UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ |
QUARTERLY report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2015
OR
☐ |
TRANSITION report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number 0-33347
Ambassadors Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
|
|
91-1957010
(I.R.S. Employer Identification No.)
|
157 S. Howard, Suite 601
Spokane, WA
(Address of Principal Executive Offices)
|
|
99201
(Zip Code)
|
Registrant’s Telephone Number, Including Area Code: (509) 568-7800
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
☐
|
|
Large accelerated filer
|
☐
|
|
Accelerated filer
|
☐
|
|
Non-accelerated filer (Do not check if a smaller reporting company)
|
☑
|
|
Smaller reporting company
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of shares outstanding of the registrant’s Common Stock, $0.01 par value, as of the close of business on October 23, 2015 was 17,575,337.
AMBASSADORS GROUP, INC.
FORM 10-Q QUARTERLY REPORT
|
Page
|
PART I – FINANCIAL INFORMATION
|
|
|
|
Item 1. Financial Statements (Unaudited)
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
|
|
14
|
|
|
|
17
|
|
|
PART II – OTHER INFORMATION
|
|
|
|
|
19
|
|
|
|
19
|
|
|
|
20
|
|
|
|
21 |
PART I
FINANCIAL INFORMATION
Item 1.
|
FINANCIAL STATEMENTS
|
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As of September 30, 2015 and December 31, 2014
(in thousands, except share and per share data)
|
|
UNAUDITED
September 30,
2015
|
|
|
AUDITED
December 31,
2014
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,449
|
|
|
$
|
2,002
|
|
Restricted cash
|
|
|
-
|
|
|
|
400
|
|
Available-for-sale securities
|
|
|
54,158
|
|
|
|
59,502
|
|
Prepaid program costs and expenses
|
|
|
772
|
|
|
|
1,335
|
|
Accounts receivable
|
|
|
179
|
|
|
|
666
|
|
Total current assets
|
|
|
56,558
|
|
|
|
63,905
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
2,429
|
|
Goodwill
|
|
|
-
|
|
|
|
70
|
|
Other long-term assets
|
|
|
-
|
|
|
|
81
|
|
Total assets
|
|
$
|
56,558
|
|
|
$
|
66,485
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,088
|
|
|
$
|
2,794
|
|
Participants’ deposits
|
|
|
1,913
|
|
|
|
23,161
|
|
Foreign currency exchange contracts
|
|
|
-
|
|
|
|
1,345
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
18
|
|
Other liabilities
|
|
|
1
|
|
|
|
1
|
|
Total current liabilities
|
|
|
4,002
|
|
|
|
27,319
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
6
|
|
Total liabilities
|
|
|
4,002
|
|
|
|
27,325
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.01 par value; 50,000,000 shares authorized; 17,575,337 and 17,286,449 shares issued and outstanding, respectively
|
|
|
175
|
|
|
|
173
|
|
Additional paid-in capital
|
|
|
2,818
|
|
|
|
1,630
|
|
Retained earnings
|
|
|
49,665
|
|
|
|
38,334
|
|
Accumulated other comprehensive loss
|
|
|
(102
|
)
|
|
|
(977
|
)
|
Stockholders’ equity
|
|
|
52,556
|
|
|
|
39,160
|
|
Total liabilities and stockholders’ equity
|
|
$
|
56,558
|
|
|
$
|
66,485
|
|
The accompanying notes are an integral part of the consolidated financial statements.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
For the three and nine months ended September 30, 2015 and 2014
(in thousands, except per share amounts)
|
|
Three months ended
September 30
|
|
|
Nine months ended
September 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net revenue, non-directly delivered programs
|
|
$
|
8,090
|
|
|
$
|
10,818
|
|
|
$
|
24,708
|
|
|
$
|
29,027
|
|
Gross revenue, directly delivered programs
|
|
|
6,050
|
|
|
|
5,896
|
|
|
|
9,183
|
|
|
|
9,734
|
|
Total revenue
|
|
|
14,140
|
|
|
|
16,714
|
|
|
|
33,891
|
|
|
|
38,761
|
|
Cost of sales, directly delivered programs
|
|
|
3,151
|
|
|
|
3,372
|
|
|
|
5,105
|
|
|
|
5,816
|
|
Cost of sales, program merchandise markdown
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
554
|
|
Gross margin
|
|
|
10,989
|
|
|
|
13,342
|
|
|
|
28,786
|
|
|
|
32,391
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
1,784
|
|
|
|
8,369
|
|
|
|
9,378
|
|
|
|
20,868
|
|
General and administrative
|
|
|
2,186
|
|
|
|
2,418
|
|
|
|
5,932
|
|
|
|
8,647
|
|
Restructuring costs
|
|
|
-
|
|
|
|
217
|
|
|
|
-
|
|
|
|
1,756
|
|
Asset impairments
|
|
|
1,456
|
|
|
|
350
|
|
|
|
1,501
|
|
|
|
2,350
|
|
Total operating expenses
|
|
|
5,426
|
|
|
|
11,354
|
|
|
|
16,811
|
|
|
|
33,621
|
|
Operating income (loss)
|
|
|
5,563
|
|
|
|
1,988
|
|
|
|
11,975
|
|
|
|
(1,230
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
142
|
|
|
|
84
|
|
|
|
428
|
|
|
|
356
|
|
Foreign currency and other income (expense)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(97
|
)
|
|
|
6
|
|
Total other income
|
|
|
142
|
|
|
|
82
|
|
|
|
331
|
|
|
|
362
|
|
Income (loss) before income tax provision from continuing operations
|
|
|
5,705
|
|
|
|
2,070
|
|
|
|
12,306
|
|
|
|
(868
|
)
|
Income tax provision
|
|
|
(975
|
)
|
|
|
(158
|
)
|
|
|
(975
|
)
|
|
|
(416
|
)
|
Net income (loss) from continuing operations
|
|
|
4,730
|
|
|
|
1,912
|
|
|
|
11,331
|
|
|
|
(1,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued segment
|
|
|
-
|
|
|
|
196
|
|
|
|
-
|
|
|
|
(9,298
|
)
|
Income tax benefit
|
|
|
-
|
|
|
|
230
|
|
|
|
-
|
|
|
|
1,184
|
|
Net income (loss) from discontinued operations
|
|
|
-
|
|
|
|
426
|
|
|
|
-
|
|
|
|
(8,114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
4,730
|
|
|
$
|
2,338
|
|
|
$
|
11,331
|
|
|
$
|
(9,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
|
|
17,378
|
|
|
|
17,041
|
|
|
|
17,321
|
|
|
|
16,827
|
|
Weighted-average common shares outstanding - diluted
|
|
|
17,378
|
|
|
|
17,046
|
|
|
|
17,321
|
|
|
|
16,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations per share - basic and diluted
|
|
$
|
0.27
|
|
|
$
|
0.11
|
|
|
$
|
0.65
|
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinued operations per share - basic and diluted
|
|
|
n/
|
a
|
|
$
|
0.03
|
|
|
|
n/
|
a
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income (loss) per share - basic and diluted
|
|
$
|
0.27
|
|
|
$
|
0.14
|
|
|
$
|
0.65
|
|
|
$
|
(0.56
|
)
|
The accompanying notes are an integral part of the consolidated financial statements.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
For the three and nine months ended September 30, 2015 and 2014
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net income (loss)
|
|
$
|
4,730
|
|
|
$
|
2,338
|
|
|
$
|
11,331
|
|
|
$
|
(9,398
|
)
|
Unrealized gain on foreign currency exchange contracts
|
|
|
220
|
|
|
|
(685
|
)
|
|
|
1,142
|
|
|
|
(329
|
)
|
Unrealized gain (loss) on available-for-sale securities
|
|
|
55
|
|
|
|
(2
|
)
|
|
|
(267
|
)
|
|
|
265
|
|
Comprehensive income (loss)
|
|
$
|
5,005
|
|
|
$
|
1,651
|
|
|
$
|
12,206
|
|
|
$
|
(9,462
|
)
|
The accompanying notes are an integral part of the consolidated financial statements.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2015 and 2014
(in thousands)
|
|
Nine months ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,331
|
|
|
$
|
(9,398
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,192
|
|
|
|
4,497
|
|
Stock-based compensation
|
|
|
1,302
|
|
|
|
1,305
|
|
Deferred income tax benefit
|
|
|
(127
|
)
|
|
|
(877
|
)
|
Gain on foreign currency exchange contracts
|
|
|
(99
|
)
|
|
|
-
|
|
Impairment and loss on sale of discontinued operations
|
|
|
-
|
|
|
|
9,676
|
|
Loss on disposition and impairment of property and equipment, other assets
|
|
|
1,840
|
|
|
|
2,364
|
|
Program merchandise writedown
|
|
|
-
|
|
|
|
554
|
|
Excess tax shortfall from stock-based compensation
|
|
|
-
|
|
|
|
109
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable and other assets
|
|
|
487
|
|
|
|
663
|
|
Prepaid program costs and expenses
|
|
|
563
|
|
|
|
3,890
|
|
Accounts payable, accrued expenses, and other current liabilities
|
|
|
(707
|
)
|
|
|
2,374
|
|
Participants’ deposits
|
|
|
(21,248
|
)
|
|
|
(16,869
|
)
|
Net cash used in operating activities
|
|
|
(5,466
|
)
|
|
|
(1,712
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of available-for-sale securities
|
|
|
(4,923
|
)
|
|
|
(29,733
|
)
|
Proceeds from sale of available-for-sale securities
|
|
|
10,000
|
|
|
|
22,582
|
|
Purchase of property and equipment
|
|
|
(488
|
)
|
|
|
(1,202
|
)
|
Proceeds from sale of property and equipment
|
|
|
36
|
|
|
|
28
|
|
Purchase of intangibles
|
|
|
-
|
|
|
|
(189
|
)
|
Proceeds from sale of BookRags, Inc.
|
|
|
400
|
|
|
|
4,600
|
|
Net cash provided by (used in) investing activities
|
|
|
5,025
|
|
|
|
(3,914
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(112
|
)
|
|
|
(188
|
)
|
Excess tax shortfall from stock-based compensation
|
|
|
-
|
|
|
|
(109
|
)
|
Net cash used in financing activities
|
|
|
(112
|
)
|
|
|
(297
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(553
|
)
|
|
|
(5,923
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
2,002
|
|
|
|
9,473
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,449
|
|
|
$
|
3,550
|
|
The accompanying notes are an integral part of the consolidated financial statements.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
For many years, Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) provided educational travel programs for students and adults. On July 13, 2015, we announced our plan to cease operations and close our student and adult travel business by the end of 2015. On October 13, 2015, our stockholders approved the dissolution of the Company, and on October 23, 2015, the Company was dissolved and our stock was delisted from trading on NASDAQ. For additional information, see Note 12 of Notes to Consolidated Financial Statements.
These consolidated financial statements include the accounts of Ambassadors Group, Inc., and our wholly owned subsidiaries, Ambassador Programs, Inc., and Ambassadors Unlimited, LLC. All significant intercompany accounts and transactions, which are of a normal recurring nature, are eliminated in consolidation.
Through September 2014, we operated an education oriented research website, BookRags.com, which provided study guides, lesson plans, and other educational resources to students and teachers. This business was operated by BookRags, Inc. (“BookRags”) our then wholly-owned subsidiary. In September 2014, we consummated the sale of the BookRags subsidiary. All activities related to BookRags have been reflected as discontinued operations for all periods presented. For additional information, see Note 8 of Notes to Consolidated Financial Statements.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being materially misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2015 are not indicative of the results that may be expected for the year ending December 31, 2015.
It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.
3. Recent Accounting Pronouncements
Management has assessed the impact of recently issued, but not yet effective, accounting standards and determined that the provisions are either not applicable to us, or are not anticipated to have a material impact on our consolidated financial statements.
4. Investments and Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market, and we consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.
Our financial instruments are measured and recorded at fair value. Our non-financial assets, including property and equipment and goodwill, are measured at fair value upon acquisition, reviewed at least annually for impairment, and are fully assessed if there is an indicator of impairment. An adjustment would be made to the fair value of non-financial assets if an impairment charge is recognized.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Fair value is determined for assets and liabilities using a three-tiered hierarchy, based upon significant levels of inputs as follows:
|
- |
Level 1 – Quoted prices in active markets for identical assets or liabilities. |
|
- |
Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
|
- |
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
The below tables summarize the composition of our investments at September 30, 2015 and December 31, 2014 (in thousands). For both periods, all investments have been recorded to short-term available-for-sale securities on the consolidated balance sheet.
September 30, 2015
|
|
Amortized Cost
|
|
|
Unrealized
Losses
|
|
|
Aggregate Fair
Value
|
|
Short term municipal securities funds1
|
|
$
|
54,443
|
|
|
$
|
(285
|
)
|
|
$
|
54,158
|
|
Total
|
|
$
|
54,443
|
|
|
$
|
(285
|
)
|
|
$
|
54,158
|
|
December 31, 2014
|
|
Amortized Cost
|
|
|
Unrealized
Losses
|
|
|
Aggregate Fair
Value
|
|
Short term municipal securities funds1
|
|
$
|
59,520
|
|
|
$
|
(18
|
)
|
|
$
|
59,502
|
|
Total
|
|
$
|
59,520
|
|
|
$
|
(18
|
)
|
|
$
|
59,502
|
|
1
|
Do not have a set maturity date.
|
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables detail the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at September 30, 2015 and December 31, 2014 (in thousands):
September 30, 2015
|
|
Fair Market
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities1
|
|
|
54,158
|
|
|
|
54,158
|
|
|
|
-
|
|
|
|
-
|
|
Total financial assets
|
|
$
|
54,158
|
|
|
$
|
54,158
|
|
|
$
|
-
|
|
|
$
|
-
|
|
December 31, 2014
|
|
Fair Market
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities1
|
|
|
59,502
|
|
|
|
59,502
|
|
|
|
-
|
|
|
|
-
|
|
Foreign currency exchange contracts
|
|
|
14
|
|
|
|
-
|
|
|
|
14
|
|
|
|
-
|
|
Total financial assets
|
|
$
|
59,516
|
|
|
$
|
59,502
|
|
|
$
|
14
|
|
|
$
|
-
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
|
1,359
|
|
|
|
-
|
|
|
|
1,359
|
|
|
|
-
|
|
Total financial liabilities
|
|
$
|
1,359
|
|
|
$
|
-
|
|
|
$
|
1,359
|
|
|
$
|
-
|
|
1
|
At September 30, 2015 and December 31, 2014, municipal securities consisted solely of holdings in short-term municipal security funds.
|
Municipal securities are classified as Level 1 assets because market prices are readily available for these investments. Level 2 financial assets and liabilities represent the fair value of our foreign currency exchange contracts that were valued using pricing models that take into account the contract terms, as well as multiple inputs where applicable, such as currency rates.
On July 13, 2015, we announced our plan to cease operations and close our student and adult travel business by the end of 2015. As a result, during the third quarter of 2015 we performed an impairment analysis that resulted in us lowering the carrying value of all remaining property and equipment to zero. During the third quarter of 2015, the Company recorded an asset impairment charge of $1.5 million, which was classified as an asset impairment cost on the consolidated statement of operations.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. Derivative Financial Instruments
The majority of our travel programs historically took place outside of the United States, and most foreign suppliers required payment in currency other than the U.S. dollar. Accordingly, we have been exposed to foreign currency risk relative to changes in foreign currency exchange rates between those currencies and the U.S. dollar for our non-directly delivered programs. We have used forward contracts that allow us to acquire foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. There were no derivative financial instruments outstanding at September 30, 2015.
For derivative instruments that were designated and qualified as a cash flow hedge, the effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income or loss and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings; primarily during the second and third quarters of the year when our student travel programs occurred. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness were recognized in current earnings.
The fair value of our forward contracts at December 31, 2014 was as follows (in thousands):
|
|
December 31, 2014
|
|
|
|
Derivatives designated as
hedging instruments
|
|
Total Net
|
|
|
|
Assets
|
|
|
Liabilities
|
|
Liabilities
|
|
Forward contracts
|
|
$
|
14
|
|
|
$
|
1,359
|
|
|
$
|
1,345
|
|
The net asset and liability derivatives at December 31, 2014 were reported in the consolidated balance sheets as current and long-term foreign currency exchange contracts.
6. Accumulated Other Comprehensive Income (Loss)
Unrealized gains or losses related to derivative securities are recorded in accumulated other comprehensive income (loss) (“AOCI”). The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income (loss) net of income taxes in the period the change occurred. When derivative securities designated as cash flow hedges are used to pay vendors, the effective portion of the hedge is reclassified into the statement of operations and recorded in net revenue, non-directly delivered programs.
Unrealized gains or losses related to available-for-sale securities are recorded in AOCI. The change in unrealized gains or losses related to available-for-sale securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When securities are sold and a realized gain or loss is recognized, the amount is reclassified from AOCI to the statement of operations and recorded in interest and dividend income. During the nine months ended September 30, 2015 and 2014, there were no realized gains or losses recognized in the statement of operations for the sale of investments.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the three and nine months ended September 30, 2015 and 2014, a summary of AOCI balances and gains (losses) recognized in OCI are as follows (in thousands):
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
Derivative Securities
|
|
|
Available-for-sale securities
|
|
|
|
Three months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Balance, beginning of period
|
|
$
|
(220
|
)
|
|
$
|
164
|
|
|
$
|
(157
|
)
|
|
$
|
(90
|
)
|
Change before reclassification
|
|
|
220
|
|
|
|
(690
|
)
|
|
|
55
|
|
|
|
12
|
|
Reclassification into net revenue, non-directly delivered programs
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
Reclassification into interest and dividend income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14
|
)
|
Effect of incomes taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other comprehensive income (loss), net of income taxes
|
|
|
220
|
|
|
|
(685
|
)
|
|
|
55
|
|
|
|
(2
|
)
|
Balance, end of period
|
|
$
|
-
|
|
|
$
|
(521
|
)
|
|
$
|
(102
|
)
|
|
$
|
(91
|
)
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
Derivative Securities
|
|
|
Available-for-sale securities
|
|
|
|
Nine months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Balance, beginning of period
|
|
$
|
(1,142
|
)
|
|
$
|
(192
|
)
|
|
$
|
165
|
|
|
$
|
(357
|
)
|
Change before reclassification
|
|
|
1,241
|
|
|
|
(310
|
)
|
|
|
(267
|
)
|
|
|
272
|
|
Reclassification into net revenue, non-directly delivered programs
|
|
|
(99
|
)
|
|
|
(19
|
)
|
|
|
-
|
|
|
|
-
|
|
Reclassification into interest and dividend income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
Effect of incomes taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other comprehensive income (loss), net of income taxes
|
|
|
1,142
|
|
|
|
(329
|
)
|
|
|
(267
|
)
|
|
|
266
|
|
Balance, end of period
|
|
$
|
-
|
|
|
$
|
(521
|
)
|
|
$
|
(102
|
)
|
|
$
|
(91
|
)
|
7. Stock-Based Compensation
Under our former Stock Incentive Plan (the “Plan”), stock-based incentive compensation awards were granted to eligible employees and non-employee directors in the form of distribution equivalent rights, incentive stock options, non-qualified stock options, performance share awards, performance unit awards, restricted stock awards, restricted stock units awards, stock appreciation rights, tandem stock appreciation rights, unrestricted stock awards or any combination of the foregoing, as may be best suited to the circumstances of the particular employee, director or consultant. All stock-based incentive compensation awards were granted by the Compensation Committee of the Board of Directors.
In connection with the Company’s dissolution on October 23, 2015, the Plan was terminated and no shares remain outstanding or available for future stock-based compensation. In addition, all unexercised stock options issued under the Plan and previous incentive plans were terminated.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Stock Options
A summary of option activity under the Plan as of September 30, 2015, and the changes during the nine months then ended is presented below. No stock options were granted during the first nine months of 2015.
|
|
Stock
Options
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractual Life
(years)
|
|
Outstanding at December 31, 2014
|
|
|
551,409
|
|
|
$
|
6.05
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Forfeited / Expired
|
|
|
(324,885
|
)
|
|
|
6.08
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Outstanding at September 30, 2015
|
|
|
226,524
|
|
|
$
|
5.95
|
|
|
|
7.05
|
|
Exercisable at September 30, 2015
|
|
|
165,081
|
|
|
$
|
6.71
|
|
|
|
6.61
|
|
During the three and nine months ended September 30, 2015, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was zero. During the three and nine months ended September 30, 2014, the total intrinsic value of stock options exercised was zero and the total fair value of options which vested was $0.8 million. The aggregate intrinsic value of outstanding and exercisable stock options was zero, based on our $2.72 closing stock price at September 30, 2015.
Compensation expense recognized in the consolidated statement of operations for stock options was $49 thousand and $0.1 million for the three months ended September 30, 2015 and 2014, respectively, before the effect of income taxes. Compensation expense recognized in the consolidated statement of operations for stock options was $0.1 million and $0.5 million for the nine months ended September 30, 2015 and 2014, respectively, before the effect of income taxes.
As of September 30, 2015, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $0.1 million.
Restricted Stock Grants
A summary of the activity of non-vested restricted stock awards and restricted stock units under the Plan as of September 30, 2015, and the changes during the nine months then ended is presented below:
|
|
Restricted Stock Awards
|
|
|
Restricted Stock Units
|
|
|
Restricted
Stock Awards
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
|
Weighted-
Average
Remaining
Contractual Life
(years)
|
|
|
Restricted
Stock Units
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
|
Weighted-
Average
Remaining
Contractual
Life (years)
|
Balance at December 31, 2014
|
|
|
341,637
|
|
|
$
|
2.83
|
|
|
|
|
|
|
82,572
|
|
|
$
|
4.17
|
|
|
|
Granted
|
|
|
31,251
|
|
|
|
2.56
|
|
|
|
|
|
|
165,000
|
|
|
|
2.55
|
|
|
|
Forfeited
|
|
|
(33,971
|
)
|
|
|
5.06
|
|
|
|
|
|
|
(122,226
|
)
|
|
|
3.30
|
|
|
|
Vested
|
|
|
(140,646
|
)
|
|
|
3.01
|
|
|
|
|
|
|
(105,208
|
)
|
|
|
2.88
|
|
|
|
Balance at September 30, 2015
|
|
|
198,271
|
|
|
$
|
2.29
|
|
|
1.05
|
|
|
|
20,138
|
|
|
$
|
2.90
|
|
|
1.56
|
At September 30, 2015, the aggregate value of non-vested restricted stock awards and restricted stock units was $0.5 million and $0.1 million, respectively, before applicable income taxes, based on a $2.72 closing stock price. Compensation expense recognized in the consolidated statement of operations for restricted stock awards and units was $0.6 million and $0.8 million for the nine months ended September 30, 2015 and 2014, respectively, before the effect of income taxes.
As of September 30, 2015, total unrecognized stock-based compensation expense related to restricted stock awards and restricted stock units was approximately $0.4 million and $49 thousand, respectively.
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In connection with the terms of executive separation agreements and the Company’s dissolution on October 23, 2015, 214,461 restricted stock awards and units vested and all other remaining shares outstanding were cancelled.
Performance Stock Awards
Performance stock awards are based on achieving key internal metrics measured at the end of each fiscal year over a three year performance period. If performance objectives are achieved as determined by the Compensation Committee, common stock is granted. The fair value of these awards is determined on the date of grant based on our share price. A summary of the activity of performance stock units under the Plan as of September 30, 2015, and the changes during the nine months then ended is presented below:
|
|
Performance
Stock Units
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
|
Weighted-
Average
Remaining
Contractual Life
(years)
|
Balance at December 31, 2014
|
|
|
229,315
|
|
|
$
|
2.50
|
|
|
|
Granted
|
|
|
165,000
|
|
|
|
2.55
|
|
|
|
Forfeited
|
|
|
(173,074
|
)
|
|
|
2.80
|
|
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
Balance at September 30, 2015
|
|
|
221,241
|
|
|
$
|
2.30
|
|
|
2.19
|
Compensation expense recognized on the consolidated statement of operations for performance stock awards was $0.1 million for the nine months ended September 30, 2015. No compensation expense was recorded during the comparable 2014 period. As of September 30, 2015, there was $0.4 million of unrecognized compensation expense related to unvested performance share unit awards.
In connection with the Company’s dissolution on October 23, 2015 and at the discretion of the Compensation Committee, 115,000 performance stock awards vested and all other remaining shares outstanding were cancelled.
8. Discontinued Operations
In September 2014, we consummated the sale of BookRags for $5.0 million. All activities related to BookRags have been reflected as discontinued operations on our consolidated financial statements for the period ended September 30, 2014. There were no discontinued operations for the three or nine month periods ending September 30, 2015.
The following table summarizes the results of discontinued operations for the periods indicated (in thousands):
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
2015
|
|
|
September 30,
2014
|
|
|
September 30,
2015
|
|
|
September 30,
2014
|
|
Total revenue
|
|
$
|
-
|
|
|
$
|
545
|
|
|
$
|
-
|
|
|
$
|
2,608
|
|
Gross margin
|
|
$
|
-
|
|
|
$
|
472
|
|
|
$
|
-
|
|
|
$
|
2,285
|
|
Selling & marketing expenses
|
|
$
|
-
|
|
|
$
|
(53
|
)
|
|
$
|
-
|
|
|
$
|
(706
|
)
|
General & administrative expenses
|
|
$
|
-
|
|
|
$
|
(258
|
)
|
|
$
|
-
|
|
|
$
|
(679
|
)
|
Restructuring costs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(522
|
)
|
Impairment and gain (loss) on sale of discontinued operations
|
|
$
|
-
|
|
|
$
|
35
|
|
|
$
|
-
|
|
|
$
|
(9,676
|
)
|
Operating income (loss) from discontinued operations
|
|
$
|
-
|
|
|
$
|
196
|
|
|
$
|
-
|
|
|
$
|
(9,298
|
)
|
Income tax benefit on discontinued operations
|
|
$
|
-
|
|
|
$
|
230
|
|
|
$
|
-
|
|
|
$
|
1,184
|
|
Net income (loss) from discontinued operations
|
|
$
|
-
|
|
|
$
|
426
|
|
|
$
|
-
|
|
|
$
|
(8,114
|
)
|
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. Net Income (Loss) and Income (Loss) per Share
The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data):
`
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
4,730
|
|
|
$
|
1,912
|
|
|
|
11,331
|
|
|
|
(1,284
|
)
|
Income (loss) from discontinued operations
|
|
|
-
|
|
|
|
426
|
|
|
|
-
|
|
|
|
(8,114
|
)
|
Net income (loss)
|
|
$
|
4,730
|
|
|
$
|
2,338
|
|
|
$
|
11,331
|
|
|
$
|
(9,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
|
16,840
|
|
|
|
16,903
|
|
|
|
16,617
|
|
|
|
16,827
|
|
Effect of unvested restricted stock awards considered participating securities
|
|
|
538
|
|
|
|
138
|
|
|
|
704
|
|
|
|
-
|
|
Weighted-average shares outstanding - basic
|
|
|
17,378
|
|
|
|
17,041
|
|
|
|
17,321
|
|
|
|
16,827
|
|
Effect of diluted restricted stock
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
Weighted-average shares outstanding – diluted
|
|
|
17,378
|
|
|
|
17,046
|
|
|
|
17,321
|
|
|
|
16,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations - basic
|
|
|
0.27
|
|
|
|
0.11
|
|
|
|
0.65
|
|
|
|
(0.08
|
)
|
Loss from discontinued operations - basic
|
|
|
-
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
(0.48
|
)
|
Net income (loss) per share - basic
|
|
$
|
0.27
|
|
|
$
|
0.14
|
|
|
$
|
0.65
|
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations - diluted
|
|
|
0.27
|
|
|
|
0.11
|
|
|
|
0.65
|
|
|
|
(0.08
|
)
|
Loss from discontinued operations - diluted
|
|
|
-
|
|
|
|
0.03
|
|
|
|
-
|
|
|
|
(0.48
|
)
|
Net income (loss) per share - diluted
|
|
$
|
0.27
|
|
|
$
|
0.14
|
|
|
$
|
0.65
|
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options, restricted stock units, restricted stock awards, and performance share awards excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive
|
|
|
227
|
|
|
|
658
|
|
|
|
227
|
|
|
|
751
|
|
10. Supplemental Disclosures of Consolidated Statements of Cash Flows
Our non-cash investing and financing activities during the nine months ended September 30, 2015 and 2014 were as follows (in thousands):
|
|
September 30, 2015
|
|
|
September 30, 2014
|
|
Unrealized income (loss) on foreign currency exchange contracts
|
|
$
|
1,345
|
|
|
$
|
(329
|
)
|
Unrealized gain (loss) on available-for-sale securities
|
|
$
|
(267
|
)
|
|
$
|
265
|
|
AMBASSADORS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
11. Commitments and Contingencies
On October 8, 2015, a lawsuit was filed against the Company and Ambassador Programs, Inc. in the State of Missouri, docketed as People to People International v. Ambassadors Group, Inc. and Ambassador Programs, Inc., Case No. 1516-CV21344. The lawsuit alleges, among other things, that defendants breached Ambassador Programs, Inc.’s student and adult travel and exchange agreements with People to People International when the Company declared in its press release dated July 13, 2015 that it will cease operations and close its student and adult travel business by the end of 2015, and that Ambassadors Programs, Inc. further breached such agreements by allegedly withholding payment of license fees otherwise earned for the 2015 travel season. The lawsuit seeks, among other things, unspecified lost future profits through June 2020 and punitive damages for intentionally withholding the 2015 license fees, in addition to payment of plaintiff’s attorney fees and costs. The Company believes that the lawsuit is without merit and intends to defend itself vigorously. There can be no assurance, however, with regard to the outcome.
We are not a party to any other material pending legal proceedings, other than litigation incidental to the wind down of our business, the outcome of which we believe will not have a material adverse effect on our financial condition.
We are subject to the possibility of various loss contingencies, including claims, suits and complaints, arising in connection with the wind down of our business. We consider the likelihood of loss or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required.
Under our Bylaws, our directors and officers have certain rights to indemnification by us against certain liabilities that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which covers certain liabilities arising from our obligation to indemnify our directors and officers and former directors in certain circumstances. No material indemnification liabilities were accrued at September 30, 2015.
12. Subsequent Events
On October 13, 2015, the Company held a special meeting of stockholders (“the Special Meeting”) to seek approval for the voluntary dissolution and liquidation pursuant to a plan of dissolution and liquidation. At the Special Meeting, the stockholders approved the voluntary dissolution and liquidation of the Company.
On October 23, 2015, the Company voluntarily delisted its common stock from NASDAQ, and at the close of business on October 23, 2015, the Company closed its stock transfer books and ceased recording transfers of shares of its common stock. The common stock and stock certificates evidencing the shares of common stock are no longer assignable or transferable on the Company’s books.
On October 23, 2015, the Company filed a certificate of dissolution with the Delaware Secretary of State in accordance with the plan of dissolution.
In connection with stockholder approval of the dissolution of the Company, the Board of Directors approved an initial liquidating distribution of $49.8 million, or $2.85 per share of common stock. The distribution was paid on or about October 29, 2015 to stockholders of record as of the close of business on October 23, 2015 (subject to clearance of trades effected through the close of business on October 23, 2015).
On October 20, 2015, in connection with the dissolution of the Company, Jefferson P. Gramm, Lisa O’Dell Rapuano, and Peter H. Kamin resigned as members of the Board of Directors. Philip B. Livingston is the sole member of the Board of Directors.
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements may appear throughout this report, including without limitation, statements in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. For a detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements, please refer to Item 1A Risk Factors disclosure in our Annual Report on Form 10-K filed on March 25, 2015. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
For many years, Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) has provided educational travel programs for students and adults. On July 13, 2015, we announced our plan to cease operations and close our student and adult travel business by the end of 2015. On October 13, 2015, the Company held a special meeting of stockholders (“the Special Meeting”) to seek approval for the voluntary dissolution and liquidation pursuant to a plan of dissolution and liquidation. At the Special Meeting, the stockholders approved the voluntary dissolution and liquidation of the Company, and on October 23, 2015, the Company was dissolved.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2015 with the Three and Nine Months Ended September 30, 2014
Consolidated financial results for the three and nine months ended September 30, 2015 and 2014 were as follows (in thousands):
|
|
Three Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
Total revenue
|
|
$
|
14,140
|
|
|
$
|
16,714
|
|
|
$
|
(2,574
|
)
|
|
|
-15
|
%
|
Cost of goods sold
|
|
|
3,151
|
|
|
|
3,372
|
|
|
|
(221
|
)
|
|
|
-7
|
%
|
Gross margin
|
|
|
10,989
|
|
|
|
13,342
|
|
|
|
(2,353
|
)
|
|
|
-18
|
%
|
Selling and marketing expenses
|
|
|
1,784
|
|
|
|
8,369
|
|
|
|
(6,585
|
)
|
|
|
-79
|
%
|
General and administrative expenses
|
|
|
2,186
|
|
|
|
2,418
|
|
|
|
(232
|
)
|
|
|
-10
|
%
|
Restructuring costs
|
|
|
-
|
|
|
|
217
|
|
|
|
(217
|
)
|
|
|
-100
|
%
|
Asset impairments
|
|
|
1,456
|
|
|
|
350
|
|
|
|
1,106
|
|
|
|
316
|
%
|
Operating income
|
|
|
5,563
|
|
|
|
1,988
|
|
|
|
3,575
|
|
|
|
180
|
%
|
Other income
|
|
|
142
|
|
|
|
82
|
|
|
|
60
|
|
|
|
73
|
%
|
Income before income tax provision
|
|
|
5,705
|
|
|
|
2,070
|
|
|
|
3,635
|
|
|
|
176
|
%
|
Income tax provision
|
|
|
(975
|
)
|
|
|
(158
|
)
|
|
|
(817
|
)
|
|
|
-517
|
%
|
Net income from continuing operations
|
|
$
|
4,730
|
|
|
$
|
1,912
|
|
|
$
|
2,818
|
|
|
|
147
|
%
|
Net income from discontinued operations
|
|
$
|
-
|
|
|
$
|
426
|
|
|
$
|
(426
|
)
|
|
|
100
|
%
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
Total revenue
|
|
$
|
33,891
|
|
|
$
|
38,761
|
|
|
$
|
(4,870
|
)
|
|
|
-13
|
%
|
Cost of goods sold
|
|
|
5,105
|
|
|
|
6,370
|
|
|
|
(1,265
|
)
|
|
|
-20
|
%
|
Gross margin
|
|
|
28,786
|
|
|
|
32,391
|
|
|
|
(3,605
|
)
|
|
|
-11
|
%
|
Selling and marketing expenses
|
|
|
9,378
|
|
|
|
20,868
|
|
|
|
(11,490
|
)
|
|
|
-55
|
%
|
General and administrative expenses
|
|
|
5,932
|
|
|
|
8,647
|
|
|
|
(2,715
|
)
|
|
|
-31
|
%
|
Restructuring costs
|
|
|
-
|
|
|
|
1,756
|
|
|
|
(1,756
|
)
|
|
|
-100
|
%
|
Asset impairments
|
|
|
1,501
|
|
|
|
2,350
|
|
|
|
(849
|
)
|
|
|
-36
|
%
|
Operating income (loss)
|
|
|
11,975
|
|
|
|
(1,230
|
)
|
|
|
13,205
|
|
|
|
1074
|
%
|
Other income
|
|
|
331
|
|
|
|
362
|
|
|
|
(31
|
)
|
|
|
-9
|
%
|
Income (loss) before income tax provision
|
|
|
12,306
|
|
|
|
(868
|
)
|
|
|
13,174
|
|
|
|
1518
|
%
|
Income tax provision
|
|
|
(975
|
)
|
|
|
(416
|
)
|
|
|
(559
|
)
|
|
|
-134
|
%
|
Net income (loss) from continuing operations
|
|
$
|
11,331
|
|
|
$
|
(1,284
|
)
|
|
$
|
12,615
|
|
|
|
982
|
%
|
Net loss from discontinued operations
|
|
$
|
-
|
|
|
$
|
(8,114
|
)
|
|
$
|
8,114
|
|
|
|
100
|
%
|
During the third quarter of 2015, we traveled 5,868 delegates compared to 6,808 delegates during the prior year quarter primarily due to lower delegates traveled on our Student Ambassadors programs. Total revenue from continuing operations was $14.1 million compared to $16.7 million in the prior year quarter. Gross margin from continuing operations during the quarter was $11.0 million compared to $13.3 million in the third quarter of 2014, and gross margin percentage was 34.1 percent compared to 33.7 percent in the prior year period.
During the nine months ended September 30, 2015, we traveled 13,124 delegates compared to 15,711 delegates during the same period in the prior year. Total revenue from continuing operations of $33.9 million compared to $38.8 million in the same period last year driven by the decline in travelers year-over-year. Gross margin from continuing operations for the nine months ended September 30, 2015 was $28.8 million from $32.4 million in the same period last year, with gross margin percentage at 36.3 percent compared to the prior year at 33.4 percent. The improved gross margin percentage is primarily due to stronger foreign exchange rates compared to the prior year. The prior year margin was also impacted negatively by an inventory write-down of $0.6 million.
Third quarter operating expenses from continuing operations were $5.4 million compared to $11.4 million in the prior year period, an improvement of $6.0 million year-over-year. The current period included a $1.5 million asset impairment charge and other associated expenditures, including severance and separation expenses, related to the wind-down of the business and its operations. Operating expenditures during the comparable nine month periods decreased $16.8 million year-over-year to $16.8 million recorded during the first nine months of 2015. Current period expenditures are lower due to actions taken in connection with downsizing the Company and ceasing our business, including less marketing spend, lower personnel expense based on headcount reductions, and lower overall spend across the organization year-over-year.
During the current three and nine month periods, we recorded income tax expense of $1.0 million related to forecasted taxable net income for the calendar year 2015. We anticipate utilizing our full net operating loss carry forward to offset taxable income for the calendar year 2015. The prior year periods include income tax benefits of $0.2 million for the three months ended September 30, 2014 and $0.4 million during the nine month period ended September 30, 2014, respectively.
Prior to September 2014, we operated BookRags, an education oriented research website, which provided study guides, lesson plans and other educational resources to students and teachers. This wholly-owned subsidiary was sold in September 2014, and results of operations have been reflected as discontinued operations for all periods presented.
During the third quarter of 2015, we reported net income of $4.7 million, or $0.27 per diluted share, compared to net income of $2.3 million, or $0.14 per share, during the third quarter of 2014. During the first nine months of 2015, we reported net income of $11.3 million, or $0.65 per diluted share, compared to a net loss of $9.4 million, or $0.56 per share, in the same period in 2014.
Key Performance Non-GAAP Financial Indicators
We analyze our performance on a net income, cash flow and liquidity basis in accordance with GAAP as well as on a non-GAAP operating, cash flow and liquidity basis referred to below as “non-GAAP operating results” or “non-GAAP cash flows and liquidity measures.” These measures and related discussions are presented as supplementary information in this analysis to enhance the readers’ understanding of, and highlight trends in, our core financial results. Any non-GAAP financial measure used by us should not be considered in isolation or as a substitute for measures of performance or liquidity prepared in accordance with GAAP.
Deployable Cash
We use deployable cash as a liquidity measure calculated as the sum of cash, cash equivalents, short-term available-for-sale securities and prepaid program costs and expenses, less the sum of accounts payable, accrued expenses and other short-term liabilities (excluding deferred taxes) and participant deposits. We believe the deployable cash measurement is useful in understanding cash available to deploy for current and future business opportunities, as it represents an estimate of excess cash available for capital deployment. This non-GAAP measure is based on conservative assumptions, such as all participants’ deposits being forfeited, and should not be construed as the maximum amount of cash sources available to run our business.
Deployable Cash Reconciliation (in thousands)
|
|
September 30,
|
|
|
December 31,
|
|
2015 |
|
|
2014 |
2014 |
Cash, cash equivalents and short-term available-for-sale securities
|
|
$
|
55,607
|
|
|
$
|
57,500
|
|
|
$
|
61,504
|
|
Prepaid program cost and expenses
|
|
|
772
|
|
|
|
17,918
|
|
|
|
1,335
|
|
Less: Participants’ deposits
|
|
|
(1,913
|
)
|
|
|
(42,865
|
)
|
|
|
(23,161
|
)
|
Less: Accounts payable / accruals / other liabilities
|
|
|
(2,089
|
)
|
|
|
(7,248
|
)
|
|
|
(2,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deployable cash
|
|
$
|
52,377
|
|
|
$
|
25,305
|
|
|
$
|
36,884
|
|
Free Cash Flow
Free cash flow is calculated as cash flow from operations less the purchase of property, equipment and intangible assets. Management believes this non-GAAP measure is useful to investors in understanding the cash generated or distributed within the current period for future use in operations.
Free Cash Flow Reconciliation (in thousands) |
|
Nine months ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
Net cash used in operating activities
|
|
|
(5,466
|
)
|
|
|
(1,712
|
)
|
|
|
(3,754
|
)
|
Purchase of property, equipment and intangibles
|
|
|
(488
|
)
|
|
|
(1,391
|
)
|
|
|
903
|
|
Free cash flow
|
|
$
|
(5,954
|
)
|
|
$
|
(3,103
|
)
|
|
$
|
(2,851
|
)
|
Liquidity and Capital Resources
Total assets at September 30, 2015 were $56.6 million compared to $66.5 million at December 31, 2014. Cash, cash equivalents and short-term available-for-sale securities increased $8.5 million to $55.6 million at September 30, 2015 compared to the balance at December 31, 2014. Total liabilities at September 30, 2015 were $4.0 million, including $1.9 million in participant deposits for fourth quarter 2015 travel.
Net cash used in operations was $5.5 million during the nine months ended September 30, 2015 compared to $1.7 million during the nine months ended September 30, 2014. This $3.8 million variance was primarily due to lower participant deposits due to a lower delegate count compared to 2014, partially offset by improved profitability year-over-year. Net cash provided by investing activities was $5.0 million during the first nine months of 2015 compared to net cash used in investing activities of $3.9 million during the first nine months of 2014.
On July 13, 2015, we announced our plan to cease operations and close our student and adult travel business by the end of 2015. Following stockholder approval of the dissolution of the Company, the Board of Directors approved an initial liquidating distribution of $49.8 million, or $2.85 per share of common stock. The distribution was paid on October 29, 2015 to stockholders of record as of the close of business on October 23, 2015.
Subject to uncertainties inherent in the winding up of its business, the Company may make one or more additional liquidating distributions, as the Company’s required contingency reserves may be released over time. However, no assurances can be made as to the ultimate amounts to be distributed, if any, or the timing of any such distributions. Any additional liquidating distributions will be made to the Company’s stockholders of record as of October 23, 2015, subject to clearance of trades effected through October 23, 2015.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported disclosures of assets, liabilities, revenue and expenses. Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business. We consider that our most critical accounting estimates are related to the valuation of available-for-sale securities, foreign currency exchange contracts, revenue recognition, and contingencies and litigation as they require us to make assumptions that may be highly uncertain at the time the accounting estimates were made and changes in them are reasonably likely to occur from period to period. There are other items within our consolidated financial statements that require estimation but are not deemed to be critical. Changes in estimates used in these and other items could have a material impact on our consolidated financial statements. For a more complete discussion, please refer to our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed on March 25, 2015.
Item 4. |
Controls and Procedures |
(a)
|
Evaluation of disclosure controls and procedures
|
As of September 30, 2015, the end of the period covered by this report, our chief executive officer and principal finance and accounting officer reviewed, evaluated and concluded that our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) were effective. These controls and procedures are designed to ensure information required to be disclosed in our Form 10-Q filed or submitted under the Exchange Act is recorded, processed, summarized, and reported on a timely basis, and has been accumulated and communicated to our management including our interim chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b)
|
Changes in internal control over financial reporting
|
In the nine months ended September 30, 2015, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
On various dates between May 2004 and May 2011, our Board of Directors authorized the repurchase of shares of our Common Stock in the open market or through private transactions (the “Repurchase Plan”). During the quarter ended September 30, 2015, there were no shares repurchased under the Repurchase Plan.
31.1 |
Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1) |
|
|
31.2
|
Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
|
|
|
32.1
|
Certification under Section 906 of the Sarbanes-Oxley Act of 2002. (2)
|
(1) Filed herewith.
(2) This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
AMBASSADORS GROUP, INC.
|
|
|
Date: November 16, 2015
|
By:
|
/s/ PHILIP B. LIVINGSTON
|
|
|
Philip B. Livingston
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
|
|
|
|
Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)
|
|
|
|
Certification under Section 906 of the Sarbanes-Oxley Act of 2002. (2)
|
(1) Filed herewith.
(2) This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
EXHIBIT 31.1
Certification required by Rule 13a-14(a) or Rule 15d-14(a) and under Section 302 of the Sarbanes-Oxley Act of 2002.
I, Philip B. Livingston, certify that:
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 of Ambassadors Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:
|
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 16, 2015
|
|
|
/s/ Philip B. Livingston
|
|
Philip B. Livingston
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
EXHIBIT 31.2
Certification required by Rule 13a-14(a) or Rule 15d-14(a) and under Section 302 of the Sarbanes-Oxley Act of 2002.
I, Lisa N. Netz, certify that:
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 of Ambassadors Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:
|
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 16, 2015
|
|
|
/s/ Lisa N. Netz
|
|
Lisa N. Netz
|
|
Vice President, Finance
|
|
(Principal Financial and Accounting Officer)
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ambassadors Group, Inc., (the "Company") on Form 10-Q for the period ending September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Philip B. Livingston, chief executive officer, and Lisa N. Netz, vice president, finance of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 16, 2015
|
/s/ Philip B. Livingston
|
|
Philip B. Livingston
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ Lisa N. Netz
|
|
Lisa N. Netz
|
|
Vice President, Finance
|
|
(Principal Financial and Accounting Officer)
|
Ambassadors (NASDAQ:EPAX)
Historical Stock Chart
From May 2024 to Jun 2024
Ambassadors (NASDAQ:EPAX)
Historical Stock Chart
From Jun 2023 to Jun 2024