Ambassadors Group, Inc. (Nasdaq:EPAX), a leading provider of
educational travel experiences, announced $1.05 fully diluted
earnings per share for the year ended December 31, 2005, a 40
percent increase from $0.75 fully diluted earnings per share for
the year ended December 31, 2004. Net income for 2005 was $22.4
million compared to $15.6 million in 2004. Please note: On
September 15, 2005, we 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. Year Ended December 31, 2005
Gross program receipts increased 22 percent to $180.0 million in
2005 from $147.1 million in 2004, while net revenues increased 28
percent to $66.4 million in 2005 from $51.8 million in 2004. The
$14.6 million increase in net revenues is primarily the result of
traveling additional delegates, combined with increases in gross
margin (net revenues as a percentage of gross program receipts)
from 35 percent to 37 percent. The increase in margin was primarily
due to traveling efficient group sizes, negotiating savings within
program pass-through expenses, and the benefits associated with
receiving reprieve of certain goods and services tax. Operating
expenses were $35.8 million and $29.2 million for the years ended
December 31, 2005 and 2004, respectively. This $6.6 million
increase resulted from additional selling and tour promotion
expenses for our 2005 and 2006 travel programs and increased
personnel costs to support a greater number of delegates traveling.
As a percent of gross receipts, operating expenses remained
consistent with the previous year resulting in a 35 percent
operating income increase year over year. Operating income was
$30.7 million for the year ended December 31, 2005 compared to
$22.7 million for the year ended December 31, 2004. The operating
margin as a percent of net revenues for 2005 was 46 percent
compared to 44 percent the previous year. Other income increased
$1.6 million to $2.6 million for 2005 due to higher interest rates
and increased investment balances held during the year. Quarter
Ended December 31, 2005 The fourth quarter 2005 net loss was $4.8
million, resulting in $0.24 loss per share. The comparable fourth
quarter 2004 net loss was $4.1 million or $0.21 loss per share.
Fourth quarter 2005 gross program receipts increased to $10.3
million compared to $9.1 million for the fourth quarter 2004, and
net revenue increased to $4.1 million for the fourth quarter 2005
from $3.3 million for the fourth quarter 2004. The 24 percent
increase in net revenue resulted from traveling approximately 13
percent more delegates than the same quarter a year ago as well as
an increase in gross margins to 40 percent for the fourth quarter
of 2005 from 36 percent for the fourth quarter of 2004. For the
quarters ended December 31, 2005 and 2004, operating expenses
incurred were $11.8 million and $9.9 million, respectively. The
$1.9 million increase resulted from additional selling and tour
promotion costs associated with the increased number of delegates
traveling, as well as increased expenditures associated with plans
for continued growth in 2006. Cashflow and Balance Sheet Cash
provided by operations of $37.7 million was an increase of $9.8
million in comparison to 2004, as a result of increased earnings
and program activity. Cash used in investing activities decreased
by $7.2 million in the corresponding periods primarily due to the
timing of the purchase of short-term investments. Cash used in
financing activities increased slightly to $6.3 million from $5.8
million as a result of increased quarterly dividends and our common
stock repurchase plan. During 2005 and 2004, we distributed $5.7
million and $4.6 million in cash dividends to our shareholders, and
repurchased $3.7 million and $2.6 million of common stock,
respectively. Our cash, cash equivalents and available-for-sale
securities balances on December 31, 2005 and 2004, were $116.6
million and $87.6 million, of which $47.5 million and $38.6 million
represented participant deposits, respectively. Deployable cash
(see definition on final page of press release) at December 31,
2005 and 2004 was $61.9 million and $43.2 million, respectively.
Jeff Thomas, president and chief executive officer of Ambassadors
Group, Inc., said, "We are pleased to announce our 2005 financial
results. We achieved a 40 percent increase in our fully diluted
earnings per share while managing through a number of terrorist
attacks in the very cities where our delegates were traveling and
staying at the time. "To achieve these results, we continued to
execute against our long term plan: growth in our core programs
accompanied by growth in new program areas. Our financial metrics
reflect these efforts. Overall gross program receipts grew by 22
percent and net revenues grew by 28 percent. In addition, we were
able to take advantage of marketplace opportunities and increase
our gross margins from 35 percent to 37 percent. "At the same time
that we were growing our programs, we were challenged by terrorism.
During July, London suffered two attacks. In November, Amman,
Jordan, was bombed. During each of these attacks, we had delegates
on the ground in the impacted cities. Thankfully, none of our
delegates were injured in any way. We responded by implementing our
crisis plans immediately. Overall, the impact on our programs has
been minimal. "Once again, we believe that our flexibility and
learning capabilities, which we work to continually enhance, have
helped us to navigate turbulent times in our world. We continue to
believe that these short term challenges benefit our organization
in the long run by creating communication channels with our
audience, continually testing our skills within the workplace, and
underlining the importance of our mission: gaining global knowledge
through firsthand experience." Ambassadors Group, Inc. will host a
conference call to discuss results of operations for 2005, Friday,
February 10, 2006 at 8:00 a.m. Pacific Time. Interested parties may
join the call by dialing 866-578-5788, then entering the passcode
"Ambassadors Group". 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 85907713 and
follow the prompts, or visit the www.AmbassadorsGroup.com/EPAX
website. Replay access will be available beginning February 10,
2006, at 1:00 p.m. through February 17, 2006. Post-view web cast
access will be available following the conference call through
April 10, 2006. The following summarizes our statements of
operations for the years and quarters ended December 31, 2005 and
2004 (in thousands, except per share amounts). Certain prior-period
amounts have been reclassified to conform to current year financial
presentation. Such reclassification had no impact on previously
reported net income or stockholders' equity. -0- *T UNAUDITED
------------------- Years ended December 31, 2005 2004
------------------------ --------- -------- Gross program receipts
$179,950 $147,130 Net revenue $ 66,449 $ 51,824 Operating expenses:
Selling and tour promotion 27,574 22,616 General and administration
8,185 6,537 -------- -------- Total operating expenses 35,759
29,153 -------- -------- Operating income 30,690 22,671 Other
income, net 2,648 1,035 -------- -------- Income before tax 33,338
23,706 Income tax provision 10,928 8,059 -------- -------- Net
income $ 22,410 $ 15,647 ======== ======== Weighted average shares
outstanding - basic 20,311 20,090 Earnings per share - basic $ 1.10
$ 0.78 Weighted average shares outstanding - diluted 21,312 20,898
Earnings per share - diluted $ 1.05 $ 0.75 UNAUDITED
------------------ Three months ended December 31, 2005 2004
------------------------------- --------- -------- Gross program
receipts $ 10,285 $ 9,097 Net revenue $ 4,131 $ 3,319 Operating
expenses: Selling and tour promotion 8,153 6,874 General and
administration 3,640 3,013 -------- -------- Total operating
expenses 11,793 9,887 -------- -------- Operating loss (7,662)
(6,568) Other income, net 638 280 -------- -------- Loss before tax
(7,024) (6,288) Income tax benefit 2,209 2,139 -------- --------
Net loss $ (4,815) $ (4,149) ======== ======== Weighted average
shares outstanding - basic and diluted 20,470 20,130 Loss per share
- basic and diluted $ (0.24) $ (0.21) *T Gross program receipts
reflect total payments received by us for Company managed and
non-Company managed programs. Gross program receipts less program
pass-through expenses for non-Company managed programs and cost of
sales for Company managed programs constitute our net revenues. 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 December 31, 2005 and 2004 (in
thousands): -0- *T UNAUDITED ------------------ 2005 2004 --------
------- Assets ------ Cash and cash equivalents $ 26,916 $11,036
Available-for-sale securities 89,688 76,521 Foreign currency
exchange contracts - 2,609 Prepaid program cost and expenses 1,596
2,461 Deferred tax asset and other 955 123 -------- ------- Total
current assets 119,155 92,750 Property and equipment, net 5,140
3,911 Deferred income tax 584 735 Other assets 167 120 --------
------- Total assets $125,046 $97,516 ======== ======= Liabilities
and Stockholders' Equity ------------------------------------
Accounts payable and accrued expenses $ 6,022 $ 4,277 Other
liabilities 2,596 3,806 Foreign currency exchange contracts 1,896 -
Participants' deposits 47,463 38,608 Deferred tax liability - 723
Current portion of long-term capital lease 180 147 -------- -------
Total current liabilities 58,157 47,561 Capital lease, long term
387 454 -------- ------- Total Liabilities 58,544 48,015 --------
------- Stockholders' equity 66,502 49,501 -------- ------- Total
liabilities and stockholders' equity $125,046 $97,516 ========
======= *T The following summarizes our statements of cash flows
for the years ended December 31, 2005 and 2004 (in thousands): -0-
*T UNAUDITED ------------------ 2005 2004 ------------------ Cash
flows from operating activities: Net income $ 22,410 $ 15,647
Adjustments to reconcile net income: Depreciation &
amortization 1,175 962 Amortization of unearned compensation 455 45
Deferred income tax provision 132 894 Equity in earnings on
investment (11) - Changes in: Accounts receivable 57 110 Prepaid
program costs and expenses 865 (853) Accounts payable and accrued
expenses 3,854 713 Participants' deposits 8,855 10,388 --------
-------- Net cash provided by operating activities 37,792 27,906
Cash flows from investing activities: Net change in
available-for-sale securities (13,296) (20,919) Purchase of
property and equipment (2,260) (1,907) Purchase of investment (36)
(4) -------- -------- Net cash used in investing activities
(15,592) (22,830) Cash flows from financing activities: Dividend
payment to shareholders (5,729) (4,630) Repurchase of common stock
(3,740) (2,568) Proceeds from exercise of stock options 3,327 1,515
Capital lease payments (178) (142) -------- -------- Net cash used
in financing activities (6,320) (5,825) Net increase (decrease) in
cash and cash equivalents 15,880 (749) Cash and cash equivalents,
beginning of year 11,036 11,785 -------- -------- Cash and cash
equivalents, end of year $ 26,916 $ 11,036 ======== ======== *T
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. The following summarizes our
deployable cash as of December 31, 2005 and 2004 (in thousands):
-0- *T 2005 2004 -------- -------- Cash, cash equivalents and
available-for-sale securities $116,604 $ 87,557 Prepaid program
cost and expenses 1,596 2,461 Less: Participants' deposits (47,463)
(38,608) Less: Accounts payable, accruals and other liabilities
(8,798) (8,230) -------- -------- Total deployable cash $ 61,939 $
43,180 ======== ======== *T Business overview 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 November 8, 2005.
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