8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

February 6, 2008

Delaware	No. 0-33347	91-1957010
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Dwight D. Eisenhower Building, 2001 S Flint Road, Spokane, WA 99224

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code

(509) 568-7800

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))  

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))  

Item 2.02 Results of Operations and Financial Condition.

On, February 6, 2008, Ambassadors Group, Inc. (the “Registrant”) issued a press release announcing the Registrant’s earnings for the year and fourth quarter ended December 31, 2007. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated by reference herein in its entirety.

The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1: Press Release, dated February 6, 2008

SIGNATURES

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 hereunto duly authorized.

	AM  AMBASSADORS GROUP, INC.
Date: February 6, 2008	By:  By:	/s/ Chadwick J. Byrd Chadwick J. Byrd Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release, dated February 6, 2008

EX-99.1

NEWS FOR IMMEDIATE RELEASE

February 6, 2008

CONTACT: Chadwick J. Byrd

(509)   568 - 7800

Ambassadors Group Reports 24 Percent Growth in Fully Diluted Earnings per Share for 2007

Spokane, WA – February 6, 2008

Ambassadors Group, Inc. (NASDAQ:EPAX), a leading provider of educational travel experiences, announced today $31.0 million net income and $1.55 fully diluted earnings per share for the year ended December 31, 2007, an increase from $26.7 million net income and $1.25 fully diluted earnings per share for the year ended December 31, 2006.

Jeff Thomas, president and chief executive officer of Ambassadors Group, Inc., said, “We are pleased with our results for 2007 and the 24 percent growth in earnings we are reporting.  In the past three months we have made numerous adjustments to our current marketing efforts that have proven positive in the face of a challenging economic environment. We will continue to develop these changes and new opportunities for growth as we head into the 2009 marketing season only a few months away.

We are committed to long-term organic growth while at the same time returning capital to our shareholders. In the fourth quarter of 2007, we repurchased approximately 303,000 shares for approximately $5.5 million and paid dividends of approximately $2.2 million. During 2007 in total, we allocated over $50.0 million back to our shareholders through our share repurchase and dividend programs.”

Ambassadors Group’s People to People Student Ambassador Programs provide international educational opportunities to a wide range of students and professionals. The company’s educational travel programs offer hands-on cultural experiences, behind-the-scenes access to people and places, and a range of outdoor adventures that combine to create life-changing educational experiences for students. The programs have provided international educational opportunities to students for close to 50 years.

Year Ended December 31, 2007

During 2007, we traveled 52,661 delegates compared to 43,075 delegates in 2006. Gross program receipts increased 26 percent to $277.3 million in 2007 from $219.5 million in 2006, while gross margin increased 24 percent to $96.0 million in 2007 from $77.5 million in 2006. The increase in gross program receipts and gross margin are primarily due to the 22 percent increase in delegates traveled during the year.  During 2007 and 2006, gross margin as a percent of gross receipts remained consistent at 35 percent.

Operating expenses were $54.2 million and $43.4 million for the years ended December 31, 2007 and 2006, respectively. This $10.9 million increase was attributable to expenses supporting the greater number of delegates traveling in 2007 and increased marketing expenses for 2008 travel programs. As a percent of gross receipts, operating expenses remained consistent at 20 percent during 2007 and 2006.

The resulting operating income was $41.8 million for the year ended December 31, 2007 compared to $34.1 million for the year ended December 31, 2006.

Other income decreased $0.6 million to $4.2 million for 2007 from $4.8 million in 2006. The decreased interest income was primarily due to lower interest income earned on lower cash, cash equivalents and available-for-sale security balances held during the year ended December 31, 2007 than those held during the year ended December 31, 2006.

Quarter Ended December 31, 2007

The fourth quarter 2007 net loss was $7.4 million, resulting in $0.39 loss per share. The comparable fourth quarter 2006 net loss was $5.4 million, or $0.26 loss per share.

Fourth quarter 2007 gross program receipts increased $1.0 million to $13.6 million from $12.6 million for the fourth quarter 2006. Gross margin decreased to $3.8 million from $4.7 million for the respective fourth quarters. The $0.9 million decrease in gross margin resulted primarily from lower margins as a percent of gross receipts due to a weaker U.S. dollar and the mix of programs traveling during the fourth quarter 2007 in comparison to those during the fourth quarter 2006. During the fourth quarters of 2007 and 2006, we traveled approximately 2,800 and 2,500 delegates, respectively.

For the quarters ended December 31, 2007 and 2006, operating expenses incurred were $15.6 million and $13.7 million, respectively. The $1.9 million increase resulted from additional selling and marketing costs associated with increased expenditures to enroll and retain 2008 delegates, costs associated with our negotiated lease termination, as well as the increased number of delegates traveling.

Cashflow and Balance Sheet

Total assets decreased 21 percent to $121.7 million from $154.0 million at December 31, 2007 and 2006, respectively. Cash, cash equivalents and available-for-sale securities were $85.0 million and $133.1 million, of which $42.7 million and $60.7 million represented participant deposits, on December 31, 2007 and 2006, respectively. The decrease in cash, cash equivalents and investments is primarily due to $41.2 million spent on repurchases of common stock during the year. Deployable cash (see definition on page 5 of press release) at December 31, 2007 and 2006 was $40.4 million and $67.9 million, respectively.

Cash provided by operations was $16.4 million during 2007, a $20.8 million decrease from $37.2 million in 2006. This decrease resulted from the net effect of increased year over year net income offset by decreased participant’s deposits for future travel.

Cash provided by investing activities was $9.7 million during 2007 and cash used in investing activities was $12.9 million during 2006, resulting from $35.4 million net sales of available-for-sale investments when comparing the two periods, and $12.8 million increase in purchases of property plant and equipment during 2007 in comparison to 2006. The increase in property, plant and equipment was primarily due to the construction of the Company’s new headquarters occupied in 2007.

Cash used in financing activities increased to $45.6 million from $14.4 million, primarily as a result of $41.2 million spent toward the Company’s stock repurchase plan during 2007, compared to $10.7 million spent in 2006. Additionally, distributed dividends increased $1.3 million, to $8.9 million in 2007 from $7.7 million in 2006.

Outlook

The Company also announced that as of January 31, 2008, its net enrolled participants for 2008 travel programs were 45,230, compared to 60,389 participants as of the same date last year for its 2007 programs. Net enrollments consist of all participants who have enrolled in the Company’s programs less those that have already withdrawn. The Company believes the 25 percent decrease in net enrollments for its 2008 programs will negatively impact its 2008 earnings; however, it is too early to assess the full extent of this impact.

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The following summarizes our statements of operations for the years and quarters ended December 31, 2007 and 2006 (in thousands, except per share amounts).

	UNAUDITED
	Year ended December 31,						Quarter ended December 31,
	2007			2006			2007			2006
Gross program receipts	$	277,346		$	219,451		$	13,552		$	12,599
Gross margin	$	96,045		$	77,482		$	3,779		$	4,704
Operating expenses:
Selling and marketing		38,943			31,638			9,877			8,713
General and administration		15,274			11,721			5,771			5,014
Total operating expenses		54,217			43,359			15,648			13,727
Operating income (loss)		41,828			34,123			(11,869	)		(9,023	)
Other income, net		4,172			4,755			835			1,129
Income(loss)before tax		46,000			38,878			(11,034	)		(7,894	)
Income tax (provision) benefit		(14,953	)		(12,186	)		3,612			2,468
Net income (loss)	$	31,047		$	26,692		$	(7,422	)	$	(5,426	)
Earnings (loss) per share – basic	$	1.60		$	1.30		$	(0.39	)	$	(0.26	)
Weighted average shares outstanding – basic		19,385			20,554			19,261			20,540
Earnings (loss) per share – diluted	$	1.55		$	1.25		$	(0.39	)	$	(0.26	)
Weighted average shares outstanding – diluted		20,094			21,393			19,261			20,540

Gross program receipts reflect total payments received by us for directly delivered and non-directly delivered programs. Gross program receipts less program pass-through expenses for non-directly delivered programs and cost of sales for directly delivered programs constitute our gross margins. For non-directly delivered programs, we do not actively deliver the operations of each program. For directly delivered programs, however, we organize and operate all activities including speakers, facilitators, events, accommodations and transportation.

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 program marketing.

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The following summarizes our balance sheets as of December 31, 2007 and 2006 (in thousands):

		UNAUDITED
		2007		2006
Assets
Cash and cash equivalents	$	17,281	$	36,784
Available-for-sale securities		67,713		96,350
Foreign currency exchange contracts		3,461		2,571
Prepaid program cost and expenses		3,624		3,786
Accounts receivable		641		675
Total current assets		92,720		140,166
Property and equipment, net		27,454		12,267
Deferred tax asset		1,338		1,328
Other assets		192		192
Total assets	$	121,704	$	153,953
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses	$	5,287	$	8,131
Participants’ deposits		42,723		60,651
Deferred tax liability		1,096		737
Current portion of long-term capital lease		187		191
Total current liabilities		49,293		69,710
Capital lease, long term		11		196
Total Liabilities		49,304		69,906
Stockholders’ equity		72,400		84,047
Total liabilities and stockholders’ equity	$	121,704	$	153,953

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The following summarizes our statements of cash flows for the years ended December 31, 2007 and 2006 (in thousands):

	UNAUDITED
	2007			2006
Cash flows from operating activities:
Net income	$	31,047		$	26,692
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,532			1,447
Deferred income tax provision (benefit)		(71	)		(748	)
Stock-based compensation		1,952			2,057
Excess tax benefit from stock-based compensation		(2,707	)		(2,376	)
Writedown of property and equipment		155			-
Equity in earnings on investment		-			(25	)
Change in assets and liabilities:
Prepaid program costs and expenses		162			(2,190	)
Accounts payable and accrued expenses		1,260			(230	)
Participants’ deposits		(17,928	)		13,188
Other current assets		34			(608	)
Net cash provided by operating activities		16,436			37,207
Cash flows from investing activities:
Net change in available-for-sale securities and other		28,948			(6,468	)
Purchase of property and equipment and other		(19,271	)		(6,455	)
Net cash provided by (used) in investing activities		9,677			(12,923	)
Cash flows from financing activities:
Dividend payment to shareholders		(8,940	)		(7,655	)
Repurchase of common stock		(41,163	)		(10,710	)
Proceeds from exercise of stock options		1,969			1,753
Excess tax benefit from stock-based compensation		2,707			2,376
Capital lease payments and other		(189	)		(180	)
Net cash used in financing activities		(45,616	)		(14,416	)
Net increase (decrease) in cash and cash equivalents		(19,503	)		9,868
Cash and cash equivalents, beginning of period		36,784			26,916
Cash and cash equivalents, end of period	$	17,281		$	36,784

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, 2007 and 2006 (in thousands):

	2007			2006
Cash, cash equivalents and available-for-sale securities	$	84,994		$	133,134
Prepaid program cost and expenses		3,624			3,786
Less:  Participants’ deposits		(42,723	)		(60,651	)
Less:  Accounts payable, accrued expenses, other liabilities		(5,474	)		(8,322	)
Total deployable cash	$	40,421		$	67,947

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Quarterly conference call and webcast

We will host a conference call to discuss fourth quarter and fiscal year 2007 results of operations on Thursday, February 7, 2008 at 8:30 a.m. Pacific Time. You may join the call by dialing 888-679-8033 then entering the pass code: 60380570. You may also join the call via the Internet at http://www.ambassadorsgroup.com/EPAX. For post-view access, you may dial 888-286-8010 with the pass code 58727897and follow the prompts, or visit our website http://www.ambassadorsgroup.com/EPAX. Post-view dial-in access will be available beginning February 7, 2008 at 1:30 p.m. until April 6, 2008. Post-view Webcast access will be available following the conference call through April 6, 2008.

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 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 met. For a more complete discussion of these and other factors, please refer to the Ambassadors Group, Inc. 10K filed March 9, 2007 and proxy filed April 2, 2007.

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