Ambassadors (NASDAQ:EPAX)
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Ambassadors Group Inc. (NASDAQ:EPAX), a leading provider
of educational travel experiences, announced third quarter fully
diluted earnings per share of $0.68 for the quarter ended September
30, 2005, an increase of 58 percent from $0.43 fully diluted earnings
per share for the same period one year ago. Net income for the third
quarter of 2005 was $14.6 million in comparison to $8.9 million for
the third quarter of 2004. For the nine months ended September 30,
2005, fully diluted earnings per share increased 35 percent, to $1.28
in 2005, compared to $0.95 for the first nine months of 2004. Net
income for the nine months ended September 30, 2005 was $27.2 million,
an increase of 37 percent from $19.8 million for the same period in
the prior year.
(Please note: On September 15, 2005, the Company implemented a two
for one stock split in the form of a 100 percent stock dividend. The
earnings per share calculations for all periods presented reflect the
increase in the number of common shares outstanding.)
Quarter Ended September 30, 2005
Gross program receipts increased 34 percent in the third quarter
of 2005 to $82.2 million from $61.2 million in the third quarter of
2004. Net revenue increased 42 percent in the third quarter of 2005 to
$30.4 million from $21.4 million in the same period of 2004. These
results were driven by an increase in the gross margin from 35 percent
for the third quarter of 2004 to 37 percent for the third quarter of
2005, as well as an increase in the number of delegates traveled, from
13,000 in the third quarter one year ago to 16,500 in the third
quarter of 2005.
Operating expenses were $9.7 million in the third quarter of 2005
compared to $8.1 million in the comparable quarter of 2004. This $1.6
million increase is attributable to expenses supporting a greater
number of delegates traveling and increased selling and tour promotion
expenses quarter over quarter. As a percent of gross receipts,
operating expenses decreased in the third quarter of 2005 to 12
percent compared to 13 percent in the third quarter of 2004.
Other income increased $0.5 million in the third quarter of 2005,
to $0.8 million from $0.3 million in the third quarter 2004, due to
higher interest rates and higher cash and short-term investment
balances during the quarter ended September 30, 2005.
Nine Months Ended September 30, 2005
For the nine months ended September 30, 2005, gross program
receipts increased 23 percent to $169.7 million from $138.0 million
for the same period in 2004. Net revenue increased 28 percent, to
$62.3 million from $48.5 million for the nine months ended September
30, 2005 and 2004, respectively. The increased gross program receipts
and net revenue resulted from 21 percent growth in the number of
delegates traveled year to date. In addition, the improvement from 35
percent gross margin in the first nine months of 2004 to 37 percent
gross margin for the first nine months of 2005 benefited the Company's
results.
Operating expenses for the nine months ended September 30, 2005
and 2004 were $24.0 and $19.3 million, respectively. The $4.7 million
increase was due primarily to additional selling and tour promotion
costs associated with the increased number of delegates traveling, as
well as higher expense levels associated with plans for continued
growth in 2006. As a percent of gross receipts, operating expenses
remained consistent at 14 percent for each of the nine months ended
September 30, 2005 and 2004.
Other income increased $1.2 million, to $2.0 million for the nine
months ended September 30, 2005 from $0.8 million for the nine months
ended September 30, 2004, due to higher interest rates and higher cash
and short-term investment balances during the nine months ended
September 30, 2005.
Cash provided by operations increased $7.9 million during the nine
months ended September 30, 2005 in comparison to the same time period
one year ago, as a result of increased net income and increased
program activity. Cash used in investing activities decreased by $6.4
million in the corresponding periods primarily due to the timing of
the purchase of available-for-sale securities. Cash used in financing
activities increased to $4.9 million from $4.6 million in the nine
months ended September 30, 2005 and 2004, as a result of our dividend
and common stock repurchase activity. During the nine months ended
September 30, 2005 and 2004, we distributed $4.0 million and $3.3
million in cash dividends to our shareholders, and repurchased $2.9
million and $2.2 million of common stock, respectively.
Cash, cash equivalents and available-for-sale securities increased
38 percent to $99.3 million from $72.1 million at September 30, 2005
and 2004, respectively. Deployable cash increased 40 percent over the
last year to $65.8 million from $46.8 million at September 30, 2005
and 2004, respectively (see definition and table on final page of this
press release).
Jeff Thomas, president and chief executive officer of Ambassadors
Group, Inc. stated, "We continue to focus on two areas of our Company:
operating results and capital deployment. Our operating results
continue to be driven by an emphasis on our brand, operational
excellence in all that we do, and continuously developing new
marketing efficiencies.
"Capital deployment programs have been strengthened. This quarter
we implemented a 2 for 1 stock split, an expansion of our share
repurchase plan, and a continuation of our dividend policy. We are
pleased that we have been able to undertake a set of actions that
enhance our returns to shareowners through multiple channels. In fact,
this year we have returned $6.9 million to shareowners through the
combination of our buyback program ($2.9 million) and the dividend
program ($4.0 million)."
We will host a conference call to discuss results of operations
and the outlook for 2005, Friday, October 14 at 8:30 a.m. Pacific
Time. Interested parties may join the call by dialing 800-798-2864,
then entering the pass code: 77708818. The conference call may also be
joined via the Internet at www.AmbassadorsGroup.com/EPAX. For replay
access, parties may dial 888-286-8010 with the pass code 58668971 and
follow the prompts, or visit the www.AmbassadorsGroup.com/EPAX
website. Replay access will be available beginning October 14 at 1:00
p.m. through October 21, 2005. Post-view web cast access will be
available following the conference call through December 22, 2005.
Ambassadors Group, Inc. is a leading educational travel
organization that organizes and promotes international and domestic
programs for students, athletes, and professionals. These programs
provide the opportunities for grade school, junior, and senior high
school students to visit foreign and domestic destinations to learn
about the history, government, economy and culture of such areas, as
well as for junior and senior high school athletes to participate in
international sports challenges. Our professional programs emphasize
meetings and seminars between participants and persons in similar
professions abroad. We are headquartered in Spokane, Washington, with
associates also in Denver, Colorado and Washington, D.C. In this press
release, "Company," "we," "us," and "our" refer to Ambassadors Group,
Inc.
Forward-Looking Statements
This press release contains forward-looking statements regarding
our actual and expected financial performance and the reasons for
variances between period-to-period results. Forward-looking
statements, which are included per the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, may involve known
and unknown risks, uncertainties and other factors that may cause our
actual results and performance in future periods to be materially
different from any future results or performance suggested by the
forward-looking statements in this release. Such forward-looking
statements speak only as of the date of this release and may not
reflect risks related to the conflict in the Middle East and
international unrest, outbreak of disease, conditions in the travel
industry, direct marketing environment, changes in economic conditions
and changes in the competitive environment. We expressly disclaim any
obligation to provide public updates or revisions to any
forward-looking statements found herein to reflect any changes in our
expectations or any change in events. Although we believe the
expectations reflected in such forward-looking statements are based
upon reasonable assumptions, we can give no assurance that our
expectations will be attained. For a more complete discussion of these
and other factors, please refer to the Ambassadors Group, Inc. 10K
filed March 14, 2005, proxy filed April 14, 2005, and 10Q filed August
9, 2005.
-0-
*T
The following summarizes our statements of operations for the quarters
ended September 30, 2005 and 2004 (in thousands, except per share
amounts):
UNAUDITED
--------------------
Quarter ended
September 30
--------------------
2005 2004
---------- ---------
Gross program receipts $ 82,161 $ 61,173
========== =========
Net revenue $ 30,447 $ 21,391
Operating expenses:
Selling and tour promotion 7,991 6,927
General and administration 1,754 1,203
---------- ---------
Total operating expenses 9,745 8,130
Operating income 20,702 13,261
Other income, net 765 250
---------- ---------
Income before tax 21,467 13,511
Income tax provision 6,855 4,593
---------- ---------
Net income $ 14,612 $ 8,918
========== =========
Earnings per share - basic $ 0.72 $ 0.44
---------- ---------
Weighted average shares outstanding - basic 20,336 20,094
Earnings per share - diluted $ 0.68 $ 0.43
---------- ---------
Weighted average shares outstanding - diluted 21,379 20,886
(Please note: On September 15, 2005, the Company implemented a two for
one stock split in the form of a 100 percent stock dividend. The
earnings per share calculations for all periods presented reflect the
increase in the number of common shares outstanding.)
The following summarizes our statements of operations for the nine
months ended September 30, 2005 and 2004 (in thousands, except per
share amounts):
UNAUDITED
---------------------
Nine months ended
September 30
---------------------
2005 2004
----------- ---------
Gross program receipts $ 169,665 $ 138,033
=========== =========
Net revenue $ 62,318 $ 48,505
Operating expenses:
Selling and tour promotion 19,421 15,742
General and administration 4,545 3,524
----------- ---------
Total operating expenses 23,966 19,266
Operating income 38,352 29,239
Other income, net 2,010 755
----------- ---------
Income before tax 40,362 29,994
Income tax provision 13,138 10,198
----------- ---------
Net income $ 27,224 $ 19,796
=========== =========
Earnings per share - basic $ 1.34 $ 0.99
----------- ---------
Weighted average shares outstanding - basic 20,258 20,076
Earnings per share - diluted $ 1.28 $ 0.95
----------- ---------
Weighted average shares outstanding - diluted 21,303 20,842
(Please note: On September 15, 2005, the Company implemented a two for
one stock split in the form of a 100 percent stock dividend. The
earnings per share calculations for all periods presented reflect the
increase in the number of common shares outstanding.)
We have a single operating segment consisting of the educational
travel and sports programs for students, athletes and professionals.
These programs have similar economic characteristics and offer
comparable products to participants, as well as utilize similar
processes for the program marketing.
The following summarizes our balance sheets as of September 30, 2005,
September 30, 2004 and December 31, 2004 (in thousands):
UNAUDITED
---------------------------------
September 30, December 31,
------------------- -------------
2005 2004 2004
---------- -------- -------------
Assets
------
Cash and cash equivalents $ 22,670 $ 9,490 $ 11,036
Available-for-sale securities 76,649 62,610 76,521
Foreign currency exchange contracts - 503 2,609
Prepaid program costs and expenses 3,656 4,821 2,461
Other current assets 1,208 589 123
---------- -------- -------------
Total current assets 104,183 78,013 92,750
Property and equipment, net 5,032 3,857 3,911
Deferred tax asset 660 1,589 735
Other assets 161 116 120
---------- -------- -------------
Total assets $ 110,036 $ 83,575 $ 97,516
========== ======== =============
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable and accruals $ 13,821 $ 12,131 $ 4,277
Other liabilities 2,646 3,535 3,806
Foreign currency exchange contracts 1,142 - -
Participants' deposits 20,568 14,264 38,608
Deferred tax liability - 60 723
Current portion of long-term
capital lease 183 146 147
---------- -------- -------------
Total current liabilities 38,360 30,136 47,561
Capital lease, long term 401 491 454
---------- -------- -------------
Total liabilities 38,761 30,627 48,015
---------- -------- -------------
Stockholders' equity 71,275 52,948 49,501
---------- -------- -------------
Total liabilities and
stockholders' equity $ 110,036 $ 83,575 $ 97,516
========== ======== =============
The following summarizes our statements of cash flows for the nine
months ended September 30, 2005 and 2004 (in thousands):
UNAUDITED
-----------------------
Nine months ended
September 30
-----------------------
2005 2004
------------ ----------
Cash flows from operating activities:
Net income $ 27,224 $ 19,796
Adjustments to reconcile net income:
Depreciation & amortization 781 714
Amortization of unearned compensation 307 -
Deferred income tax provision - 75
Changes in:
Prepaid program costs and expenses (1,195) (3,213)
Accounts payable and accrued expenses 10,096 7,807
Participants' deposits (18,040) (13,956)
Other current assets (454) (356)
------------ ----------
Net cash provided by operating activities 18,719 10,867
Cash flows from investing activities:
Net cash change in available-for-sale
securities (193) (6,956)
Purchase of investment (41) -
Purchase of property and equipment (1,902) (1,605)
------------ ----------
Net cash used in investing activities (2,136) (8,561)
Cash flows from financing activities:
Dividend payment to shareholders (3,971) (3,314)
Repurchase of common stock (2,865) (2,204)
Proceeds from exercise of stock options 1,904 1,023
Capital lease payments (17) (106)
------------ ---------
Net cash used in financing activities (4,949) (4,601)
Net increase (decrease) in cash and cash
equivalents 11,634 (2,295)
Cash and cash equivalents, beginning of
period 11,036 11,785
------------ ----------
Cash and cash equivalents, end of period $ 22,670 $ 9,490
============ ==========
Certain prior-year amounts have been reclassified to conform with
current year financial statement presentation. Such reclassifications
had no impact on previously reported net income, operating cash flows
or stockholders' equity.
The following summarizes our deployable cash as of September 30, 2005,
September 30, 2004 and December 31, 2004 (in thousands):
UNAUDITED
----------------------------------------
September 30, September 30, December 31,
2005 2004 2004
------------- ------------- ------------
Cash, cash equivalents and
available-for-sale securities $99,319 $72,100 $87,557
Prepaid program cost and
expenses 3,656 4,821 2,461
Less: Participants' deposits (20,568) (14,264) (38,608)
Less: Accounts payable,
accruals, and other
liabilities (16,650) (15,812) (8,230)
------------- ------------- ------------
Deployable cash $65,757 $46,845 $43,180
============= ============= ============
Deployable cash is a non-GAAP liquidity measure. Deployable cash is
calculated as the sum of cash and cash equivalents, 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 foreign exchange currency contracts),
participant deposits and the current portion of long-term capital
lease. We believe this non-GAAP measure is useful to investors in
understanding the cash available to deploy for future business
opportunities.
*T