Monster to restate profits, trim $271 million

December 14, 2006|By BLOOMBERG NEWS

NEW YORK -- Monster Worldwide Inc., owner of the most-used online job-listing service, said yesterday that it overstated earnings by $271.9 million in the past nine years because of improperly recorded stock option grants.

Monster also made more than $500,000 in inappropriate payments to founder Andrew McKelvey, the company said.

The adjustments cut 2005 net income by $9.24 million, 2004 net income by $14.4 million, 2003 net income by $27 million and reduce earnings for earlier years.

Monster is among at least 80 companies to restate earnings after uncovering options grants that were backdated to boost returns to executives.

Monster's grants were "intentionally" changed by former officials from 1997 to 2003, the company said. McKelvey quit as chief executive officer Oct. 6.

"This puts the issue behind them, and it doesn't impact the fundamentals of the business going forward," said Glenn Greene, an analyst at ThinkEquity Partners in Chicago who rates the shares "buy" and doesn't own them. "We knew it was going to be a big charge."

Monster disclosed payments to McKelvey to insure relatives and personal employees. McKelvey, 72, has repaid $533,000 and may pay more, Monster said.

Shares of Monster fell 31 cents to close at $44.18 yesterday on the Nasdaq stock market. They have gained 8.2 percent this year.

McKelvey quit as chairman emeritus Oct. 29 after refusing to answer options-related questions. The company said in June that internal auditors and the Justice Department and Securities and Exchange Commission had started reviewing option grants. On Nov. 22, the company fired general counsel Myron Olesnyckyj.

Investigators found that some transactions Monster had with McKelvey and his relatives from 1996 to 2006 weren't properly disclosed. Monster paid for health-care costs of nine of McKelvey's relatives and nine individuals personally employed by McKelvey at varying times since 1997.

It also granted stock options to four of McKelvey's personal employees.

The company said McKelvey "generally reimbursed" Monster for "a vast majority" of the salary payments it made to his personal employees. It said some of his workers also participated in Monster's 401(k) retirement savings plan.

Monster also disclosed payments of thousands of dollars in rental and aircraft fees to businesses owned or controlled by McKelvey. Some other company executives and directors shared ownership of one office the company rented, Monster said, without naming the other individuals.

McKelvey has paid back $533,000 for certain expenses, and Monster said it continues to seek reimbursement for other costs.

The transactions are "troubling" and may drag on Monster's reputation and increase the risk of further regulatory inquiries, analyst Kelly Flynn of UBS AG wrote yesterday in a note to clients.

Financial results for this year will not be "materially" affected by the changes, Monster said.

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