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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

COMMISSION FILE NUMBER: 000-21571

Monster Worldwide, Inc.
(Exact name of registrant as specified in its charter)

622 Third Avenue, New York, New York 10017
(Address of principal executive offices)

(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 ý No o

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

        Indicate the number of shares outstanding of each of the issuer's class of common stock as of April 30, 2004, the latest practicable date.

MONSTER WORLDWIDE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

(All other items on this report are inapplicable)

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

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

See accompanying notes.

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MONSTER WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

See accompanying notes.

2

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

See accompanying notes.

3

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

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

        Monster Worldwide, Inc. ("Monster Worldwide" or the "Company"), founded in 1967 operates Monster®, the leading global online careers property. The Company also owns TMP Worldwide, the world's largest Yellow Pages and one of the world's largest Recruitment Advertising agency networks and provider of direct marketing services. The Company operates in North America, Europe and the Asia/Pacific Region.

Basis of Presentation

        The consolidated interim financial statements included herein are unaudited and have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

        These statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. The Company adheres to the same accounting policies in preparation of interim financial statements. As permitted under generally accepted accounting principles, interim accounting for certain expenses, including income taxes are based on full year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.

        Cash and cash equivalents, which primarily consist of commercial paper and time deposits, are stated at cost, which approximates fair value. For financial statement presentation purposes, the Company considers all highly liquid investments having original maturities of three months or less as cash equivalents. Outstanding checks in excess of account balances typically represent media publisher payments, payroll and other contractual obligations disbursed on or near the last day of a reporting period.

2. EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

Earnings Per Share

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

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        A reconciliation of shares used in calculating basic and diluted earnings per common and Class B common share follows:

*

Certain stock options and stock issuable under employee compensation plans were excluded from the computation of earnings per share due to their antidilutive effect. The weighted average number of such common stock equivalents is approximately 8,820, and 16,566 for 2004 and 2003, respectively.

Stock Options

        The Company's financial statements are presented in accordance with the Accounting Principles Board's Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"). Under APB No. 25, generally, no compensation expense is recognized in connection with the awarding of stock option grants to employees provided that, as of the grant date, all terms associated with the award are fixed and the quoted market price of the stock is equal to or less than the amount an employee must pay to acquire the stock as defined. As the Company only issues fixed term stock option grants at or above the quoted market price on the date of the grant, there has been no compensation expense recognized in the accompanying financial statements. The Company adopted the disclosure only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), which requires certain financial statement disclosures, including pro forma operating results had the Company prepared its consolidated financial statements in accordance with the fair value based method of accounting for stock-based compensation.

        The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no restrictions and are fully transferable and negotiable in a free trading market. Black-Scholes does not consider the employment, transfer or vesting restrictions that are inherent in the Company's employee options. Use of an option valuation model, as required by SFAS 123, includes highly subjective assumptions based on long-term predictions, including the expected stock price volatility and average life of each option grant. Because the Company's employee options have characteristics significantly different from those of freely traded options, and because changes in the subjective input assumptions can materially affect the Company's estimate of the fair value of those options, in the Company's opinion, the existing valuation models, including Black-Scholes, are not reliable single measures and may misstate the fair value of the Company's employee options.

        As required under SFAS 123 and SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure ("SFAS 148"), the pro forma effects of stock options on net income (loss) and net earnings

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per share have been estimated at the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:

        For purposes of pro forma disclosures, the estimated fair value of the options is assumed to be expensed over the options' vesting periods. The pro forma effects of recognizing compensation expense under the fair value method on the Company's operating results and per share data are as follows:

3. BUSINESS COMBINATIONS

Accrued Integration and Restructuring Costs

        The Company has formulated plans to eliminate redundant facilities, personnel and duplicate assets in connection with its business combinations.

        A summary of accrued integration and restructuring costs is as follows:

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(a)

Accrued liabilities for surplus properties relate to leased office locations of the acquired companies that are either under utilized prior to the acquisition date or closed by the Company in connection with acquisition-related restructuring plans. The amount is based on the present value of minimum future lease obligations, net of estimated sublease income.

(b)

Costs associated with the consolidation of existing offices of acquired companies relate to termination costs of contracts relating to billing systems, external reporting systems, other contractual arrangements with third parties and above market lease costs.

(c)

Costs associated with employee severance, benefits and relocation.

        The Company continues to evaluate and assess the impact of duplicate responsibilities and office locations. In connection with the finalization of plans relating to purchased entities, additions to restructuring reserves within one year of the date of acquisition are treated as additional purchase price, however costs incurred resulting from plan revisions made after the first year will be charged to operations in the period in which they occur. Reductions to restructuring reserves established in connection with purchase business combinations are recorded as a reduction to goodwill.

        The following table presents the summary activity relating to the Company's integration plans. Amounts in the "Additions" column of the following table represent amounts charged to goodwill in connection with purchase acquisitions and amounts charged to integration expense for acquisitions accounted for as pooling of interests. Additions to plans are recorded from the date of the business combination to the date the plan is finalized, within one year from the date of acquisition. As a result, additions in the current year may relate to the finalization of plans initiated in the prior year. Cash payments and associated write-offs relating to the plans are reflected in the "Utilization" caption of the following table. Details of the exit plan activity comprising the Company's integration and restructuring accruals as of March 31, 2004 are as follows:

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

4. BUSINESS REORGANIZATION AND OTHER SPECIAL CHARGES

        The Company recorded business reorganization and other special charges of $47,874 classified as a component of operating expenses in the three months ended March 31, 2003. There were no business reorganization and other special charges for the three months ended March 31, 2004. Information relating to the business reorganization and other special charges is as follows:

Workforce Reduction

        The Company reduced its global workforce by over 1,000 employees between June 30, 2002 and March 31, 2003. The Company recorded $7,021 for workforce reduction costs in the three months ended March 31, 2003. Workforce reduction costs consist of severance and employee benefits.

Consolidation of Excess Facilities and Other Special Charges

        During the three months ended March 31, 2003, the Company recorded $5,738 of costs for consolidation of excess facilities, disposal of property and equipment, professional fees and other special charges, relating to future lease obligations (related to office abandonment), non-cancelable lease costs and other contractual arrangements with third parties net of estimated sublease income. The Company also recorded $25,751 of expense related to the disposal of property and equipment that was removed from operations including leasehold improvements, computer equipment, software and furniture and fixtures. Expenses for professional fees and other were $9,364 and primarily relate to legal costs in connection with workforce reduction, professional fees in connection with the spin-off transaction and bonuses of $1,826 to key employees and executives for completing the spin-off.

        A summary of the activity related to accrued business reorganization and spin-off costs for the three months ended March 31, 2004 is outlined as follows:

        The following table presents a summary of plan activity related our accrued business reorganization and spin-off costs in the three months ended March 31, 2004.

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5. COMPREHENSIVE INCOME (LOSS)

        The Company's comprehensive income (loss) is as follows:

6. DISCONTINUED OPERATIONS

        On March 31, 2003, the Company completed the distribution of the common stock of HH Group, which was previously reported as the Company's eResourcing and Executive Search segments. As a result of the spin-off, the Company's financial statements have been reclassified to reflect HH Group as discontinued operations for all periods presented.

        On August 1, 2003, the Company and Ninemsn terminated their joint venture arrangement in Australia and New Zealand (the "Joint Venture"). Consequently, the Company has shut down its websites in Australia and New Zealand (Monster.au and Monster.nz) and redirected all traffic to its Monster.com website. As a result of the termination of the Joint Venture, the Company's financial statements have been restated to reflect the Joint Venture as discontinued operations for all periods presented.

        Summarized results of operations relating to HH Group and the Joint Venture (as reported in discontinued operations) for the three months ended March 31, 2004 and 2003 are as follows:

^(a)

Includes $43,034 for the impairment of deferred tax assets in connection with the spin-off of HH Group in the 2003 period.

        The provision for income taxes reported in discontinued operations in 2003 differs from the amount computed using the Federal statutory income tax rate primarily as a result of change in valuation allowance and non-deductible expenses.

7. SEGMENT AND GEOGRAPHIC DATA

        The following segment information is presented in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). This standard is based on a management approach that requires segmentation based upon the Company's internal organization and disclosure of revenue and operating income based upon internal accounting methods. The Company's financial

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reporting systems present various data for management to operate the business, including internal profit and loss statements prepared on a basis not consistent with generally accepted accounting principles.

        The Company operates in three business segments: Monster, Advertising & Communications and Directional Marketing. Corporate level operating expenses are allocated to the segments and are included in the operating results below. The Company's Advertising & Communications division recognizes a commission on the sale of certain Monster products. Revenue recognized by the Advertising & Communications segment for such sales was $2,085 and $3,007 on Monster sales of $13,900 and $20,047 for the three months ended March 31, 2004 and 2003, respectively. Segment results for 2003 have been reclassified to reflect a current year change in the composition of the Company's operating segments, because the Company's Advertising & Communications division now manages certain business components that were previously reported by its Monster segment.

        Following is a summary of the Company's operations by business segment and by geographic region, for the three months ended March 31, 2004 and 2003.

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^(a)

Includes Canada and the Asia Pacific region.

        The following table reconciles each reportable segment's assets to total assets reported on the Company's consolidated balance sheet as of March 31, 2004 and December 31, 2003:

*

Shared assets represent assets that provide benefit to all of the Company's operating segments. Shared assets are not allocated to operating segments for internal reporting or decision-making purposes.

Reclassification of Operating Segment Data

        We have reclassified prior year results to reflect a current year change in the composition of the Company's operating segments. Our Advertising & Communications division now manages certain

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business components that were previously reported by Monster. Reclassified revenue and operating income (loss) for the four quarters of 2003 by operating segment is as follows:

8. SUBSEQUENT EVENT

        On April 22, 2004, the Company acquired jobpilot GmbH from Adecco S.A. Total consideration for the acquisition consisted of one million shares of the Company's common stock and cash of approximately $60,600, net of cash acquired.

        In addition, the Company entered into a job posting Agreement with Adecco S.A., dated April 23, 2004, pursuant to which, in exchange for approximately $3,600 the Company will provide Adecco S.A. job postings on the Monster and jobpilot sites in Europe plus specified amounts of resume access, company profile and visibility products, for a one-year period, subject to certain limitations.

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Report of Independent Certified Public Accountants

Board of Directors
Monster Worldwide, Inc.
New York, New York

        We have reviewed the consolidated balance sheet of Monster Worldwide, Inc. as of March 31, 2004, and the related consolidated statements of operations and cash flows for the three-month periods ended March 31, 2004 and 2003, included in the accompanying Securities and Exchange Commission Form 10-Q for the period ended March 31, 2004. These financial statements are the responsibility of the Company's management.

        We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

        Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP

New York, New York
April 26, 2004

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

•

projections of our revenues, income, earnings per share, capital expenditures, capital structure or other financial items;



•

descriptions of plans or objectives of our management for future operations, products or services, including pending acquisitions;



•

forecasts of our future economic performance; and



•

descriptions of assumptions underlying or relating to the foregoing.

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

        There are many factors—many beyond our control—that could cause results to differ significantly from our expectations. Some of these factors are described in "Item 1. Business Risk Factors" of our Form 10-K for the year ended December 31, 2003.

Overview

        Founded in 1967, Monster Worldwide, Inc. is the parent company of Monster, the leading global online careers property. We also own TMP Worldwide, the world's largest Yellow Pages advertising agency and one of the world's largest recruitment advertising agencies. Our more than 495,000 clients include, on a non-exclusive basis, approximately 90 of the Fortune 100 and approximately 490 of the Fortune 500 companies. These Fortune 100 and Fortune 500 clients accounted for 3.6% and 10.6%, respectively, of our revenue for the three months ended March 31, 2004.

        Our flagship brand Monster was founded in 1994 as the 454^th commercial website in the world and has since revolutionized the way employers and job seekers connect with one another. We help clients streamline and more effectively manage their entire hiring process by providing them with one-stop-shopping for their online recruitment and career management needs.

        As of March 2004, the Monster global network consists of 22 local content and language sites in countries in North America, Europe and the Asia Pacific Region. We recorded over 53 million visits during the month of March 2004 according to independent research conducted by I/PRO and offer a database of over 36 million resumes.

        In 2004, our Advertising & Communications division began managing certain business components that were previously reported by our Monster segment. As a result, prior period segment results have been reclassified to reflect the change in reporting.

Critical Accounting Policies and Items Affecting Comparability

        Quality financial reporting relies on consistent application of our accounting policies, which are based on accounting principles generally accepted in the United States. The policies discussed below are considered by management to be critical to understanding our financial statements and often require management judgment and estimates regarding matters that are inherently uncertain. When such

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judgments and estimates are required, all material developments and resolutions are discussed with our audit committee.

Revenue Recognition and Work-In-Process

        Monster.    Our Monster division primarily earns revenue from the placement of job postings on the websites within the Monster network, access to the Monster network's online resume database and other ancillary services. We recognize revenue at the time that job postings are displayed on the Monster network websites. Revenue earned from subscriptions to the Monster network's resume database is recognized over the length of the underlying subscriptions, typically one to twelve months. Revenue associated with multiple element contracts is allocated based on the relative fair value of the services included in the contract. Unearned revenues are reported on the balance sheet as deferred revenue.

        Advertising & Communications.    Our Advertising & Communications division derives revenue for job advertisements placed in newspapers, Internet career job boards such as Monster and other media, plus associated fees for related services. Revenue is recorded net of media placement costs, which are passed on to the customer. Revenue is generally recognized upon placement date for newspapers and other print and offline media. Online media revenue is recognized when services are purchased.

        Directional Marketing.    Our Directional Marketing division derives revenue from the placement of advertisements in telephone directories (Yellow Pages advertising). Revenue for Yellow Pages advertisements are recognized on the publications' closing dates and are recorded net of publisher advertising costs, which are passed on to the customer. Direct operating costs incurred that relate to future revenue for Yellow Pages advertisements, are deferred (recorded as work-in-process in the accompanying consolidated balance sheets) and subsequently charged to expense when the directories are closed for publication and the related commission is recognized as income. In addition, we earn revenue from mortgage companies, real estate firms and other companies that place advertisements on our online relocation portal, Monstermoving. Revenue derived from such advertisements is recognized over the stated terms of fixed contracts, or upon referral to advertisers on our website for performance based contracts.

Business Acquisitions and Intangibles

        We account for acquired businesses using the purchase method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income. Accordingly, for significant items, we typically obtain assistance from independent valuation specialists.

        Goodwill represents acquisition costs in excess of the fair value of net tangible and intangible assets of businesses purchased. Intangibles consist primarily of the value of client lists, non-compete agreements and trademarks and goodwill. With the exception of goodwill and indefinite-lived trademarks, intangible assets are being amortized over periods ranging from two to thirty years. We evaluate our goodwill and other indefinite-lived intangible assets annually for impairment, or earlier if indicators of potential impairment exist. The determination of whether or not goodwill or other intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the reporting units. Changes in our strategy and our market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets.

        We have adopted a policy to review each reporting unit for impairment using a discounted cash flow approach that uses forward-looking information regarding market share, revenues and costs for each reporting unit as well as appropriate discount rates. As a result, changes in these assumptions and current working capital could materially change the outcome of each reporting unit's fair value determinations in future periods, which could require a further permanent write-down of goodwill.

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Integration, Restructuring and Business Reorganization and Spin-off Plans

        We have recorded significant charges and accruals in connection with our integration, restructuring and business reorganization and spin-off plans. These accruals include estimates pertaining to future lease obligations, employee separation costs and the settlements of contractual obligations resulting from our actions. Although we do not anticipate significant changes, the actual costs may differ from these estimates.

Contingencies

        We are subject to legal proceedings, lawsuits and other claims related to labor, service and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies are made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters.

Accounts Receivable

        We are required to estimate the collectibility of our trade receivables and notes receivable. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including the current credit-worthiness of our customers. Changes in required reserves may occur due to changing circumstances, including changes in the current market environment or in the particular circumstances of individual customers. The Company assesses the recoverability of accounts receivable by performing a specific account review of significant customer accounts and applying general reserve percentages (based on historical collection experience) to the remaining population of customer accounts. The allowance for doubtful accounts approximates 4.8% of our accounts receivable portfolio as of March 31, 2004. A 1% change in the calculation of bad debt reserves for the three months ended March 31, 2004, would have impacted the allowance for doubtful accounts by approximately $3.7 million.

Interim Financial Reporting

        As permitted under generally accepted accounting principles, interim accounting for certain expenses, such as income taxes, are based on full year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.

Constant Currencies

        We define the term "constant currency" to be a comparison of financial information from period to period that excludes the effect of translating foreign currencies to U.S. dollars at differing exchange rates. Changes in our revenues and core operating expenses, which we identify as salaries and related, office and general and marketing and promotion expenses, include the effect of changes in foreign currency exchange rates because they are translated at average exchange rates for each period, as required by generally accepted accounting principles.

        The Company believes that these calculations are a useful measure, providing additional detail about the change in operations from period to period. Earnings from subsidiaries are rarely repatriated to the United States and there are no significant gains or losses on foreign currency transactions between

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subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings and not the Company's economic condition.

The Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31, 2003

Monster

        The operating results of our Monster division for the three months ended March 31, 2004 and 2003 are as follows:

        The Monster division's revenue increased mainly as a result of improved economic conditions in the United States, where we saw a general increase in the level of hiring activity across several occupational categories, with the largest increase in opportunities in the wholesale trade, retail trade, manufacturing, financial services and educational services industries. Globally, job postings on our core Monster properties were up 21% versus last year's first quarter. Compared to the first quarter of 2003, Monster's revenue mix remained relatively stable in the current period, with 54% of the division's revenue coming from job postings and 28% coming from resume database access. Revenue generated from other sources, which primarily include our government and campus businesses, contributed 18% to revenue. These sources showed strong year over year growth and demonstrate our commitment to developing diversified interactive revenue streams. In March 2004, we acquired Military Advantage, Inc. ("Military Advantage"), which expanded our offerings to military personnel, veterans and those considering a military career. Military Advantage and QuickHire (a third quarter, 2003 acquisition) together contributed $3.3 million to the increase in the division's revenue when compared to the three months ended Mach 31, 2003.

        In reaction to improving economic and labor conditions in the United States, we added to our sales force and increased spending on marketing and promotion in the first quarter of 2004. In addition, a

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weaker US dollar increased our expenses in the current period. Beginning in 2004, we redirected a large portion of our marketing resources toward mass media advertising such as television, Internet, outdoor advertising and sponsorship placements. As a result of our targeted marketing efforts and the improvements in the labor markets, Monster properties were the 17^th most visited on the Internet in March 2004, up from 22^nd in March 2003 according to independent research conducted by Media Metrix.

Advertising & Communications

        The operating results of our Advertising & Communications division for the three months ended March 31, 2004 and 2003 are as follows:

        We noted an improvement in the North American help-wanted print market and better overall economic conditions in the first quarter of 2004, compared to the same period in 2003. Our Advertising & Communications division recorded its highest revenue levels since the third quarter of 2002. We continue to remain cautious, however, about the print-based recruitment advertising market and do not believe that it will return to the levels seen prior to the introduction of online alternatives. As a result, we continue to encourage our Advertising & Communications division sales force to introduce their clients to Monster services. During the three months ended March 31, 2004 and 2003, our Advertising & Communications divisions sold $13.9 million and $20.0 million of Monster services, respectively.

        Since the announcement of our reorganization initiatives in 2002 and 2003, we have focused on reducing the cost structure at our Advertising & Communications division to reflect the shrinking demand for print based recruitment advertising and depressed economic conditions in prior periods. Through our reorganization initiatives, we have reduced the number of employees in the division and consolidated duplicative office locations. As a result, core operating expenses in the first quarter of 2004 decreased, both on a constant currency basis and as a percentage of revenue, compared to the three months ended March 31, 2003.

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Directional Marketing

        The operating results of our Directional Marketing division for the three months ended March 31, 2004 and 2003 are as follows:

        Directional Marketing's revenue decreased in the three months ended March 31, 2004, as a result of delays in Yellow Pages directories' closing dates and lower ad placement volume. Yellow Pages publishers often extend the closing dates of their directories, and such delays directly impact the timing of our revenue stream. The division's other ancillary services also realized a decline in revenue in the first quarter of 2004.

        As a result of our 2003 reorganization initiatives, the Directional Marketing division's core operating are lower in the first quarter of 2004. Although core operating expenses are a greater percentage of revenue in the current quarter, we believe that the current fixed cost structure is appropriate for the revenue that we expect to generate for the full year.

Total Operating Expenses and Operating Income (Loss)

        Consolidated operating expenses and operating income (loss) for the three months ended March 31, 2004 and 2003 are as follows:

        The decrease in consolidated operating expenses is primarily due to lower business reorganization, spin-off and other special charges as we completed the spin-off of HH Group in the first quarter of 2003. Our core operating expenses were higher by $15.9 million in 2004, partially as a result of rising foreign currency exchange rates, particularly the British Pound and the Euro. The increase in salaries and related expenses also reflects additional sales force in the Monster division in 2004, the acquisitions of QuickHire and Military Advantage, and higher sales commissions due to stronger sales. In addition, re-engineering the structure of our Directional Marketing division continued to have a temporarily incremental effect on salaries in the first quarter of 2004. The decrease in office and general expenses reflects a significantly lower provision for doubtful accounts in the current period and a continued focus on our fixed cost

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structure. In an effort to take advantage of the improving economy and labor markets in the first quarter of 2004, we increased our spending on marketing and promotion in our Monster division.

Income Taxes

        Income taxes for the three months ended March 31, 2004 and 2003 are as follows:

        Our effective tax rates differ from the statutory rate due to the impact of nondeductible integration, business reorganization and spin-off costs and valuation allowances. Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. In addition, our filed tax returns are subject to the examination by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

Discontinued Operations

        The results from discontinued operations for the three months ended March 31, 2004 and 2003 are as follows:

        In connection with our spin-off transaction and the termination of our joint venture arrangement in Australia and New Zealand in 2003, we have reclassified the results of operations for our former eResourcing and Executive Search divisions and the terminated joint venture as discontinued operations.

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Income (Loss) from Continuing Operations and Net Income (Loss)

        Income (loss) from continuing operations and net income (loss) and per share amounts for the three months ended March 31, 2004 and 2003 are as follows:

Financial Condition

        Cash flow information for the three months ended March 31, 2004 and 2003 is as follows:

        Our principal capital requirements have been to fund (i) the spin-off of Hudson Highland Group, Inc. ("HH Group") in the first quarter of 2003, (ii) working capital, (iii) marketing and development of our Monster network, (iv) acquisitions and (v) capital expenditures. Our working capital requirements are generally higher in the quarters ending March 31 and September 30, during which periods the payments to the major yellow page directory publishers are at their highest levels. In addition, because of our reorganization initiatives, the spin-off of HH Group, and the integration of prior business acquisitions, we have substantial cash commitments over the next several years. As of March 31, 2004, we had $36.2 million of accrued integration and restructuring expenses and business reorganization and spin-off costs, of which we estimate that $12.6 million will be paid over the next twelve months. Historically, we have met our liquidity needs by (a) funds provided by operating activities, (b) equity offerings, (c) short and long-term borrowings, (d) capital equipment leases and (e) seller-financed notes.

        We invest our excess cash predominantly in money market funds, overnight deposits, and commercial paper that are highly liquid, of high-quality investment grade, and have maturities of less than three months with the intent to make such funds readily available for operating and strategic long-term equity investment purposes.

        On January 6, 2004, we completed the sale of 2.5 million shares of common stock. Net proceeds from the offering were $55.7 million, which will be used for general corporate purposes, including working capital, and to acquire or invest in complementary businesses.

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        Following the spin-off of HH Group, we agreed to pay $2.5 million per quarter, or a total of $10.0 million, to reimburse HH Group for cash payments related to their accrued integration, restructuring, business reorganization and spin-off obligations. These quarterly payments began in July 2003. In 2003 we also paid HH Group for re-branding costs, bank fees and other miscellaneous costs relating to commitments that existed prior to the spin-off. As of March 31, 2004, our liability to HH Group is $3.0 million, which we anticipate will be fully paid by the end of 2004.

        As of March 31, 2004, we had cash and cash equivalents of $155.9 million, compared to $142.3 million as of December 31, 2003. Cash balances as of March 31, 2004 and December 31, 2003 exclude the effect of $49.4 million and $35.7 million, respectively, of outstanding checks in excess of cash balances, which have been recorded as current liabilities on our balance sheet. These outstanding checks typically represent media publisher payments, payroll and other contractual obligations disbursed on or near the last day of a reporting period. Such payments are disbursed from a financial institution separate from that of our depository accounts. Our net increase in cash of $13.6 million in the three months ended March 31, 2004, primarily relates to our financing activities, which includes proceeds of $55.7 million from the issuance of our common stock.

        Cash used for operating activities resulted from decreases in accounts payable and accrued expenses, which reflect significant payments to Yellow Pages directory publishers and our $2.5 million quarterly payment to HH Group in the first three months of 2004. In addition, we made cash payments of $4.1 million related to our merger, integration, business reorganization and spin-off costs. Conversely, deferred revenue and accounts receivable both increased as a result of a stronger U.S. economic and labor environment and strong sales at our Monster division during the quarter. Net income was adjusted for $19.2 million of non-cash related items to arrive at cash used for operating activities. Such non-cash items included compensation, income taxes, bad debts and depreciation and amortization. Cash used for operating activities in the first quarter of 2004 compares unfavorably to the prior year period because the three months ended March 31, 2003 contains a $15.6 million income tax refund.

        Cash used for investing activities includes a $24.0 million initial payment for our acquisition of Military Advantage, Inc. and $1.9 million of payments to former owners of other acquisitions, based on pre-determined financial goals, and the restructuring of businesses acquisitions. In addition, we made $7.8 million of payments for capital expenditures during the first quarter of 2004.

        Cash provided by financing activities mainly reflects $55.7 million of proceeds received upon our issuance of 2.5 million shares of common stock on January 6, 2004 and $2.7 million of cash from employee stock option exercises. We used $0.2 million of cash for payments on our capital lease obligations. In the three months ended March 31, 2004, total debt increased by $15.0 million related to future consideration in connection with our purchase of Military Advantage.

        We believe that our current cash and cash equivalents, revolving credit facility and cash we anticipate to generate from operating activities will provide us with sufficient liquidity to satisfy our working capital needs, capital expenditures, investment requirements and commitments through at least the next twelve months. Our cash generated from operating activities is subject to fluctuations in the global economy, unemployment rates and the demand for Yellow Pages advertising.

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        Payments due under contractual obligations at March 31, 2004 are as follows: