<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO .
</TABLE>
COMMISSION FILE NUMBER: 000-21571
------------------------
TMP WORLDWIDE INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3906555
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
622 THIRD AVENUE, 39TH FLOOR, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
(212) 351-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING ON AUGUST 11, 2000
----- ------------------------------
<S> <C>
Common Stock....................................... 91,381,902
Class B Common Stock............................... 4,762,000
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--June 30, 2000 and
December 31, 1999......................................... 2
Consolidated Condensed Statements of Income--Three Months
and Six Months Ended June 30, 2000 and 1999............... 3
Consolidated Condensed Statements of Comprehensive Income
(Loss)--Three Months and Six Months Ended June 30, 2000
and 1999.................................................. 4
Consolidated Condensed Statement of Stockholders'
Equity--Six Months Ended June 30, 2000.................... 5
Consolidated Condensed Statements of Cash Flows--Six Months
Ended June 30, 2000 and 1999.............................. 6
Notes to Consolidated Condensed Financial Statements........ 7-19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20-30
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 30
PART II OTHER INFORMATION
Item 2(c). Changes in Securities and Use of Proceeds................... 31
Item 4. Submission of Matters to a Vote of Security-Holders......... 31-32
Item 6. Exhibits and Reports on Form 8-K............................ 32
Signature................................................... 33
</TABLE>
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 511,445 $ 64,599
Accounts receivable, net.................................. 539,897 462,595
Work-in-process........................................... 26,970 25,632
Prepaid and other......................................... 58,725 60,019
---------- ----------
Total current assets.................................. 1,137,037 612,845
Property and equipment, net............................... 98,352 80,839
Intangibles, net.......................................... 374,658 311,873
Deferred income taxes..................................... 11,103 25,237
Other assets.............................................. 22,089 22,434
---------- ----------
$1,643,239 $1,053,228
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 325,640 $ 364,951
Accrued expenses and other current liabilities............ 209,320 134,838
Accrued integration and restructuring costs............... 21,850 21,453
Deferred commissions and fees............................. 104,174 72,298
Current portion of long term debt......................... 8,141 11,068
---------- ----------
Total current liabilities............................. 669,125 604,608
Long term debt, less current portion...................... 15,139 100,098
Other long-term liabilities............................... 22,318 30,735
---------- ----------
Total liabilities..................................... 706,582 735,441
---------- ----------
Stockholders' equity:
Preferred stock, $.001 par value, authorized 800,000
shares; issued and outstanding: none.................... -- --
Common stock, $.001 par value, authorized 200,000,000
shares; issued and outstanding: 91,204,907 and
81,359,671 shares....................................... 91 81
Class B common stock, $.001 par value, authorized
39,000,000 shares; issued and outstanding: 4,762,000
shares.................................................. 5 5
Additional paid-in capital.................................. 1,017,899 367,857
Other comprehensive loss.................................... (42,836) (4,899)
Deficit..................................................... (38,502) (45,257)
---------- ----------
Total stockholders' equity.................................. 936,657 317,787
---------- ----------
$1,643,239 $1,053,228
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Commissions and fees................................ $300,727 $210,568 $558,137 $402,090
-------- -------- -------- --------
Operating expenses:
Salaries & related................................ 162,613 126,499 308,638 241,430
Office & general.................................. 66,698 45,183 127,883 98,649
Marketing & promotion............................. 38,353 19,378 67,702 29,564
Merger & integration.............................. 13,649 6,767 22,323 11,454
Restructuring..................................... -- -- -- 2,789
Amortization of intangibles....................... 3,905 3,078 7,540 6,167
-------- -------- -------- --------
Total operating expenses.......................... 285,218 200,905 534,086 390,053
-------- -------- -------- --------
Operating income.................................... 15,509 9,663 24,051 12,037
-------- -------- -------- --------
Other income (expense):
Interest income (expense), net.................... 5,496 (2,723) 7,290 (6,226)
Other, net........................................ (495) (1,341) (582) (1,511)
-------- -------- -------- --------
5,001 (4,064) 6,708 (7,737)
-------- -------- -------- --------
Income before provision for income taxes, minority
interests and equity in losses of affiliates...... 20,510 5,599 30,759 4,300
Provision for income taxes.......................... 12,248 2,283 19,528 1,488
-------- -------- -------- --------
Income before minority interests and equity in
losses of affiliates.............................. 8,262 3,316 11,231 2,812
Minority interests.................................. (243) 8 (324) 107
Equity in losses of affiliates...................... -- (100) -- (200)
-------- -------- -------- --------
Net income applicable to common and Class B common
stockholders...................................... $ 8,505 $ 3,208 $ 11,555 $ 2,505
======== ======== ======== ========
Net income per common and Class B common share:
Basic............................................. $ 0.09 $ 0.04 $ 0.12 $ 0.03
======== ======== ======== ========
Diluted........................................... $ 0.08 $ 0.04 $ 0.11 $ 0.03
======== ======== ======== ========
Weighted average shares outstanding:
Basic............................................. 95,614 84,166 94,048 83,380
======== ======== ======== ========
Diluted........................................... 102,100 88,268 101,078 87,318
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Net income.................................................. $ 11,555 $ 2,505
Foreign currency translation adjustment..................... (37,937) 579
-------- -------
Comprehensive income (loss)................................. $(26,382) $ 3,084
======== =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Net income.................................................. $ 8,505 $ 3,208
Foreign currency translation adjustment..................... (4,358) (1,691)
-------- -------
Comprehensive income........................................ $ 4,147 $ 1,517
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK, COMMON STOCK,
$.001 PAR VALUE $.001 PAR VALUE ADDITIONAL OTHER
---------------------- -------------------- PAID-IN COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS DEFICIT
---------- --------- --------- -------- ---------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000..... 81,359,671 $ 81 4,762,000 $ 5 $ 367,857 $ (4,899) $(45,257)
Issuance of common stock in
connection with a pubic
offering completed
February 2, 2000........... 8,000,000 8 -- -- 594,230 -- --
Issuance of common stock in
connection with the
exercise of options........ 1,332,397 1 -- -- 19,781 -- --
Tax benefit from the exercise
of stock options........... -- -- -- -- 7,828 -- --
Issuance of common stock in
connection with
acquisitions............... 428,864 1 -- -- 26,000 -- --
Issuance of common stock for
matching contribution to
401(k) plan................ 14,399 -- -- -- 1,023 -- --
Issuance of common stock in
for employee stay
bonuses.................... 22,702 -- -- -- 553 -- --
Other issuance of common
stock of pooled entities... 46,874 -- -- -- 627 -- --
Foreign currency translation
adjustment................. -- -- -- -- -- (37,937) --
Pooled company earnings
included in both current
and previous periods....... -- -- -- -- -- -- (285)
Dividends declared by pooled
companies.................. -- -- -- -- -- -- (4,515)
Net income................... -- -- -- -- -- -- 11,555
---------- --------- --------- ------ ---------- -------- --------
Balance, June 30, 2000....... 91,204,907 $ 91 4,762,000 $ 5 $1,017,899 $(42,836) $(38,502)
========== ========= ========= ====== ========== ======== ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, January 1, 2000..... $317,787
Issuance of common stock in
connection with a pubic
offering completed
February 2, 2000........... 594,238
Issuance of common stock in
connection with the
exercise of options........ 19,782
Tax benefit from the exercise
of stock options........... 7,828
Issuance of common stock in
connection with
acquisitions............... 26,001
Issuance of common stock for
matching contribution to
401(k) plan................ 1,023
Issuance of common stock in
for employee stay
bonuses.................... 553
Other issuance of common
stock of pooled entities... 627
Foreign currency translation
adjustment................. (37,937)
Pooled company earnings
included in both current
and previous periods....... (285)
Dividends declared by pooled
companies.................. (4,515)
Net income................... 11,555
--------
Balance, June 30, 2000....... $936,657
========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 11,555 $ 2,505
--------- ---------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 28,498 20,904
Provision for doubtful accounts......................... 13,800 2,695
Common stock issued for matching contribution to 401(k)
plan and employee stay bonuses........................ 1,576 902
Loss on disposal & write-down of fixed assets........... -- 2,801
Provision (benefit) for deferred income taxes........... 4,955 (2,277)
Minority interests and other............................ -- 4,372
Effect of pooled companies included in more than one
period................................................ (285) 1,465
Changes in assets and liabilities, net of effects of
purchases of businesses:
Increase in accounts receivable, net.................... (85,772) (35,438)
(Increase) decrease in work-in-process, prepaid and
other................................................. 7,228 (2,608)
Increase in deferred commissions and fees............... 31,335 12,522
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities................ (21,133) 4,732
--------- ---------
Total adjustments..................................... (19,798) 10,070
--------- ---------
Net cash provided by (used in) operating activities... (8,243) 12,575
--------- ---------
Cash flows from investing activities:
Capital expenditures...................................... (32,410) (17,990)
Payments for purchases of businesses, net of cash
acquired................................................ (33,372) (18,835)
--------- ---------
Net cash used in investing activities................. (65,782) (36,825)
--------- ---------
Cash flows from financing activities:
Borrowings under line of credit and proceeds from issuance
of debt................................................. 137,083 599,888
Repayments under line of credit and principal payments on
debt.................................................... (223,015) (590,171)
Net proceeds from issuance of common stock................ 594,238 --
Cash received from the exercise of employee stock
options................................................. 19,782 7,163
Other..................................................... (59) (241)
Dividends paid by pooled entities......................... (4,515) (5,100)
Payments on capitalized leases............................ (2,140) (2,466)
--------- ---------
Net cash provided by financing activities............. 521,374 9,073
--------- ---------
Effect of exchange rate changes on cash..................... (503) 294
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 446,846 (14,883)
Cash and cash equivalents, beginning of period.............. 64,599 79,868
--------- ---------
Cash and cash equivalents, end of period.................... $ 511,445 $ 64,985
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The consolidated condensed interim financial statements included herein have
been prepared by TMP Worldwide Inc. ("TMP" or the "Company") without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments that, in the opinion of management, are necessary for fair
presentation of the information contained herein. It is suggested that these
consolidated condensed financial statements be read in conjunction with (i) the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 and (ii) the
supplemental consolidated financial statements filed on Form 8-K dated July 21,
2000. The Company follows the same accounting policies in preparation of interim
reports.
During the period of January 1, 2000 through March 31, 2000, the Company
consummated mergers with the following companies in transactions that provided
for the exchange of all of the outstanding stock of each entity for a total of
1,699,123 shares of TMP common stock. Such transactions were accounted for as
poolings of interest (the "First Quarter 2000 Mergers"):
<TABLE>
<CAPTION>
NUMBER OF
ENTITY BUSINESS SEGMENT ACQUISITION DATE TMP SHARES ISSUED
------ ---------------------------------- ------------------ -----------------
<S> <C> <C> <C>
HW Group PLC............. Selection & Temporary Contracting February 16, 2000 715,769
Microsurf, Inc. ......... Interactive February 16, 2000 684,462
Burlington Wells,
Inc. .................. Selection & Temporary Contracting February 29, 2000 52,190
Illsley Bourbonnais...... Executive Search March 1, 2000 246,702
</TABLE>
During the period of April 1, 2000 through June 30, 2000, the Company
consummated mergers with the following companies in transactions that provided
for the exchange of all of the outstanding stock of each entity for a total of
3,117,169 shares of TMP common stock. Such transactions were accounted for as
poolings of interests (the "Second Quarter 2000 Mergers", collectively with the
First Quarter 2000 Mergers, the "First Half 2000 Mergers"):
<TABLE>
<CAPTION>
NUMBER OF
ENTITY BUSINESS SEGMENT ACQUISITION DATE TMP SHARES ISSUED
------ ---------------------------------- ------------------ -----------------
<S> <C> <C> <C>
System One Services,
Inc.................... Selection & Temporary Contracting April 3, 2000 1,022,257
GTR Advertising.......... Recruitment Advertising April 4, 2000 54,041
Virtual Relocation.com,
Inc.................... Interactive May 9, 2000 947,916
Business Technologies
Ltd.................... Interactive May 17, 2000 205,703
Simpatix, Inc............ Interactive May 31, 2000 152,500
Rollo Associates, Inc.... Executive Search May 31, 2000 110,860
Web Technology Partners,
Inc.................... Interactive May 31, 2000 623,892
</TABLE>
7
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION (CONTINUED)
The Company's consolidated financial statements have been retroactively
restated as of June 30, 1999 and for the six months ended June 30, 1999 to
reflect the First Half 2000 Mergers. As a result, the financial position, and
statements of income, comprehensive income (loss) and cash flows are presented
as if the combining companies had been consolidated for all periods presented.
In addition, the consolidated statement of stockholders' equity reflects the
accounts of TMP as if the additional common stock issued in connection with
these mergers had been issued for all periods when each of the related companies
had issued their shares and for the amounts that reflect the exchange ratios of
the mergers.
In addition, for the period July 1, 1999 through June 30, 2000 the Company
completed 20 acquisitions using the purchase method of accounting. Given the
significant number of acquisitions affecting the periods presented, the results
of operations from period to period may not necessarily be comparable.
Furthermore, results of operations for the interim periods are not necessarily
indicative of annual results.
Amounts charged to clients for Temporary Contracting services are reported
net of the costs paid to the temporary contractor. The details for such amounts
are:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Temporary Contracting revenue........................... $241,131 $226,753
Temporary Contracting costs............................. 187,738 181,910
-------- --------
Temporary Contracting, billings and commissions and
fees.................................................. $ 53,393 $ 44,843
======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Temporary Contracting revenue........................... $119,560 $119,044
Temporary Contracting costs............................. 91,795 94,665
-------- --------
Temporary Contracting, billings and commissions and
fees.................................................. $ 27,765 $ 24,379
======== ========
</TABLE>
On January 27, 2000, in connection with its third public offering, the
Company issued an aggregate of, on a post-split basis, 8,000,000 shares of
common stock at a purchase price of $77 5/16 per share. The offering was
completed in February 2000. The net proceeds from this offering were
$594.2 million, and approximately $82 million was used to pay down debt on the
Company's credit line. The remainder is being invested in short and medium term
interest bearing instruments until used for acquisitions, strategic equity
investments and general corporate purposes.
Basic earnings per share assumes no dilution, and is computed by dividing
income available to common and Class B common stockholders by the weighted
average number of common and Class B common shares outstanding during each
period. Diluted earnings per share reflect, in periods in which they have a
dilutive effect, the effect of common shares issuable upon exercise of stock
options and warrants, based on the treasury stock method of computing such
effects and contingent shares.
8
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION (CONTINUED)
A reconciliation of shares used in calculating basic and diluted earnings
per common and Class B common share follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Basic...................................................... 94,048 83,380
Effect of assumed conversion of options.................... 7,030 3,938
------- ------
Diluted.................................................... 101,078 87,318
======= ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Basic...................................................... 95,614 84,166
Effect of assumed conversion of options.................... 6,486 4,102
------- ------
Diluted.................................................... 102,100 88,268
======= ======
</TABLE>
NOTE 2--NATURE OF BUSINESS AND CREDIT RISK
The Company operates in five business segments: Interactive (including
Monster-Registered Trademark-.com and MonsterMoving.com(sm)), Recruitment
Advertising, Selection & Temporary Contracting, Executive Search and Yellow Page
Advertising. The Company's commissions and fees are earned from the following
activities: (i) advertisements placed on its career and other websites,
(ii) resume and other database access, (iii) executive placement services,
(iv) mid-level employee selection and temporary contracting services,
(v) selling and placing recruitment advertising and related services,
(vi) resume screening services and (vii) selling and placing Yellow Page
Advertising and related services. These services are provided to a large number
of customers in many different industries. The Company operates principally
throughout North America, the United Kingdom, Continental Europe and the
Asia-Pacific Region (primarily Australia and New Zealand).
9
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3--BUSINESS COMBINATIONS
ACQUISITIONS ACCOUNTED FOR USING THE POOLING OF INTERESTS METHOD
During the period of April 1, 2000 through June 30, 2000, the Company
completed the following mergers which provided for the exchange of all of the
outstanding stock of each entity for a total of 3,117,169 shares of TMP common
stock. Such transactions were accounted for as poolings of interests.
<TABLE>
<CAPTION>
NUMBER OF TMP
ENTITY BUSINESS SEGMENT GEOGRAPHIC REGION ACQUISITION DATE SHARES ISSUED
------ ---------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
System One Services, Selection & North America April 3, 2000 1,022,257
Inc...................... Temporary
Contracting
GTR Advertising............ Recruitment North America April 4, 2000 54,041
Advertising
Virtual Relocation.com, Interactive North America May 9, 2000 947,916
Inc......................
Business Technologies Interactive United Kingdom May 17, 2000 205,703
Ltd......................
Simpatix, Inc.............. Interactive North America May 31, 2000 152,500
Rollo Associates, Inc...... Executive Search North America May 31, 2000 110,860
Web Technology Partners, Interactive North America May 31, 2000 623,892
Inc......................
</TABLE>
10
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3--BUSINESS COMBINATIONS (CONTINUED)
Commissions and fees, net income (loss) applicable to common and Class B
common stockholders and net income per common and Class B common share of the
combining companies are as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1999 1999
------------ -----------
<S> <C> <C>
COMMISSIONS AND FEES:
TMP, as previously reported on Form 10-K for the year ended
December 31, 1999........................................... $186,144 $355,150
HW Group, PLC............................................. 10,228 21,303
Microsurf, Inc. .......................................... 1,282 2,208
Burlington Wells, Inc..................................... 656 821
Illsley Bourbonnais....................................... 1,843 2,730
System One Services, Inc.................................. 7,541 14,558
GTR Advertising........................................... 774 1,561
Virtual Relocation.com, Inc............................... 346 501
Business Technologies Ltd................................. 197 394
Simpatix, Inc............................................. 4 (7)
Rollo Associates, Inc..................................... 838 1,605
Web Technology Partners, Inc.............................. 715 1,266
-------- --------
TMP, as restated............................................ $210,568 $402,090
======== ========
NET INCOME APPLICABLE TO COMMON AND CLASS B COMMON
STOCKHOLDERS:
TMP, as previously reported on Form 10-K for the year ended
December 31, 1999........................................... $ 3,249 $ 930
HW Group, PLC............................................. (1,688) 205
Microsurf, Inc. .......................................... 832 828
Burlington Wells, Inc..................................... 161 265
Illsley Bourbonnais....................................... 1,092 1,372
System One Services, Inc.................................. (231) (920)
GTR Advertising........................................... 175 374
Virtual Relocation.com, Inc............................... (525) (884)
Business Technologies Ltd................................. 27 56
Simpatix, Inc............................................. (92) (241)
Rollo Associates, Inc..................................... 323 594
Web Technology Partners, Inc.............................. (115) (74)
-------- --------
TMP, as restated............................................ $ 3,208 $ 2,505
======== ========
</TABLE>
11
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3--BUSINESS COMBINATIONS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1999 1999
------------ -----------
<S> <C> <C>
NET INCOME PER COMMON AND CLASS B COMMON SHARE:
TMP, as previously reported on Form 10-K for the year ended
December 31, 1999
Basic..................................................... $ 0.04 $ 0.01
Diluted................................................... $ 0.04 $ 0.01
TMP, as restated
Basic..................................................... $ 0.04 $ 0.03
Diluted................................................... $ 0.04 $ 0.03
</TABLE>
MERGER & INTEGRATION COSTS INCURRED WITH POOLING OF INTERESTS TRANSACTIONS
Merger and integration costs are expenses incurred in connection with
business combinations accounted for under the pooling of interests method of
accounting. In general, merger costs are comprised of transaction costs (such as
advisory, legal and accounting fees, printing costs and costs incurred for the
subsequent registration of shares in connection with the transactions) and stay
bonuses. Integration costs are those associated with the elimination of
redundant facilities and personnel, integration of the operations of the pooled
entities and acceleration of benefits and separation pay in accordance with
pre-existing contractual change in control provisions.
In connection with pooling of interests transactions completed prior to
June 30, 2000, the Company expensed merger and integration costs of $22,323. Of
this amount $13,062 is for merger costs and $9,261 is for integration costs. The
merger costs for the period ended June 30, 2000 consist of (a) $3,548 for
payments made in connection with the repayment of debt of a pooled company
pursuant to change in control provisions of such debt, (b) $4,634 of non-cash
employee stay bonuses and (c) $4,880 of transaction related costs, including
legal, accounting, printing, advisory fees and the costs incurred for the
subsequent registration of shares issued in the mergers. The $9,261 of
integration costs consists of (a) $4,424 for assumed obligations of closed
facilities, (b) $5,010 for consolidation of acquired facilities and (c) $488 for
severance, relocation and other employee costs, partially offset by a $661
recovery of a reserve for receivables. See schedule of Accrued Integration and
Restructuring Costs in the section below.
During the six months ended June 30, 1999, the Company expensed merger and
integration costs of $11,454 which were comprised of $5,449 of transaction
costs, $2,280 for the amortization of employee stay bonuses payable in TMP
common stock., $2,100 in separation costs for the Chief Operating Officer of an
acquired company and $1,625 for integration costs,
ACQUISITIONS ACCOUNTED FOR USING THE PURCHASE METHOD
In addition to the pooling of interests transactions discussed above, in the
six month period ended June 30, 2000, the Company completed nine acquisitions
using the purchase method of accounting, five
12
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3--BUSINESS COMBINATIONS (CONTINUED)
Selection & Temporary Contracting firms, two Recruitment Advertising firms and
two Interactive firms for the MonsterMoving.com(sm) business. The total amount
of cash paid for these acquisitions was approximately $36.1 million. In
addition, the Company issued 352,575 shares of common stock in connection with
certain of the above mentioned acquisitions. Operations of these businesses have
been included in the consolidated financial statements from their acquisition
dates.
The summarized unaudited pro forma results of operations set forth below for
the six month periods ended June 30, 2000 and 1999 and the year ended
December 31, 1999 assume the acquisitions in 2000 and 1999 occurred as of the
beginning of the year of acquisition and the beginning of the preceding year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
------------------- DECEMBER 31,
2000 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Commissions and fees........................................ $563,462 $434,907 $923,183
Net income (loss) applicable to common and Class B common
stockholders.............................................. $ 10,816 $ 2,970 $ (9,068)
Net income (loss) per common and Class B common share:
Basic..................................................... $ 0.11 $ 0.04 $ (0.11)
Diluted................................................... $ 0.11 $ 0.03 $ (0.11)
</TABLE>
The unaudited pro forma results of operations are not necessarily indicative
of what actually would have occurred if the acquisitions had been completed at
the beginning of each of the periods presented, nor are the results of
operations necessarily indicative of the results that will be attained in the
future.
ACCRUED INTEGRATION AND RESTRUCTURING COSTS
In connection with its acquisitions, the Company formulated plans to
integrate the operations of the acquired companies. Such plans involve the
closure of certain offices of such companies and the elimination of redundant
management and employees. The objectives of the plans are to take advantage of
the Company's existing operating infrastructure and efficiencies or to develop
efficiencies from the infrastructure of the acquired companies, and to create a
single brand in the related markets in which the Company operates.
In connection with such plans, in the six months ended June 30, 2000, the
Company (i) expensed, as part of merger and integration expenses, $9,261, for
companies acquired in transactions accounted for as
13
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 3--BUSINESS COMBINATIONS (CONTINUED)
poolings of interests and (ii) increased goodwill by $2,156 for companies
acquired in transactions accounted for under the purchase method. These costs
and liabilities include:
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
BALANCE ---------------------- --------------------------- BALANCE
DECEMBER 31, CHARGED TO APPLIED AGAINST JUNE 30,
1999 GOODWILL EXPENSED RELATED ASSET PAYMENTS 2000
------------ ---------- --------- --------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Assumed obligations on closed leased
facilities.................................. $ 9,564 $ 327 $4,424 $ -- $(3,189) $11,126(a)
Consolidation of acquired facilities.......... 8,715 243 5,010 -- (6,007) 7,961(b)
Contracted lease payments exceeding current
market costs................................ 562 -- -- -- (70) 492(c)
Severance, relocation and other employee
costs....................................... 954 1,586 488 -- (2,415) 613(d)
Provision for uncollectible receivables....... -- -- (661) 661 -- --
Pension obligations........................... 1,658 -- -- -- -- 1,658(e)
------- ------ ------ ---- ------- -------
Total......................................... $21,453 $2,156 $9,261 $661 $11,681 $21,850
======= ====== ====== ==== ======= =======
</TABLE>
------------------------------
(a) Accrued liabilities for surplus property in the amount of $11,126 as of
June 30, 2000 relate to leased office locations of acquired companies that
were either unutilized prior to the acquisition date or will be closed by
December 31, 2000 in connection with the restructuring plans. The amount is
based on the present value of minimum future lease obligations, net of
estimated sublease income.
(b) Other costs associated with the closure or consolidation of existing offices
of acquired companies in the amount of $7,961 as of June 30, 2000 relate to
termination costs of contracts relating to billing systems, external
reporting systems and other contractual arrangements with third parties.
(c) Above market lease costs in the amount of $492 as of June 30, 2000 relate to
the present value of contractual lease payments in excess of current market
lease rates.
(d) Estimated employee severance and relocation expenses and other employee
costs in the amount of $613 as of June 30, 2000 relate to estimated
severance for terminated employees at closed locations, costs associated
with employees transferred to continuing offices and other related costs.
Employee groups affected include sales, service, administrative and
management personnel at duplicate locations as well as redundant management
and administrative personnel at corporate headquarters. As of June 30, 2000,
the accrual related to approximately 50 employees, senior management, sales,
service and administrative personnel. During the six months ended June 30,
2000, payments of $2,415 were made for severance and charged against the
reserve.
(e) Pension obligations in the amount of $1,658 were assumed in connection with
the acquisition of Austin Knight.
The Company continues to evaluate and assess the impact of duplicate
responsibilities and office locations. Pursuant to the conclusions reached by
the Emerging Issues Task Force ("EITF") of the FASB in EITF Issues No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)," and
No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination," in connection with the finalization of preliminary plans relating
to purchased entities, additions to restructuring reserves within one year of
the date of acquisition are treated as additional purchase price but costs
incurred resulting from plan revisions made after the first year will be charged
to operations in the period in which they occur.
14
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 4--SEGMENT AND GEOGRAPHIC DATA
The Company is engaged in five lines of business based primarily on the
reporting of senior management to the Chief Operating Officer: Interactive
(including Monster-Registered Trademark-.com and MonsterMoving.com(sm)),
Recruitment Advertising, Selection & Temporary Contracting, Executive Search and
Yellow Page Advertising, which now also includes full service interactive
advertising services provided by IN2. Operations are conducted in several
geographic regions: North America, Asia-Pacific (primarily Australia and New
Zealand), the United Kingdom and Continental Europe. The following is a summary
of the Company's operations by business segment and by geographic region, for
the six month and three month periods ended June 30, 2000 and 1999. Overhead is
allocated based on retroactively restated commissions and fees.
<TABLE>
<CAPTION>
INTERACTIVE SELECTION &
INFORMATION BY BUSINESS --------------------------------------------------------- RECRUITMENT TEMPORARY EXECUTIVE
SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING.COM(SM) ADVERTISING CONTRACTING SEARCH
----------------------- --------------------------------- --------------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE
30, 2000
Commissions and fees:
Traditional sources..... $ -- $ -- $95,553 $165,821 $ 87,352
Interactive............. 134,966 4,158 12,717 6,179 --
------- ------- ------- -------- --------
Total commissions and
fees.................. 134,966 4,158 108,270 172,000 87,352
------- ------- ------- -------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... -- -- 83,945 160,969 79,915
Interactive (a)......... 111,718 10,002 11,064 5,022 --
Merger & integration.... 122 787 1,133 13,763 5,654
Amortization of
intangibles........... 164 56 3,376 1,389 388
------- ------- ------- -------- --------
Total operating
expenses.............. 112,004 10,845 99,518 181,143 85,957
------- ------- ------- -------- --------
Operating income (loss):
Traditional sources..... -- -- 7,099 (10,300) 1,395
Interactive............. 22,962 (6,687) 1,653 1,157 --
------- ------- ------- -------- --------
Total operating income
(loss)................ $22,962 $(6,687) $ 8,752 $ (9,143) $ 1,395
======= ======= ======= ======== ========
Total other income,
net................... * * * * *
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * * * * *
<CAPTION>
YELLOW
INFORMATION BY BUSINESS PAGE
SEGMENT ADVERTISING TOTAL
----------------------- ----------- --------
<S> <C> <C>
SIX MONTHS ENDED JUNE
30, 2000
Commissions and fees:
Traditional sources..... $46,381 $395,107
Interactive............. 5,010 163,030
------- --------
Total commissions and
fees.................. 51,391 558,137
------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... 37,419 362,248
Interactive (a)......... 4,169 141,975
Merger & integration.... 864 22,323
Amortization of
intangibles........... 2,167 7,540
------- --------
Total operating
expenses.............. 44,619 534,086
------- --------
Operating income (loss):
Traditional sources..... 5,931 4,125
Interactive............. 841 19,926
------- --------
Total operating income
(loss)................ $ 6,772 24,051
=======
Total other income,
net................... * 6,708
--------
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * $ 30,759
========
</TABLE>
------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
* Not allocated.
15
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 4--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
<TABLE>
<CAPTION>
INTERACTIVE SELECTION &
INFORMATION BY BUSINESS --------------------------------------------------------- RECRUITMENT TEMPORARY EXECUTIVE
SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING.COM(SM) ADVERTISING CONTRACTING SEARCH
----------------------- --------------------------------- --------------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE
30, 1999
Commissions and fees:
Traditional sources..... $ -- $ -- $93,527 $122,707 $ 84,199
Interactive............. 37,632 2,709 5,647 3,035 --
------- ------- ------- -------- --------
Total commissions and
fees.................. 37,632 2,709 99,174 125,742 84,199
------- ------- ------- -------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... -- -- 80,750 109,126 89,144
Interactive (a)......... 37,914 2,818 4,858 2,460 8,823
Merger & integration.... -- -- 198 4,787 6,439
Restructuring........... -- -- -- -- 2,789
Amortization of
intangibles........... 121 6 3,235 1,029 470
------- ------- ------- -------- --------
Total operating
expenses.............. 38,035 2,824 89,041 117,402 107,665
------- ------- ------- -------- --------
Operating income (loss):
Traditional sources..... -- -- 9,344 7,765 (14,643)
Interactive............. (403) (115) 789 575 (8,823)
------- ------- ------- -------- --------
Total operating income
(loss)................ $ (403) $ (115) $10,133 $ 8,340 $(23,466)
======= ======= ======= ======== ========
Total other expense,
net................... * * * * *
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * * * * *
<CAPTION>
YELLOW
INFORMATION BY BUSINESS PAGE
SEGMENT ADVERTISING TOTAL
----------------------- ----------- --------
<S> <C> <C>
SIX MONTHS ENDED JUNE
30, 1999
Commissions and fees:
Traditional sources..... $50,982 $351,415
Interactive............. 1,652 50,675
------- --------
Total commissions and
fees.................. 52,634 402,090
------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... 32,286 311,306
Interactive (a)......... 1,464 58,337
Merger & integration.... 30 11,454
Restructuring........... -- 2,789
Amortization of
intangibles........... 1,306 6,167
------- --------
Total operating
expenses.............. 35,086 390,053
------- --------
Operating income (loss):
Traditional sources..... 17,360 19,826
Interactive............. 188 (7,789)
------- --------
Total operating income
(loss)................ $17,548 12,037
=======
Total other expense,
net................... * (7,737)
--------
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * $ 4,300
========
</TABLE>
------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
* Not allocated.
16
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 4--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
<TABLE>
<CAPTION>
INTERACTIVE SELECTION &
INFORMATION BY BUSINESS --------------------------------------------------------- RECRUITMENT TEMPORARY EXECUTIVE
SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING.COM(SM) ADVERTISING CONTRACTING SEARCH
----------------------- --------------------------------- --------------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
JUNE 30, 2000
Commissions and fees:
Traditional sources..... $ -- $ -- $49,040 $ 88,005 $48,345
Interactive............. 76,905 2,085 6,935 3,711 --
------- ------- ------- -------- -------
Total commissions and
fees.................. 76,905 2,085 55,975 91,716 48,345
------- ------- ------- -------- -------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... -- -- 43,478 83,019 41,674
Interactive (a)......... 63,430 5,393 6,248 3,202 --
Merger & integration.... 122 712 990 8,024 3,121
Amortization of
intangibles........... 104 49 2,099 456 114
------- ------- ------- -------- -------
Total operating
expenses.............. 63,656 6,154 52,815 94,701 44,909
------- ------- ------- -------- -------
Operating income (loss):
Traditional sources..... -- -- 2,473 (3,494) 3,436
Interactive............. 13,249 (4,069) 687 509 --
------- ------- ------- -------- -------
Total operating income
(loss)................ $13,249 $(4,069) $ 3,160 $ (2,985) $ 3,436
------- ------- ------- -------- -------
Total other income,
net................... * * * * *
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * * * * *
<CAPTION>
YELLOW
INFORMATION BY BUSINESS PAGE
SEGMENT ADVERTISING TOTAL
----------------------- ----------- --------
<S> <C> <C>
THREE MONTHS ENDED
JUNE 30, 2000
Commissions and fees:
Traditional sources..... $23,081 $208,471
Interactive............. 2,620 92,256
------- --------
Total commissions and
fees.................. 25,701 300,727
------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... 19,599 187,770
Interactive (a)......... 1,621 79,894
Merger & integration.... 680 13,649
Amortization of
intangibles........... 1,083 3,905
------- --------
Total operating
expenses.............. 22,983 285,218
------- --------
Operating income (loss):
Traditional sources..... 1,719 4,134
Interactive............. 999 11,375
------- --------
Total operating income
(loss)................ $ 2,718 15,509
-------
Total other income,
net................... * 5,001
--------
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * $ 20,510
========
</TABLE>
------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
* Not allocated.
17
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 4--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
<TABLE>
<CAPTION>
INTERACTIVE SELECTION &
INFORMATION BY BUSINESS --------------------------------------------------------- RECRUITMENT TEMPORARY EXECUTIVE
SEGMENT MONSTER-REGISTERED TRADEMARK-.COM MONSTERMOVING.COM(SM) ADVERTISING CONTRACTING SEARCH
----------------------- --------------------------------- --------------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
JUNE 30, 1999
Commissions and fees:
Traditional sources..... $ -- $ -- $47,102 $ 65,274 $ 42,686
Interactive............. 21,186 1,628 2,821 1,713 --
------- ------- ------- -------- --------
Total commissions and
fees.................. 21,186 1,628 49,923 66,987 42,686
------- ------- ------- -------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... -- -- 42,605 56,526 39,894
Interactive (a)......... 19,934 1,343 3,235 1,387 8,823
Merger & integration.... -- -- 119 2,304 4,314
Amortization of
intangibles........... 63 3 1,542 540 260
------- ------- ------- -------- --------
Total operating
expenses.............. 19,997 1,346 47,501 60,757 53,291
------- ------- ------- -------- --------
Operating income (loss):
Traditional sources..... -- -- 2,836 5,904 (1,782)
Interactive............. 1,189 282 (414) 326 (8,823)
------- ------- ------- -------- --------
Total operating income
(loss)................ $ 1,189 $ 282 $ 2,422 $ 6,230 $(10,605)
======= ======= ======= ======== ========
Total other expense,
net................... * * * * *
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * * * * *
<CAPTION>
YELLOW
INFORMATION BY BUSINESS PAGE
SEGMENT ADVERTISING TOTAL
----------------------- ----------- --------
<S> <C> <C>
THREE MONTHS ENDED
JUNE 30, 1999
Commissions and fees:
Traditional sources..... $27,187 $182,249
Interactive............. 971 28,319
------- --------
Total commissions and
fees.................. 28,158 210,568
------- --------
Operating expenses:
Salaries & related,
office & general,
marketing & promotion,
and overhead.......... 16,381 155,406
Interactive (a)......... 932 35,654
Merger & integration.... 30 6,767
Amortization of
intangibles........... 670 3,078
------- --------
Total operating
expenses.............. 18,013 200,905
------- --------
Operating income (loss):
Traditional sources..... 10,106 17,064
Interactive............. 39 (7,401)
------- --------
Total operating income
(loss)................ $10,145 9,663
=======
Total other expense,
net................... * (4,064)
--------
Income before provision
for income taxes,
minority interests and
equity in losses of
affiliates............ * $ 5,599
========
</TABLE>
------------------------------
(a) Is comprised of salaries & related, office & general, marketing & promotion
and allocated overhead.
- Not allocated.
18
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 4--SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
<TABLE>
<CAPTION>
UNITED CONTINENTAL
INFORMATION BY GEOGRAPHIC REGION NORTH AMERICA ASIA-PACIFIC KINGDOM EUROPE TOTAL
-------------------------------- ------------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Commissions and fees................... $325,174 $90,812 $75,309 $66,842 $558,137
Income (loss) before income taxes,
minority interests and equity in
losses of affiliates................. $ 24,605 $ 8.804 $(8,921) $ 6,271 $ 30,759
SIX MONTHS ENDED JUNE 30, 1999
Commissions and fees................... $218,392 $77,829 $64,056 $41,813 $402,090
Income (loss) before income taxes,
minority interests and equity in
losses of affiliates................. $(12,542) $ 9,248 $ 256 $ 7,338 $ 4,300
</TABLE>
<TABLE>
<CAPTION>
UNITED CONTINENTAL
INFORMATION BY GEOGRAPHIC REGION NORTH AMERICA ASIA-PACIFIC KINGDOM EUROPE TOTAL
-------------------------------- ------------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 2000
Commissions and fees................. $177,688 $48,211 $38,292 $36,536 $300,727
Income (loss) before income taxes,
minority interests and equity in
losses of affiliates............... $ 16,639 $ 5,346 $(4,024) $ 2,549 $ 20,510
THREE MONTHS ENDED JUNE 30, 1999
Commissions and fees................. $115,268 $42,086 $31,589 $21,625 $210,568
Income (loss) before income taxes,
minority interests and equity in
losses of affiliates............... $ 1,777 $ 6,076 $(4,723) $ 2,469 $ 5,599
</TABLE>
19
<PAGE>
TMP WORLDWIDE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q CONCERNING OUR BUSINESS
OUTLOOK OR FUTURE ECONOMIC PERFORMANCE, ANTICIPATED PROFITABILITY, GROSS
BILLINGS, COMMISSIONS AND FEES, EXPENSES OR OTHER FINANCIAL ITEMS AND STATEMENTS
CONCERNING ASSUMPTIONS MADE OR EXCEPTIONS AS TO ANY FUTURE EVENTS, CONDITIONS,
PERFORMANCE OR OTHER MATTERS ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS
DEFINED UNDER THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH WOULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. SUCH RISKS,
UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO, (I) WE MAY NOT BE
ABLE TO MANAGE OUR GROWTH, (II) OUR SUCCESS DEPENDS ON THE VALUE OF OUR BRANDS,
PARTICULARLY MONSTER-REGISTERED TRADEMARK-.COM, (III) THE ACCEPTANCE AND
EFFECTIVENESS OF INTERNET ADVERTISING IS UNPROVEN, (IV) WE FACE RISKS RELATING
TO DEVELOPING TECHNOLOGY, INCLUDING THE INTERNET, (V) WE DEPEND ON TRADITIONAL
MEDIA, (VI) WE ARE VULNERABLE TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS
BROUGHT AGAINST US BY OTHERS, (VII) WE HAVE NEVER PAID CASH DIVIDENDS,
(VIII) COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS,
(IX) INTERNET USERS MAY NOT ACCEPT OUR INTERNET CONTENT, (X) WE FACE RISKS
ASSOCIATED WITH OUR ACQUISITION STRATEGY, (XI) OUR MARKETS ARE HIGHLY
COMPETITIVE, (XII) OUR OPERATING RESULTS FLUCTUATE FROM QUARTER TO QUARTER,
(XIII) THE EFFECT OF GLOBAL ECONOMIC FLUCTUATIONS, (XIV) WE DEPEND ON OUR
CONSULTANTS, (XV) OUR CONSULTANTS MAY DEPART WITH EXISTING EXECUTIVE SEARCH
CLIENTS, (XVI) WE FACE RISKS MAINTAINING OUR PROFESSIONAL REPUTATION AND BRAND
NAME, (XVII) WE FACE RESTRICTIONS IMPOSED BY OFF-LIMITS ARRANGEMENTS,
(XVIII) WE FACE RISKS RELATING TO OUR FOREIGN OPERATIONS, (XIX) WE DEPEND ON OUR
KEY PERSONNEL, (XX) WE ARE CONTROLLED BY A PRINCIPAL STOCKHOLDER, (XXI) THE
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT OUR ACQUISITION, (XXII) THERE
MAY BE VOLATILITY IN OUR STOCK PRICE AND (XXIII) WE FACE RISKS ASSOCIATED WITH
GOVERNMENT REGULATION.
OVERVIEW
TMP Worldwide Inc. ("TMP" or the "Company"), through its flagship
Interactive product, Monster-Registered Trademark-.com (www.monster.com), is the
on-line recruitment leader. TMP is also the world's largest Recruitment
Advertising agency network, one of the world's largest Executive Search,
Selection and Temporary Contracting agencies, the world's largest Yellow Pages
Advertising agency, a provider of full service interactive advertising and
interactive marketing technology services, and a provider of online moving
services.
Our Interactive growth is attributable to increased sales of our Internet
products, expansion of our Interactive businesses into certain European
countries, migration of our traditional businesses to the Internet and the
addition of new Interactive services. Monster.com is the leading global career
portal on the Web with over 15.2 million unique visits per month as of
June 2000 per Nielson I/Pro. The Monster.com global network consists of local
language and content sites in the United States, Canada (French and English),
United Kingdom, Ireland, France, Germany, the Netherlands, Belgium, Australia,
New Zealand, Singapore and Hong Kong.
A substantial part of our growth in Recruitment Advertising, Selection &
Temporary Contracting and Yellow Page Advertising has been achieved through
acquisitions accounted for as purchases. For the period January 1, 1997 through
June 30, 2000 we completed 64 such acquisitions, with estimated annual gross
billings of approximately $495 million. Given the significant number of
acquisitions affecting the periods presented, the results of operations from
period to period may not necessarily be comparable.
Furthermore, during the six months ended June 30, 2000, we completed eleven
mergers that are being accounted for as poolings of interests (the "First Half
2000 Pooled Companies"). During the period of January 1, 2000 through March 31,
2000, we consummated mergers with HW Group PLC, Microsurf, Inc., Burlington
Wells, Inc., and Illsley Bourbonnais. During the period of April 1, 2000 through
June 30, 2000,
20
<PAGE>
we consummated mergers with System One Services, Inc., GTR Advertising, Virtual
Relocation.com, Inc., Business Technologies Ltd., Simpatix, Inc., Rollo
Associates, Inc., and Web Technology Partners, Inc. (the "Second Quarter 2000
Mergers"). Approximately 4.8 million shares of our common stock were issued in
exchange for all of the outstanding common stock of the First Half 2000 Pooled
Companies (the "First Half 2000 Mergers"). The financial statements as of and
for the quarters ended June 30, 1999 have been retroactively restated as if the
First Half 2000 Mergers had been consolidated from January 1, 1999.
Gross billings refers to billings for advertising placed on the Internet, in
newspapers and telephone directories by our clients, and associated fees for
related services. In addition, Executive Search fees, Selection fees, and net
fees from Temporary Contracting services are also part of gross billings. Gross
billings for Recruitment Advertising and Yellow Page Advertising are not
included in our consolidated financial statements because they include a
substantial amount of funds that are collected from our clients but passed
through to publishers for advertisements. However, the trends in gross billings
in these two segments directly impact the commissions and fees earned because,
for these segments, we earn commissions based on a percentage of the media
advertising purchased at a rate established by the related publisher. We also
earn associated fees for related services; such amounts are also included in
gross billings. Publishers and third party websites typically bill us for the
advertising purchased and we in turn bill our clients for this amount and retain
a commission. Generally, the payment terms for Yellow Page Advertising clients
require payment to us prior to the date payment is due to the publishers. The
payment terms with Recruitment Advertising clients typically require payment
when payment is due to publishers. Historically, we have not experienced
substantial problems with unpaid accounts.
Commissions and fees related to our Interactive businesses are derived from:
- job postings and access to the resume database and related services
delivered via the Internet, primarily our own Web site, www.monster.com;
- searches for permanent and temporary employees, at the executive and
professional levels, and related services conducted through the Internet;
- Internet advertising services provided to our Yellow Page Advertising
clients;
- the providing of interactive advertising services and technologies, which
allow advertisers to measure and track sales, repeat traffic and other key
statistics to enable such advertisers to greatly reduce costs, while
driving only the most qualified users to their web sites; and
- online moving services, primarily on our own Web site,
www.monstermoving.com(sm).
MonsterMoving.com(sm) (www.monstermoving.com) provides important relocation
information and services to Monster.com's job seeker and employer community,
which averages over 3.9 million unique visitors and over 15.2 million unique
visits per month. According to the U.S. Census Department 1997 Study,
approximately 20% of the general U.S. population is relocating at any point in
time and we believe that these additional relocation services will be highly
valued by Monster.com's audience and customer base.
MonsterMoving.com, currently through the individual properties the Company
acquired in 2000 (primarily Virtual Relocation.com, Inc. and Microsurf, Inc.),
is already one of the Internet's most comprehensive providers of moving-related
analytical tools, and features information that addresses the entire relocation
process. This information includes new residence listings, community maps,
education summaries, mortgage quotes, moving quotes, insurance quotes, address
and utility change services, and home repair and maintenance information.
MonsterMoving.com, which is scheduled to be launched as a new site in the
third quarter of 2000, will be directly accessible to Monster.com's large base
of consumer traffic through URL links and promotions on Monster.com. In
addition, the cross-selling of MonsterMoving.com's services has started with the
Company's other divisions and will provide an important new advertising venue
for moving-related clients,
21
<PAGE>
particularly in the Yellow Page Advertising division, where over 30% of our
Yellow Page revenues are derived from the moving services industry, including
van lines, truck rentals and home services.
For Recruitment Advertising placements in the U.S., publisher commissions
historically average 15% of recruitment advertising gross billings. We also earn
fees from related services such as campaign development and design, retention
and referral programs, resume screening, brochures and other collateral
services, research and other creative and administrative services. Outside of
the U.S., where, collectively, we derive the majority of our Recruitment
Advertising commissions and fees, our commission rates for recruitment
advertising vary, historically ranging from approximately 10% in Australia to
15% in Canada and the United Kingdom.
Executive Search offers an advanced and comprehensive range of services
aimed at identifying the appropriate senior executive for our clients. Such
senior executives typically earn in excess of $250,000 annually. Our specialized
services include identification of candidates, competence measurement,
assessment of candidate/company cultural fit and transaction negotiation and
closure.
Selection & Temporary Contracting offers placement services for executives
and professionals in mid-level and temporary positions, as well as for specific
short-term projects. Our Selection business provides services similar to our
Executive Search business, and focuses on mid-level professionals or executives,
who typically earn between $75,000 and $150,000, annually. Our Temporary
Contracting business provides contract employees primarily in Australia, New
Zealand, the United Kingdom and the U.S.
We believe that our Executive Search and Selection & Temporary Contracting
services are helping to broaden the universe of both job seekers and employers
who utilize Monster.com. Through the use of Monster.com, Recruitment
Advertising, Selection & Temporary Contracting and Executive Search, we believe
that we can accommodate all of our clients' employee recruitment needs, which is
our "Intern to CEO" strategy.
We design and execute Yellow Page Advertising, receiving an effective
commission rate from directory publishers which historically approximated 20% of
Yellow Page Advertising gross billings. However, due to reductions in commission
rates by the publishers and higher discounts provided to clients, the rate has
declined and for 1999 was approximately 19% and has declined to approximately
17.3% by June 30, 2000. In addition to base commissions, certain yellow pages
publishers pay increased commissions for volume placement by advertising
agencies. We typically recognize this additional commission, if any, in the
fourth quarter when it is certain that such commission has been earned. No such
amounts were reported in the fourth quarter of 1999 due to the aggressive
objectives set by the publishers, and the Company does not foresee achieving
these aggressive goals in the future.
Interactive commissions and fees were $163.0 million for the six months
ended June 30, 2000, an increase of $112.3 million or 221.7% over the same
period of 1999, which had Interactive commissions and fees of $50.7 million.
This growth reflects an increase in the acceptance of our Interactive products
and services by existing and new clients and the effect of increased sales and
marketing activities. Recruitment Advertising commissions and fees were up 2.2%
at $95.6 million for the six months ended June 30, 2000 versus $93.5 million for
the same period of 1999 reflecting modest growth in traditional billings of
4.1%. Selection & Temporary Contracting commissions and fees were
$165.8 million, up $43.1 million or 35.1% from $122.7 million for the same
period ended June 30, 1999. The increase reflects the greater demand for
professional level and information service technology employees worldwide,
particularly in mid-level management positions (annual salaries ranging from
$75,000 to $150,000), the resumption of strong demand for temporary employees in
Australia, and European acquisitions accounted for as purchases. Executive
Search commissions and fees were $87.4 million for the six months ended
June 30, 2000, an increase of $3.2 million or 3.7% from $84.2 million for the
comparable six months of 1999, reflecting strong global demand for senior
executive positions. Yellow Page Advertising billings increased 4.6% to
$268.9 million for the six month period ended June 30, 2000 and commissions and
fees decreased 9.0% to
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<PAGE>
$46.4 million for the six months of 2000 compared to $51.0 million for the prior
year period, reflecting substantially reduced commissions paid by publishers and
the effects of higher discounts for certain large clients. Total commissions and
fees as a percent of related billings for the six months ended June 30, 2000
were 48.4% as compared to 42.4% for the prior year period. The higher percentage
reflects increased sales volume for Interactive, Executive Search, and
Selection & Temporary Contracting, where the Company retains greater portions of
the amounts billed.
Based on our consolidated results for the periods ended June 30, 2000 and
1999, 44.4% and 47.7% respectively, of our consolidated commissions and fees are
attributable to clients outside the U.S.
RESULTS OF OPERATIONS
The following table sets forth our gross billings, commissions and fees,
commissions and fees as a percentage of gross billings, EBITDA and cash flow
information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
2000 1999 2000 1999
-------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
GROSS BILLINGS:
Interactive(1)........................... $102,771 $ 31,820 $ 183,230 $ 56,804
Recruitment Advertising.................. 224,900 211,835 444,455 426,820
Selection & Temporary Contracting(2)..... 89,035 65,803 168,321 124,445
Executive Search......................... 48,345 42,686 87,352 84,230
Yellow Page Advertising.................. 135,694 137,101 268,869 257,112
-------- -------- ---------- --------
Total...................................... $600,745 $489,245 $1,152,227 $949,411
======== ======== ========== ========
COMMISSIONS AND FEES:
Interactive(1)........................... $ 92,256 $ 28,319 $ 163,030 $ 50,675
Recruitment Advertising.................. 49,040 47,102 95,553 93,527
Selection & Temporary Contracting(2)..... 88,005 65,274 165,821 122,707
Executive Search......................... 48,345 42,686 87,352 84,199
Yellow Page Advertising.................. 23,081 27,187 46,381 50,982
-------- -------- ---------- --------
Total...................................... $300,727 $210,568 $ 558,137 $402,090
======== ======== ========== ========
COMMISSIONS AND FEES AS A PERCENTAGE OF
GROSS BILLINGS:
Interactive(1)........................... 89.8% 89.0% 89.0% 89.2%
Recruitment Advertising.................. 21.8% 22.2% 21.5% 21.9%
Selection & Temporary Contracting(2)..... 98.8% 99.2% 98.5% 98.6%
Executive Search......................... 100.0% 100.0% 100.0% 100.0%
Yellow Page Advertising.................. 17.0% 19.8% 17.3% 19.8%
Total...................................... 50.1% 43.0% 48.4% 42.4%
EBITDA(3).................................. $ 29,545 $ 18,572 $ 52,291 $ 31,123
Cash provided by (used in) operating
activities............................... $ 49,119 $ 25,598 $ (8,243) $ 12,575
Cash used in investing activities.......... $(35,437) $(14,652) $ (65,782) $(36,825)
Cash provided by (used in) financing
activities............................... $(23,728) $ (4,708) $ 521,374 $ 9,073
Effect of exchange rate changes on cash.... $ 960 $ (376) $ (503) $ 294
</TABLE>
------------------------
(1) Represents fees earned in connection with recruitment, yellow page and other
advertisements placed on the Internet, interactive moving services and
employment searches and temporary contracting services sourced through the
Internet.
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<PAGE>
(2) Amounts for temporary contracting are reported net of the costs paid to the
temporary contractor.
(3) Earnings before interest, income taxes, depreciation and amortization.
EBITDA is presented to provide additional information about our ability to
meet our future debt service, capital expenditures and working capital
requirements and is one of the measures which determines our ability to
borrow under our credit facility. EBITDA should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure of
our profitability or liquidity.
EBITDA for the indicated periods is calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income.............................................. $ 8,505 $ 3,208 $11,555 $ 2,505
Interest (income) expense, net.......................... (5,496) 2,723 (7,290) 6,226
Income tax expense...................................... 12,248 2,283 19,528 1,488
Depreciation and amortization........................... 14,288 10,358 28,498 20,904
------- ------- ------- -------
EBITDA.................................................. $29,545 $18,572 $52,291 $31,123
======= ======= ======= =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
Gross billings for the six months ended June 30, 2000 were
$1,152.2 million, an increase of $202.8 million or 21.4% from $949.4 million for
the six months ended June 30, 1999. Total commissions and fees for the six
months ended June 30, 2000 were $558.1 million, an increase of $156.0 million or
38.8% from $402.1 million for the comparable period in 1999. Interactive
commissions and fees for the six months ended June 30, 2000 were
$163.0 million, an increase of $112.3 million or 221.7% compared with
$50.7 million for the six months ended June 30, 1999. The increase in
Interactive commissions and fees from the June 1999 period to the June 2000
period is due to: (i) an increasing acceptance of our Interactive services and
products from existing clients, new clients and Internet users, (ii) the
benefits of Monster.com's marketing campaign, (iii) increases in the services
and content available on our websites, (iv) expansion into certain European
markets, (v) price increases on certain products, and (vi) the continuing
migration of our traditional businesses to the Internet. Recruitment Advertising
commissions and fees increased 2.2% to $95.6 million for the six months ended
June 30, 2000 compared to $93.5 million for the first six months of 1999. This
increase reflects moderate growth in traditional billings related to publisher
price increases for help-wanted advertisements placed in newspapers partially
offset by migration of traditional business to the Internet. Accordingly,
Interactive recruitment commissions and fees, which is included in the
Interactive number above, increased 125.2% to $12.7 million for the six months
ended June 30, 2000 from $5.6 million for the comparable 1999 period.
Selection & Temporary Contracting commissions and fees were $165.8 million, up
$43.1 million or 35.1% from $122.7 million for the period ended June 30, 1999.
The increase reflects a strong global labor market and the resulting increased
demand for professional level and information service technology employees
worldwide, the resumption of strong demand for temporary employees in Australia
and acquisitions accounted for as purchases in Europe. Executive Search
commissions and fees were $87.4 million for the six months ended June 30, 2000,
an increase of $3.2 million or 3.7% from $84.2 million for the comparable six
months of 1999, reflecting the strong labor market and demand for senior
executive positions, partially offset by the decrease, as anticipated, in
consultants at LAI (many of whom would have been deemed redundant as a result of
the merger) in the second quarter of 1999, in anticipation of the merger with
TMP. Yellow Page Advertising commissions and fees were $46.4 million for the six
months ended June 30, 2000, a decrease of $4.6 million
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<PAGE>
or 9.0% from $51.0 million for the comparable six months of 1999. This decrease
was due to substantially reduced commissions paid by publishers and the effects
of higher discounts for certain large clients.
Operating expenses for the six months ended June 30, 2000 were
$534.1 million, compared with $390.1 million for the same period in 1999, an
increase of $144.0 million or 36.9%. The increase is primarily due to
$67.2 million in higher salaries and related costs due to organic growth and
acquisitions accounted for as purchases, $38.1 million in marketing and
promotion expenses, primarily related to Monster.com and $29.3 million in office
and general expenses. As a percent of commissions and fees operating expenses
were 95.7% for the six months ended June 30, 2000 compared with 97.0% for the
comparable 1999 period.
Salaries and related expenses for the six months ended June 30, 2000 were
$308.6 million, compared with $241.4 million for the same period in 1999. The
increase of $67.2 million or 27.8% is primarily due to organic growth in
Interactive and Selection & Temporary Contracting operations and acquisitions
accounted for as purchases. Because the growth in total commissions and fees
outpaced the growth in salaries and related expenses, salary and related
expenses as a percent of commissions and fees declined from 60.0% for the six
months ended June 30, 1999 to 55.3% for the six months ended June 30, 2000.
Office and general expenses for the six months ended June 30, 2000 were
$127.9 million, compared with $98.6 million for the same period in 1999. The
increase of $29.3 million or 29.6% reflects organic growth in both Interactive
and Selection & Temporary Contracting operations, and higher bad debt reserves,
which reflects the $202.8 million increase in gross billings for the six months
ended June 30, 2000 over the same period last year, partially offset by savings
through consolidation of back offices and support functions in Recruitment and
Yellow Pages Advertising. Because the growth in total commissions and fees
outpaced the growth in office and general expenses, office and general expenses
as a percent of commissions and fees declined from 24.5% to 22.9%.
Marketing and promotion expenses for the six months ended June 30, 2000 were
$67.7 million or 12.1% of commissions and fees, compared with $29.6 million or
7.4% of commissions and fees for the same period in 1999. The increase of
$38.1 million or 129.0% is primarily due to higher marketing costs for
Monster.com and reflects the Company's plan to increase the promotion of
Monster.com with funds provided from increased revenues. The six months 2000
expenses include a pro rata charge pursuant to the content and marketing
agreement with America Online, Inc. ("AOL") whereby Monster.com, for the payment
of $100 million over four years, is the exclusive provider of career search
services in the U.S. and Canada to AOL members across seven AOL properties,
including the AOL Service, AOL Canada, Compuserve, ICQ, AOL.com, Netscape and
Digital City.
Merger and integration costs reflect costs incurred in connection with
acquisitions and accounted for as poolings of interests and reflect integration
of their operations. Such costs were anticipated and factored into the prices
paid for these companies. For the six months ended June 30, 2000 merger and
integration costs were $22.3 million compared with $11.5 million for the same
period in 1999, an increase of $10.8 million or 94.9%. The $22.3 million is
comprised of $9.3 million for integration, $3.5 million for debt settlement
costs pursuant to change in control provisions of a pooled company's existing
loan, $4.6 million for the amortization of employee stay bonuses, payable in
stock, and $4.9 million in transaction related costs such as legal, accounting,
advisory fees and costs to register the shares issued in the transactions. The
$11.5 million for the six months ended June 30, 1999 is comprised of
$5.5 million in transaction related costs, including legal, accounting, printing
and advisory fees and the costs incurred for the subsequent registration of
shares issued in the acquisitions, $2.3 million for the amortization of non-cash
employee stay bonuses, $2.1 million in separation pay for the chief operating
officer of an acquired company and $1.6 million of office and staff integration
costs.
Restructuring charges for the six months ended June 30, 1999 were
$2.8 million. These charges relate to LAI's closing of its London and Hong Kong
offices prior to LAI's merger with TMP. These charges include $0.5 million for
the write-off of leasehold improvements and fixed assets, $1.3 million for
severance
25
<PAGE>
benefits payable to 24 employees, and $1.0 million for consolidation of
facilities related to the restructuring.
As a result of the above, operating income for the six months ended
June 30, 2000 was $24.1 million, an increase of $12.1 million or 99.8% from
$12.0 million for the comparable period in 1999.
Net interest income for the six months ended June 30, 2000 was
$7.3 million, compared with a net interest expense of $6.2 million for the
comparable 1999 period, an improvement of $13.5 million or 217.1%. This
improvement primarily reflects the investing of net proceeds from the Company's
February 2000 follow-on offering after a significant portion of existing
long-term debt was repaid with a portion of such proceeds. The Company completed
the follow-on public offering of 4.0 million (8.0 million, adjusted for the
February 29, 2000 2-for-1 stock split) shares of common stock on February 2,
2000. The net proceeds raised by the Company totaled $594.2 million.
Taxes on income for the six months ended June 30, 2000 were $19.5 million on
pre-tax profit of $30.8 million, compared with a tax of $1.5 million on pre-tax
profit of $4.3 million for the six months of 1999. The increase of
$18.0 million reflects the higher pretax profit in the six months ended
June 30, 2000. In addition, in each period the provision reflects expenses that
are not tax deductible; these are primarily related to merger costs from pooling
of interests transactions and amortization of certain intangible assets. Also
for both periods the provision is affected by profits and losses from certain
pooled entities that were not taxed at the corporate level prior to their merger
with TMP.
Minority interests in consolidated earnings for the six months ended
June 30, 2000 was a $324,000 loss compared with a profit of $107,000 for the six
months ended June 30, 1999.
Equity in losses of unconsolidated affiliates, which reflected losses
associated with the real estate advertising company in which the Company holds a
minority interest, was $200,000 for the six months ended June 30, 1999.
As a result of all of the above, the net income available to common and
Class B common stockholders for the six months ended June 30, 2000 was
$11.6 million, an increase of $9.1 million from the net income of $2.5 million
for the six months ended June 30, 1999. On a diluted per share basis, the net
income available to common and Class B common stockholders for the six months
ended June 30, 2000 was $0.11, compared to a net income of $0.03 for the
comparable 1999 period.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999
Gross billings for the three months ended June 30, 2000 were
$600.7 million, an increase of $111.5 million or 22.8% from $489.2 million for
the three months ended June 30, 1999. Total commissions and fees for the three
months ended June 30, 2000 were $300.7 million, an increase of $90.1 million or
42.8% from $210.6 million for the comparable period in 1999. Interactive
commissions and fees for the three months ended June 30, 2000 were
$92.3 million, an increase of $64.0 million or 225.8% compared with
$28.3 million for the three months ended June 30, 1999. The increase in
Interactive commissions and fees from the June 1999 period to the June 2000
period is due to: (i) an increasing acceptance of our Interactive services and
products from existing clients, new clients and Internet users, (ii) the
benefits of Monster.com's marketing campaign, (iii) increases in the services
and content available on our websites, (iv) expansion into certain European
markets, (v) price increases on certain products, and (vi) the continuing
migration of our traditional businesses to the Internet. Recruitment Advertising
commissions and fees increased 4.1% to $49.0 million for the three months ended
June 30, 2000 compared to $47.1 million for the second quarter of 1999,
reflecting growth in traditional billings of 6.2% despite migration of
recruitment advertising to the Internet. Accordingly, Interactive recruitment
commissions and fees, included in the Interactive number above, increased 145.8%
to $6.9 million for the three months ended June 30, 2000 from $2.8 million for
the comparable 1999 period. Selection & Temporary Contracting commissions and
fees were $88.0 million, up $22.7 million or 34.8% from $65.3 million for the
26
<PAGE>
period ended June 30, 1999. The increase reflects the increased demand for
professional level employees worldwide and the resumption of strong demand for
temporary employees in Australia, particularly in the information technology
sector and acquisitions. Executive Search commissions and fees were
$48.3 million for the three months ended June 30, 2000, an increase of
$5.6 million or 13.3% from $42.7 million for the comparable three months of
1999, reflecting strong global demand for senior executive positions. Yellow
Page Advertising commissions and fees were $23.1 million for the three months
ended June 30, 2000, a decrease of $4.1 million or 15.1% from $27.2 million for
the comparable three months of 1999. This decrease was due to substantially
reduced commissions paid by publishers and the effects of higher discounts for
certain large clients.
Operating expenses for the three months ended June 30, 2000 were
$285.2 million, compared with $200.9 million for the same period in 1999, an
increase of $84.3 million or 42.0%. The increase is primarily due to
$36.1 million in higher salaries and related costs due to organic growth and
acquisitions accounted for as purchases, $21.5 million in office and general
expenses, and $19.0 million in marketing and promotion expenses, primarily
related to Monster.com. As a percent of commissions and fees operating expenses
were 94.8% for the three months ended June 30, 2000 compared with 95.4% for the
comparable 1999 period.
Salaries and related expenses for the three months ended June 30, 2000 were
$162.6 million, compared with $126.5 million for the same period in 1999. The
increase of $36.1 million or 28.5% is primarily due to acquisitions accounted
for as purchases and organic growth in Interactive and Selection & Temporary
Contracting operations. Salary and related expenses as a percent of commissions
and fees declined from 60.1% for the three months ended June 30, 1999 to 54.1%
for the three months ended June 30, 2000, primarily due to the organic growth
mentioned above.
Office and general expenses for the three months ended June 30, 2000 were
$66.7 million compared with $45.2 million for the same period in 1999, an
increase of $21.5 million or 47.6%. The increase reflects organic growth in both
Interactive and Selection & Temporary Contracting operations and higher bad debt
reserves which reflects the $111.5 million increase in gross billings for the
three months ended June 30, 2000 over the same period last year, partially
offset by savings through consolidation of back offices and support functions in
Recruitment, Executive Search and Yellow Pages Advertising. Office and general
expenses as a percent of commissions and fees increased from 21.5% to 22.2%.
This increase in expenses as a percent of commissions & fees is primarily due to
higher bad debt reserve, partially offset by the organic growth and cost
reductions mentioned above.
Marketing and promotion expenses for the three months ended June 30, 2000
were $38.4 million or 12.8% of commissions and fees, compared with
$19.4 million or 9.2% of commissions and fees for the same period in 1999. The
increase of $19.0 million or 97.9% is primarily due to higher marketing costs
for Monster.com and reflects the Company's plan to increase the promotion of
Monster.com with funds provided from increased revenues. The second quarter 2000
expenses include a pro rata charge pursuant to the content and marketing
agreement with America Online, Inc. ("AOL") whereby Monster.com, for the payment
of $100 million over four years, is the exclusive provider of career search
services in the U.S. and Canada to AOL members across seven AOL properties,
including the AOL Service, AOL Canada, Compuserve, ICQ, AOL.com, Netscape and
Digital City.
Merger and integration costs reflect costs incurred with acquisitions
accounted for as poolings of interests and reflect integration of their
operations. For the three months ended June 30, 2000 merger and integration
costs were $13.6 million compared with $6.8 million for the same period in 1999,
an increase of $6.8 million or 101.7%. Included in the 2000 amount was
$4.2 million for integration costs, $3.6 million in transaction costs,
$3.5 million of debt settlement costs pursuant to change in control provisions
of the loan in connection with an acquisition and $2.3 million for the
amortization of employee stay bonuses payable in stock in connection with
certain of the acquisitions. The merger and integration costs of $6.8 million
for the three months ended June 30, 1999 are primarily comprised of
$2.3 million in transaction costs,
27
<PAGE>
$2.1 million in separation pay for the chief operating officer of an acquired
company, $1.6 million in integration costs and $0.8 million for the amortization
of employee stay bonuses which is payable in stock in connection with certain of
the acquisitions.
As a result of the above, operating income for the three months ended
June 30, 2000 was $15.5 million, an increase of $5.8 million or 60.5% from
$9.7 million for the comparable period in 1999.
Net interest income for the three months ended June 30, 2000 was
$5.5 million, compared with a net interest expense of $2.7 million for the
comparable 1999 period, an improvement of $8.2 million or 301.8%. This
improvement primarily reflects the investing of net proceeds from the Company's
February 2000 follow-on offering after a significant portion of existing
long-term debt was repaid with a portion of such proceeds. The Company completed
the follow-on public offering of 4.0 million (8.0 million, adjusted for the
February 29, 2000 2-for-1 stock split) shares of common stock on February 2,
2000. The net proceeds raised by the Company totaled $594.2 million.
Taxes on income for the three months ended June 30, 2000 were $12.2 million
on pre-tax profit of $20.5 million, compared with a tax of $2.3 million on
pre-tax profit of $5.6 million for the second quarter of 1999. The increase of
$9.9 million reflects the higher pretax profit in the three months ended
June 30, 2000. In addition, in each quarter the provision reflects expenses that
are not tax deductible; these are primarily related to merger costs from pooling
of interests transactions and amortization of certain intangible assets. Also
for both periods the provision is affected by profits and losses from certain
pooled entities that were not taxed at the corporate level prior to their merger
with TMP.
Minority interests in consolidated earnings for the three months ended
June 30, 2000 was a $243,000 loss compared with a profit of $8,000 for the three
months ended June 30, 1999.
Equity in losses of unconsolidated affiliates, which reflected losses
associated with the real estate advertising company in which the Company holds a
minority interest, was $100,000 for the three months ended June 30, 1999.
As a result of all of the above, the net income available to common and
Class B common stockholders for the three months ended June 30, 2000 was
$8.5 million, an increase of $5.3 million from the net income of $3.2 million
for the three months ended June 30, 1999. On a diluted per share basis, the net
income available to common and Class B common stockholders for the three months
ended June 30, 2000 was $0.08, compared to a net income of $0.04 for the
comparable 1999 period.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements have been to fund (i) acquisitions,
(ii) working capital, (iii) capital expenditures and (iv) marketing and
development of our Interactive business. Our working capital requirements are
generally higher in the quarters ending March 31 and June 30 during which
payments to the major yellow page directory publishers are at their highest
levels. We have met our liquidity needs over the last three years through
(a) funds provided by operating activities, (b) equity offerings, (c) long-term
borrowings, and (d) capital leases. On January 27, 2000, in connection with its
third public offering, the Company issued an aggregate of, on a post split
basis, 8,000,000 shares of common stock at a purchase price of $77 5/16 per
share. The offering was completed in February 2000. The net proceeds from this
offering were $594.2 million, and approximately $82 million was used to pay down
debt on the Company's credit line. The remainder is being invested in short and
medium term interest bearing instruments until used for acquisitions, strategic
equity investments and general corporate purposes.
Net cash used in operating activities for the six months ended June 30, 2000
was $8.2 million and net cash provided by operating activities for the six
months ended June 30, 1999 was $12.6 million. The increase in cash used in
operating activities of $20.8 million for 2000 over 1999 was primarily
attributable to (i) $50.3 million due to increases in accounts receivable for
the 2000 period over the 1999 period, related mostly to growth at Monster.com,
Selection & Temporary Contracting and Recruitment Advertising
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(ii) $25.5 million resulting from decreases in cash from accounts payable and
accrued liabilities and (iii) $1.8 million due to the effects of higher earnings
from pooled companies in both the current and previous period, partially offset
by (i) $28.2 million increase in earnings after adjusting for non-cash items
(ii) $18.8 million resulting from increases in deferred commissions and fees,
primarily at Monster.com and (iii) $9.8 million related to increases in the use
of funds for work-in-process and prepaid and other assets for the 2000 period
over the 1999 period.
EBITDA was $52.3 million for the six months ended June 30, 2000, an increase
of $21.2 million or 68.0% from $31.1 million for the six months ended June 30,
1999. The increase primarily reflects, for the 2000 period, a $12.0 million
increase in operating profits and $7.6 million more in depreciation and
amortization costs. As a percentage of commissions and fees, EBITDA increased to
9.4% for the six months ended June 30, 2000 as compared with 7.7% for the six
months ended June 30, 1999. The higher percent reflects the improved operating
margins (including the effects of merger and integration costs), which were 4.0%
and 2.8% of commissions and fees for the 2000 and 1999 periods, respectively.
Net cash used in investing activities for the six months ended June 30, 2000
and 1999 was $65.8 million and $36.8 million, respectively. The $29.0 million
increase in cash used in 2000 compared to 1999 was due to a $14.5 million
increase in payments for business acquisitions and $14.5 million for capital
expenditures, primarily leasehold improvements and computer equipment and
software for the expansion of the Company's global technology infrastructure.
We estimate that our expenditures for computer equipment and software,
furniture and fixtures, and leasehold improvements will be approximately $70 to
$80 million for the year ended December 31, 2000.
Our financing activities include equity offerings, borrowings and repayments
under our bank financing agreements and borrowings for and payments on
(i) installment notes, principally to finance acquisitions, (ii) capital leases
and (iii) equipment. Our financing activities for the six months ended June 30,
2000 and June 30, 1999 provided net cash of $521.3 million and $9.1 million,
respectively. The change of $512.2 million resulted primarily from
$594.2 million in net proceeds from our follow-on common stock offering and a
$12.6 million increase in cash received from the exercise of employee stock
options, partially offset by net repayments in the 2000 period of $88.1 million
against credit facilities and capitalized lease obligations compared with a net
increase in credit facilities and capitalized lease obligations of $7.2 million
in the prior year period.
At June 30, 2000, we had a $185 million committed line of credit from our
primary lender pursuant to a revolving credit agreement expiring November 5,
2003. Of such line, at June 30, 2000, approximately $156.1 million was unused
and accounts receivable is sufficient to allow drawdown of the entire amount.
Our current interest rate under the agreement is LIBOR plus 50 basis points. In
addition, we had secured lines of credit aggregating $12.2 million for our
operations in Australia, New Zealand, France, Belgium, and Italy, of which
approximately $3.6 million was unused at June 30, 2000.
Cash and cash equivalents at June 30, 2000 were $511.4 million, an increase
of $446.8 million from $64.6 million at December 31, 1999, and were
$446.4 million higher than the June 30, 1999 balance of $65.0 million.
We intend to continue our acquisition strategy and the marketing and
promotion of our Interactive businesses through the use of cash-on-hand,
operating profits, issuance of additional shares of our common stock, borrowings
against our long-term debt facility and seller financed notes. We believe that
our anticipated cash flow from operations, cash-on-hand, as well as the
availability of funds under our existing financing agreements will provide us
with sufficient liquidity to meet our current foreseeable cash needs.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities,"
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<PAGE>
which had an initial adoption date by the Company of January 1, 2000. During the
second quarter of 1999, the FASB postponed the adoption date of SFAS No. 133
until January 1, 2001. The FASB further amended SFAS No. 133 in June 2000. SFAS
No. 133 requires that all derivative financial instruments be recorded on the
consolidated balance sheets at their fair value. Changes in the fair value of
derivatives will be recorded each period in earnings or other comprehensive
earnings, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Gains and losses on
derivative instruments reported in other comprehensive earnings will be
reclassified as earnings in the periods in which earnings are affected by the
hedged item. The Company does not expect the adoption of this statement to have
a significant impact on the Company's results of operations, financial position
or cash flows.
In 1999, the SEC issued Staff Accounting Bulletin No. 101 dealing with
revenue recognition which is effective in the fourth quarter of 2000. The
Company does not expect its adoption to have a material effect on the Company's
financial statements.
In 2000, the Emerging Issues Task Force ("EITF") of the FASB issued EITF
Issue No. 00-2, "Website Development Costs," which established guidelines for
accounting for website development costs and is effective for quarters beginning
after June 30, 2000. Although the Company is still evaluating its impact, the
Company does not believe its adoption will have a significant effect on its
financial statements.
YEAR 2000 ISSUE
We completed our Year 2000 software program conversions and compliance
programs during the fourth quarter of 1999. The total external costs for such
programs were approximately $3.0 million. Through the six months ended June 30,
2000 we have not experienced any Year 2000 problems either internally or from
outside sources. We have no reason to believe that Year 2000 failures will
materially affect us in the future. However, since it may take several
additional months before it is known whether we or third party suppliers,
vendors or customers may have undergone Year 2000 problems, no assurances can be
given that we will not experience losses or disruptions due to Year 2000
computer-related problems. We will continue to monitor the operation of our
computers and microprocessor-based devices for any Year 2000 problems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risks include fluctuations in interest rates,
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
and exchange rate variability. Substantially all of the Company's debt relates
to a five-year financing agreement with an outstanding principal balance of
approximately $28.9 million, including $18.3 million reflected as a reduction to
accounts receivable and $7.7 million for letters of credit, as of June 30, 2000.
Interest on the outstanding balance is charged based on a variable interest rate
related to the higher of the prime rate, Federal Funds rate less 1/2 of 1% or
LIBOR plus 50 basis points as specified in the agreement, and is thus subject to
market risk in the form of fluctuations in interest rates. The Company does not
trade in derivative financial instruments.
The Company also conducts operations in various foreign countries, including
Australia, Belgium, Canada, China, France, Germany, Italy, Japan, the
Netherlands, New Zealand, Singapore, Spain, and the United Kingdom. For the six
months ended June 30, 2000 approximately 44.4% of our commissions and fees were
earned outside the United States and collected in local currency and related
operating expenses were also paid in such corresponding local currency.
Accordingly, we will be subject to increased risk for exchange rate fluctuations
between such local currencies and the dollar. We do not conduct any significant
hedging activities.
The financial statements of the Company's non-U.S. subsidiaries are
translated into U.S. dollars using current rates of exchange, with gains or
losses included in the cumulative translation adjustment account, a component of
stockholders' equity. During the six months of 2000, due to the strengthening of
the U.S. dollar, the Company had an exchange loss of $37.9 million, primarily
attributable to the strengthening of the U.S. dollar against the Australian
dollar.
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PART II OTHER INFORMATION
ITEM 2(C). CHANGES IN SECURITIES AND USE OF PROCEEDS
1. On April 3, 2000, we issued 1,022,257 shares of our common stock in a
private placement transaction pursuant to Section 4(2) of the Securities Act of
1933, as amended, in exchange for all of the outstanding stock in System One
Services, Inc.
2. On April 4, 2000 we issued 54,041 shares of our common stock in a private
placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange for all of the outstanding stock in GTR Advertising, Inc.
3. On May 9, 2000 we issued 947,916 shares of our common stock in a private
placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange for all of the outstanding stock in Virtual
Relocation.com, Inc.
4. On May 12, 2000 we issued 51,906 shares of our common stock in a private
placement transaction pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended, in exchange for all of the outstanding shares of NIBO
Holding B.V.
5. On May 17, 2000 we issued 205,703 shares of our common stock in a private
placement transaction pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended, in exchange for all of the outstanding shares of
Business Technologies Limited.
6. On May 31, 2000 we issued 164,833 shares of our common stock in a private
placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange for all of the outstanding shares of Simpatix Inc., and in
connection with issuances of stock related stay bonuses.
7. On May 31, 2000 we issued 623,892 shares of our common stock in a private
placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange for all of the outstanding shares of Web Technology
Partners, Inc.
8. On May 31, 2000 we issued 144,601 shares of our common stock in a private
placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange for all of the outstanding shares of Rollo
Associates, Inc., and in connection with issuances of stock related stay
bonuses.
9. On June 5, 2000 we issued 23,817 shares of our common stock in a private
placement transaction pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended, in exchange for all of the outstanding shares of
Management Resources International B.V.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The annual meeting of Stockholders was held on June 14, 2000.
(b) The following directors were elected at the Annual Meeting and received
the vote indicated:
<TABLE>
<CAPTION>
FOR WITHELD
----------- --------
<S> <C> <C>
Andrew J. McKelvey................................... 122,750,255 532,889
George Eisele........................................ 122,745,493 537,652
Michael Kaufman...................................... 122,873,836 409,309
James J. Treacy...................................... 122,750,344 532,801
John Swann........................................... 122,746,568 536,577
Ronald J. Kramer..................................... 122,875,294 407,851
</TABLE>
31
<PAGE>
(c) The adoption of the Amendment to the Company's Certificate of
Incorporation was approved by the vote indicated:
<TABLE>
<S> <C>
For: ....................................................... 60,789,956
Against: ................................................... 14,858,405
Abstain: ................................................... 14,784
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this report:
27.1 Financial Data Schedule - June 30, 2000
27.2 Financial Data Schedule - June 30, 1999
(b) (i) The Company's Current Report of Form 8-K, filed June 30, 2000,
relating to the Company's acquisition of MoveCentral, Inc.
All other items of this report are inapplicable.
32
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
TMP WORLDWIDE INC.
(REGISTRANT)
Dated: August 14, 2000 By: /s/ BART CATALANE
-----------------------------------------
Bart Catalane
Chief Financial Officer
(Principal Financial and Accounting
Officer)
</TABLE>
33
