ̈ |   | Non-Accelerated  Filer  ̈ |
|---------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  ̈  Yes   ̈  No

Indicate the number ofshares outstanding of each of the issuer’s class of common stock as of May 1,2006, the latest practicable date.

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| Class                      | ** ** | **Outstanding on  May 1, 2006** | ** **  |
|----------------------------|------------|------------------------------------------------|-------------|
| Common Stock               |       |                                           | 123,607,036 |   |   |
| Class B Common  Stock |       |                                           | 4,762,000   |   |   |

 

 

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**MONSTERWORLDWIDE, 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**                                                                    | 27       |
| **PART II  – OTHER INFORMATION**    |                                                                                            |
| **Item 2.**                                   | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                | 28       |
| **Item 6.**                                   | **Exhibits**                                                                                    | 28       |

 

2

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**PART I—FINANCIALINFORMATION**

**ITEM 1.**                FINANCIALSTATEMENTS

**MONSTER WORLDWIDE, INC.CONSOLIDATED STATEMENTS OF OPERATIONS**(in thousands,except per share amounts)(unaudited)

| ** **                                                                  | ** ** | **Three Months Ended March 31,** | ** **  |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------|-------------|
| ** **                                                                  | ** ** | **2006**                                             | ** **  | **2005** | ** ** |
| **Revenue**                                                                 | ** ** | **$**                                                | **291,747** | ** ** | **$** | **228,524** | ** ** |
| Salaries and related                                                        |       | 113,348                                              |        | 97,659 |   |
| Office and  general                                                         |       | 54,804                                               |        | 45,399 |   |
| Marketing and  promotion                                                    |       | 66,117                                               |        | 48,411 |   |
| Total operating  expenses                                                   |       | 234,269                                              |        | 191,469 |   |
| **Operating income**                                                        | ** ** | **57,478**                                           | ** **  | **37,055** | ** ** |
| Interest and other, net                                                     |       | 3,342                                                |        | (82 | ) |
| Income from continuing operations before income  taxes and equity interests |       | 60,820                                               |        | 36,973 |   |
| Income taxes                                                                |       | 22,149                                               |        | 13,068 |   |
| Losses in equity  interests                                                 |       | (1,241                                               | )           | (209 | ) |
| **Income from continuing operations**                                       | ** ** | **37,430**                                           | ** **  | **23,696** | ** ** |
| Income (loss) from discontinued operations, net of  tax                     |       | 4,832                                                |        | (3,126 | ) |
| **Net income**                                                              | ** ** | **$**                                                | **42,262**  | ** ** | **$** | **20,570** | ** ** |
| **Basic  earnings per share:**                                              |       |                                                 |        |   |   |
| Earnings per share from continuing operations                               |       | $                                                    | 0.30        |   | $ | 0.20 |   |
| Income (loss) per  share from discontinued operations, net of tax           |       | 0.04                                                 |        | (0.03 | ) |
| **Basic  earnings per share***                                              | ** ** | **$**                                                | **0.33**    | ** ** | **$** | **0.17** | ** ** |
| **Diluted  earnings per share:**                                            |       |                                                 |        |   |   |
| Earnings per share from continuing operations                               |       | $                                                    | 0.29        |   | $ | 0.19 |   |
| Income (loss) per  share from discontinued operations, net of tax           |       | 0.04                                                 |        | (0.03 | ) |
| **Diluted  earnings per share***                                            | ** ** | **$**                                                | **0.32**    | ** ** | **$** | **0.17** | ** ** |
| **Weighted  average shares outstanding:**                                   |       |                                                 |        |   |   |
| Basic                                                                       |       | 126,753                                              |        | 120,655 |   |
| Diluted                                                                     |       | 130,619                                              |        | 123,577 |   |

 

* - Basic earningsper share for the three months ended March 31, 2006 and diluted earningsper share for the three months ended March 31, 2006 and 2005 do not adddue to rounding.

*See accompanyingnotes.*

3

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

| **ASSETS**                                                                        | ** ** | **March 31,  2006** | ** **    | **December 31,** | ** **  |
|-----------------------------------------------------------------------------------|------------|--------------------------|---------------|-----------------------|-------------|
| ** **                                                                        | ** ** | **(Unaudited)**          | ** **    | **2005**              | ** **  |
| Current assets:                                                                   |       |                     |          |                  |        |   |   |
| Cash and cash equivalents                                                         |       | $                        | 166,035       |                  |        | $ | 196,597 |   |   |
| Available-for-sale  securities                                                    |       | 221,019                  |          |                  | 123,747     |   |   |
| Accounts receivable, net  of allowance for doubtful accounts of $15,831 and       |       |                     |          |                  |        |   |   |
| $14,067                                                                           |       | 384,985                  |          |                  | 382,606     |   |   |
| Prepaid and other                                                                 |       | 62,187                   |          |                  | 59,711      |   |   |
| Current assets of  discontinued operations                                        |       | —                   |          |                  | 10,398      |   |   |
| **Total  current assets**                                                         |       | **834,226**              |          | ** **            | **773,059** |   |   |
| Property and equipment,  net                                                      |       | 94,974                   |          |                  | 92,034      |   |   |
| Goodwill                                                                          |       | 689,803                  |          |                  | 679,008     |   |   |
| Intangibles, net                                                                  |       | 54,541                   |          |                  | 56,670      |   |   |
| Investment in  unconsolidated affiliate                                           |       | 65,480                   |          |                  | 46,758      |   |   |
| Other assets                                                                      |       | 30,544                   |          |                  | 29,939      |   |   |
| Non-current assets of  discontinued operations                                    |       | —                   |          |                  | 1,247       |   |   |
| **Total  assets**                                                                 |       | **$**                    | **1,769,568** | ** **            | ** **  | **$** | **1,678,715** |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                    |       |                     |          |                  |        |   |   |
| Current liabilities:                                                              |       |                     |          |                  |        |   |   |
| Accounts payable                                                                  |       | $                        | 117,532       |                  |        | $ | 106,154 |   |   |
| Accrued expenses and  other current liabilities                                   |       | 178,818                  |          |                  | 176,362     |   |   |
| Income taxes payable                                                              |       | 37,248                   |          |                  | 40,045      |   |   |
| Deferred revenue                                                                  |       | 345,040                  |          |                  | 328,902     |   |   |
| Current portion of  long-term debt                                                |       | 21,789                   |          |                  | 31,378      |   |   |
| Current liabilities of  discontinued operations                                   |       | —                   |          |                  | 13,747      |   |   |
| **Total  current liabilities**                                                    |       | **700,427**              |          | ** **            | **696,588** |   |   |
| Long-term debt, less  current portion                                             |       | 3,093                    |          |                  | 15,678      |   |   |
| Deferred income taxes                                                             |       | 46,065                   |          |                  | 45,396      |   |   |
| Other long-term  liabilities                                                      |       | 1,399                    |          |                  | 1,241       |   |   |
| Long-term liabilities of  discontinued operations                                 |       | —                   |          |                  | 137         |   |   |
| **Total  liabilities**                                                            |       | **750,984**              |          | ** **            | **759,040** |   |   |
| 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: 124,617       |       |                     |          |                  |        |   |   |
| and 121,830 shares,  respectively; outstanding: 123,310 and 120,703 shares,       |       |                     |          |                  |        |   |   |
| respectively                                                                      |       | 124                      |          |                  | 122         |   |   |
| Class B common  stock, $.001 par value, authorized 39,000 shares; issued and |       |                     |          |                  |        |   |   |
| outstanding: 4,762 shares                                                         |       | 5                        |          |                  | 5           |   |   |
| Additional paid-in  capital                                                       |       | 1,358,758                |          |                  | 1,267,741   |   |   |
| Accumulated other  comprehensive income                                           |       | 42,979                   |          |                  | 35,518      |   |   |
| Unamortized stock based  compensation                                             |       | (46,236                  | )             |                  | (4,403      | ) |   |
| Retained deficit                                                                  |       | (337,046                 | )             |                  | (379,308    | ) |   |
| **Total  stockholders’ equity**                                              |       | **1,018,584**            |          | ** **            | **919,675** |   |   |
| **Total liabilities and stockholders’ equity**                               | ** ** | **$**                    | **1,769,568** | ** **            | ** **  | **$** | **1,678,715** |   |   |

 

*See accompanyingnotes.*

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

| ** **                                                                         | ** ** | **Three Months Ended March 31,** | ** **  |
|------------------------------------------------------------------------------------|------------|---------------------------------------|-------------|
| ** **                                                                         | ** ** | **2006**                              | ** **  | **2005** | ** ** |
| **Cash  flows provided by operating activities:**                                  |       |                                  |        |   |   |
| Net  income                                                                        | ** ** | **$**                                 | **42,262**  | ** ** | **$** | **20,570** | ** ** |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                  |        |   |   |
| (Income)  Loss from discontinued operations, net of tax                            |       | (4,832                                | )           | 3,126 |   |
| Depreciation  and amortization of intangibles                                      |       | 10,694                                |        | 9,119 |   |
| Provision  for doubtful accounts                                                   |       | 3,745                                 |        | 2,315 |   |
| Tax  benefit on stock based compensation                                           |       | 17,315                                |        | 581 |   |
| Excess  tax benefit on stock option exercises                                      |       | (17,051                               | )           | — |   |
| Non-cash  compensation                                                             |       | 2,068                                 |        | 1,447 |   |
| Common  stock issued for matching contribution to 401(k) plan                 |       | 996                                   |        | 741 |   |
| Deferred  income taxes                                                             |       | 1,163                                 |        | 8,854 |   |
| Minority  interests and other                                                      |       | 1,235                                 |        | 280 |   |
| Changes in assets  and liabilities, net of business combinations:                  |       |                                  |        |   |   |
| Accounts  Receivable                                                               |       | (6,123                                | )           | 7,607 |   |
| Prepaid  and other                                                                 |       | (375                                  | )           | 1,742 |   |
| Deferred  revenue                                                                  |       | 16,138                                |        | 6,728 |   |
| Accounts  payable, accrued liabilities and other                                   |       | 11,281                                |        | (7,875 | ) |
| Net  cash used for operating activities of discontinued operations                 |       | (2,234                                | )           | (13,872 | ) |
| **Total adjustments**                                                              |       | 34,020                                |        | 20,793 |   |
| **Net cash  provided by operating activities**                                     | ** ** | **76,282**                            | ** **  | **41,363** | ** ** |
| **Cash flows used for investing activities:**                                      |       |                                  |        | ** ** |   |
| Capital  expenditures                                                              |       | (10,925                               | )           | (7,881 | ) |
| Purchase  of marketable securities                                                 |       | (334,990                              | )           | — |   |
| Sales  and maturities of marketable securities                                     |       | 238,001                               |        |   |   |
| Payments  for acquisitions and intangible assets, net of cash acquired             |       | (23,655                               | )           | (42,477 | ) |
| Investment  in unconsolidated affiliate                                            |       | (19,936                               | )           | (50,137 | ) |
| Sale  of long-term investment and other                                            |       | —                                |        | 1,446 |   |
| Net  cash used for investing activities of discontinued operations                 |       | (960                                  | )           | (752 | **)** |
| **Net cash  used for investing activities**                                        | ** ** | **(152,465**                          | **)**       | **(99,801** | ) |
| **Cash flows provided by financing activities:**                                   |       |                                  |        | ** ** |   |
| Payments  on capital lease obligations                                             |       | (276                                  | )           | (507 | ) |
| Proceeds  from exercise of employee stock options                                  |       | 59,594                                |        | 3,653 |   |
| Excess  tax benefits on stock option exercises                                     |       | 17,051                                |        | — |   |
| Repurchase  of common stock                                                        |       | (8,537                                | )           | — |   |
| Structured  stock repurchase, net                                                  |       | (22,758                               | )           | — | ** ** |
| **Net cash  provided by financing activities**                                     | ** ** | **45,074**                            | ** **  | **3,146** |   |
| Effects  of exchange rates on cash                                                 |       | 547                                   |        | (1,894 | ) |
| **Net decrease in cash and cash equivalents**                                      |       | (30,562                               | )           | (57,186 | ) |
| **Cash and  cash equivalents, beginning of period**                                |       | 196,597                               |        | 198,111 | ** ** |
| **Cash and  cash equivalents, end of period**                                      | ** ** | **$**                                 | **166,035** | ** ** | **$** | **140,925** | ** ** |
| **Supplemental disclosures of cash flow  information:**                            |       |                                  |        |   |   |
| Cash  paid for interest                                                            |       | $                                     | 3,917       |   | $ | 1,089 |   |
| Cash  paid for income taxes                                                        |       | $                                     | 673         |   | $ | 893 |   |
| **Non-cash financing and investing activities:**                                   |       |                                  |        |   |   |
| Liabilities  created in connection with business combinations                      |       | $                                     | —      |   | $ | 10,236 |   |

 

*See accompanying notes.*

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**MONSTERWORLDWIDE, 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”) hascontinuing operations that consist of four reportable segments:  Monster Careers - North America; MonsterCareers - International; Internet Advertising and Fees; and Advertising &Communications. These segments provide services to customers in a variety ofindustries throughout North America, Europe and the Asia-Pacific region.

*Monster Careers.*   TheCompany’s Monster Careers segments (both North America and International)predominantly earn revenue from the placement of job postings on the websiteswithin the Monster network, access to the Company’s resume databases and othercareer-related services. The Company’s Monster Careers segments operateglobally.

*Internet Advertising and Fees.*   TheCompany’s Internet Advertising and Fees segment earns revenue from the displayof advertisements on the Monster network of websites, click-throughs ontext-based links, leads provided to advertisers and subscriptions to premiumservices. Among the larger components of this segment are the Company’sFastweb, MonsterTrak, Tickle and Military.com businesses. Prior to the firstquarter of 2006, these operations were managed and reported by the Company’s “Monster”segment. Revenue from this segment is primarily earned in the United States.

*Advertising &Communications.*   The Company’sAdvertising & Communications segment mainly earns revenue from jobadvertisements placed in newspapers, Internet career-related websites such asMonster, and other media, plus associated fees for related services. Revenue isrecorded net of media placement costs. This segment operates primarily in NorthAmerica and in the United Kingdom.

***Basis of Presentation***

The consolidated interim financial statements includedherein are unaudited and have been prepared by the Company pursuant to the rules andregulations of the Securities and Exchange Commission. Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Stateshave been omitted pursuant to such rules and regulations, although theCompany believes that the disclosures are adequate to make the informationpresented not misleading. The consolidated interim financial statements includethe accounts of the Company and all of its wholly-owned and majority-ownedsubsidiaries. All significant inter-company accounts and transactionshave been eliminated in consolidation.

These statements reflect all normal recurringadjustments that, in the opinion of management, are necessary for fair presentationof the information contained herein. These consolidated interim financialstatements should be read in conjunction with the financial statements andnotes thereto included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2005. The Company adheres to the sameaccounting policies in preparation of interim financial statements. Aspermitted under generally accepted accounting principles, interim accountingfor certain expenses, including income taxes are based on full year assumptions.Such amounts are expensed in full in the year incurred. For interim financialreporting purposes, income taxes are recorded based upon estimated annualincome tax rates.

6

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

**Earnings Per Share**

Basic earnings per share does not include the effectsof potentially dilutive stock options and restricted stock awards, 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.

Areconciliation of shares used in calculating basic and diluted earnings percommon and Class B common share follows. Certain stock options and stockissuable under employee compensation plans were excluded from the computationof earnings per share due to their anti-dilutive effect. The weighted averagenumber of such common stock equivalents is approximately 713,000 and 5,539,000for the three months ended March 31, 2006 and 2005, respectively.

| **(thousands of shares)**                                          | ** ** | ** **                                                                                               | ** ** | **Three Months Ended March 31,**                                                     | ** ** |
|------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **        2006        ** | ** ** | **        2005        ** | ** ** |
| Basic weighted  average shares outstanding                                   |       |                                                                                                     | 126,753    |                                                                                                     |       |   | 120,655 |   |   |
| Effect of common  stock equivalents - stock options and stock issuable under |       |                                                                                                     |       |                                                                                                     |       |   |   |   |   |
| employee  compensation plans                                                 |       |                                                                                                     | 3,866      |                                                                                                     |       |   | 2,922 |   |   |
| Diluted weighted average  shares outstanding                                 |       |                                                                                                     | 130,619    |                                                                                                     |       |   | 123,577 |   |   |

 

**Impact of theAdoption of SFAS 123R**

The Company adopted Statementof Financial Accounting Standards (“SFAS”) No. 123(R) *Share Based Payment* (“SFAS 123R”) using themodified-prospective-transition method beginning January 1, 2006. Underthat transition method, stock compensation costs recognized during thethree-month period ended March 31, 2006 includes: (a) compensationcost for all share based payments granted to, but not yet vested as of January 1,2006, based on the grant-date fair value estimated in accordance with SFAS 123,and (b) compensation cost for all share-based payments granted subsequentto January 1, 2006, based on the grant date fair value in accordance withthe provisions of SFAS 123R. Results for prior periods have not been restated. SFAS123R also requires excess tax benefits from the exercise of stock options to bepresented in the consolidated statements of cash flows as a financing activityrather than an operating activity, as presented prior to the adoption of SFAS123R. Excess tax benefits are realized benefits from tax deductions forexercised options in excess of the deferred tax asset attributable to stockbased compensation costs for such options. The total income tax benefitrecognized in the statement of operations for stock-based compensation costswas $264 for the three months ending March 31, 2006. The Company did nothave any stock-based compensation costs capitalized as part of an asset. TheCompany has granted stock options and awarded non-vested stock to employees andexecutive officers.

At March 31, 2006, the Company has the followingstock-based employee compensation plans:

*Employee Stock Options.**  *For the three months ended March 31,2006, the Company recognized approximately $95 of pre-tax compensation expensein the consolidated statement of operations related to employee stock options. Thefair value of these options was estimated on the grant date using theBlack-Scholes option-pricing model. As of January 1, 2006, substantiallyall of the Company’s employee stock options were vested and the Company has notgranted any stock options subsequent to January 1, 2006.

*Executive Stock Bonus Arrangements.**  *The Company, from time to time, enters intoseparate share-based payment arrangements with executive officers. The terms ofsuch agreements are subject to various specified performance and vestingconditions. As of March 31, 2006, there were approximately 421,559non-vested shares outstanding related to executive agreements with varyingexercise prices. The Company 

7

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recorded the awards as a component of equity using thefair market value of the Company’s common stock on the date the award wasapproved by the Compensation Committee of the Board of Directors. These awardsare amortized on a straight-line basis over the vesting period. For the threemonths ended March 31, 2006 and 2005, the Company recognized approximately$1,290 and $968, respectively, of pre-tax compensation expense, as a componentof salaries and related in the consolidated statements of operations, relatedto stock bonus arrangements with executive officers.

*2006 Restricted Stock UnitPlan.**  *On March 27,2006, the Compensation Committee of the Board of Directors approved the grantof 675,200 restricted stock units to approximately 350 employees of the Company(“2006 RSU Plan”). The amounts of restricted stock units awarded are subject toreduction or elimination based on whether or not certain specifiedperformance-based conditions are satisfied. If the optimal performance-basedcondition becomes satisfied, the maximum number of restricted stock units willvest in 25% increments on each of March 5, 2007, March 5, 2008, March 5,2009 and March 5, 2010, provided that the recipient is continuouslyemployed by the Company or any of its affiliates on each applicable vestingdate. The Company recorded the equity award using the fair market value of theCompany’s stock on March 27, 2006, which was $48.58 and will amortize theaward on a straight-line basis over the vesting period. For the three monthsended March 31, 2006, the Company recorded approximately $683 of pre-taxcompensation expense, as a component of salaries and related in theconsolidated statements of operations, related to the 2006 RSU Plan.

**Share-based PaymentActivity**

Thefollowing table summarizes the activity of our employee stock options for thethree months ended March 31, 2006:

| ** **                                   | ** ** | ** ** | ** ** | ** **                | ** ** | **Weighted**    | ** ** | ** **                    | ** ** |
|----------------------------------------------|------------|------------|------------|---------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **                                   | ** ** | ** ** | ** ** | **Weighted**              | ** ** | **Average**     | ** ** | ** **                    | ** ** |
| ** **                                   | ** ** | ** ** | ** ** | **Average Exercise** | ** ** | **Contractual** | ** ** | **Aggregate**                 | ** ** |
| **(thousands of shares)**          | ** ** | ** ** | ** ** | **Shares**                | ** ** | **Price**       | ** ** | **Term (in years)** | ** ** | **Intrinsic Value** | ** ** |
| Outstanding at January 1, 2006          |       | 13,673     |       |                      | $          | 27.94           |       |                          |       |   |   |   |   |   |   |   |
| Granted                                      |       | —     |       |                      | —     |            |       |                          |       |   |   |   |   |   |   |
| Exercised                                    |       | (2,505     | )          |                      | 23.74      |            |       |                          |       |   |   |   |   |   |   |
| Forfeited/expired/cancelled                  |       | (104       | )          |                      | 47.09      |            |       |                          |       |   |   |   |   |   |   |
| Outstanding at  March 31, 2006          |       | 11,064     |       |                      | 28.74      |            |       |                          | 6.2        |   |   |   | $ | 233,700 |   |   |
| Options exerciseable at  March 31, 2006 |       | 7,348      |       |                      | $          | 28.41           |       |                          |       | 5.2 |   |   |   | $ | 157,636 |   |   |
|                                              |            |            |            |                           |            |                 |            |                               |            |  |  |  |  |  |  |  |  |  |  |

 

The aggregate intrinsic value is calculated as thedifference between the market price of our common stock as of March 31,2006 and the exercise price of the underlying options. During the three monthsended March 31, 2006 and 2005, the aggregate intrinsic value of optionsexercised was $59,897 and $1,802, respectively. The Company did not grant anyoptions in the 2006 period; however, the weighted average grant date fair valueof options granted in the 2005 period was $28.85. There is approximately $53 ofunrecognized compensation expense related to unvested stock options awardedunder our incentive plan. This cost will be recorded in the second quarter of2006.

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Thefollowing table summarizes the activity of our non-vested stock for the threemonths ended March 31, 2006:

| ** **                            | ** ** | ** ** | ** ** | **Weighted**                 | ** ** |
|---------------------------------------|------------|------------|------------|------------------------------|------------|
| ** **                            | ** ** | ** ** | ** ** | **Average Fair**        | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Value at Grant** | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Shares**                   | ** ** | **Date** | ** ** |
| Non-vested at January 1, 2006    |       | 241,309    |       |                         | $          | 29.64 |   |   |
| Granted - 2006  RSU Plan              |       | 675,200    |       |                         | 48.58      |   |   |
| Granted -  Executive Bonus Agreements |       | 237,500    |       |                         | 46.11      |   |   |
| Vested                                |       | (57,250    | )          |                         | —     |   |   |
| Non-vested at  March 31, 2006    |       | 1,096,759  |       |                         | $          | 46.41 |   |   |
|                                       |            |            |            |                              |            |  |  |  |  |  |

 

As of March 31, 2006there was approximately $32,118 and $14,065 of unrecognized compensation costrelated to the Company’s 2006 RSU Plan and Executive stock bonus agreements,respectively. These awards relate to non-vested stock and are being amortizedover the vesting periods on a straight-line basis.

**Prior to theAdoption of SFAS 123R**

Prior to the adoption of SFAS 123R, the Companyprovided the disclosures required under SFAS 123, as amended by SFAS No. 148,*Accounting for Stock-Based Compensation—Transitionand Disclosure,*which requires disclosure of the pro forma effectsof stock option expense on net income and earnings per share. The Company’sprior period financial statements accounted for the issuance of employee stockoptions using Accounting Principles Board (“APB”) Opinion No. 25 (“APB 25”),*Accounting for Stock Issued to Employees* and related interpretations. UnderAPB 25, generally, no compensation expense was recognized in connection withthe awarding of stock option grants to employees provided that, as of the grantdate, all terms associated with the award are fixed and the quoted market priceof the stock is equal to or less than the amount an employee must pay toacquire the stock as defined. The pro forma effects of stock-basedcompensation on net income and net income per share in the 2005 period havebeen estimated at the date of grant using the Black-Scholes option-pricingmodel based on the following weighted average assumptions:

| ** **               | ** ** | **Three Months**         | ** ** |
|--------------------------|------------|-------------------------------|------------|
| ** **               | ** ** | **Ended March 31,** | ** ** |
| ** **               | ** ** | **2005**                      | ** ** |
| Risk-free  interest rate |       | 4.2%                          |       |
| Volatility               |       | 42.2%                         |       |
| Expected life (years)    |       |     4.4   |       |

 

 

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For purposes of pro forma disclosures, the estimatedfair value of the options is assumed to be expensed over the options’ vestingperiods. The pro forma effects of recognizing compensation expense under thefair value method on the Company’s operating results and per share data are asfollows:

| ** **                                                                                        | ** ** | **Three Months**         | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                        | ** ** | **Ended March 31,** | ** ** |
| ** **                                                                                        | ** ** | **2005**                      | ** ** |
| Net income as  reported                                                                           |       | $                             | 20,570     |   |   |
| Add: Stock based employee compensation expense  included in  reported net income, net of tax      |       |                          | 629        |   |   |
| Deduct: Compensation expense determined under fair  value based method for all awards, net of tax |       |                          | (21,552    | ) |   |
| Pro forma net  loss                                                                               |       | $                             | (353       | ) |   |
| **Basic  earnings per share:**                                                                    |       |                          |       |   |   |
| Net income - as reported                                                                          |       | $                             | 0.17       |   |   |
| Net income - pro forma                                                                            |       | $                             | —     |   |   |
| **Diluted earnings per share:**                                                                   |       |                          |       |   |   |
| Net income - as reported                                                                          |       | $                             | 0.17       |   |   |
| Net income - pro  forma                                                                           |       | $                             | —     |   |   |

 

**Stock OptionAccelerations**

During the year ended December 31,2005, the Company accelerated the vesting date of substantially all of itsunvested, outstanding stock option awards in order to avoid recognizing compensation expense in the consolidated statement ofoperations in the Company’s financial statements subsequent to theeffectiveness of SFAS 123R on January 1, 2006. As a result of theaccelerations, the Company has eliminated approximately $26,940 of compensationexpense that would have been recognized in future periods.

On December 28, 2004,the Company granted approximately 2,800,000 options to executives and employees.Such options vested over the five-month period ending on May 31, 2005 andthe vested options generally become exercisable in four annual installmentscommencing December 28, 2005.

Includedin pro-forma compensation expense for the three months ended March 31,2005 is approximately $940, net of tax, resulting from accelerated vesting thatoccurred in the first quarter of 2005. In addition, the pro-forma compensationexpense for the three months ended March 31, 2005 includes approximately$13,910, net of tax, related to the vesting of the December 28, 2004grant.

**3.**   BUSINESSCOMBINATIONS

For the period January 1, 2005 through March 31,2006, we completed two business combinations. Although none of the followingacquired businesses was considered to be a significant subsidiary, eitherindividually or in the aggregate, they do affect the comparability of resultsfrom period to period. The acquisitions and the acquisition dates are asfollows:

| **Acquired  Business** | ** ** | **Acquisition Date**   | ** ** | **Business Segment**             |
|------------------------|------------|------------------------|------------|----------------------------------|
| Emailjob SAS           |       | February 11, 2005 |       | Monster Careers -  International |
| JobKorea Co., Ltd.     |       | October 14, 2005  |       | Monster Careers - International  |

 

**Accrued Integrationand Restructuring Costs**

The Company has formulatedintegration and restructuring plans to eliminate redundant facilities,personnel and duplicate assets in connection with its business combinations.These costs were recognized 

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as liabilities assumed inconnection with the Company’s business combinations. Accordingly, these costsare considered part of the purchase price of the business combinations and havebeen recorded as increases to goodwill. During the three months ended March 31,2006, the Company charged $1,340 to goodwill relating to the Company’sacquisition of Emailjob.

Changesin the Company’s approved restructuring plans or costs related to newrestructuring initiatives may be recorded in goodwill for up to one yearfollowing the acquisition date and must be recorded in the Company’s operatingresults thereafter. Reductions to integration and restructuring reservesestablished in connection with purchase business combinations are recorded as areduction to goodwill. As of March 31, 2006 and December 31, 2005,the Company had accrued $7,966 and $7,703, respectively, for integration andrestructuring obligations, mainly future operating lease payments.

**4.   INVESTMENTIN UNCONSOLIDATED AFFILIATE**

In February 2005, theCompany acquired a 40% interest in ChinaHR.com Holdings Ltd. (“ChinaHR”)for consideration of $50,000 in cash. In February 2006, the Companyincreased its ownership interest in ChinaHR to 44.4% by acquiring an additional4.4% interest from ChinaHR shareholders, for cash consideration of $19,936. TheCompany accounts for its investment in ChinaHR using the equity method ofaccounting, thereby recording its owned percentage of ChinaHR’s net results ofoperations as Losses in Equity Interests in the Company’s statements ofoperations. Such losses reduce the carrying value of the Company’s investmentin ChinaHR.

In March 2006, theCompany entered into a loan agreement with ChinaHR, whereby the Company hasagreed to advance ChinaHR up to an aggregate of $20,000, with no more than$10,000 being advanced in the first year of the agreement. Interest on theloans will be assessed at the average one-month U.S. Dollar LIBOR rate plus 1%and shall be payable quarterly, in arrears. The credit facility provides thatany advances shall be due and payable in full on the maturity date, which isthe earliest of March 2011 or the consummation of an initial publicoffering of securities by ChinaHR. There were no amounts outstanding under thisfacility at March 31, 2006.

ChinaHRis a leading recruitment website in China and provides online recruiting,campus recruiting and other human resource solutions. As a result of itsinvestment, the Company has the right to occupy three of seven seats on ChinaHR’sBoard of Directors. In addition, 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 ChinaHR in the event of an initial publicoffering or February 1, 2008, whichever comes first.

**5.** COMPREHENSIVEINCOME (LOSS)

TheCompany’s comprehensive income (loss) is as follows:

| ** **                                        | ** ** | **Three Months ended March 31,** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                        | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Net income                                        |       | $                                                    | 42,262     |   | $ | 20,570 |   |
| Foregn currency  translation adjustment and other |       | 7,461                                                |       | (26,223 | ) |
| Comprehensive income  (loss)                      |       | $                                                    | 49,723     |   | $ | (5,653 | ) |

 

**6.   STOCKHOLDERS’EQUITY**

**Share RepurchaseProgram**

In November 2005,the Board of Directors authorized the Company to purchase up to$100 million of its shares of common stock in the open market or otherwisefrom time to time over a 30-month period as conditions warrant. Through March 31,2006, the Company has repurchased 380,000 shares of its common 

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stockfor an aggregate purchase price of $16,443, of which, 180,000 shares werepurchased during the three months ended March 31, 2006 for $8,537.

**Structured StockRepurchase**

In March 2006,the Company entered into a $22,758 structured stock repurchase transaction. Uponmaturity, if the market price of the Company’s common stock is at or abovecertain thresholds, the Company will have its investment returned with apremium. If the market price of the Company’s common stock is below thepre-determined price, the Company will repurchase an agreed upon number ofshares.

**6.**   DISCONTINUEDOPERATIONS

On March 1, 2006, theCompany sold its TMP Worldwide Advertising & Communications businessesin Australia/New Zealand and Singapore in two separate transactions. The salesof these businesses were the result of the Company’s ongoing assessment of itsoperations to support the growth of the Monster franchise in local andinternational markets.  The impact of thetransactions and the historical operating results of these businesses have beenreclassified to discontinued operations for all periods presented. Thedispositions were not considered material and did not include a significantamount of assets. Included in income from discontinued operations for the threemonths ended March 31, 2006 is a gain on the sale of these businesses of$5,420 ($2,453 excluding the tax benefit recognized upon disposition).

Duringthe year ended December 31, 2005, the Company disposed of the followingbusinesses that collectively comprised substantially all of its DirectionalMarketing operating segment. The results of operations of these businesses andthe associated disposal costs are reflected as discontinued operations in theconsolidated statements of operations for the three months ended March 31,2005:

·       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 the dispositiondate) and a $7,000, 3% promissory note due to the Company after 7 years. Thesale included the Company’s Yellow Pages business in North America andJapan along with its online relocation business. The Company recognized a losson sale of these businesses of $10,729 ($1,803 net of tax benefits) in thesecond quarter of 2005. In the third quarter of 2005, the Company returned cashconsideration of $657 upon final determination of working capital sold inconnection with the disposition. The sale of the Directional Marketing businessdid not include the Company’s Directional Marketing operations in the UnitedKingdom. The Company’s European Advertising & Communicationsmanagement continues to operate that business, and accordingly, those resultshave been reclassified to our Advertising & Communications operatingsegment.

·       OnMay 2, 2005, the Company sold its TMP Direct business unit, an orderfulfillment business, formerly part of the Company’s Directional Marketingsegment. The business was purchased by GECKO Inc., an entity owned 65% byGeorge Eisele, a director of Monster Worldwide, for $2,500 cash paid at closingplus an amount equal to 50% of TMP Direct’s working capital as of the closingdate payable on May 2, 2006. George Eisele and another individualshareholder of GECKO Inc. personally guaranteed the May 2, 2006 paymentobligation of GECKO Inc. The sale was not considered material and did notinclude a significant amount of assets. The Company recognized a pre-tax andafter tax loss on sale of this business of $551 in the second quarter of 2006.

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The following amounts primarily related to ourdispositions in 2006 and 2005 have been segregated from continuing operationsand are reflected as discontinued operations in each period’s consolidatedstatement of operations:

| ** **                                        | ** ** | **Three Months ended March 31,**                                                     | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| ** **                                        | ** ** | **        2006        ** | ** ** | **        2005        ** | ** ** |
| Revenue                                           |       |                                                                                                     | $          | 2,396 |   |   |   | $ | 18,414 |   |   |
| Loss before  income taxes                         |       |                                                                                                     | (662       | ) |   |   | (4,940 | ) |   |
| Income tax  benefit                               |       |                                                                                                     | (74        | ) |   |   | (1,814 | ) |   |
| Loss from discontinued  operations, net of tax    |       |                                                                                                     | (588       | ) |   |   | (3,126 | ) |   |
| Pre-tax gain on  sales of discontinued operations |       |                                                                                                     | 2,453      |   |   |   | — |   |   |
| Income tax  benefit                               |       |                                                                                                     | (2,967     | ) |   |   | — |   |   |
| Gain on sale of  business, net of tax             |       |                                                                                                     | 5,420      |   |   |   | — |   |   |
| Discontinued operations,  net of tax              |       |                                                                                                     | $          | 4,832 |   |   |   | $ | (3,126 | ) |   |

 

**7.**   SEGMENTAND GEOGRAPHIC DATA

As of January 1,2006, the Company changed the composition of its reportable segments to reflectchanges in its internal management and reporting structure. The prior periodsegment information contained below has been restated to reflect the Company’snew operating structure.  The Companyconducts business in four reportable segments: Monster Careers - North America; Monster Careers - International;Internet Advertising and Fees; and Advertising & Communications. Corporateoperating expenses are not allocated to the Company’s reportable segments. SeeNote 1 for a description of our revised operating segments.

The Company’s Advertising &Communications division recognizes a commission on the sale of certain Monsterproducts. Revenue recognized by the Advertising & Communicationssegment for such sales was $ 4,399 and $3,435 for the three months ended March 31,2006 and 2005.

The following tables present the Company’s operationsby business segment and by geographic region:

| ** **                            | ** ** | **Three Months ended March 31,** | ** **  |
|---------------------------------------|------------|------------------------------------------------------|-------------|
| **Revenue**                           | ** ** | **2006**                                             | ** **  | **2005** | ** ** |
| Monster:                              |       |                                                 |        |   |   |
| Careers - North America               |       | $                                                    | 159,998     |   | $ | 123,556 |   |
| Careers - International               |       | 64,591                                               |        | 41,217 |   |
| Internet Advertising and Fees         |       | 32,447                                               |        | 24,761 |   |
| Total Monster                         |       | 257,036                                              |        | 189,534 |   |
| Advertising & Communications |       | 34,711                                               |        | 38,990 |   |
| **Total Revenue**                     | ** ** | **$**                                                | **291,747** | ** ** | **$** | **228,524** | ** ** |

 

| ** **                            | ** ** | **Three Months ended March 31,** | ** ** |
|---------------------------------------|------------|------------------------------------------------------|------------|
| **Operating Income (loss)** | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Monster:                              |       |                                                 |       |   |   |
| Careers - North America               |       | $                                                    | 55,314     |   | $ | 38,656 |   |
| Careers - International               |       | 1,166                                                |       | (1,565 | ) |
| Internet Advertising and Fees         |       | 9,627                                                |       | 7,356 |   |
| Total Monster                         |       | 66,107                                               |       | 44,447 |   |
| Advertising & Communications |       | 3,035                                                |       | 2,831 |   |
| Corporate expenses                    |       | (11,664                                              | )          | (10,223 | ) |
| **Operating Income**                  | ** ** | **$**                                                | **57,478** | ** ** | **$** | **37,055** | ** ** |

 

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| ** **                                      | ** ** | **Three Months ended March 31,** | ** **  |
|-------------------------------------------------|------------|------------------------------------------------------|-------------|
| **Revenue by Geographic Region** | ** ** | **2006**                                             | ** **  | **2005** | ** ** |
| United States                                   |       | $                                                    | 208,338     |   | $ | 165,709 |   |
| United Kingdom                                  |       | 24,891                                               |        | 23,263 |   |
| Continental  Europe                             |       | 44,606                                               |        | 34,779 |   |
| Other (a)                                       |       | 13,912                                               |        | 4,773 |   |
| **Total Revenue**                               | ** ** | **$**                                                | **291,747** | ** ** | **$** | **228,524** | ** ** |

 

The following table reconciles each reportable segment’sassets to total assets reported on the Company’s consolidated balance sheets asof March 31, 2006 and December 31, 2005:

| ** **                                 | ** ** | ** **                   | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| **Total Assets by Segment** | ** ** | **March 31, 2006** | ** ** | **2005**              | ** ** |
| Monster Careers -  North America           |       |                         | $          | 245,076               |       |   |   | $ | 244,598 |   |   |
| Monster Careers -  International           |       |                         | 603,650    |                  |       |   | 559,736 |   |   |
| Internet  Advertising & Fees      |       |                         | 151,557    |                  |       |   | 151,827 |   |   |
| Advertising &  Communications     |       |                         | 333,355    |                  |       |   | 335,084 |   |   |
| Corporate                                  |       |                         | 379,746    |                  |       |   | 328,188 |   |   |
| Shared assets (b)                          |       |                         | 56,184     |                  |       |   | 47,637 |   |   |
| Assets of  discontinued operations         |       |                         | —     |                  |       |   | 11,645 |   |   |
| **Total Assets**                           | ** ** | ** **                   | **$**      | **1,769,568**         |       | ** ** | ** ** | **$** | **1,678,715** |   |   |

 

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

(b)             Shared assets represent assets that provide economicbenefit to all of the Company’s operating segments. Shared assets are not allocatedto operating segments for internal reporting or decision-making purposes.

**8. SUBSEQUENT EVENTS**

On May 2, the Company acquired PWP, LLC (“PWP”),for $20,000 cash and 20,000 shares of unregistered common stock.  Under the terms of the agreement, the Companypaid $17,000 upon closing and will pay the remaining $3,000 within 12 to 18 monthsof the closing, subject to certain conditions. PWP was acquired by the Company’s Internet Advertising & Fees segmentand owns education-related domain names.  

On May 10, 2006, theCompany sold its remaining TMP Worldwide Advertising &Communications businesses in Europe. The sale includes all of the Company’sAdvertising & Communications businesses in the United Kingdom and Ireland.  In a separate transaction, the Company alsosold its recruitment advertising agency in Spain. The purchase price of thesetransactions was approximately $40,000, including approximately $31,000 in cashand a $9,000 note receivable.  Thesetransactions allow the Company to focus its resources on the expansion andgrowth of Monster across local and international markets.

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**Report ofIndependent Registered Public Accounting Firm**

Board of Directorsand StockholdersMonster Worldwide, Inc.New York, New York

We have reviewed the consolidated balance sheet ofMonster Worldwide, Inc. as of March 31, 2006 and the relatedconsolidated statements of operations and cash flows for the three-monthperiods ended March 31, 2006 and 2005 included in the accompanyingSecurities and Exchange Commission Form 10-Q for the period ended March 31,2006. These interim financial statements are the responsibility of the Company’smanagement.

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 of America.

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, 2005, and the related consolidated statements ofoperations, stockholders’ equity, and cash flows for the year then ended (notpresented herein); and in our report dated February 3, 2006, we expressedan unqualified opinion on those consolidated financial statements. In ouropinion, the information set forth in the accompanying consolidated balancesheet as of December 31, 2005 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 YorkApril 26, 2006

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**ITEM 2.    MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

Wemake forward-looking statements in this report and in other reports and proxystatements that we file with the SEC. In addition, our senior management mightmake forward-looking statements. Broadly speaking, forward-looking statementsinclude:

·       projectionsof our revenues, income, earnings per share, capital expenditures, capital structureor 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 statementsdiscuss matters that are not historical facts. Because they discuss futureevents 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 1A. Risk Factors” of our annual report on Form 10-Kfor the year ended December 31, 2005.

**Overview**

Founded in 1967, MonsterWorldwide, Inc. is the parent company of Monster, the leading globalonline careers property. We also own TMP Worldwide, one of the world’s largestrecruitment advertising agency networks. Our clients range from Fortune 100companies to small and medium-sized enterprises and government agencies.

Monster is our flagship brand. Monster consists ofthree reportable segments, spans 24 countries and accounted for 88.1% of ourtotal revenue for the three months ended March 31, 2006. Monster connectsemployers with job seekers and offers innovative technology and services thatgive employers more control over the recruiting process. We have been able tocapitalize on Monster’s brand and create worldwide awareness by offering onlinerecruiting solutions that we believe are redefining the way employers and jobseekers connect. These tools, which include searchable job postings, a resumedatabase and career management content and advice, provide users with morecontrol over the employment process. Monster’s job search, resume postingservices and basic networking are free to the job seeker. Monster also offerspremium career services at a fee to job seekers. Employers and human resourcesprofessionals pay to post jobs, search Monster’s resume database and use careersite hosting and applicant tracking systems and other ancillary services. Inaddition, Monster offers Internet advertising to a wide variety of businessesthat seek to market their products and services through a broad and diversenetwork of online properties.

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**Business Combinations**

For the period January 1,2005 through March 31, 2006, we completed two business combinations.Although none of the following acquired businesses was considered to be asignificant subsidiary, either individually or in the aggregate, they do affectthe comparability of results from period to period. The acquisitions and theacquisition dates are as follows:

| **Acquired Business** | **Acquisition  Date**  | **Business  Segment**           |
|-----------------------|------------------------|---------------------------------|
| Emailjob SAS          | February 11, 2005 | Monster Careers - International |
| JobKorea Co.,  Ltd.   | October 14, 2005  | Monster Careers - International |

 

**DiscontinuedOperations**

On March 1, 2006, wesold our TMP Worldwide Advertising & Communications businesses inAustralia/New Zealand and Singapore in two separate transactions. The sales ofthese businesses were the result of our ongoing assessment of its operations tosupport the growth of the Monster franchise in local and international markets. The impact of the transactions and thehistorical operating results of these businesses have been reclassified todiscontinued operations for all periods presented. The dispositions were notconsidered material and did not include a significant amount of assets. Includedin income from discontinued operations for the three months ended March 31,2006 is a gain on the sale of these businesses of $5,420 ($2,453 excluding thetax benefit recognized upon disposition).

Duringthe year ended December 31, 2005, we disposed of the following businessesthat collectively comprised substantially all of our 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 months ended March 31,2005:

·       OnJune 1, 2005, we sold substantially all of our Directional Marketingdivision to a private equity firm for net cash consideration of $49,586 ($80million purchase price less working capital and other adjustments and $2,500 ofcash placed 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 saleincluded our Yellow Pages business in North America and Japan along withits online relocation business. We 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, we returned cash consideration of $657 uponfinal determination of working capital sold in connection with the disposition.The sale of the Directional Marketing business did not include our DirectionalMarketing operations in the United Kingdom. Our European Advertising &Communications management continues to operate that business, and accordingly,those results have been reclassified to our Advertising &Communications operating segment.

·       OnMay 2, 2005, we sold our TMP Direct business unit, an order fulfillmentbusiness, formerly part of our 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 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. Werecognized a pre-tax and after tax loss on sale of this business of $551 in thesecond quarter of 2006.

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The following amounts primarily related to ourdispositions in 2006 and 2005 have been segregated from continuing operationsand are reflected as discontinued operations in each period’s consolidatedstatement of operations:

| ** **                                        | ** ** | **Three Months ended March 31,** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                        | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Revenue                                           |       | $                                                    | 2,396      |   | $ | 18,414 |   |
| Loss before  income taxes                         |       | (662                                                 | )          | (4,940 | ) |
| Income tax  benefit                               |       | (74                                                  | )          | (1,814 | ) |
| Loss from  discontinued operations, net of tax    |       | (588                                                 | )          | (3,126 | ) |
| Pre-tax gain on  sales of discontinued operations |       | 2,453                                                |       | — |   |
| Income tax  benefit                               |       | (2,967                                               | )          | — |   |
| Gain on sale of  business, net of tax             |       | 5,420                                                |       | — |   |
| Discontinued operations,  net of tax              |       | $                                                    | 4,832      |   | $ | (3,126 | ) |

 

**Critical AccountingEstimates**

Our consolidated financial statements are prepared inaccordance with accounting principles generally accepted in the United States (“GAAP”).In connection with the preparation of our financial statements, we are requiredto make assumptions and estimates about future events, and apply judgments thataffect the reported amounts of assets, liabilities, revenue, expenses and therelated disclosures. We base our assumptions, estimates and judgments onhistorical experience, current trends and other factors that managementbelieves to be relevant at the time our consolidated financial statements areprepared. On a regular basis, management reviews the accounting policies,assumptions, estimates and judgments to ensure that our financial statementsare presented fairly and in accordance with GAAP. However, because futureevents and their effects cannot be determined with certainty, actual resultscould differ from our assumptions and estimates, and such differences could bematerial.

Our significant accountingpolicies are discussed in Note 1, *Basisof Presentation and Significant Accounting Policies*, of the Notes toConsolidated Financial Statements, included in Item 8, *Financial Statements and Supplementary Data*,of our Annual Report on Form 10-K. Management believes that thefollowing accounting policies are the most critical to aid in fullyunderstanding and evaluating our reported financial results, and they require management’smost difficult, subjective or complex judgments, resulting from the need tomake estimates about the effect of matters that are inherently uncertain.Management has reviewed these critical accounting estimates and relateddisclosures with the Audit Committee of our Board of Directors.

***Revenue Recognition***

*Monster Careers.**  *Our Monster Careers segments (both NorthAmerica and International) earn revenue primarily from the placement of jobpostings on the websites within the Monster network, access to the Monsternetwork’s online resume database and other career-related services. Werecognize revenue at the time that job postings are displayed on the Monsternetwork websites. Revenue earned from subscriptions to the Monster network’sresume database is recognized over the length of the underlying subscriptions,typically from two weeks to twelve months. Revenue associated with multipleelement contracts is allocated based on the relative fair value of the servicesincluded in the contract. Unearned revenues are reported on the balance sheetas deferred revenue.

*Internet Advertising and Fees.*   OurInternet Advertising and Fees segment earns revenue from the display ofadvertisements on the Monster network of websites, click-throughs on text-basedlinks, leads provided to advertisers and subscriptions to our non-careerpremium services.

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The Company recognizes revenue related to the displayof advertisements on its Internet properties as “impressions” are delivered. An“impression” is delivered when an advertisement appears in pages viewed byusers. Arrangements for these services generally have terms of less than oneyear or may be terminated at any time by the advertiser.

The Company generates revenue from the display of textbased links to the websites of its advertisers that are placed on the Company’sInternet properties. The Company recognizes revenue from these arrangements as “click-throughs”occur. A “click-through” occurs when a user clicks on an advertiser’s listing.

The Company generates revenue from “leads” that itprovides to third-party advertisers. “Leads” consist of information solicitedby an advertiser by way of the Company’s website. When a user provides therequested information, the Company turns over such information to theadvertiser for a predetermined fee, at which time, revenue is recognized. Agreementsto provide such information generally have terms that define the number ofleads and time period over which they must be provided to the advertiser.

Fee revenue consists of revenues generated from avariety of consumer based services, including subscriptions and networking. TheCompany recognizes fee revenue over the length of the underlying subscriptionsor when services are performed.

*Advertising &Communications.*   Our Advertising &Communications division derives revenue from job advertisements placed innewspapers, Internet career job boards such as Monster and other media, plusassociated fees for related services. Revenue is recorded net of mediaplacement costs, which are passed on to the customer. Revenue is generallyrecognized upon placement date for newspapers and other print and offlinemedia. Online media revenue is recognized when services are purchased.

***Asset Impairment***

*Business Combinations, Goodwill and IntangibleAssets.  *The purchase method of accounting requires thatassets acquired and liabilities assumed be recorded at their fair values on thedate of a business acquisition. Our consolidated financial statements andresults of operations reflect an acquired business from the completion date ofan acquisition. The costs to acquire a business, including transaction,integration and restructuring costs, are allocated to the fair value of netassets acquired upon acquisition. Any excess of the purchase price over theestimated fair values of the net tangible and intangible assets acquired isrecorded as goodwill.

The judgments that we make in determining theestimated fair value assigned to each class of assets acquired and liabilitiesassumed, as well as asset lives, can materially impact net income in periodsfollowing a business combination. We generally use either the income, cost ormarket approach to aid in our conclusions of such fair values and asset lives.The income approach presumes that the value of an asset can be estimated by thenet economic benefit to be received over the life of the asset, discounted topresent value. The cost approach presumes that an investor would pay no morefor an asset than its replacement or reproduction cost. The market approachestimates value based on what other participants in the market have paid forreasonably similar assets. Although each valuation approach is considered invaluing the assets acquired, the approach ultimately selected is based on thecharacteristics of the asset and the availability of information.

We evaluate our goodwill annually for impairment ormore frequently if indicators of potential impairment exist. The determinationof whether or not goodwill has become impaired involves a significant level ofjudgment in the assumptions underlying the approach used to determine the valueof our reporting units. Changes in our strategy and/or market conditions couldsignificantly impact these judgments and require reductions to recorded amountsof intangible assets.

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*Long-livedassets.*   We review long-lived assets, other thangoodwill, for impairment whenever events or changes in circumstances indicatethat the related carrying amounts may not be recoverable. Determining whetheran impairment has occurred typically requires various estimates andassumptions, including determining which cash flows are directly related to thepotentially impaired asset, the useful life over which cash flows will occur,their amount and the asset’s residual value, if any. In turn, measurement of animpairment loss requires a determination of fair value, which is based on thebest information available. We use internal discounted cash flows estimates,quoted market prices when available and independent appraisals, as appropriate,to determine fair value. We derive the required cash flow estimates from ourhistorical experience and our internal business plans, and apply an appropriatediscount rate.

***Income Taxes***

We record a valuationallowance to reduce our deferred tax assets to the amount that is more likely thannot to be realized. While we have considered projected future taxable incomeand ongoing tax planning strategies in assessing the need for the valuationallowance, in the event we were to determine that we would be able to realize anet deferred tax asset in the future, in excess of the net recorded amount, anadjustment to the deferred tax asset would increase earnings in the period suchdetermination was made. Likewise, should we determine that we would not be ableto realize all or part of our net deferred tax asset in the future, anadjustment to the deferred tax asset would decrease earnings in the period suchdetermination was made. Our future effective tax rates could be adverselyaffected by earnings being lower than anticipated in countries where we havelower statutory rates, changes in the valuation of our deferred tax assets orliabilities, or changes in tax laws or interpretations thereof. In addition,our filed tax returns are subject to the examination by the Internal RevenueService and other tax authorities. We regularly assess the likelihood ofadverse outcomes resulting from these examinations to determine the adequacy ofour provision for income taxes.

**Results ofOperations**

Consolidated operatingresults as a percent of revenue follows:

| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                                  | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| **Revenue**                                                                 | ** ** | **100.0%**                       | ** ** | **100.0%** | ** ** |
| Salaries and related                                                        |       | 38.9%                            |       | 42.7% |   |
| Office and  general                                                         |       | 18.8%                            |       | 19.9% |   |
| Marketing and  promotion                                                    |       | 22.7%                            |       | 21.2% |   |
| Total operating  expenses                                                   |       | 80.3%                            |       | 83.8% |   |
| **Operating income**                                                        | ** ** | **19.7%**                        | ** ** | **16.2%** | ** ** |
| Interest and other, net                                                     |       | 1.1%                             |       | 0.0% |   |
| Income from continuing operations before income  taxes and equity interests |       | 20.8%                            |       | 16.2% |   |
| Income taxes                                                                |       | 7.6%                             |       | 5.7% |   |
| Losses in equity  interests                                                 |       | -0.4%                            |       | -0.1% |   |
| **Income from continuing operations**                                       | ** ** | **12.8%**                        | ** ** | **10.4%** | ** ** |
| Income (loss) from discontinued operations, net of  tax                     |       | 1.7%                             |       | -1.4% |   |
| **Net  income**                                                             | ** ** | **14.5%**                        | ** ** | **9.0%** | ** ** |

 

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**The Three MonthsEnded March 31, 2006 Compared to the Three Months Ended March 31,2005**

***Monster Careers – North America***

Theoperating results of our Monster Careers—North America division for the threemonths ended March 31, 2006 and 2005 are as follows:

| ** **                           | ** ** | **%**      | ** ** | **% of** | ** ** | ** **  | ** ** | **% of** | ** ** | ** **  | ** ** | **%**        | ** ** |
|--------------------------------------|------------|------------|------------|----------|------------|-------------|------------|----------|------------|-------------|------------|--------------|------------|
| **(dollars in thousands)** | ** ** | ** ** | ** ** | **2006** | ** ** | **Revenue** | ** ** | **2005** | ** ** | **Revenue** | ** ** | **Increase** | ** ** | **Increase** | ** ** |
| Revenue                              |       | $          | 159,998    |     |       | 100.0       | %          |     | $          | 123,556     |       |         | 100.0      | % |   | $ | 36,442 |   |   | 29.5 | % |   |
| Selling, general and administrative  |       | 100,780    |       |     | 63.0       | %           |       | 81,045   |       |        | 65.6       | %            |       | 19,735 |   |   | 24.4 | % |   |
| Depreciation and  amortization*      |       | 3,904      |       |     | 2.4        | %           |       | 3,855    |       |        | 3.1        | %            |       | 49 |   |   | 1.3 | % |   |
| Operating income                     |       | $          | 55,314     |     |       | 34.6        | %          |     | $          | 38,656      |       |         | 31.3       | % |   | $ | 16,658 |   |   | 43.1 | % |   |
|                                      |            |            |            |          |            |             |            |          |            |             |            |              |            |  |  |  |  |  |  |  |  |  |  |  |

*                     Includes amortization of stock based compensation.

Our Monster Careers – North America segment benefitedsignificantly from an improved domestic labor market, continued migration toonline employment advertising and our ongoing sales force expansion. We saw aparticularly strong demand for access to our Monster’s resume database in thefirst quarter of 2006, suggesting an environment where employers are placingincreasing emphasis and resources on finding qualified candidates as a resultof tighter labor markets. We were able to penetrate further into the enterprisemarket, which largely consists of businesses that operate on a global platform.In addition, we continue to successfully execute on our eCommerce model,allowing our clients to self-serve their job-posting needs. Our eCommerceservice generated over 15,000 new customers in the first quarter of 2006 anddelivered more than 40% revenue growth compared to the prior period. Theinvestments we made in the eCommerce model continue to drive strong revenuegrowth among the SMB market (small to medium sized businesses), whilegenerating high margin returns despite the smaller average order size. Webelieve that our growth in North America will largely come from makingcompetitive gains at the regional and local market level and we, therefore,continue to monitor our pricing structure in the local and regional markets inorder to achieve a competitive advantage and continually improve our customerservice.

Our Monster Careers – North America segment generatedan operating margin of 34.6% while making incremental investments in marketingand sales. Our marketing resources are diversely allocated to online media,radio, television and traditional print advertising. We have made opportunisticinvestments in driving quality seeker traffic to our website and accordingly,the number of resumes in our database increased 25% compared to the priorperiod. In addition, we added approximately 80 sales and support staff in thefirst quarter of 2006. We believe that our new sales center in Tempe, Arizonapresents us with a unique opportunity to leverage a lower cost structure in akey regional market, while at the same time adding to our sales infrastructure.

***Monster Careers – International***

Theoperating results of our Monster Careers—International division for the threemonths ended March 31, 2006 and 2005 are as follows:

| ** **                           | ** ** | ** ** | ** ** | **% of** | ** ** | ** **  | ** ** | **% of** | ** ** | ** **  | ** ** | **%**        | ** ** |
|--------------------------------------|------------|------------|------------|----------|------------|-------------|------------|----------|------------|-------------|------------|--------------|------------|
| **(dollars in thousands)** | ** ** | ** ** | ** ** | **2006** | ** ** | **Revenue** | ** ** | **2005** | ** ** | **Revenue** | ** ** | **Increase** | ** ** | **Increase** | ** ** |
| Revenue                              |       | $          | 64,591     |     |       | 100.0       | %          |     | $          | 41,217      |       |         | 100.0      | % |   | $ | 23,374 |   |   | 56.7 | % |   |
| Selling, general and administrative  |       | 59,565     |       |     | 92.2       | %           |       | 40,292   |       |        | 97.8       | %            |       | 19,273 |   |   | 47.8 | % |   |
| Depreciation and  amortization*      |       | 3,860      |       |     | 6.0        | %           |       | 2,490    |       |        | 6.0        | %            |       | 1,370 |   |   | 55.0 | % |   |
| Operating income  (loss)             |       | $          | 1,166      |     |       | 1.8         | %          |     | $          | (1,565      | )          |         | -3.8       | % |   | $ | 2,731 |   |   | 174.5 | % |   |
|                                      |            |            |            |          |            |             |            |          |            |             |            |              |            |  |  |  |  |  |  |  |  |  |  |  |

*                     Includes amortization of stock based compensation.

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Our Monster Careers – International segment increasedrevenue in each country where we operate and now comprises 22.1% of our totalrevenue. Our considerable time and capital investments in the major countriesacross Continental Europe and Asia are paying off, evidenced by the segment’s51% organic revenue growth, which excludes the negative effect of currencyexchange rates and the operations of businesses acquired within the trailingfifteen month period. As in North America, we are seeing an rapid migration ofhelp wanted advertising online. The United Kingdom, Germany and Francecontributed most heavily to revenue gains, despite some uneven marketconditions in those countries. We also saw promising gains in some of oursecondary markets such as Italy, Switzerland and Austria. We have activelymarketed and promoted our eCommerce model throughout Europe and earlyindicators suggest that it is becoming a strong complement to our field andtelesales groups. Our fourth quarter 2005 acquisition of JobKorea, which islargely an eCommerce business, has established our presence in one of Asia’slargest emerging markets where a large portion of the population is online. Asa result, our revenue from the Asia/Pacific region is growing and is now 15.3%of our International Careers revenue.

Our investment in sales force and marketing temperedthe segment’s operating margins in the first quarter of 2006. Our marketingexpense outgrew revenue in the quarter and increased 74.4% compared to the 2005period. Our investments in marketing are increasing our brand awareness,driving job seeker traffic to our websites and expanding our reach, both to thejob seeker and to the employer. Those investments, combined with the additionof over 100 sales and support staff in the first quarter of 2006, have helpedus achieve a significant portion of our overall revenue growth. Our objectiveto transition Monster Careers—International into a scalable operation, similarto that of our North American business, is taking hold and we believe that ourinvestments in marketing, training and productivity will enable us to continuethe migration of the European and Asian markets online.

***InternetAdvertising & Fees***

| ** **                           | ** ** | ** ** | ** ** | **% of** | ** ** | ** **  | ** ** | **% of** | ** ** | ** **  | ** ** | **%**        | ** ** |
|--------------------------------------|------------|------------|------------|---------------|------------|-------------|------------|---------------|------------|-------------|------------|--------------|------------|
| **(dollars in thousands)** | ** ** | ** ** | ** ** | **2006**      | ** ** | **Revenue** | ** ** | **2005**      | ** ** | **Revenue** | ** ** | **Increase** | ** ** | **Increase** | ** ** |
| Revenue                              |       | $          | 32,447     |          |       | 100.0       | %          |          | $          | 24,761      |       |         | 100.0      | % |   |   | $ | 7,686 |   |   |   | 31.0 | % |   |
| Selling, general and administrative  |       | 20,732     |       |          | 63.9       | %           |       | 16,304        |       |        | 65.8       | %            |       |   | 4,428 |   |   |   | 27.2 | % |   |
| Depreciation and  amortization*      |       | 2,088      |       |          | 6.4        | %           |       | 1,101         |       |        | 4.4        | %            |       |   | 987 |   |   |   | 89.6 | % |   |
| Operating income                     |       | $          | 9,627      |          |       | 29.7        | %          |          | $          | 7,356       |       |         | 29.7       | % |   |   | $ | 2,271 |   |   |   | 30.9 | % |   |
|                                      |            |            |            |               |            |             |            |               |            |             |            |              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

*                     Includes amortization of stock based compensation.

Revenue at our Internet Advertising and Fees segmentincreased as we stepped up our focus, introduced a fully dedicated managementteam and experienced greater demand for online advertising in the first quarterof 2006 as companies targeted users across our network of websites, whichconsistently rank in the top 20 most visited properties on the Internet. Wewere able to generate higher quality leads for our advertisers, therebyallowing us to charge higher rates per lead. We also generated a greateroverall volume of leads when compared to the prior period.  We believe that online advertising representsa significant growth opportunity for us, as our audience is appealing to bothbrand and remnant advertisers. Our subscription and fee based revenue, whichprovides access to our premium services, continues to generate revenue,primarily through memberships, which range from one month to twelve months.

The segment posted an operating margin of 29.7% in thefirst quarter of 2006, consistent with the 2005 period. We plan to expand ouradvertising sales force across the United States and introduce the Internetadvertising model overseas in the latter half of 2006. As of March 31,2006, we had approximately 85 sales and support staff in various locationsacross the United States. Our marketing costs were up slightly from the 2005period as we made enhancements to our product and promoted our services to ourdiverse audience.

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***Advertising & Communications***

Theoperating results of our Advertising & Communications division for thethree months ended March 31, 2006 and 2005 are as follows:

| ** **                           | ** ** | ** ** | ** ** | ** **    | ** ** | ** **  | ** ** | ** **    | ** ** | ** **   | ** ** | **%**          | ** ** |
|--------------------------------------|------------|------------|------------|---------------|------------|-------------|------------|---------------|------------|--------------|------------|----------------|------------|
| ** **                           | ** ** | ** ** | ** ** | **% of** | ** ** | ** **  | ** ** | **% of** | ** ** | **Increase** | ** ** | **Increase**   | ** ** |
| **(dollars in thousands)** | ** ** | ** ** | ** ** | **2006**      | ** ** | **Revenue** | ** ** | **2005**      | ** ** | **Revenue**  | ** ** | **(decrease)** | ** ** | **(decrease)** | ** ** |
| Revenue                              |       | $          | 34,711     |          |       | 100.0       | %          |          | $          | 38,990       |       |           | 100.0      | % |   |   | $ | (4,279 | ) |   |   | -11.0% |   |   |
| Selling, general and administrative  |       | 30,385     |       |          | 87.5       | %           |       | 34,761        |       |         | 89.2       | %              |       |   | (4,376 | ) |   |   | -12.6% |   |   |
| Depreciation and  amortization*      |       | 1,291      |       |          | 3.7        | %           |       | 1,398         |       |         | 3.6        | %              |       |   | (107 | ) |   |   | -7.6% |   |   |
| Operating income                     |       | $          | 3,035      |          |       | 8.7         | %          |          | $          | 2,831        |       |           | 7.3        | % |   |   | $ | 204 |   |   |   | 7.2% |   |   |
|                                      |            |            |            |               |            |             |            |               |            |              |            |                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

*                     Includes amortization of stock based compensation.

Revenue at our Advertising & Communicationsdivision decreased 11.0% entirely due to a weaker recruitment advertisingmarket in the United Kingdom. We believe that the current trends in the printadvertising market in the UK are challenging, especially within our publicservice customer base. In North America, we continue to see help-wantedadvertising moving online, however the segment was helped by a stronger overalllabor environment. As a result, revenue was flat in North America compared tothe 2005 period, as demand for print advertising and our other servicesremained stable compared to the comparable prior year period.

The segment postedoperating income in both North America and internationally for the firstquarter of 2006, as a result of a concerted effort to maintain a disciplinedcost structure and manage expenses to expected revenue levels. We believe thata coordinated shift in emphasis toward higher margin products and offerings,coupled with tight expense management has aided our profitability in the firstquarter of 2006. We will continually monitor our cost structure to ensure thatexpenses are in line with revenue.

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

Consolidatedoperating expenses and operating income for the three months ended March 31,2006 and 2005 are as follows:

| ** **                           | ** ** | ** ** | ** ** | **% of** | ** ** | ** **  | ** ** | **% of** | ** ** | ** **  | ** ** | **%**        | ** ** |
|--------------------------------------|------------|------------|------------|---------------|------------|-------------|------------|---------------|------------|-------------|------------|--------------|------------|
| **(dollars in thousands)** | ** ** | ** ** | ** ** | **2006**      | ** ** | **Revenue** | ** ** | **2005**      | ** ** | **Revenue** | ** ** | **Increase** | ** ** | **Increase** | ** ** |
| Salaries and related                 |       | $          | 113,348    |          |       | 38.9        | %          |          | $          | 97,659      |       |         | 42.7       | % |   | $ | 15,689 |   |   | 16.1 | % |   |
| Office and  general                  |       | 54,804     |       |          | 18.8       | %           |       | 45,399        |       |        | 19.9       | %            |       | 9,405 |   |   | 20.7 | % |   |
| Marketing and  promotion             |       | 66,117     |       |          | 22.7       | %           |       | 48,411        |       |        | 21.2       | %            |       | 17,706 |   |   | 36.6 | % |   |
| Operating  expenses                  |       | 234,269    |       |          | 80.3       | %           |       | 191,469       |       |        | 83.8       | %            |       | 42,800 |   |   | 22.4 | % |   |
| Operating income                     |       | $          | 57,478     |          |       | 19.7        | %          |          | $          | 37,055      |       |         | 16.2       | % |   | $ | 20,423 |   |   | 55.1 | % |   |
|                                      |            |            |            |               |            |             |            |               |            |             |            |              |            |  |  |  |  |  |  |  |  |  |  |  |

 

Our Monster Careers – North America and Internationalsegments accounted for nearly all of the year over year increase in totaloperating expenses, stemming mainly from hiring initiatives since March 2005and increased marketing and promotion of the Monster brand. We increased globalheadcount by 14.1% over the 2005 period, primarily for increased sales andsupport staff in our Monster Careers segments. As a result we incurred highersalary, benefits and commission costs. Marketing increased $17.7 million as aresult of allocating greater resources to expanding our brand recognition and salesforce in our International Careers segment. We also stepped up our marketingefforts in the North America to drive further penetration into local markets. Wewill continue to market our services heavily throughout Europe and Asia whilekeeping our marketing and promotion expenses in line with our revenueexpectations. Our 

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acquisition of JobKorea contributed approximately $3.6million to the increase in total operating expenses for the quarter.

In March 2006 the Compensation Committee to ourBoard of Directors approved our 2006 Restricted Stock Unit Plan (the “RSU Plan”).Our RSU Plan is incentive and retention based, and was developed to replacebroad-based stock option grants that were used as incentive and retention toolsin prior years. Approximately 350 people currently participate in the 2006 RSUPlan and we expect to recognize approximately $32.7 million of compensationexpense over a four-year period related to the 2006 grants. In March 2006,we recorded $0.7 million of compensation expense related to this plan. Prior toJanuary 1, 2006, generally accepted accounting principles (“GAAP”) did notrequire us to record compensation expense for our broad-based stock optiongrants and therefore the expense recognized in connection with our RSU Plan isincremental to the prior period.

***Income Taxes***

Incometaxes for the three months ended March 31, 2006 and 2005 are as follows:

| ** **                                             | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|--------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **(dollars in thousands)**                   | ** ** | ** ** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **$** | ** ** | **%** | ** ** |
| Income from continuing operations before income  taxes |       | $          | 60,820     |       | $          | 36,973     |       | $ | 23,847 |   | 64.5 | % |
| Income taxes                                           |       | 22,149     |       | 13,068     |       | 9,081      |       | 69.5 | % |
| Effective tax rate                                     |       | 36.4       | %          | 35.3       | %          |       |       |   |   |
|                                                        |            |            |            |            |            |            |            |  |  |  |  |  |  |  |

 

Our effective tax rates differ from the statutory ratedue to the impact of state and local income taxes, certain nondeductibleexpenses, foreign earnings taxed at different tax rates and valuationallowances. Our future effective tax rates could be adversely affected byearnings being lower than anticipated in countries where we have lowerstatutory rates, changes in the valuation of our deferred tax assets orliabilities, or changes in tax laws or interpretations thereof. In addition,our filed tax returns are subject to the examination by the Internal RevenueService and other tax authorities. We regularly assess the likelihood ofadverse outcomes resulting from these examinations to determine the adequacy ofour provision for income taxes.

***Earnings Per Share***

Diluted earnings per share increased 88.2% in thecurrent period, even as diluted weighted average shares outstanding increased7.0 million shares. The share increase is mainly the result of incrementaldilution associated with a higher average stock price in the 2006 period, aswell as additional shares issued in connection with employee stock optionexercises. We repurchased 180,000 shares in the first quarter of 2006 to offsetadditional dilution. Net income was 14.5% of total revenue in the 2006 period,compared to 9.0% in the 2005 period.

**Financial Condition**

Thefollowing table details our cash and cash equivalents, marketable securitiesand cash flow components:

| ** **                                           | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **Change** | ** ** |
|------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|------------|------------|
| **(dollars in thousands)**                 | ** ** | ** **         | ** ** | **2006**              | ** ** | **2005**   | ** ** | **$** | ** ** | **%** | ** ** |
| Cash and cash equivalents                            |       | $                  | 166,035    |                  |       | $          | 196,597    |   |   | $ | (30,562 | ) | -15.5% |   |
| Marketable securities                                |       | 221,019            |       |                  | 123,747    |       |       | 97,272 |   | 78.6% |   |
| Cash and cash  equivalents and marketable securities |       | $                  | 387,054    |                  |       | $          | 320,344    |   |   | $ | 66,710 |   | 20.8% |   |
| Percentage of  total assets                          |       | 21.9%              |       |                  | 19.1%      |       |       |   |   |   |   |
|                                                      |            |                    |            |                       |            |            |            |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **(dollars in thousands)**                            | ** ** | ** ** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **$** | ** ** | **%** | ** ** |
| Cash provided by operating activities of continuing  operations |       | $          | 78,516     |       | $          | 55,235     |       | $ | 23,281 |   | 42.1 | % |
| Cash used for  investing activities of continuing operations    |       | (151,505   | )          | (99,049    | )          | (52,456    | )          | 53.0 | % |
| Cash provided by  financing activities of continuing operations |       | 45,074     |       | 3,146      |       | 41,928     |       | 1332.7 | % |
| Cash used in  discontinued operations                           |       | (3,194     | )          | (14,624    | )          | 11,430     |       | -78.2 | % |
| Effect of exchage rates  on cash                                |       | 547        |       | (1,894     | )          | 2,441      |       | -128.9 | % |
|                                                                 |            |            |            |            |            |            |            |  |  |  |  |  |  |  |

 

Our principal capital requirements have been to fund (i) workingcapital, (ii) marketing and development of our Monster network, (iii) acquisitionsand (iv) capital expenditures. Prior to the sale of our DirectionalMarketing segment in the second quarter of 2005, our working capitalrequirements were generally higher in the first half of each year, whenpayments to major Yellow Page directory publishers were at their highestlevels.

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 marketable debt securities such as auction rate bonds, whichare highly liquid and of high investment grade, commercial paper, and in moneymarket funds, with the intent to make such funds readily available foroperating and strategic long-term equity investment purposes.

We believe that our current cash and cash equivalents,marketable securities, revolving credit facility and cash we anticipate togenerate from operating activities will provide us with sufficient liquidity tosatisfy our working capital needs, capital expenditures, meet our investmentrequirements and commitments and fund our share repurchase activities throughat least the next twelve months. Our cash generated from operating activitiesis subject to fluctuations in the global economy and unemployment rates.

As of March 31, 2006, we had cash and cashequivalents and marketable securities of $387.1 million, compared to $320.3million as of December 31, 2005. Our increase in cash and marketablesecurities of $66.8 million in the three months ended March 31, 2006 wasmainly due to our strong operating income before taking into accountdepreciation and amortization of intangibles and stock-based compensation (“OIBDA”)and cash received from the exercise of employee stock options, including theirassociated tax benefit. Strong sales and working capital management, aided by a$16.1 million increase in deferred revenue, brought cash flow from operatingactivities to a level slightly above OIBDA. Overall, working capital increasedat a measured rate compared to revenue and expenses. The disposition of ourDirectional Marketing business in 2005 significantly improved the consistencyof our cash flows from operations and its correlation to OIBDA from quarter toquarter. Cash flow from operating activities was decreased by $2.2 million forcash used in our discontinued operations.

We used $152.5 million of cash for investingactivities in the three months ended March 31, 2006, reflecting our netcash purchase of marketable securities of $97.0 million and our payment of$23.7 million for seller-notes payable on Monster businesses acquired in priorperiods. In addition, we acquired an additional 4.4% equity interest inChinaHR.com for $19.9 million and we now own a 44.4% equity stake in ChinaHR. Capitalexpenditures were $10.9 million in the first three months of 2006.

We generated cash from financing activities in thefirst quarter of 2006, resulting from $59.6 million of cash received fromemployee stock option exercises, and $17.1 million related to the tax benefiton stock options exercised. Offsetting the stock option exercises were $22.8million of cash used in a structured stock repurchase that will mature aroundmid-year 2006 and $8.5 million used to repurchase 180,000 shares of commonstock. Depending on the price of our common stock at the maturity date of thestructured stock repurchase agreement, we will either have repurchased anagreed upon number of shares of common stock or receive our initial cashinvestment plus a premium.

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In March 2006, we entered into a loan agreementwith ChinaHR, whereby we have agreed to advance ChinaHR up to an aggregate of$20.0 million with no more than $10.0 million being advanced in thefirst year of the agreement. Interest on the loans will be assessed at the averageone-month U.S. LIBOR rate plus 1% and shall be payable quarterly in arrears. Thecredit facility provides that any advances shall be due and payable in full onthe maturity date, which is the earliest of March 2011 or the consummationof an initial public offering of securities by ChinaHR. There were no amountsoutstanding under this facility as of March 31, 2006.

In November 2005, ourBoard of Directors authorized us to purchase up to $100 million of ourcommon stock on the open market, or otherwise from time to time, over a 30-monthperiod as conditions warrant. Through March 31, 2006, the Company hasrepurchased 380,000 shares of its common stock for an aggregate purchase priceof $16.4 million.

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

Our primary market risks include fluctuations ininterest rates and exchange rate variability.

We have interest rate risk primarily related to ourshort-term investment portfolio. Our short-term investments will produce lessincome than expected if market interest rates fall therefore our futureinvestment income may fall short of expectations due to changes in marketinterest rates or we may suffer losses in principal if forced to sellshort-term investments which have declined in market value due to increases ininterest rates.

We also have interest rate risk related to ourrevolving credit agreement. At March 31, 2006, the utilized portion of ourthree-year revolving credit agreement was approximately $3.1 million forstandby letters of credit and approximately $96.9 million was unused.Interest on future outstanding loans under the revolving credit agreement shallbe charged based on a variable interest rate related to our choice of(1) the higher of (a) the prime rate or (b) the Federal Fundsrate plus 0.5%, plus a margin determined by the ratio of our debt to earningsbefore interest, taxes, depreciation and amortization (“EBITDA”) as defined inthe revolving 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 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 months ended March 31, 2006, approximately 29% of our revenue wasearned outside the United States and collected in local currency and relatedoperating expenses were also paid in such corresponding local currency. To the extent the U.S. dollar strengthens againstforeign currencies, the translation of these foreign currency denominatedtransactions results in reduced revenues, operating expenses and net income forour international operations. Similarly, our revenues, operating expenses andnet income will increase for our international operations if the U.S. dollarweakens against foreign currencies. We use forward foreign exchangecontracts as cash flow hedges to offset risks related to certain foreigncurrency transactions. These transactions primarily relate to non-functionalcurrency denominated inter-company funding loans and non-functional currency indebtedness.We do not trade derivative financial instruments for speculative purposes. Thefinancial statements of our non-U.S. subsidiaries are translated into U.S.dollars using current rates of exchange, with gains or losses included in thecumulative translation adjustment account, a component of stockholders’ equity.During the quarter ended March 31, 2006, we had a translation gain of$7.5 million, primarily attributable to the weakening of the U.S. dollaragainst the Euro, the British Pound and the Swedish Krona.

We have risks related toour short term investment activities. The primary objective of our investmentactivities is to preserve principal while at the same time maximizing yieldswithout significantly increasing risk. To achieve this objective, we maintainour portfolio of short-term investments and cash & cash 

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equivalents in a varietyof marketable debt instruments of high quality issuers, including auction ratebonds, commercial paper, money market funds and bank time deposits. We limitthe amount of credit exposure to any one issuer. Our marketable securities aregenerally classified as available for sale and consequently are recorded on thebalance sheet at fair value with unrealized gains or losses reported as aseparate component of accumulated other comprehensive income. As ofMarch 31, 2006, net unrealized losses on these investments were not material.

**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 managementrecognized that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives and Monster Worldwide’s management necessarily was requiredto apply its judgment in evaluating the cost-benefit relationship of possiblecontrols and procedures. Monster Worldwide has carried out an evaluation, as ofthe end of the period covered by this report, under the supervision and withthe participation of Monster Worldwide’s management, including MonsterWorldwide’s Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of Monster Worldwide’s disclosurecontrols and procedures. Based upon their evaluation and subject to theforegoing, the Chief Executive Officer and Chief Financial Officer concludedthat Monster Worldwide’s disclosure controls and procedures were effective inensuring that material information relating to Monster Worldwide is made knownto the Chief Executive Officer and Chief Financial Officer by others withinMonster Worldwide during the 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—OTHERINFORMATION**

**ITEM 2.   UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

TheCompany has a stock repurchase plan in place that allows it to purchasesecurities on the open market or otherwise from time to time as conditionswarrant. A summary of the Company’s repurchase activity for the three monthsended March 31, 2006 is as follows:
| Period                                  | ** ** | **Total number  of shares  repurchased** | ** ** | **Average  Price  Paid Per  Share** | ** ** | **Total Number  of Shares  Purchased as  Part of Publicly  Announced  Plans or  Programs** | ** ** | **Maximum Dollar  Value of Shares  That  May Yet Be  Purchased Under  the  Plans or  Programs(a)** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1 – January 31   |       |                                               | —     |                                     |       |                                                                                                                     | N/A        |                                                                                                                                  |       |   | — |   |   |   | $ | 92,093,440 |   |   |
| February 1 – February 28 |       |                                               | 110,000    |                                     |       |                                                                                                                     | $          | 46.89                                                                                                                                 |       |   |   | 110,000 |   |   |   | $ | 86,944,334 |   |   |
| March 1 – March 31       |       |                                               | 70,000     |                                     |       |                                                                                                                     | $          | 47.96                                                                                                                                 |       |   |   | 70,000 |   |   |   | $ | 83,556,688 |   |   |
| **Total**                               |       |                                               | 180,000    |                                     |       |                                                                                                                     | $          | 47.41                                                                                                                                 |       |   |   | 180,000 |   |   |   | $ | 83,556,688 |   |   |

 

(a) -On November 10, 2005, the Board of Directors approved a share  repurchase plan, authorizing the Company topurchase up to $100 million of shares of its common stock. The sharerepurchase plan expires 30 months from the authorization date.

**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**

Pursuant to therequirements 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: May 10, 2006 | By:                                        | /s/ ANDREW J.  MCKELVEY |
|                     |                                       | Andrew J.  McKelvey |
|                     |                                       | Chairman of the  Board and Chief Executive Officer |
|                     |                                       | (principal  executive officer) |
| Dated: May 10, 2006 | By:                                        | /s/ CHARLES  BAKER |
|                     |                                       | Charles Baker |
|                     |                                       | Chief Financial  Officer |
|                     |                                       | (principal  financial officer) |
| Dated: May 10, 2006 | By:                                        | /s/ JONATHAN  TRUMBULL |
|                     |                                       | Jonathan Trumbull |
|                     |                                       | Chief Accounting  Officer and Global Controller |
|                     |                                       | (principal  accounting officer) |

 

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