10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

OR

o 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.)

Dwight D. Eisenhower Building 2001 South Flint Road Spokane, WA (Address of Principal Executive Offices) 99224 (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.

þ Yes

o No

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).

þ Yes

o No

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):

o Large accelerated  filer

þ Accelerated filer

o Non-accelerated filer (Do not check if a smaller reporting company)

o Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes

þ No

The number of shares outstanding of the registrant’s Common Stock, $0.01 par value, as of October 31, 2013 was 16,983,331.

AMBASSADORS GROUP, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	23
PART II – OTHER INFORMATION
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 6. Exhibits	24
SIGNATURES	25
EXHIBIT INDEX

PART I

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of September 30, 2013 and December 31, 2012

(in thousands, except share and per share data)

	UNAUDITED			AUDITED
	September 30,			December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,775		$	6,150
Available-for-sale securities and other		36,240			32,122
Foreign currency exchange contracts		-			837
Prepaid program costs and expenses		7,090			17,217
Accounts receivable		1,022			850
Deferred tax assets		547			221
Total current assets		49,674			57,397
Property and equipment, net		18,948			26,344
Available-for-sale securities		717			723
Intangibles		3,529			3,565
Goodwill		9,781			9,781
Other long-term assets		82			85
Total assets	$	82,731		$	97,895
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	9,035		$	4,238
Participants’ deposits		9,847			25,735
Foreign currency exchange contracts		90			-
Other liabilities		94			111
Total current liabilities		19,066			30,084
Deferred tax liabilities		2,330			2,688
Total liabilities		21,396			32,772
Commitments and Contingencies (Note 12)
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; 16,983,331 and 17,047,470 shares issued and outstanding, respectively		170			170
Additional paid-in capital		196			-
Retained earnings		61,372			64,589
Accumulated other comprehensive gain (loss)		(403	)		364
Stockholders’ equity		61,335			65,123
Total liabilities and stockholders’ equity	$	82,731		$	97,895

The accompanying notes are an integral part of the consolidated financial statements.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the three and nine months ended September 30, 2013 and 2012

(in thousands, except per share amounts)

	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Net revenue, non-directly delivered programs	$	15,071		$	16,746		$	36,254		$	44,589
Gross revenue, directly delivered programs		6,296			4,783			10,460			9,008
Gross revenue, internet and advertising		910			903			2,938			3,106
Total revenue		22,277			22,432			49,652			56,703
Cost of sales, directly delivered programs		4,128			3,273			7,053			6,172
Cost of sales, internet and advertising		125			118			380			421
Gross margin		18,024			19,041			42,219			50,110
Operating expenses:
Selling and marketing		9,589			11,289			25,431			26,459
General and administrative		2,847			3,522			11,451			12,113
Restructuring costs		1,756			-			1,756			-
Asset impairments		6,461			-			6,461			-
Total operating expenses		20,653			14,811			45,099			38,572
Operating income (loss)		(2,629	)		4,230			(2,880	)		11,538
Other income (expense):
Interest and dividend income		71			595			358			1,454
Foreign currency and other income		1			(2	)		22			(5	)
Total other income		72			593			380			1,449
Income (loss) before income tax benefit (provision)		(2,557	)		4,823			(2,500	)		12,987
Income tax benefit (provision)		943			662			919			(1,210	)
Net Income (Loss)	$	(1,614	)	$	5,485		$	(1,581	)	$	11,777
Weighted-average common shares outstanding - basic		16,984			17,613			16,982			17,595
Weighted-average common shares outstanding - diluted		16,984			17,613			16,982			17,595
Net income (loss) per share - basic	$	(0.10	)	$	0.31		$	(0.09	)	$	0.67
Net income (loss) per share - diluted	$	(0.10	)	$	0.31		$	(0.09	)	$	0.67

The accompanying notes are an integral part of the consolidated financial statements.

-2-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For the three and nine months ended September 30, 2013 and 2012

(in thousands)

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net income (loss)	$	(1,614	)	$	5,485		$	(1,581	)	$	11,777
Unrealized gain (loss) on foreign currency exchange contracts, net of income tax benefit (provision) of ($112), ($363), $324 and ($762)		209			674			(603	)		1,414
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit (provision) of ($12), $92, $89 and $107		21			(171	)		(165	)		(198	)
Comprehensive income (loss)	$	(1,384	)	$	5,988		$	(2,349	)	$	12,993

The accompanying notes are an integral part of the consolidated financial statements.

-3-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the nine months ended September 30, 2013 and 2012

(in thousands)

	Nine months ended September 30,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	(1,581	)	$	11,777
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		4,088			3,786
Stock-based compensation		2,161			1,166
Deferred income tax provision (benefit)		(2,373	)		159
Loss on disposition and impairment of property and equipment		6,461			-
Excess tax shortfall from stock-based compensation		2,103			260
Change in assets and liabilities:
Accounts receivable and other assets		(169	)		576
Prepaid program costs and expenses		9,652			526
Accounts payable, accrued expenses, and other current liabilities		4,802			1,653
Participants’ deposits		(15,888	)		(20,003	)
Net cash provided by (used in) operating activities		9,256			(100	)
Cash flows from investing activities:
Purchase of available-for-sale securities		(27,297	)		(70,333	)
Proceeds from sale of available-for-sale securities		22,931			63,277
Purchase of property and equipment		(2,413	)		(4,589	)
Purchase of intangibles		(251	)		(418	)
Net cash used in investing activities		(7,030	)		(12,063	)
Cash flows from financing activities:
Repurchase of Common Stock		(486	)		-
Dividend payment to shareholders		(1,017	)		(3,166	)
Proceeds from exercise of stock options		5			-
Excess tax shortfall from stock-based compensation		(2,103	)		(260	)
Net cash used in financing activities		(3,601	)		(3,426	)
Net decrease in cash and cash equivalents		(1,375	)		(15,589	)
Cash and cash equivalents, beginning of period		6,150			19,519
Cash and cash equivalents, end of period	$	4,775		$	3,930

The accompanying notes are an integral part of the consolidated financial statements

-4-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) is an educational company primarily engaged in organizing and promoting differentiated worldwide travel programs for students and professionals.  In addition, we operate an education oriented research website, called BookRags.com, which provides study guides, lesson plans and other educational resources to students and teachers. These consolidated financial statements include the accounts of Ambassadors Group, Inc., and our wholly owned subsidiaries, Ambassador Programs, Inc., World Adventures Unlimited, Inc., Ambassadors Unlimited, LLC, AGI Hong Kong Limited, Beijing People to People Education Consultation Co., Ltd, Marketing Production Systems LLC, and BookRags, Inc (“BookRags”). All significant intercompany accounts and transactions, which are of a normal recurring nature, are eliminated in consolidation.

Our operations are organized in two reporting segments, 1) “Ambassador Programs and Other,” which provides educational travel services to students and professionals through multiple itineraries and corporate overhead, and 2) “BookRags,” which provides online research capabilities through book summaries, critical essays, online study guides, lesson plans, biographies, and references to encyclopedia articles.

 2. Basis of Presentation

The accompanying unaudited condensed 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, 2013 are not indicative of the results that may be expected for the year ending December 31, 2013.

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, 2012.

3. Summary of Significant Accounting Policies

Revenue Recognition

We invoice delegates in advance of travel, and payments made are recorded as deferred liabilities for participant deposits. The use of cash collected from participant deposits is not restricted by agreement or law, and therefore is not reported as restricted cash. We also pay for certain program costs in advance of travel, including but not limited to airfare, hotel, and transportation services. Those advanced payments are recorded as prepaid program costs.

For non-directly delivered programs, we do not actively manage the operations of each program, and therefore, recognize revenue and anticipated costs from these programs on a net basis within total revenue when travel programs begin. For directly delivered programs in which we organize and operate all activities, we recognize the gross revenue and cost of sales of these programs over the period the programs operate.

We charge administrative fees under our withdrawal policy for any delegate who enrolls on our programs but does not ultimately travel. The amount of the administrative fee will vary depending on when the withdrawal occurs. We recognize withdrawal fees concurrent with the revenue recognition from the related programs.

Revenue from fees charged to access internet content is recognized at the point of sale while advertising revenues are recognized in conjunction with an advertisement being viewed on the BookRags site. Revenue from subscriptions for website content access is deferred and recognized monthly over the term of the subscription. Cost of internet content sales include amortization of intangible assets and licensing agreement costs.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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 for the year ended December 31, 2012 on March 11, 2013.

 4. Restructuring Costs

During the third quarter of 2013, we initiated a corporate restructuring plan aimed at streamlining our cost structure and focusing our business on core Student Ambassador Programs in order to promote the long-term health of the organization. This plan includes restructuring the operations and programs associated with Discovery Student Education (“Discovery Student Adventures”) and terminating the operations associated with our Beijing office (“People to People – China”). The costs associated with this restructuring plan include contract termination fees associated with Discovery Student Adventures, asset impairments, and transition-related costs primarily comprised of charges for employee termination benefits, retention incentives during the transition period, and other operating costs incurred as part of the transition period. We anticipate all restructuring expenses to be recognized within six to twelve months of the initial implementation of the restructuring plan. All contract termination fees and transition-related expenses are classified on our consolidated statement of operations as restructuring costs. The costs associated with the impairment of assets as a result of the restructuring plan are classified as asset impairments in our consolidated statements of operations.

 The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of September 30, 2013 (in thousands):

	Contract Termination Fees		Transition-related costs			Total
Balance as of July 1, 2013	$	-	$	-		$	-
Restructuring costs incurred		1,550		206			1,756
Restructuring costs paid		-		(177	)		(177	)
Balance as of September 30, 2013	$	1,550	$	29		$	1,579

5. Asset Impairments

In April 2012, our Board of Directors approved the listing for sale of our corporate headquarters building located in Spokane, Washington. We intend to relocate our headquarters to a new leased location in Spokane upon sale. The initial listing price for the building and underlying land was $13.3 million. During the quarter ended September 30, 2013, we changed real estate brokers and lowered the listing price to $11.9 million.

Due to changes in market conditions, we lowered the carrying value of our corporate headquarters building during the quarter ended September 30, 2013. We will continue to classify the building as an asset held for use until the sale is probable within 12 months and it becomes unlikely that significant changes to the plan will be made.  In total, we recorded approximately $6.5 million in expenses to reflect the impairment of the building and other assets before the effect of income taxes. These costs are classified in our consolidated statements of operations as asset impairments

.

6. 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, intangible assets 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.

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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 following tables summarize the composition of our investments at September 30, 2013 and December 31, 2012 (in thousands):

								Classification on Balance Sheet
September 30, 2013	Amortized Cost			Unrealized Gains (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term  available-for-sale securities		Long-term available-for- sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(283	)	$	717	$	-	$	-	$	717
Money market funds, ninety days or less		269		-			269		269		-		-
Municipal securities1
Short term municipal securities funds2		27,343		(117	)		27,226		-		27,226		-
One year or less		775		3			778		-		778		-
After one year through three years		2,482		4			2,486		-		2,486		-
Greater than three years		5,879		(129	)		5,750		-		5,750		-
Total	$	37,748	$	(522	)	$	37,226	$	269	$	36,240	$	717
								Classification on Balance Sheet
December 31, 2012	Amortized Cost			Unrealized Gains  (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for- sale securities
ARS, greater than one year	$	1,000	$	(277	)	$	723	$	-	$	-	$	723
Money market funds, ninety days or less		1,150		-			1,150		1,150		-		-
Municipal securities1
Short term municipal securities funds2		26,095		(3	)		26,092		-		26,092		-
One year or less		790		2			792		-		792		-
After one year through three years		1,345		7			1,352		-		1,352		-
Greater than three years		3,884		2			3,886		-		3,886		-
Total	$	34,264	$	(269	)	$	33,995	$	1,150	$	32,122	$	723

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2Amounts include short-term municipal security funds that do not have a set maturity date.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Non-financial assets:
Property and equipment, net	$	10,954	$	-	$	-		$	10,954
			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	717	$	-	$	-		$	717
Money market funds		269		269		-			-
Municipal securities1		36,240		36,240		-			-
Foreign currency exchange contracts		116		-		116			-
Total financial assets	$	37,342	$	36,509	$	116		$	717
Financial liabilities:
Foreign currency exchange contracts		206		-		206			-
Total financial liabilities	$	206	$	-	$	206		$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2012	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	723	$	-	$	-		$	723
Money market funds		1,150		1,150		-			-
Municipal securities1		32,122		32,122		-			-
Foreign currency exchange contracts		952		-		952			-
Total financial assets	$	34,947	$	33,272	$	952		$	723
Financial liabilities:
Foreign currency exchange contracts		115		-		115			-
Total financial liabilities	$	115	$	-	$	115		$	-

1 At September 30, 2013, municipal securities consisted of a 75/14/11 percent split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. At December 31, 2012, municipal securities consisted of an 82/12/6 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at September 30, 2013 and December 31, 2012 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Money market funds and 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 equity prices, interest rate yield curve, option volatility and currency rates. Level 3 financial assets represent the fair value of our auction-rate securities (“ARS”) and the building housing our corporate headquarters. ARS were valued using a pricing model that takes into account the average life of the underlying collateral, the rate of return, and the spread used for similar issuances. The fair value of our corporate headquarters was determined using an expected cash flow model.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Fair value measurements on a recurring basis using Level 3 inputs consist of one available-for-sale ARS. The following table presents a reconciliation for the three and nine months ended September 30, 2013 and 2012, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2013		2012		2013			2012
Beginning balance	$	716	$	714	$	723		$	700
Total realized / unrealized losses:
Included in earnings		-		-		-			-
Included in OCI		1		5		(6	)		19
Sales and settlements		-		-		-			-
Transfers into Level 3, net		-		-		-			-
Ending balance	$	717	$	719	$	717		$	719

During the nine months ended September 30, 2013, we experienced one failed ARS auction, representing principal of $1.0 million. This ARS continues to be classified as a long-term asset due to the high probability that the ARS may fail in future auctions. The next scheduled auction for this ARS is March 6, 2014. We have determined that there is no other-than-temporary impairment on this security, since we do not intend and are not required to sell this security before we have recovered the amortized cost basis, there has been no further deterioration of the credit rating of this investment, interest payments at coupon rate continue to be received and we expect to recover the amortized cost basis of this security. We will continue to reassess liquidity in future reporting periods based on several factors, including the success or failure of future auctions, possible failure of the investment to be redeemed, deterioration of the credit rating of the investment, market risk and other factors.

In determining the fair value of bond and ARS investments, we consider the individual ratings of each holding. With regard to bonds, we consider the following: the underlying rating of the issuer irrespective of the insurance; the performance of the issuer; the term of the bond; and the quality of bond insurance provided by the rating of the bond insurer. With regard to valuation of our ARS, which is made up of student loans, we consider the underlying credit quality of comparable student loan portfolios and the average life of the underlying student loan assets and apply a discount related to the illiquidity of our ARS due to past failed auctions. Based on these inputs, we have applied a discount of 340-basis points to the London interbank offered rate resulting in a valuation of $0.7 million from a costs basis of $1.0 million as of September 30, 2013. At the reporting dates and in the future, we recognize that this investment is subject to general credit, liquidity, market and interest rate risks. The fair value of this investment accordingly will continue to change, and we will continue to evaluate its carrying value.

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AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Unrealized gains or losses related to available-for-sale securities are recorded in accumulated other comprehensive income (“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 income statement and recorded in interest and dividend income. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

 

	Accumulated Other Comprehensive Income (Loss)
	Available-for-sale securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(366	)	$	108		$	(180	)	$	135
Change before reclassification		(24	)		66			(216	)		193
Reclassification into interest and dividend (income) loss		70			(364	)		79			(602	)
Effect of incomes taxes		(25	)		127			(28	)		211
Other comprehensive income (loss), net of income taxes		21			(171	)		(165	)		(198	)
Balance, end of period	$	(345	)	$	(63	)	$	(345	)	$	(63	)

During the nine months ended September 30, 2013, the change in AOCI for available-for-sale securities was primarily due to a decline in the fair market value of debt securities resulting from an increase in market interest rates during the period.

7. Derivative Financial Instruments

The majority of our travel programs take place outside of the United States,  and most foreign suppliers require payment in currency other than the U.S. dollar. Accordingly, we are 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 use forward contracts that allow us to acquire the foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. All of our derivatives are cash flow hedges and at September 30, 2013, all contracts qualified for cash flow hedge accounting.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is 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; this is primarily during the second and third quarters of the year when our student travel programs occur. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At September 30, 2013, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		2,950	January 2014 - July 2014
Euro		1,200	January 2014 - March 2014
British pound		600	March 2014 - June 2014
Canadian dollar		550	March 2014 - June 2014

-10-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The fair value of our forward contracts were as follows (in thousands):

	September 30, 2013
	Derivatives designated as  hedging instruments					Total Net
	Assets		Liabilities			Liabilities
Forward contracts	$	116		$	206	$	90
					December 31, 2012
	Derivatives designated as hedging instruments					Total Net
	Assets			Liabilities		Assets
Forward contracts	$	952		$	115	$	837

The net asset and liability derivatives at September 30, 2013 and December 31, 2012 are reported in the consolidated balance sheet as current and long-term foreign currency exchange contracts.

Unrealized gains or losses related to derivative securities are recorded in AOCI. The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income 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 income statement and recorded in net revenue, non-directly delivered programs. When derivative securities designated as cash flow hedges are de-designated, a realized gain or loss is recognized, and the amount is reclassified from AOCI to the income statement and recorded in foreign currency and other expenses. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(267	)	$	(413	)	$	544		$	(1,153	)
Change before reclassification		253			233			(483	)		366
Reclassification into net revenue, non-directly delivered programs		(67	)		679			(185	)		1,613
Reclassification into foreign currency and other expenses		-			-			-			-
Effect of incomes taxes		23			(238	)		65			(565	)
Other comprehensive income (loss), net of income taxes		209			674			(603	)		1,414
Balance, end of period	$	(58	)	$	261		$	(58	)	$	261

8. Stock-Based Compensation

Under our 2013 Equity Participation Plan we have outstanding options to purchase shares of our Common Stock and restricted stock awards held by eligible employees, non-employee directors and consultants as granted by the Compensation Committee of the Board of Directors.

-11-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and nine months ended September 30, 2013 and 2012.

	Three months ended  September 30, 2013			Three months ended  September 30, 2012			Nine months ended  September 30, 2013			Nine months ended  September 30, 2012
Expected dividend yield1		-	%		4.44	%		1.37	%		4.40	%
Expected stock price volatility		-	%		60.41	%		54.66	%		60.75	%
Risk-free interest rate		-	%		1.58	%		2.08	%		1.74	%
Expected life of options		-	Years		4.47	Years		4.56	Years		4.47	Years
Estimated fair value per option granted		-		$	1.93		$	1.63		$	1.90

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

The dividend yield is based on expected quarterly cash dividends paid to our shareholders as of the date of grant. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Additionally, an annualized forfeiture rate of 14.0 percent is used as an estimate of future forfeitures based on our historical forfeiture experience. The stock-based compensation expense is adjusted in later periods if the actual forfeiture rate is different from the estimate.

Total stock-based compensation expense recognized in the consolidated statement of operations for the quarter ended September 30, 2013 was approximately $0.2 million before income taxes. Of the total stock-based compensation expense during the quarter, stock option expense was approximately $0.1 million and restricted stock award and restricted stock unit expense was approximately $0.1 million. Total stock-based compensation expense recognized in the consolidated statement of operations for the nine months ended September 30, 2013 was $2.2 million before income taxes. Of the total stock-based compensation expense recognized in 2013, stock option expense was $1.0 million and restricted stock award expense was $1.2 million.

The following table presents information about outstanding common stock options and restricted grants as of September 30, 2013:

			Options and Awards Outstanding				Options Exercisable
Range of Exercise Prices			Shares	Weighted-Average Remaining Contractual Life  (years)	Weighted-Average  Exercise Price		Shares	Weighted- Average Exercise Price
	Restricted Stock Awards
	$	0.00	252,483	2.18		N/A	N/A		N/A
	Stock Options
	$	3.47 - 6.93	544,590	8.91	$	4.53	62,164	$	4.87
		6.94 - 10.39	51,962	5.97		8.64	39,887		8.58
		10.40 - 13.86	127,650	6.15		11.40	85,284		11.47
		13.87 - 17.32	22,464	2.39		16.78	22,464		16.78
		17.33 - 20.79	5,496	4.61		18.41	5,496		18.41
		20.80 - 24.25	1,000	1.87		21.09	1,000		21.09
		24.26 - 27.72	6,500	2.35		26.96	6,500		26.95
		27.73 - 31.18	5,958	3.12		29.74	5,958		29.74
		31.19 - 34.65	3,711	3.59		34.65	3,711		34.65
Total Stock Options			769,331	7.90	$	6.96	232,464	$	11.20
Combined			1,021,814	6.49	$	5.24	232,464	$	11.20

At September 30, 2013, the aggregate value of restricted stock awards and restricted stock units was $0.9 million and the aggregate intrinsic value of outstanding and exercisable stock options was zero based on our $3.45 closing stock price at September 30, 2013. The intrinsic value is the amount that would have been received by the optionees had all restricted stock been vested and all stock options been exercised on that date. As of September 30, 2013, total unrecognized stock-based compensation expense related to non-vested stock options and non-vested restricted stock awards was approximately $1.4 million, which is expected to be recognized over approximately 3.68 years.

-12-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table presents information about stock option and restricted stock activity during the nine months ended September 30, 2013:

	Restricted Stock Awards and Units	Weighted-Average Grant Date Fair  Value		Stock Options	Weighted-Average Exercise Price
Balance at December 31, 2012	446,946	$	6.25	1,877,500	$	11.02
Granted	54,907		3.84	129,119		3.89
Forfeited	(10,436)		5.61	(1,236,167)		12.81
Vested	(249,107)		7.97	N/A		N/A
Exercised	N/A		N/A	(1,121)		4.52
Balance at September 30, 2013	242,310	$	5.79	769,331	$	6.95

9. Net Income (Loss) and Dividends per Share

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended   September 30,						Nine months ended   September 30,
	2013				2012		2013			2012
Numerator:
Net income (loss)		$	(1,614	)	$	5,485	$	(1,581	)	$	11,777
Denominator:
Weighted-average shares outstanding			16,741			17,219		16,703			17,201
Effect of unvested restricted stock awards considered participating securities			243			394		279			394
Weighted-average shares outstanding – basic			16,984			17,613		16,982			17,595
Effect of dilutive common stock options			-			-		-			-
Effect of dilutive restricted stock units			-			-		-			-
Weighted-average shares outstanding – diluted			16,984			17,613		16,982			17,595
Net income (loss) per share - basic		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Net income (loss) per share - diluted		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Cash dividends declared per share1		$	-		$	0.06	$	0.06		$	0.18
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive			782,000			1,209,000		1,319,000			1,346,000

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

-13-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

10. Segment Reporting

Ambassador Programs and Other’s gross margin is comprised of gross receipts less direct program costs, including accommodations, transportation, speakers, facilitators, and event costs. BookRags’ gross margin is comprised of content and subscription and advertising revenues via www.BookRags.com, less affiliate commissions and amortization of intangible assets directly associated with sales.

Segment information for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	Three months ended September 30, 2013									Three months ended September 30, 2012
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated					BookRags		Consolidated
Total revenue	$	21,367		$	910		$	22,277		$	21,529	$	903	$	22,432
Gross margin	$	17,239		$	785		$	18,024		$	18,256	$	785	$	19,041
Depreciation and amortization	$	1,230		$	141		$	1,371		$	1,236	$	138	$	1,374
Operating income (loss)	$	(2,878	)	$	249		$	(2,629	)	$	3,991	$	239	$	4,230
Income tax benefit (provision)	$	1,004		$	(61	)	$	943		$	569	$	93	$	662
Net income (loss)	$	(1,803	)	$	189		$	(1,614	)	$	5,131	$	354	$	5,485

	Nine months ended September 30, 2013									Nine months ended September 30, 2012
	Ambassador  Programs and Other1									Ambassador  Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	46,714		$	2,938		$	49,652		$	53,597		$	3,106		$	56,703
Gross margin	$	39,661		$	2,558		$	42,219		$	47,425		$	2,685		$	50,110
Depreciation and amortization	$	3,655		$	433		$	4,088		$	3,373		$	413		$	3,786
Operating income (loss)	$	(3,838	)	$	958		$	(2,880	)	$	10,480		$	1,058		$	11,538
Income tax benefit (provision)	$	1,269		$	(350	)	$	919		$	(1,110	)	$	(100	)	$	(1,210	)
Net income (loss)	$	(2,190	)	$	609		$	(1,581	)	$	10,767		$	1,010		$	11,777
Total additions to property and equipment, net	$	2,501		$	313		$	2,814		$	4,290		$	289		$	4,579
Total additions to intangibles	$	-		$	251		$	251		$	-		$	418		$	418
Intangibles	$	-		$	3,529		$	3,529		$	-		$	3,541		$	3,541
Total assets	$	67,672		$	15,059		$	82,731		$	87,940		$	17,295		$	105,235

1Ambassador Programs and Other include all travel programs offered by Ambassador Programs and World Adventures Unlimited as well as corporate overhead.

Any intercompany sales or services provided are eliminated upon consolidation.

11. Supplemental Disclosures of Consolidated Statements of Cash Flows

Our non-cash investing and financing activities during the nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	September 30,  2013			September 30,  2012
Unrealized income (loss) on foreign currency exchange contracts	$	(927	)	$	2,176
Unrealized loss on available-for-sale securities	$	(254	)	$	(305	)
Property and equipment	$	(22	)	$	(10	)

-14-

AMBASSADORS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

12.  Commitments and Contingencies

On February 25, 2013, Jeffrey D. Thomas, our former President and Chief Executive Officer, and Margaret M. Thomas, our former Executive Vice President, tendered their resignations to our Board of Directors. In connection with Mr. and Ms. Thomas’ resignations, we entered into separation agreements effective February 25, 2013. Under the terms of the separation agreements, cash payouts of approximately $0.8 million and $0.4 million were to be made to Mr. and Ms. Thomas, respectively, which were fully expensed during the first quarter of 2013. As of September 30, 2013, approximately $0.2 million in cash payments remained to be paid within the next six months under the terms of the agreements.

We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, the outcome of which we believe will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

We are subject to the possibility of various loss contingencies, including claims, suits and complaints, arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset 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 an asset has been impaired or 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, 2013.

-15-

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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “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 11, 2013. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Introduction

Ambassadors Group, Inc. is a leading provider of educational travel experiences and online education research materials primarily engaged in organizing and promoting worldwide educational travel programs for students through a direct to consumer revenue model. We operate student and adult travel programs primarily using the People to People brand under a long-term exclusive license agreement. We have been traveling students on People to People programs for over 50 years and have over 500,000 alumni. We believe that our association with that brand and experience in the educational travel industry give us both a strong awareness in the market and a high level of credibility.

Our core program offering under the People to People brand is international destination trips for U.S. students in the 11 to 17 year old age group (“Student Ambassador Program”). Student Ambassador Programs make up the majority of our program offerings and are the center of our strategic focus. However, under the People to People brand, we also offer domestic destination travel programs for U.S. students and international students from over 60 countries focused on leadership and education (“Leadership Ambassador Program”) as well as professional travel programs for adults (“Citizen Ambassador Program”). We have also operated domestic and international student programs associated with Discovery Student Education (“Discovery Student Adventures”) and in-bound travel programs out of our Beijing office for Chinese students traveling on U.S. destination trips (“People to People – China”). See discussion below within the ‘Executive Summary’ regarding third quarter 2013 restructuring expenses incurred in relation to these two program changes.

Lastly, we operate BookRags (www.bookrags.com), an education oriented research website, which provides study guides, lesson plans and other educational resources to students and teachers. The site attracts students and teachers each month to its millions of pages of content, which includes internally developed material, licensed material, and user-generated content.

Our operating results depend primarily on the number of travelers who attend our programs (“travelers” or “delegates”), the fees we are able to charge for each traveler, net of pass-through expenses associated with non-directly delivered programs such as airfare and third-party tour operator fees (“total revenue”), and the direct costs associated with the traveler’s itinerary on directly delivered programs including airfare, hotel charges, meal costs, event and location fees, chaperone costs, tour manager fees, and the cost of in-country travel (“cost of sales”). Our business is highly seasonal our gross revenue and cost of sales are typically at their highest levels in the second and third quarters. As part of our strategic realignment, we are shifting our marketing efforts towards a year-round approach,  which we expect will cause our sales and marketing expenses to shift correspondingly and not necessarily be incurred in the traditional third and fourth quarters of each fiscal year. Revenue associated with selling and marketing expenses are generally recognized in the second and third quarter of the following fiscal year upon delegate travel.

-16-

Executive Summary

We have completed our 2013 summer season with Student Ambassador Programs having traveled over 13,700 students and over 17,900 delegates over all programs during the nine months ended September 30, 2013. While we will continue our effort to safely travel the remainder of our delegates in the fourth quarter, including our new winter programs, our primary focus has shifted towards enrolling delegates for our 2014 programs. We are encouraged that our shift to a multi-channel marketing strategy is showing indications of improvement as year-over-year enrollments are slightly higher, as discussed further below under Net Enrollments. We are committed to a threefold strategy that consists of: implementing and executing a year-round multi-channel marketing approach; right-sizing the business to match our revenue base; and, finally, staying focused on our customers.

With regard to our multi-channel marketing approach, we continue to employ social media on a greater scale in our marketing efforts and to augment our traditional direct marketing approach. Therefore, we are focused on integrating both direct mail and social media as part of a true cross-channel marketing campaign at both lead generation and conversion. We believe this will give us greater flexibility as we emphasize selling to our customers year-round. Using our multi-channel approach, we began selling to our customers earlier than ever this year for the 2014 travel season. While it is still early in the campaign, enrollments to date are encouraging, and we believe this multi-channel approach is halting the decrease in delegate counts we have seen in the last few years.

We are highly committed to profitability and right-sizing our business to match our revenue stream and focusing on core People to People products. As previously discussed, during the third quarter of 2013 we recorded restructuring expenditures of $1.8 million to allow us to further direct our focus to our core People to People products. We have closed existing Discovery Student Adventure operations and will look at different ways to potentially partner with Discovery Education, as the existing model has not proven to be financially viable.In addition, we are unwinding our Beijing office and will pursue enrollments for in-bound China delegates through our Leadership Ambassador Programs and other partnerships. We believe these changes will ultimately allow us to operate with a more favorable cost structure as well as increase delegate counts.

We remain committed to staying close to our customers through our high touch engagement model. We believe we offer a premium product with strong brand value. Through consistent customer service based interaction with our customers, utilizing our multi-channel approach during the sales process all the way through and continuing after travel, we believe we are building a customer base of advocates for our brand. We believe that staying close to our customers will improve retention efforts as well as increase our brand presence in social media and ultimately increase future delegate travel and, therefore, profitability.

-17-

Results of Operations

Comparison of the Three Months Ended September 30, 2013 with the Three Months Ended September 30, 2012

Consolidated financial results for the three months ended September 30, 2013 and 2012 were as follows (in thousands):

	Three Months Ended September 30,
	2013			2012		$ Change			% Change
Total revenue	$	22,277		$	22,432	$	(155	)		-1	%
Cost of goods sold		4,253			3,391		862			25	%
Gross margin		18,024			19,041		(1,017	)		-5	%
Selling and marketing expenses		9,589			11,289		(1,700	)		-15	%
General and administrative expenses		2,847			3,522		(675	)		-19	%
Restructuring costs		1,756			-		1,756			100	%
Asset impairments		6,461			-		6,461			100	%
Operating income (loss)		(2,629	)		4,230		(6,859	)		-162	%
Other income		72			593		(521	)		-88	%
Income (loss) before income tax benefit		(2,557	)		4,823		(7,380	)		-153	%
Income tax benefit		943			662		281			42	%
Net income (loss)	$	(1,614	)	$	5,485	$	(7,099	)		-129	%

The decrease in total revenue during the three months ended September 30, 2013 compared to the same period in 2012 was primarily due to a 15 percent decline in Student Ambassador Program travelers, partially offset by an increase in Leadership Ambassador Program, Citizen Ambassador Program, Discovery Student Adventure, and People to People – China travelers for an overall two percent decline in total delegates traveled. Total revenue was also positively impacted by lower costs paid to vendors to deliver our non-directly delivered Student Ambassador Programs in the quarter ended September 30, 2013, compared to the same period in 2012, a result of more favorable foreign currency rates. The increase in cost of goods sold was primarily due to an increase in delegates traveling on directly delivered Leadership Ambassador Programs in the third quarter of 2013 compared to the same quarter in 2012. As a result of the overall decline in delegate counts, gross margin decreased approximately $1.0 million, or five percent, during the three months ended September 30, 2013 compared to the same period in 2012. Gross margin as a percentage of gross revenues was 37.7 and 35.5 percent during the quarters ended September 30, 2013 and 2012, respectively.

Selling and marketing expenses decreased approximately $1.7 million during the three months ended September 30, 2013 compared to the same period in 2012 mainly due to a shift in marketing spend forward to the second quarter of 2013. General and administrative expenses decreased approximately $0.7 million during the three months ended September 30, 2013 compared to the same period in 2012 due to an increase of capitalized compensation in the 2013 period to develop software, as well as a decline in personnel expenses related to a reduction in associate counts initiated in 2012. As discussed previously, we also incurred $6.5 million in asset impairment expense and $1.8 million in restructuring costs during the third quarter of 2013 that did not occur in 2012.

Other income decreased to $0.1 million during the three months ended September 30, 2013 from $0.6 million during the three months ended September 30, 2012, due to a decline in interest income earned on lower cash balances in 2013 and approximately $0.4 million in realized gains from the early sale of investments during 2012. Current results have also been negatively impacted by rising interest rates.

We recorded income tax benefits using effective income tax rates of 36.9 percent and 13.7 percent applied to pre-tax income for the three months ended September 30, 2013 and 2012, respectively. The difference from our statutory rate of 34 percent during 2013 was primarily due to the impact of tax exempt interest income on projected net loss for the year ending December 31, 2013. The difference from our statutory rate of 34 percent during 2012 was primarily due to an increase in the ratio of tax exempt interest income earned in relation to projected net income for the year ended December 31, 2012.

-18-

Comparison of the Nine Months Ended September 30, 2013 with the Nine Months Ended September 30, 2012

Consolidated financial results for the nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	Nine Months Ended September 30,
	2013			2012			$ Change			% Change
Total revenue	$	49,652		$	56,703		$	(7,051	)		-12	%
Cost of goods sold		7,433			6,593			840			13	%
Gross margin		42,219			50,110			(7,891	)		-16	%
Selling and marketing expenses		25,431			26,459			(1,028	)		-4	%
General and administrative expenses		11,451			12,113			(662	)		-5	%
Restructuring costs		1,756			-			1,756			100	%
Asset impairments		6,461			-			6,461			100	%
Operating income (loss)		(2,880	)		11,538			(14,418	)		-125	%
Other income		380			1,449			(1,069	)		-74	%
Income (loss) before income tax benefit (provision)		(2,500	)		12,987			(15,487	)		-119	%
Income tax benefit (provision)		919			(1,210	)		2,129			-176	%
Net income (loss)	$	(1,581	)	$	11,777		$	(13,358	)		-113	%

The decrease in total revenue during the nine months ended September 30, 2013 compared to 2012 was primarily due to a 15 percent decline in total delegates traveled, driven by a 21 percent decline in Student Ambassador Program travelers year-over-year. The increase in cost of goods sold was primarily due to a 12 percent increase in delegates traveling on our directly delivered Leadership Ambassador Programs during the nine months ended September 30, 2013 compared to 2012. Primarily a result of the decline in Student Ambassador Program delegate counts, gross margin decreased approximately $7.9 million, or 16 percent, during the nine months ended September 30, 2013 compared to the same period in 2012. Gross margin as a percentage of gross revenues was 37.3 and 36.4 percent during the nine months ended September 30, 2013 and 2012, respectively, reflective of the lower land vendor expense, a result of favorable foreign exchange rates compared to 2012.

Selling and marketing expenses decreased approximately $1.0 million during the nine months ended September 30, 2013 compared to the same period in 2012 primarily due to a planned reduction in marketing costs in 2013. General and administrative expenses decreased approximately $0.7 million during the nine months ended September 30, 2013 compared to the same period in 2012, primarily due to reduced personnel expenses associated with an increase in 2013 for compensation capitalized related to internally developed software, reduced personnel costs from reductions in our associate base initiated in 2012, and from approximately $1.5 million in one-time legal and other fees incurred in 2012 that did not re-occur in 2013. This was partially offset by a $2.7 million increase in general and administrative costs associated with separation payments made to former executives in 2013. As discussed above, we also incurred $6.5 million in asset impairment expense and $1.8 million in restructuring costs during the first nine months of 2013 that did not occur in the same period of 2012.

Other income decreased to approximately $0.4 million during the nine months ended September 30, 2013 from nearly $1.4 million during the nine months ended September 30, 2012, due to a decline in interest income earned on lower cash balances in 2013 and realized gains of $0.6 million from the sale of investments earned during 2012.

We recorded an income tax benefit using an effective income tax rate of 36.8 percent applied to pre-tax income for the nine months ended September 30, 2013. We recorded an income tax provision using an effective income tax rate of 9 percent applied to pre-tax income for the nine months ended September 30, 2012. The difference from our statutory rate of 34 percent during 2013 was primarily due to the impact of tax exempt interest income on projected net loss for the year ending December 31, 2013. The difference from our statutory rate of 34 percent during 2012 was primarily due to the impact of tax exempt interest income earned in relation to projected net income for the year ended December 31, 2012.

-19-

Results of Operations by Segment

Segment results of operations for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	Three months ended September 30, 2013									Three months ended September 30, 2012
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated					BookRags		Consolidated
Total revenue	$	21,367		$	910		$	22,277		$	21,529	$	903	$	22,432
Cost of goods sold		4,128			125			4,253			3,273		118		3,391
Gross margin		17,239			785			18,024			18,256		785		19,041
Selling and marketing expenses		9,224			365			9,589			10,937		352		11,289
General and administrative expenses		2,676			171			2,847			3,328		194		3,522
Restructuring costs		1,756			-			1,756			-		-		-
Asset impairments		6,461			-			6,461			-		-		-
Operating income (loss)		(2,878	)		249			(2,629	)		3,991		239		4,230
Other income		71			1			72			571		22		593
Income (loss) before income tax benefit (provision)		(2,807	)		250			(2,557	)		4,562		261		4,823
Income tax benefit (provision)		1,004			(61	)		943			569		93		662
Net income (loss)	$	(1,803	)	$	189		$	(1,614	)	$	5,131	$	354	$	5,485

	Nine months ended September 30, 2013									Nine months ended September 30, 2012
	Ambassador Programs and Other1									Ambassador Programs and Other1
					BookRags		Consolidated						BookRags			Consolidated
Total revenue	$	46,714		$	2,938		$	49,652		$	53,597		$	3,106		56,703
Cost of goods sold		7,053			380			7,433			6,172			421		6,593
Gross margin		39,661			2,558			42,219			47,425			2,685		50,110
Selling and marketing expenses		24,275			1,156			25,431			25,403			1,056		26,459
General and administrative expenses		11,007			444			11,451			11,542			571		12,113
Restructuring costs		1,756			-			1,756			-			-		-
Asset impairments		6,461			-			6,461			-			-		-
Operating income (loss)		(3,838	)		958			(2,880	)		10,480			1,058		11,538
Other income		379			1			380			1,397			52		1,449
Income (loss) before income tax benefit (provision)		(3,459	)		959			(2,500	)		11,877			1,110		12,987
Income tax benefit (provision)		1,269			(350	)		919			(1,110	)		(100	)	(1,210	)
Net income (loss)	$	(2,190	)	$	609		$	(1,581	)	$	10,767		$	1,010		11,777

1Ambassador Programs and Other include all travel programs offered by Ambassador Programs and World Adventures Unlimited as well as corporate overhead.

During the nine months ended September 30, 2013 compared to the same period of 2012, the decline in BookRags’ total revenue can be attributed to a decline in content revenue of approximately $0.3 million offset partially by an increase of approximately $0.1 million in advertising revenue. The decline in content revenue was primarily due to decreased traffic to the website experienced during the first nine months of 2013.

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.

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Net Enrollments

Net enrollments on a forward looking basis consist of all active participants, which we define as those who have enrolled in our programs, including travel that has already been completed, less those who have already withdrawn for the travel year referenced. This is a point in time measurement that we use as an indication of expected future gross revenues for our travel programs. Enrolled revenue consists of estimated gross receipts to be recognized in the future upon travel of an enrolled participant and may not result in the actual gross receipts eventually recognized due both to withdrawals from our programs and expected future enrollments. This non-GAAP measure relates to our travel programs only and does not include anticipated revenue for BookRags.

	As of October 27, 2013 and 2012
	Delegates
Enrollment detail for travel year	2014		2013		Change		% Change
Student Ambassadors		14,915		14,517		398		2.7	%
Total, all programs		17,298		17,004		294		1.7	%

Deployable Cash

We use deployable cash as a liquidity measure, which is 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,
	2013			2012			2012
Cash, cash equivalents and short-term available-for-sale securities	$	41,015		$	49,790		$	38,272
Prepaid program cost and expenses		7,090			12,773			17,217
Less: Participants’ deposits		(9,847	)		(7,393	)		(25,735	)
Less: Accounts payable / accruals / other liabilities		(9,129	)		(7,873	)		(4,349	)
Deployable cash	$	29,129		$	47,297		$	25,405

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,
	2013			2012			$ Change
Net cash provided by (used in) operating activities	$	9,256		$	(100	)		9,356
Purchase of property, equipment and intangibles		(2,664	)		(5,007	)		2,343
Free cash flow	$	6,592		$	(5,107	)		11,699

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Liquidity and Capital Resources

Total assets at September 30, 2013 were $82.7 million, of which 49.6 percent, or $41.0 million, were cash, cash equivalents and short-term available-for-sale securities. At September 30, 2012, total assets were $105.2 million, of which 47.3 percent, or $49.8 million, were cash, cash equivalents and short-term available-for-sale securities.

Net cash provided by operations was $9.3 million compared to net cash used in operations of $0.1 million during the nine months ended September 30, 2013 and 2012, respectively. This $9.4 million positive change was primarily due to the timing of a prepaid airline deposit made in the third quarter of 2012 that did not reoccur in the current period, a $4.0 million favorable change in participant deposits due to delegates enrolled earlier in 2013 compared to 2012 and additional payments made as a result, offset by decline in net income year-over-year.

Net cash used in investing activities was $7.0 million during the first nine months of 2013 compared to $12.1 million during the first nine months of 2012, primarily due to a reduction in the net purchases of available-for-sale securities year-over-year. Additionally, we reduced our cash used for the purchase of property and equipment and intangibles by approximately $2.3 million in the first nine months of 2013 compared to the same period of 2012.

Net cash used in financing activities was $3.6 million and $3.4 million during the nine months ended September 30, 2013 and 2012, respectively. The increase in cash used in financing activities was primarily due to excess tax benefits associated with the cancellation of expired stock compensation benefits and the repurchase of our common stock through buybacks and share surrenders.  Offsetting this was a reduction in cash used for dividends resulting from the suspension of quarterly dividends paid to shareholders announced during the second quarter of 2013.

Effective June 30, 2013, we amended our credit agreement with Wells Fargo Bank, National Association, modifying the principal amount available under our credit agreement and changing certain covenants. At September 30, 2013, we maintain an unsecured revolving line of credit with Wells Fargo Bank with an unused line of credit of $12.5 million. This line of credit is limited to 50 percent of deployable cash as defined above in “Key Performance Non-GAAP Financial Indicators.” In addition, our covenants also include a measurement of deployable cash greater than zero and a tangible net worth measurement greater than $40.0 million. At September 30, 2013, we were in compliance with all covenants. For additional information regarding our line of credit, please see our 8-K filed with the SEC on July 3, 2013.

We do not have any other material capital expenditure commitments for 2013. Our business is not capital intensive and we believe that existing cash and cash equivalents and cash flows from operations will be sufficient to fund our anticipated operating needs and capital expenditures through 2013. For additional information related to our contractual obligations, please refer to our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K filed on March 11, 2013.

Contractual Obligations

As discussed in Note 4, “Restructuring Costs”, as of September 30, 2013, we have accrued a buyout of our Discovery Education contract for approximately $1.6 million that we anticipate to pay in November 2013.  These costs were incurred as part of a corporate restructuring plan aimed at streamlining our cost structure and focusing our business on core Student Ambassador Programs in order to promote the long-term health of the organization.

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, valuation of goodwill, intangible assets, and long-lived assets, 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 11, 2013.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There has been no significant change to our market risks as discussed in ‘Market Risk,’ as part of Item 7, ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ in our Annual Report on Form 10-K filed on March 11, 2013.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

As of September 30, 2013, the end of the period covered by this report, our interim chief executive officer and chief financial 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, 2013, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1A. Risk Factors

The discussion of our business and operations should be read together with our risk factors, as discussed in Item 1A, ‘Risk Factors,’ contained in our Annual Report on Form 10-K filed on March 11, 2013 and those set forth below, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

Our financial results may suffer if we cannot successfully implement our restructuring plans and objectives.

We have described in this report a plan to terminate or realign certain operations and to take other measures that are intended to strengthen our company. We also described various impairment and restructuring charges related to this plan. If we fail to complete our restructuring plans timely and successfully, or if we fail to achieve the intended results, our financial condition, results of operations, and cash flows may be further impaired. This plan also may have an adverse impact upon the morale or motivation of our employees, or may prove distracting or may result in further distractions to our management. Any such outcomes, alone or in combination with other events or circumstances, may cause a decline in our stock price or may otherwise adversely affect an investment in our company.

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, 2013, there were no shares repurchased under the Repurchase Plan. As of September 30, 2013, approximately $13.1 million was available to repurchase shares of our Common Stock under the Repurchase Plan.

Item 6. Exhibits

10.1	Third Amendment to Credit Agreement by and between the registrant and Wells Fargo Bank, National Association incorporated by reference to the registrant’s Form 8-K filed July 3, 2013.
10.2	Second Modification to Revolving Line of Credit Note incorporated by reference to the registrant’s Form 8-K filed July 3, 2013.
31.1	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.

-24-

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 thereunto duly authorized.

	AMBASSADORS GROUP, INC.
Date: November 8, 2013	By:	/s/ ANTHONY F. DOMBROWIK
		Anthony F. Dombrowik,
		Interim Chief Executive Officer, Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

-25

EXHIBIT INDEX

10.1	Third Amendment to Credit Agreement by and between the registrant and Wells Fargo Bank, National Association incorporated by reference to the registrant’s Form 8-K filed July 3, 2013.
10.2	Second Modification to Revolving Line of Credit Note incorporated by reference to the registrant’s Form 8-K filed July 3, 2013.
31.1	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.

EX-31.1

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, Anthony F. Dombrowik, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 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 8, 2013 

/s/ Anthony F. Dombrowik

Anthony F. Dombrowik

Interim Chief Executive Officer,

Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

EX-32.1

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, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Anthony F. Dombrowik, interim chief executive officer and chief financial officer 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 8, 2013 

/s/ Anthony F. Dombrowik

Anthony F. Dombrowik

Interim Chief Executive Officer,

Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

XML

Segment Reporting

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

10. Segment Reporting

Ambassador Programs and Other’s gross margin is comprised of gross receipts less direct program costs, including accommodations, transportation, speakers, facilitators, and event costs. BookRags’ gross margin is comprised of content and subscription and advertising revenues via www.BookRags.com, less affiliate commissions and amortization of intangible assets directly associated with sales.

Segment information for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	Three months ended September 30, 2013									Three months ended September 30, 2012
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated					BookRags		Consolidated
Total revenue	$	21,367		$	910		$	22,277		$	21,529	$	903	$	22,432
Gross margin	$	17,239		$	785		$	18,024		$	18,256	$	785	$	19,041
Depreciation and amortization	$	1,230		$	141		$	1,371		$	1,236	$	138	$	1,374
Operating income (loss)	$	(2,878	)	$	249		$	(2,629	)	$	3,991	$	239	$	4,230
Income tax benefit (provision)	$	1,004		$	(61	)	$	943		$	569	$	93	$	662
Net income (loss)	$	(1,803	)	$	189		$	(1,614	)	$	5,131	$	354	$	5,485

	Nine months ended September 30, 2013									Nine months ended September 30, 2012
	Ambassador  Programs and Other1									Ambassador  Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	46,714		$	2,938		$	49,652		$	53,597		$	3,106		$	56,703
Gross margin	$	39,661		$	2,558		$	42,219		$	47,425		$	2,685		$	50,110
Depreciation and amortization	$	3,655		$	433		$	4,088		$	3,373		$	413		$	3,786
Operating income (loss)	$	(3,838	)	$	958		$	(2,880	)	$	10,480		$	1,058		$	11,538
Income tax benefit (provision)	$	1,269		$	(350	)	$	919		$	(1,110	)	$	(100	)	$	(1,210	)
Net income (loss)	$	(2,190	)	$	609		$	(1,581	)	$	10,767		$	1,010		$	11,777
Total additions to property and equipment, net	$	2,501		$	313		$	2,814		$	4,290		$	289		$	4,579
Total additions to intangibles	$	-		$	251		$	251		$	-		$	418		$	418
Intangibles	$	-		$	3,529		$	3,529		$	-		$	3,541		$	3,541
Total assets	$	67,672		$	15,059		$	82,731		$	87,940		$	17,295		$	105,235

1Ambassador Programs and Other include all travel programs offered by Ambassador Programs and World Adventures Unlimited as well as corporate overhead.

Any intercompany sales or services provided are eliminated upon consolidation.

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Net revenue, non-directly delivered programs	$ 15,071	$ 16,746	$ 36,254	$ 44,589
Gross revenue, directly delivered programs	6,296	4,783	10,460	9,008
Gross revenue, internet and advertising	910	903	2,938	3,106
Total revenue	22,277	22,432	49,652	56,703
Cost of sales, directly delivered programs	4,128	3,273	7,053	6,172
Cost of sales, internet and advertising	125	118	380	421
Gross margin	18,024	19,041	42,219	50,110
Operating expenses:
Selling and marketing	9,589	11,289	25,431	26,459
General and administrative	2,847	3,522	11,451	12,113
Restructuring costs	1,756	0	1,756	0
Asset impairments	6,461	0	6,461	0
Total operating expenses	20,653	14,811	45,099	38,572
Operating income (loss)	(2,629)	4,230	(2,880)	11,538
Other income (expense):
Interest and dividend income	71	595	358	1,454
Foreign currency and other income	1	(2)	22	(5)
Total other income	72	593	380	1,449
Income (loss) before income tax benefit (provision)	(2,557)	4,823	(2,500)	12,987
Income tax benefit (provision)	943	662	919	(1,210)
Net Income (Loss)	$ (1,614)	$ 5,485	$ (1,581)	$ 11,777
Weighted-average common shares outstanding - basic (in shares)	16,984	17,613	16,982	17,595
Weighted-average common shares outstanding - diluted (in shares)	16,984	17,613	16,982	17,595
Net income (loss) per share - basic (in dollars per share)	$ (0.10)	$ 0.31	$ (0.09)	$ 0.67
Net income (loss) per share - diluted (in dollars per share)	$ (0.10)	$ 0.31	$ (0.09)	$ 0.67

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

Revenue Recognition

We invoice delegates in advance of travel, and payments made are recorded as deferred liabilities for participant deposits. The use of cash collected from participant deposits is not restricted by agreement or law, therefore is not reported as restricted cash. We also pay for certain program costs in advance of travel, including but not limited to airfare, hotel, and transportation services. Those advanced payments are recorded as prepaid program costs.

For non-directly delivered programs, we do not actively manage the operations of each program, and therefore, recognize revenue and anticipated costs from these programs on a net basis within total revenue when travel programs begin. For directly delivered programs in which we organize and operate all activities, we recognize the gross revenue and cost of sales of these programs over the period the programs operate.

We charge administrative fees under our withdrawal policy for any delegate who enrolls on our programs but does not ultimately travel. The amount of the administrative fee will vary depending on when the withdrawal occurs. We recognize withdrawal fees concurrent with the revenue recognition from the related programs.

Revenue from fees charged to access internet content is recognized at the point of sale while advertising revenues are recognized in conjunction with an advertisement being viewed on the BookRags site. Revenue from subscriptions for website content access is deferred and recognized monthly over the term of the subscription. Cost of internet content sales include amortization of intangible assets and licensing agreement costs.

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 for the year ended December 31, 2012 on March 11, 2013.

XML

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation [Abstract]

Valuation assumptions

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and nine months ended September 30, 2013 and 2012.

	Three months ended  September 30, 2013			Three months ended  September 30, 2012			Nine months ended  September 30, 2013			Nine months ended  September 30, 2012
Expected dividend yield1		-	%		4.44	%		1.37	%		4.40	%
Expected stock price volatility		-	%		60.41	%		54.66	%		60.75	%
Risk-free interest rate		-	%		1.58	%		2.08	%		1.74	%
Expected life of options		-	Years		4.47	Years		4.56	Years		4.47	Years
Estimated fair value per option granted		-		$	1.93		$	1.63		$	1.90

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

Information about common stock options and restricted grants

The following table presents information about outstanding common stock options and restricted grants as of September 30, 2013:

			Options and Awards Outstanding				Options Exercisable
Range of Exercise Prices			Shares	Weighted-Average Remaining Contractual Life  (years)	Weighted-Average  Exercise Price		Shares	Weighted- Average Exercise Price
	Restricted Stock Awards
	$	0.00	252,483	2.18		N/A	N/A		N/A
	Stock Options
	$	3.47 - 6.93	544,590	8.91	$	4.53	62,164	$	4.87
		6.94 - 10.39	51,962	5.97		8.64	39,887		8.58
		10.40 - 13.86	127,650	6.15		11.40	85,284		11.47
		13.87 - 17.32	22,464	2.39		16.78	22,464		16.78
		17.33 - 20.79	5,496	4.61		18.41	5,496		18.41
		20.80 - 24.25	1,000	1.87		21.09	1,000		21.09
		24.26 - 27.72	6,500	2.35		26.96	6,500		26.95
		27.73 - 31.18	5,958	3.12		29.74	5,958		29.74
		31.19 - 34.65	3,711	3.59		34.65	3,711		34.65
Total Stock Options			769,331	7.90	$	6.96	232,464	$	11.20
Combined			1,021,814	6.49	$	5.24	232,464	$	11.20

Stock options and restricted stock stock activity

The following table presents information about stock option and restricted stock activity during the nine months ended September 30, 2013:

	Restricted Stock Awards and Units	Weighted-Average Grant Date Fair  Value		Stock Options	Weighted-Average Exercise Price
Balance at December 31, 2012	446,946	$	6.25	1,877,500	$	11.02
Granted	54,907		3.84	129,119		3.89
Forfeited	(10,436)		5.61	(1,236,167)		12.81
Vested	(249,107)		7.97	N/A		N/A
Exercised	N/A		N/A	(1,121)		4.52
Balance at September 30, 2013	242,310	$	5.79	769,331	$	6.95

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Supplemental Disclosures of Consolidated Statements of Cash Flows

9 Months Ended

Sep. 30, 2013

Supplemental Disclosures of Consolidated Statements of Cash Flows [Abstract]

Supplemental Disclosures of Consolidated Statements of Cash Flows

11. Supplemental Disclosures of Consolidated Statements of Cash Flows

Our non-cash investing and financing activities during the nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	September 30,  2013			September 30,  2012
Unrealized income (loss) on foreign currency exchange contracts	$	(927	)	$	2,176
Unrealized loss on available-for-sale securities	$	(254	)	$	(305	)
Property and equipment	$	(22	)	$	(10	)

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Supplemental Disclosures of Consolidated Statements of Cash Flows (Tables)

9 Months Ended

Sep. 30, 2013

Supplemental Disclosures of Consolidated Statements of Cash Flows [Abstract]

Non-cash investing and financing activities

Our non-cash investing and financing activities during the nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	September 30,  2013			September 30,  2012
Unrealized income (loss) on foreign currency exchange contracts	$	(927	)	$	2,176
Unrealized loss on available-for-sale securities	$	(254	)	$	(305	)
Property and equipment	$	(22	)	$	(10	)

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Financial information by reporting segment

Segment information for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands):

	Three months ended September 30, 2013									Three months ended September 30, 2012
	Ambassador Programs and Other1									Ambassador Programs and Other1
				BookRags			Consolidated					BookRags		Consolidated
Total revenue	$	21,367		$	910		$	22,277		$	21,529	$	903	$	22,432
Gross margin	$	17,239		$	785		$	18,024		$	18,256	$	785	$	19,041
Depreciation and amortization	$	1,230		$	141		$	1,371		$	1,236	$	138	$	1,374
Operating income (loss)	$	(2,878	)	$	249		$	(2,629	)	$	3,991	$	239	$	4,230
Income tax benefit (provision)	$	1,004		$	(61	)	$	943		$	569	$	93	$	662
Net income (loss)	$	(1,803	)	$	189		$	(1,614	)	$	5,131	$	354	$	5,485

	Nine months ended September 30, 2013									Nine months ended September 30, 2012
	Ambassador  Programs and Other1									Ambassador  Programs and Other1
				BookRags			Consolidated						BookRags			Consolidated
Total revenue	$	46,714		$	2,938		$	49,652		$	53,597		$	3,106		$	56,703
Gross margin	$	39,661		$	2,558		$	42,219		$	47,425		$	2,685		$	50,110
Depreciation and amortization	$	3,655		$	433		$	4,088		$	3,373		$	413		$	3,786
Operating income (loss)	$	(3,838	)	$	958		$	(2,880	)	$	10,480		$	1,058		$	11,538
Income tax benefit (provision)	$	1,269		$	(350	)	$	919		$	(1,110	)	$	(100	)	$	(1,210	)
Net income (loss)	$	(2,190	)	$	609		$	(1,581	)	$	10,767		$	1,010		$	11,777
Total additions to property and equipment, net	$	2,501		$	313		$	2,814		$	4,290		$	289		$	4,579
Total additions to intangibles	$	-		$	251		$	251		$	-		$	418		$	418
Intangibles	$	-		$	3,529		$	3,529		$	-		$	3,541		$	3,541
Total assets	$	67,672		$	15,059		$	82,731		$	87,940		$	17,295		$	105,235

1Ambassador Programs and Other include all travel programs offered by Ambassador Programs and World Adventures Unlimited as well as corporate overhead.

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Net Income (Loss) and Dividends per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Numerator [Abstract]
Net income (loss)	$ (1,614)		$ 5,485		$ (1,581)		$ 11,777
Denominator [Abstract]
Weighted-average shares outstanding (in shares)	16,741,000		17,219,000		16,703,000		17,201,000
Effect of unvested restricted stock awards considered participating securities (in shares)	243,000		394,000		279,000		394,000
Weighted-average shares outstanding - basic (in shares)	16,984,000		17,613,000		16,982,000		17,595,000
Weighted-average shares outstanding - diluted (in shares)	16,984,000		17,613,000		16,982,000		17,595,000
Net income (loss) per share - basic (in dollars per share)	$ (0.10)		$ 0.31		$ (0.09)		$ 0.67
Net income (loss) per share - diluted (in dollars per share)	$ (0.10)		$ 0.31		$ (0.09)		$ 0.67
Cash dividends declared per share (in dollars per share)	$ 0	[1]	$ 0.06	[1]	$ 0.06	[1]	$ 0.18	[1]
Stock options [Member]
Denominator [Abstract]
Effect of dilutive common stock options and restricted stock units (in shares)	0		0		0		0
Stock options and restricted stock units excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive	782,000		1,209,000		1,319,000		1,346,000
Restricted stock units [Member]
Denominator [Abstract]
Effect of dilutive common stock options and restricted stock units (in shares)	0		0		0		0

[1] The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

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Investments and Fair Value Measurements (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013 Investment		Sep. 30, 2012	Sep. 30, 2013 Investment		Sep. 30, 2012	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 37,748,000			$ 37,748,000			$ 34,264,000
Unrealized Gains (Losses)	(522,000)			(522,000)			(269,000)
Aggregate Fair Value	37,226,000			37,226,000			33,995,000
Cash and cash equivalents	269,000			269,000			1,150,000
Short-term available-for-sale securities	36,240,000			36,240,000			32,122,000
Long-term available-for-sale securities	717,000			717,000			723,000
Non-financial assets [Abstract]
Property and equipment, net	10,954,000			10,954,000
Financial assets [Abstract]
ARS	717,000			717,000			723,000
Money market funds	269,000			269,000			1,150,000
Municipal securities	36,240,000	[1]		36,240,000	[1]		32,122,000	[1]
Foreign currency exchange contracts	116,000			116,000			952,000
Total financial assets	37,342,000			37,342,000			34,947,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	206,000			206,000			115,000
Total financial liabilities	206,000			206,000			115,000
Short-term municipal security funds as a percentage of municipal securities (in hundredths)	75.00%			75.00%			82.00%
Municipal revenue bonds as a percentage of municipal securities (in hundredths)	14.00%			14.00%			12.00%
Municipal general obligation bonds as a percentage of municipal securities (in hundredths)	11.00%			11.00%			6.00%
Reconciliation of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs [Roll Forward]
Beginning balance	716,000		714,000	723,000		700,000
Total realized / unrealized losses [Abstract]
Included in earnings	0		0	0		0
Included in OCI	1,000		5,000	(6,000)		19,000
Sales and settlements	0		0	0		0
Transfers into Level 3, net	0		0	0		0
Ending balance	717,000		719,000	717,000		719,000
Number of investments that failed at auction	1			1
Principal amount of failed ARS auction	1,000,000			1,000,000
Basis points (in hundredths)	3.40%			3.40%
Valuation of Ars after discount has been applied	700,000			700,000
Cost basis	1,000,000			1,000,000
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period				364,000
Reclassification into interest and dividend income (loss)	71,000		595,000	358,000		1,454,000
Effect of incomes taxes	12,000		(92,000)	(89,000)		(107,000)
Balance, end of period	(403,000)			(403,000)
Available-for-sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period	(366,000)		108,000	(180,000)		135,000
Change before reclassification	(24,000)		66,000	(216,000)		193,000
Effect of incomes taxes	(25,000)		127,000	(28,000)		211,000
Other comprehensive income (loss), net of income taxes	21,000		(171,000)	(165,000)		(198,000)
Balance, end of period	(345,000)		(63,000)	(345,000)		(63,000)
Available-for-sale securities [Member] | Reclassification Out of Accumulated Other Comprehensive Income [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification into interest and dividend income (loss)	70,000		(364,000)	79,000		(602,000)
Quoted Prices in Active Markets for Identical Assets (Level 1)
Non-financial assets [Abstract]
Property and equipment, net	0			0
Financial assets [Abstract]
ARS	0			0			0
Money market funds	269,000			269,000			1,150,000
Municipal securities	36,240,000	[1]		36,240,000	[1]		32,122,000	[1]
Foreign currency exchange contracts	0			0			0
Total financial assets	36,509,000			36,509,000			33,272,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	0			0			0
Total financial liabilities	0			0			0
Significant Other Observable Inputs (Level 2) [Member]
Non-financial assets [Abstract]
Property and equipment, net	0			0
Financial assets [Abstract]
ARS	0			0			0
Money market funds	0			0			0
Municipal securities	0	[1]		0	[1]		0	[1]
Foreign currency exchange contracts	116,000			116,000			952,000
Total financial assets	116,000			116,000			952,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	206,000			206,000			115,000
Total financial liabilities	206,000			206,000			115,000
Significant Other Unobservable Inputs (Level 3) [Member]
Non-financial assets [Abstract]
Property and equipment, net	10,954,000			10,954,000
Financial assets [Abstract]
ARS	717,000			717,000			723,000
Money market funds	0			0			0
Municipal securities	0	[1]		0	[1]		0	[1]
Foreign currency exchange contracts	0			0			0
Total financial assets	717,000			717,000			723,000
Financial liabilities [Abstract]
Foreign currency exchange contracts	0			0			0
Total financial liabilities	0			0			0
Auction Rate Securities ("ARS"), Greater Than One Year [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,000,000			1,000,000			1,000,000
Unrealized Gains (Losses)	(283,000)			(283,000)			(277,000)
Aggregate Fair Value	717,000			717,000			723,000
Cash and cash equivalents	0			0			0
Short-term available-for-sale securities	0			0			0
Long-term available-for-sale securities	717,000			717,000			723,000
Money Market Funds, Ninety Days or Less [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	269,000			269,000			1,150,000
Unrealized Gains (Losses)	0			0			0
Aggregate Fair Value	269,000			269,000			1,150,000
Cash and cash equivalents	269,000			269,000			1,150,000
Short-term available-for-sale securities	0			0			0
Long-term available-for-sale securities	0			0			0
Short Term Municipal Securities Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	27,343,000	[2],[3]		27,343,000	[2],[3]		26,095,000	[2],[3]
Unrealized Gains (Losses)	(117,000)	[2],[3]		(117,000)	[2],[3]		(3,000)	[2],[3]
Aggregate Fair Value	27,226,000	[2],[3]		27,226,000	[2],[3]		26,092,000	[2],[3]
Cash and cash equivalents	0	[2],[3]		0	[2],[3]		0	[2],[3]
Short-term available-for-sale securities	27,226,000	[2],[3]		27,226,000	[2],[3]		26,092,000	[2],[3]
Long-term available-for-sale securities	0	[2],[3]		0	[2],[3]		0	[2],[3]
Municipal Securities Maturing in One Year or Less [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	775,000	[2],[3]		775,000	[2],[3]		790,000	[2],[3]
Unrealized Gains (Losses)	3,000	[2],[3]		3,000	[2],[3]		2,000	[2],[3]
Aggregate Fair Value	778,000	[2],[3]		778,000	[2],[3]		792,000	[2],[3]
Cash and cash equivalents	0	[2],[3]		0	[2],[3]		0	[2],[3]
Short-term available-for-sale securities	778,000	[2],[3]		778,000	[2],[3]		792,000	[2],[3]
Long-term available-for-sale securities	0	[2],[3]		0	[2],[3]		0	[2],[3]
Municipal Securities Maturing After One Year Through Three Years [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,482,000	[2]		2,482,000	[2]		1,345,000	[2]
Unrealized Gains (Losses)	4,000	[2]		4,000	[2]		7,000	[2]
Aggregate Fair Value	2,486,000	[2]		2,486,000	[2]		1,352,000	[2]
Cash and cash equivalents	0	[2]		0	[2]		0	[2]
Short-term available-for-sale securities	2,486,000	[2]		2,486,000	[2]		1,352,000	[2]
Long-term available-for-sale securities	0	[2]		0	[2]		0	[2]
Municipal Securities Maturing Greater Than Three Years [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,879,000	[2]		5,879,000	[2]		3,884,000	[2]
Unrealized Gains (Losses)	(129,000)	[2]		(129,000)	[2]		2,000	[2]
Aggregate Fair Value	5,750,000	[2]		5,750,000	[2]		3,886,000	[2]
Cash and cash equivalents	0	[2]		0	[2]		0	[2]
Short-term available-for-sale securities	5,750,000	[2]		5,750,000	[2]		3,886,000	[2]
Long-term available-for-sale securities	$ 0	[2]		$ 0	[2]		$ 0	[2]

[1] At September 30, 2013, municipal securities consisted of a 75/14/11 percent split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. At December 31, 2012, municipal securities consisted of an 82/12/6 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at September 30, 2013 and December 31, 2012 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

[2] Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

[3] Amounts include short-term municipal security funds that do not have a set maturity date.

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Net Income (Loss) and Dividends per Share (Tables)

9 Months Ended

Sep. 30, 2013

Net Income (Loss) and Dividends per Share [Abstract]

Reconciliation of basic and diluted income per share computations

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended   September 30,						Nine months ended   September 30,
	2013				2012		2013			2012
Numerator:
Net income (loss)		$	(1,614	)	$	5,485	$	(1,581	)	$	11,777
Denominator:
Weighted-average shares outstanding			16,741			17,219		16,703			17,201
Effect of unvested restricted stock awards considered participating securities			243			394		279			394
Weighted-average shares outstanding – basic			16,984			17,613		16,982			17,595
Effect of dilutive common stock options			-			-		-			-
Effect of dilutive restricted stock units			-			-		-			-
Weighted-average shares outstanding – diluted			16,984			17,613		16,982			17,595
Net income (loss) per share - basic		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Net income (loss) per share - diluted		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Cash dividends declared per share1		$	-		$	0.06	$	0.06		$	0.18
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive			782,000			1,209,000		1,319,000			1,346,000

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Unrealized gain (loss) on foreign currency exchange contracts, income tax benefit (provision)	$ (112)	$ (363)	$ 324	$ (762)
Unrealized gain (loss) on available-for-sale securities, income tax benefit (provision)	$ (12)	$ 92	$ 89	$ 107

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The Company

9 Months Ended

Sep. 30, 2013

The Company [Abstract]

The Company

1. The Company

Ambassadors Group, Inc. (the “Company”, “we”, “us” or “our”) is an educational company primarily engaged in organizing and promoting differentiated worldwide travel programs for students and professionals.  In addition, we operate an education oriented research website, called BookRags.com, which provides study guides, lesson plans and other educational resources to students and teachers. These consolidated financial statements include the accounts of Ambassadors Group, Inc., and our wholly owned subsidiaries, Ambassador Programs, Inc., World Adventures Unlimited, Inc., Ambassadors Unlimited, LLC, AGI Hong Kong Limited, Beijing People to People Education Consultation Co., Ltd, Marketing Production Systems LLC, and BookRags, Inc (“BookRags”). All significant intercompany accounts and transactions, which are of a normal recurring nature, are eliminated in consolidation.

Our operations are organized in two reporting segments, 1) “Ambassador Programs and Other,” which provides educational travel services to students and professionals through multiple itineraries and corporate overhead, and 2) “BookRags,” which provides online research capabilities through book summaries, critical essays, online study guides, lesson plans, biographies, and references to encyclopedia articles.

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Restructuring Costs

9 Months Ended

Sep. 30, 2013

Restructuring Costs [Abstract]

Restructuring Costs

4. Restructuring Costs

During the third quarter of 2013, we initiated a corporate restructuring plan aimed at streamlining our cost structure and focusing our business on core Student Ambassador Programs in order to promote the long-term health of the organization. This plan includes restructuring the operations and programs associated with Discovery Student Education (“Discovery Student Adventures”) and terminating the operations associated with our Beijing office (“People to People – China”). The costs associated with this restructuring plan include contract termination fees associated with Discovery Student Adventures, asset impairments, and transition-related costs primarily comprised of charges for employee termination benefits, retention incentives during the transition period, and other operating costs incurred as part of the transition period. We anticipate all restructuring expenses to be recognized within six to twelve months of the initial implementation of the restructuring plan. All contract termination fees and transition-related expenses are classified on our consolidated statement of operations as restructuring costs. The costs associated with the impairment of assets as a result of the restructuring plan are classified as asset impairments in our consolidated statements of operations.

 The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of September 30, 2013 (in thousands):

	Contract Termination Fees		Transition-related costs			Total
Balance as of July 1, 2013	$	-	$	-		$	-
Restructuring costs incurred		1,550		206			1,756
Restructuring costs paid		-		(177	)		(177	)
Balance as of September 30, 2013	$	1,550	$	29		$	1,579

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

2. Basis of Presentation

The accompanying unaudited condensed 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, 2013 are not indicative of the results that may be expected for the year ending December 31, 2013.

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, 2012.

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The Company (Details)	9 Months Ended
	Sep. 30, 2013 Segment
The Company [Abstract]
Number of reporting segments	2

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Derivative Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended					9 Months Ended			9 Months Ended			9 Months Ended			9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Derivative Securities [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2012 Derivative Securities [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2013 Derivative Securities [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2012 Derivative Securities [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2013 Derivative Securities [Member] Reclassification Out of Accumulated Other Comprehensive Income [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2012 Derivative Securities [Member] Reclassification Out of Accumulated Other Comprehensive Income [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2013 Derivative Securities [Member] Reclassification Out of Accumulated Other Comprehensive Income [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2012 Derivative Securities [Member] Reclassification Out of Accumulated Other Comprehensive Income [Member] Foreign Currency Exchange Contracts [Member]	Sep. 30, 2013 Designated as Hedging Instrument [Member]	Dec. 31, 2012 Designated as Hedging Instrument [Member]	Sep. 30, 2013 Euro [Member]	Sep. 30, 2013 Euro [Member] Minimum [Member]	Sep. 30, 2013 Euro [Member] Maximum [Member]	Sep. 30, 2013 Australian Dollar [Member]	Sep. 30, 2013 Australian Dollar [Member] Minimum [Member]	Sep. 30, 2013 Australian Dollar [Member] Maximum [Member]	Sep. 30, 2013 British Pound [Member]	Sep. 30, 2013 British Pound [Member] Minimum [Member]	Sep. 30, 2013 British Pound [Member] Maximum [Member]	Sep. 30, 2013 Canadian Dollar [Member]	Sep. 30, 2013 Canadian Dollar [Member] Minimum [Member]	Sep. 30, 2013 Canadian Dollar [Member] Maximum [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts															$ 1,200			$ 2,950			$ 600			$ 550
Derivative maturity date range																Jan. 31, 2014	Mar. 31, 2014		Jan. 31, 2014	Jul. 31, 2014		Mar. 31, 2014	Jun. 30, 2014		Mar. 31, 2014	Jun. 30, 2014
Derivatives, Fair Value [Line Items]
Forward contracts, assets													116	952
Forward contracts, liabilities													206	115
Total net forward contracts													90	837
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, beginning of period			364		(267)	(413)	544	(1,153)
Other Comprehensive Income Loss Before Reclassifications Before Tax					253	233	(483)	366
Net Revenue Non Directly Delivered Programs	15,071	16,746	36,254	44,589					(67)	679	(185)	1,613
Reclassification into foreign currency and other expenses	1	(2)	22	(5)					0	0	0	0
Effect of incomes taxes	112	363	(324)	762	23	(238)	65	(565)
Other comprehensive income (loss), net of income taxes					209	674	(603)	1,414
Balance, end of period	$ (403)		$ (403)		$ (58)	$ 261	$ (58)	$ 261

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified		3 Months Ended
	Sep. 30, 2013 Mr. and Ms. Thomas [Member]	Mar. 31, 2013 Mr. Thomas [Member]	Mar. 31, 2013 Ms. Thomas [Member]
Related Party Transaction [Line Items]
Cash payouts to be made under separation agreements		$ 0.8	$ 0.4
Cash payments remained to be paid	$ 0.2

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	16,983,331	17,047,470
Common stock, shares outstanding (in shares)	16,983,331	17,047,470

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2013

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

7. Derivative Financial Instruments

The majority of our travel programs take place outside of the United States,  and most foreign suppliers require payment in currency other than the U.S. dollar. Accordingly, we are 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 use forward contracts that allow us to acquire the foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. All of our derivatives are cash flow hedges and at September 30, 2013, all contracts qualified for cash flow hedge accounting.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is 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; this is primarily during the second and third quarters of the year when our student travel programs occur. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At September 30, 2013, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		2,950	January 2014 - July 2014
Euro		1,200	January 2014 - March 2014
British pound		600	March 2014 - June 2014
Canadian dollar		550	March 2014 - June 2014

The fair value of our forward contracts were as follows (in thousands):

	September 30, 2013
	Derivatives designated as  hedging instruments					Total Net
	Assets		Liabilities			Liabilities
Forward contracts	$	116		$	206	$	90
					December 31, 2012
	Derivatives designated as hedging instruments					Total Net
	Assets			Liabilities		Assets
Forward contracts	$	952		$	115	$	837

The net asset and liability derivatives at September 30, 2013 and December 31, 2012 are reported in the consolidated balance sheet as current and long-term foreign currency exchange contracts.

Unrealized gains or losses related to derivative securities are recorded in AOCI. The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income 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 income statement and recorded in net revenue, non-directly delivered programs. When derivative securities designated as cash flow hedges are de-designated, a realized gain or loss is recognized, and the amount is reclassified from AOCI to the income statement and recorded in foreign currency and other expenses. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(267	)	$	(413	)	$	544		$	(1,153	)
Change before reclassification		253			233			(483	)		366
Reclassification into net revenue, non-directly delivered programs		(67	)		679			(185	)		1,613
Reclassification into foreign currency and other expenses		-			-			-			-
Effect of incomes taxes		23			(238	)		65			(565	)
Other comprehensive income (loss), net of income taxes		209			674			(603	)		1,414
Balance, end of period	$	(58	)	$	261		$	(58	)	$	261

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net income (loss)	$ (1,614)	$ 5,485	$ (1,581)	$ 11,777
Unrealized gain (loss) on foreign currency exchange contracts, net of income tax benefit (provision) of ($112), ($363), $324 and ($762)	209	674	(603)	1,414
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit (provision) of ($12), $92, $89 and $107	21	(171)	(165)	(198)
Comprehensive income (loss)	$ (1,384)	$ 5,988	$ (2,349)	$ 12,993

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 4,775	$ 6,150
Available-for-sale securities and other	36,240	32,122
Foreign currency exchange contracts	0	837
Prepaid program costs and expenses	7,090	17,217
Accounts receivable	1,022	850
Deferred tax assets	547	221
Total current assets	49,674	57,397
Property and equipment, net	18,948	26,344
Available-for-sale securities	717	723
Intangibles	3,529	3,565
Goodwill	9,781	9,781
Other long-term assets	82	85
Total assets	82,731	97,895
Current liabilities:
Accounts payable and accrued expenses	9,035	4,238
Participants' deposits	9,847	25,735
Foreign currency exchange contracts	90	0
Other liabilities	94	111
Total current liabilities	19,066	30,084
Deferred tax liabilities	2,330	2,688
Total liabilities	21,396	32,772
Commitments and Contingencies (Note 12)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding	0	0
Common stock, $.01 par value; 50,000,000 shares authorized; 16,983,331 and 17,047,470 shares issued and outstanding, respectively	170	170
Additional paid-in capital	196	0
Retained earnings	61,372	64,589
Accumulated other comprehensive gain (loss)	(403)	364
Stockholders' equity	61,335	65,123
Total liabilities and stockholders' equity	$ 82,731	$ 97,895

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Restructuring Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Restructuring cost liability [Roll Forward]
Balance as of July 1, 2013	$ 0
Restructuring costs incurred	1,756	0	1,756	0
Restructuring costs paid	(177)
Balance as of September 30, 2013	1,579		1,579
Contract Termination Fees [Member]
Restructuring cost liability [Roll Forward]
Balance as of July 1, 2013	0
Restructuring costs incurred	1,550
Restructuring costs paid	0
Balance as of September 30, 2013	1,550		1,550
Transition related costs [Member]
Restructuring cost liability [Roll Forward]
Balance as of July 1, 2013	0
Restructuring costs incurred	206
Restructuring costs paid	(177)
Balance as of September 30, 2013	$ 29		$ 29

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Financial Instruments [Abstract]

Foreign currency contracts, by maturity

At September 30, 2013, the following forward contracts were outstanding (in thousands):

	Notional Amount		Matures
Forward contracts:
Australian dollar		2,950	January 2014 - July 2014
Euro		1,200	January 2014 - March 2014
British pound		600	March 2014 - June 2014
Canadian dollar		550	March 2014 - June 2014

Forward contracts, by hedging designation

The fair value of our forward contracts were as follows (in thousands):

	September 30, 2013
	Derivatives designated as  hedging instruments					Total Net
	Assets		Liabilities			Liabilities
Forward contracts	$	116		$	206	$	90
					December 31, 2012
	Derivatives designated as hedging instruments					Total Net
	Assets			Liabilities		Assets
Forward contracts	$	952		$	115	$	837

Summary of AOCI balances for Derivative Securities

For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

	Accumulated Other Comprehensive Income (Loss)
	Derivative Securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(267	)	$	(413	)	$	544		$	(1,153	)
Change before reclassification		253			233			(483	)		366
Reclassification into net revenue, non-directly delivered programs		(67	)		679			(185	)		1,613
Reclassification into foreign currency and other expenses		-			-			-			-
Effect of incomes taxes		23			(238	)		65			(565	)
Other comprehensive income (loss), net of income taxes		209			674			(603	)		1,414
Balance, end of period	$	(58	)	$	261		$	(58	)	$	261

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Segment Reporting Information [Line Items]
Total revenue	$ 22,277		$ 22,432		$ 49,652		$ 56,703
Gross margin	18,024		19,041		42,219		50,110
Depreciation and amortization	1,371		1,374		4,088		3,786
Operating income (loss)	(2,629)		4,230		(2,880)		11,538
Income tax benefit (provision)	943		662		919		(1,210)
Net income (loss)	(1,614)		5,485		(1,581)		11,777
Total additions to property and equipment, net					2,814		4,579
Total additions to intangibles					251		418
Intangibles	3,529		3,541		3,529		3,541		3,565
Total assets	82,731		105,235		82,731		105,235		97,895
Ambassador Programs and Other [Member]
Segment Reporting Information [Line Items]
Total revenue	21,367	[1]	21,529	[1]	46,714	[1]	53,597	[1]
Gross margin	17,239	[1]	18,256	[1]	39,661	[1]	47,425	[1]
Depreciation and amortization	1,230	[1]	1,236	[1]	3,655	[1]	3,373	[1]
Operating income (loss)	(28,780)	[1]	3,991	[1]	(3,838)	[1]	10,480	[1]
Income tax benefit (provision)	1,004	[1]	569	[1]	1,269	[1]	(1,110)	[1]
Net income (loss)	(1,803)	[1]	5,131	[1]	(2,190)	[1]	10,767	[1]
Total additions to property and equipment, net					2,501	[1]	4,290	[1]
Total additions to intangibles					0	[1]	0	[1]
Intangibles	0	[1]	0	[1]	0	[1]	0	[1]
Total assets	67,672	[1]	87,940	[1]	67,672	[1]	87,940	[1]
BookRags [Member]
Segment Reporting Information [Line Items]
Total revenue	910		903		2,938		3,106
Gross margin	785		785		2,558		2,685
Depreciation and amortization	141		138		433		413
Operating income (loss)	249		239		958		1,058
Income tax benefit (provision)	(61)		93		(350)		(100)
Net income (loss)	189		354		609		1,010
Total additions to property and equipment, net					313		289
Total additions to intangibles					251		418
Intangibles	3,529		3,541		3,529		3,541
Total assets	$ 15,059		$ 17,295		$ 15,059		$ 17,295

[1] Ambassador Programs and Other include all travel programs offered by Ambassador Programs and World Adventures Unlimited as well as corporate overhead.

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Supplemental Disclosures of Consolidated Statements of Cash Flows (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Non-cash financing and investing activities [Abstract]
Unrealized income (loss) on foreign currency exchange contracts	$ (927)	$ 2,176
Unrealized loss on available-for-sale securities	(254)	(305)
Property and equipment	$ (22)	$ (10)

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Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Investments and Fair Value Measurements [Abstract]

Investments and Fair Value Measurements

6. 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, intangible assets 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.

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 following tables summarize the composition of our investments at September 30, 2013 and December 31, 2012 (in thousands):

								Classification on Balance Sheet
September 30, 2013	Amortized Cost			Unrealized Gains (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term  available-for-sale securities		Long-term available-for- sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(283	)	$	717	$	-	$	-	$	717
Money market funds, ninety days or less		269		-			269		269		-		-
Municipal securities1
Short term municipal securities funds2		27,343		(117	)		27,226		-		27,226		-
One year or less		775		3			778		-		778		-
After one year through three years		2,482		4			2,486		-		2,486		-
Greater than three years		5,879		(129	)		5,750		-		5,750		-
Total	$	37,748	$	(522	)	$	37,226	$	269	$	36,240	$	717
								Classification on Balance Sheet
December 31, 2012	Amortized Cost			Unrealized Gains  (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for- sale securities
ARS, greater than one year	$	1,000	$	(277	)	$	723	$	-	$	-	$	723
Money market funds, ninety days or less		1,150		-			1,150		1,150		-		-
Municipal securities1
Short term municipal securities funds2		26,095		(3	)		26,092		-		26,092		-
One year or less		790		2			792		-		792		-
After one year through three years		1,345		7			1,352		-		1,352		-
Greater than three years		3,884		2			3,886		-		3,886		-
Total	$	34,264	$	(269	)	$	33,995	$	1,150	$	32,122	$	723

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

2Amounts include short-term municipal security funds that do not have a set maturity date.

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Non-financial assets:
Property and equipment, net	$	10,954	$	-	$	-		$	10,954
			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	717	$	-	$	-		$	717
Money market funds		269		269		-			-
Municipal securities1		36,240		36,240		-			-
Foreign currency exchange contracts		116		-		116			-
Total financial assets	$	37,342	$	36,509	$	116		$	717
Financial liabilities:
Foreign currency exchange contracts		206		-		206			-
Total financial liabilities	$	206	$	-	$	206		$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2012	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	723	$	-	$	-		$	723
Money market funds		1,150		1,150		-			-
Municipal securities1		32,122		32,122		-			-
Foreign currency exchange contracts		952		-		952			-
Total financial assets	$	34,947	$	33,272	$	952		$	723
Financial liabilities:
Foreign currency exchange contracts		115		-		115			-
Total financial liabilities	$	115	$	-	$	115		$	-

1 At September 30, 2013, municipal securities consisted of a 75/14/11 percent split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. At December 31, 2012, municipal securities consisted of an 82/12/6 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at September 30, 2013 and December 31, 2012 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Money market funds and 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 equity prices, interest rate yield curve, option volatility and currency rates. Level 3 financial assets represent the fair value of our auction-rate securities (“ARS”) and the building housing our corporate headquarters. ARS were valued using a pricing model that takes into account the average life of the underlying collateral, the rate of return, and the spread used for similar issuances. The fair value of our corporate headquarters was determined using an expected cash flow model.

Fair value measurements on a recurring basis using Level 3 inputs consist of one available-for-sale ARS. The following table presents a reconciliation for the three and nine months ended September 30, 2013 and 2012, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2013		2012		2013			2012
Beginning balance	$	716	$	714	$	723		$	700
Total realized / unrealized losses:
Included in earnings		-		-		-			-
Included in OCI		1		5		(6	)		19
Sales and settlements		-		-		-			-
Transfers into Level 3, net		-		-		-			-
Ending balance	$	717	$	719	$	717		$	719

During the nine months ended September 30, 2013, we experienced one failed ARS auction, representing principal of $1.0 million. This ARS continues to be classified as a long-term asset due to the high probability that the ARS may fail in future auctions. The next scheduled auction for this ARS is March 6, 2014. We have determined that there is no other-than-temporary impairment on this security, since we do not intend and are not required to sell this security before we have recovered the amortized cost basis, there has been no further deterioration of the credit rating of this investment, interest payments at coupon rate continue to be received and we expect to recover the amortized cost basis of this security. We will continue to reassess liquidity in future reporting periods based on several factors, including the success or failure of future auctions, possible failure of the investment to be redeemed, deterioration of the credit rating of the investment, market risk and other factors.

In determining the fair value of bond and ARS investments, we consider the individual ratings of each holding. With regard to bonds, we consider the following: the underlying rating of the issuer irrespective of the insurance; the performance of the issuer; the term of the bond; and the quality of bond insurance provided by the rating of the bond insurer. With regard to valuation of our ARS, which is made up of student loans, we consider the underlying credit quality of comparable student loan portfolios and the average life of the underlying student loan assets and apply a discount related to the illiquidity of our ARS due to past failed auctions. Based on these inputs, we have applied a discount of 340-basis points to the London interbank offered rate resulting in a valuation of $0.7 million from a costs basis of $1.0 million as of September 30, 2013. At the reporting dates and in the future, we recognize that this investment is subject to general credit, liquidity, market and interest rate risks. The fair value of this investment accordingly will continue to change, and we will continue to evaluate its carrying value.

Unrealized gains or losses related to available-for-sale securities are recorded in accumulated other comprehensive income (“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 income statement and recorded in interest and dividend income. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

 

	Accumulated Other Comprehensive Income (Loss)
	Available-for-sale securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(366	)	$	108		$	(180	)	$	135
Change before reclassification		(24	)		66			(216	)		193
Reclassification into interest and dividend (income) loss		70			(364	)		79			(602	)
Effect of incomes taxes		(25	)		127			(28	)		211
Other comprehensive income (loss), net of income taxes		21			(171	)		(165	)		(198	)
Balance, end of period	$	(345	)	$	(63	)	$	(345	)	$	(63	)

During the nine months ended September 30, 2013, the change in AOCI for available-for-sale securities was primarily due to a decline in the fair market value of debt securities resulting from an increase in market interest rates during the period.

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Asset Impairments (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Apr. 30, 2012
Asset Impairments [Abstract]
Initial listing price for land and building					$ 13,300,000
Changed listing price for land and building	11,900,000		11,900,000
Asset impairment charges	$ 6,461,000	$ 0	$ 6,461,000	$ 0

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Net Income (Loss) and Dividends per Share

9 Months Ended

Sep. 30, 2013

Net Income (Loss) and Dividends per Share [Abstract]

Net Income (Loss) and Dividends per Share

9. Net Income (Loss) and Dividends per Share

The following table presents a reconciliation of basic and diluted income (loss) per share computations (in thousands, except per share data and anti-dilutive stock option counts):

	Three months ended   September 30,						Nine months ended   September 30,
	2013				2012		2013			2012
Numerator:
Net income (loss)		$	(1,614	)	$	5,485	$	(1,581	)	$	11,777
Denominator:
Weighted-average shares outstanding			16,741			17,219		16,703			17,201
Effect of unvested restricted stock awards considered participating securities			243			394		279			394
Weighted-average shares outstanding – basic			16,984			17,613		16,982			17,595
Effect of dilutive common stock options			-			-		-			-
Effect of dilutive restricted stock units			-			-		-			-
Weighted-average shares outstanding – diluted			16,984			17,613		16,982			17,595
Net income (loss) per share - basic		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Net income (loss) per share - diluted		$	(0.10	)	$	0.31	$	(0.09	)	$	0.67
Cash dividends declared per share1		$	-		$	0.06	$	0.06		$	0.18
Stock options and restricted stock units excluded from the calculation of diluted earnings per share  because their effect would have been anti-dilutive			782,000			1,209,000		1,319,000			1,346,000

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

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Asset Impairments

9 Months Ended

Sep. 30, 2013

Asset Impairments [Abstract]

Asset Impairments

5. Asset Impairments

In April 2012, our Board of Directors approved the listing for sale of our corporate headquarters building located in Spokane, Washington. We intend to relocate our headquarters to a new leased location in Spokane upon sale. The initial listing price for the building and underlying land was $13.3 million. During the quarter ended September 30, 2013, we changed real estate brokers and lowered the listing price to $11.9 million.

Due to changes in market conditions, we lowered the carrying value of our corporate headquarters building during the quarter ended September 30, 2013. We will continue to classify the building as an asset held for use until the sale is probable within 12 months and it becomes unlikely that significant changes to the plan will be made. In total, we recorded approximately $6.5 million in expenses to reflect the impairment of the building  and other assets before the effect of income taxes. These costs are classified in our consolidated statements of operations as asset impairments.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ (1,581)	$ 11,777
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,088	3,786
Stock-based compensation	2,161	1,166
Deferred income tax provision (benefit)	(2,373)	159
Loss on disposition and impairment of property and equipment	6,461	0
Excess tax shortfall from stock-based compensation	2,103	260
Change in assets and liabilities:
Accounts receivable and other assets	(169)	576
Prepaid program costs and expenses	9,652	526
Accounts payable, accrued expenses, and other current liabilities	4,802	1,653
Participants' deposits	(15,888)	(20,003)
Net cash provided by (used in) operating activities	9,256	(100)
Cash flows from investing activities:
Purchase of available-for-sale securities	(27,297)	(70,333)
Proceeds from sale of available-for-sale securities	22,931	63,277
Purchase of property and equipment	(2,413)	(4,589)
Purchase of intangibles	(251)	(418)
Net cash used in investing activities	(7,030)	(12,063)
Cash flows from financing activities:
Repurchase of Common Stock	(486)	0
Dividend payment to shareholders	(1,017)	(3,166)
Proceeds from exercise of stock options	5	0
Excess tax shortfall from stock-based compensation	(2,103)	(260)
Net cash used in financing activities	(3,601)	(3,426)
Net decrease in cash and cash equivalents	(1,375)	(15,589)
Cash and cash equivalents, beginning of period	6,150	19,519
Cash and cash equivalents, end of period	$ 4,775	$ 3,930

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Stock-Based Compensation (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield (in hundredths)	0.00%	[1]	4.44%	[1]	1.37%	[1]	4.40%	[1]
Expected stock price volatility (in hundredths)	0.00%		60.41%		54.66%		60.75%
Risk-free interest rate (in hundredths)	0.00%		1.58%		2.08%		1.74%
Expected life of options			4 years 5 months 19 days		4 years 6 months 22 days		4 years 5 months 19 days
Estimated fair value per option granted (in dollars per share)	$ 0		$ 1.93		$ 1.63		$ 1.90
Fair value assumptions expected forfeiture rate (in hundredths)					14.00%
Stock-based compensation	$ 200,000				$ 2,161,000		$ 1,166,000
Options and Awards Outstanding Shares (in shares)	1,021,814				1,021,814
Weighted-Average Remaining Contractual Life (years)					6 years 5 months 26 days
Weighted-Average Exercise Price (in dollars per share)	$ 5.24				$ 5.24
Options Exercisable (in shares)	232,464				232,464
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 11.20				$ 11.20
Option outstanding, intrinsic value	0				0
Options exercisable, intrinsic value	0				0
Closing stock price (in dollars per share)	$ 3.45				$ 3.45
Unrecognized stock-based compensation expense	1,400,000				1,400,000
Unrecognized stock-based compensation expense recognition period					3 years 8 months 5 days
Restricted stock value	900,000				900,000
Restricted Stock Awarded [Roll Forward]
Restricted Stock Awarded, Beginning Balance (in shares)					446,946
Restricted Stock Awarded, Shares Granted (in shares)					54,907
Restricted Stock Awarded, Forfeitures (in shares)					(10,436)
Restricted Stock Awarded, Vested (in shares)					(249,107)
Restricted Stock Awarded, Ending Balance (in shares)	242,310				242,310
Restricted Stock Awarded, Weighted Average Grant Date Fair Value [Roll Forward]
Restricted Stock Awarded, Weighted-Average Grant Date Fair Value, Beginning Balance (in dollars per share)					$ 6.25
Restricted Stock Awarded, Granted, Weighted-Average Grant Date Fair Value (in dollars per share)					$ 3.84
Restricted Stock Awarded, Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share)					$ 5.61
Restricted Stock Awarded, Vested, Weighted-Average Grant Date Fair Value (in dollars per share)					$ 7.97
Restricted Stock Awarded, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share)	$ 5.79				$ 5.79
Stock Options [Roll Forward]
Stock Options, Beginning Balance (in shares)					1,877,500
Stock Options, Grants in Period (in shares)					129,119
Stock Options, Forfeited (in shares)					(1,236,167)
Stock Options, Exercised (in shares)					(1,121)
Stock Options, Ending Balance (in shares)	769,331				769,331
Stock Options, Weighted-Average Exercise Price [Roll Forward]
Stock Options, Weighted-Average Exercise Price, Beginning Balance (in dollars per share)					$ 11.02
Stock Options, Grants, Weighted-Average Exercise Price (in dollars per share)					$ 3.89
Stock Options, Forfeited, Weighted Average Exercise Price (in dollars per share)					$ 12.81
Stock Options, Exercised, Weighted Average Exercise Price (in dollars per share)					$ 4.52
Stock Options, Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 6.95				$ 6.95
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	100,000				1,000,000
Options and Awards Outstanding Shares (in shares)	769,331				769,331
Weighted-Average Remaining Contractual Life (years)					7 years 10 months 24 days
Weighted-Average Exercise Price (in dollars per share)	$ 6.96				$ 6.96
Options Exercisable (in shares)	232,464				232,464
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 11.20				$ 11.20
Stock Options [Member] | Exercise Price Range 3.47 - 6.93 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 3.47
Exercise price upper range limit (in dollars per share)					$ 6.93
Options and Awards Outstanding Shares (in shares)	544,590				544,590
Weighted-Average Remaining Contractual Life (years)					8 years 10 months 28 days
Weighted-Average Exercise Price (in dollars per share)	$ 4.53				$ 4.53
Options Exercisable (in shares)	62,164				62,164
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 4.87				$ 4.87
Stock Options [Member] | Exercise Price Range 6.94 - 10.39 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 6.94
Exercise price upper range limit (in dollars per share)					$ 10.39
Options and Awards Outstanding Shares (in shares)	51,962				51,962
Weighted-Average Remaining Contractual Life (years)					5 years 11 months 19 days
Weighted-Average Exercise Price (in dollars per share)	$ 8.64				$ 8.64
Options Exercisable (in shares)	39,887				39,887
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 8.58				$ 8.58
Stock Options [Member] | Exercise Price Range 10.40 - 13.86 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 10.40
Exercise price upper range limit (in dollars per share)					$ 13.86
Options and Awards Outstanding Shares (in shares)	127,650				127,650
Weighted-Average Remaining Contractual Life (years)					6 years 1 month 24 days
Weighted-Average Exercise Price (in dollars per share)	$ 11.40				$ 11.40
Options Exercisable (in shares)	85,284				85,284
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 11.47				$ 11.47
Stock Options [Member] | Exercise Price Range 13.87 - 17.32 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 13.87
Exercise price upper range limit (in dollars per share)					$ 17.32
Options and Awards Outstanding Shares (in shares)	22,464				22,464
Weighted-Average Remaining Contractual Life (years)					2 years 4 months 20 days
Weighted-Average Exercise Price (in dollars per share)	$ 16.78				$ 16.78
Options Exercisable (in shares)	22,464				22,464
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 16.78				$ 16.78
Stock Options [Member] | Exercise Price Range 17.33 - 20.79 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 17.33
Exercise price upper range limit (in dollars per share)					$ 20.79
Options and Awards Outstanding Shares (in shares)	5,496				5,496
Weighted-Average Remaining Contractual Life (years)					4 years 7 months 10 days
Weighted-Average Exercise Price (in dollars per share)	$ 18.41				$ 18.41
Options Exercisable (in shares)	5,496				5,496
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 18.41				$ 18.41
Stock Options [Member] | Exercise Price Range 20.80 - 24.25 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 20.80
Exercise price upper range limit (in dollars per share)					$ 24.25
Options and Awards Outstanding Shares (in shares)	1,000				1,000
Weighted-Average Remaining Contractual Life (years)					1 year 10 months 13 days
Weighted-Average Exercise Price (in dollars per share)	$ 21.09				$ 21.09
Options Exercisable (in shares)	1,000				1,000
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 21.09				$ 21.09
Stock Options [Member] | Exercise Price Range 24.26 - 27.72 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 24.26
Exercise price upper range limit (in dollars per share)					$ 27.72
Options and Awards Outstanding Shares (in shares)	6,500				6,500
Weighted-Average Remaining Contractual Life (years)					2 years 4 months 6 days
Weighted-Average Exercise Price (in dollars per share)	$ 26.96				$ 26.96
Options Exercisable (in shares)	6,500				6,500
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 26.95				$ 26.95
Stock Options [Member] | Exercise Price Range 27.73 - 31.18 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 27.73
Exercise price upper range limit (in dollars per share)					$ 31.18
Options and Awards Outstanding Shares (in shares)	5,958				5,958
Weighted-Average Remaining Contractual Life (years)					3 years 1 month 13 days
Weighted-Average Exercise Price (in dollars per share)	$ 29.74				$ 29.74
Options Exercisable (in shares)	5,958				5,958
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 29.74				$ 29.74
Stock Options [Member] | Exercise Price Range 31.19 - 34.65 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price lower range limit (in dollars per share)					$ 31.19
Exercise price upper range limit (in dollars per share)					$ 34.65
Options and Awards Outstanding Shares (in shares)	3,711				3,711
Weighted-Average Remaining Contractual Life (years)					3 years 7 months 2 days
Weighted-Average Exercise Price (in dollars per share)	$ 34.65				$ 34.65
Options Exercisable (in shares)	3,711				3,711
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 34.65				$ 34.65
Restricted Stock Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	$ 100,000				$ 1,200,000
Exercise price lower range limit (in dollars per share)					$ 0
Options and Awards Outstanding Shares (in shares)	252,483				252,483
Weighted-Average Remaining Contractual Life (years)					2 years 2 months 5 days
Weighted-Average Exercise Price (in dollars per share)
Options Exercisable (in shares)
Options Exercisable, Weighted-Average Exercise Price (in dollars per share)

[1] The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12.  Commitments and Contingencies

On February 25, 2013, Jeffrey D. Thomas, our former President and Chief Executive Officer, and Margaret M. Thomas, our former Executive Vice President, tendered their resignations to our Board of Directors. In connection with Mr. and Ms. Thomas’ resignations, we entered into separation agreements effective February 25, 2013. Under the terms of the separation agreements, cash payouts of approximately $0.8 million and $0.4 million were to be made to Mr. and Ms. Thomas, respectively, which were fully expensed during the first quarter of 2013. As of September 30, 2013, approximately $0.2 million in cash payments remained to be paid within the next six months under the terms of the agreements.

We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, the outcome of which we believe will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

We are subject to the possibility of various loss contingencies, including claims, suits and complaints, arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset 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 an asset has been impaired or 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, 2013.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

Under our 2013 Equity Participation Plan we have outstanding options to purchase shares of our Common Stock and restricted stock awards held by eligible employees, non-employee directors and consultants as granted by the Compensation Committee of the Board of Directors.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the three and nine months ended September 30, 2013 and 2012.

	Three months ended  September 30, 2013			Three months ended  September 30, 2012			Nine months ended  September 30, 2013			Nine months ended  September 30, 2012
Expected dividend yield1		-	%		4.44	%		1.37	%		4.40	%
Expected stock price volatility		-	%		60.41	%		54.66	%		60.75	%
Risk-free interest rate		-	%		1.58	%		2.08	%		1.74	%
Expected life of options		-	Years		4.47	Years		4.56	Years		4.47	Years
Estimated fair value per option granted		-		$	1.93		$	1.63		$	1.90

1The Company suspended quarterly dividend payments during the three months ended June 30, 2013.

The dividend yield is based on expected quarterly cash dividends paid to our shareholders as of the date of grant. Expected stock price volatility is based on historical volatility of our stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Additionally, an annualized forfeiture rate of 14.0 percent is used as an estimate of future forfeitures based on our historical forfeiture experience. The stock-based compensation expense is adjusted in later periods if the actual forfeiture rate is different from the estimate.

Total stock-based compensation expense recognized in the consolidated statement of operations for the quarter ended September 30, 2013 was approximately $0.2 million before income taxes. Of the total stock-based compensation expense during the quarter, stock option expense was approximately $0.1 million and restricted stock award and restricted stock unit expense was approximately $0.1 million. Total stock-based compensation expense recognized in the consolidated statement of operations for the nine months ended September 30, 2013 was $2.2 million before income taxes. Of the total stock-based compensation expense recognized in 2013, stock option expense was $1.0 million and restricted stock award expense was $1.2 million.

The following table presents information about outstanding common stock options and restricted grants as of September 30, 2013:

			Options and Awards Outstanding				Options Exercisable
Range of Exercise Prices			Shares	Weighted-Average Remaining Contractual Life  (years)	Weighted-Average  Exercise Price		Shares	Weighted- Average Exercise Price
	Restricted Stock Awards
	$	0.00	252,483	2.18		N/A	N/A		N/A
	Stock Options
	$	3.47 - 6.93	544,590	8.91	$	4.53	62,164	$	4.87
		6.94 - 10.39	51,962	5.97		8.64	39,887		8.58
		10.40 - 13.86	127,650	6.15		11.40	85,284		11.47
		13.87 - 17.32	22,464	2.39		16.78	22,464		16.78
		17.33 - 20.79	5,496	4.61		18.41	5,496		18.41
		20.80 - 24.25	1,000	1.87		21.09	1,000		21.09
		24.26 - 27.72	6,500	2.35		26.96	6,500		26.95
		27.73 - 31.18	5,958	3.12		29.74	5,958		29.74
		31.19 - 34.65	3,711	3.59		34.65	3,711		34.65
Total Stock Options			769,331	7.90	$	6.96	232,464	$	11.20
Combined			1,021,814	6.49	$	5.24	232,464	$	11.20

At September 30, 2013, the aggregate value of restricted stock awards and restricted stock units was $0.9 million and the aggregate intrinsic value of outstanding and exercisable stock options was zero based on our $3.45 closing stock price at September 30, 2013. The intrinsic value is the amount that would have been received by the optionees had all restricted stock been vested and all stock options been exercised on that date. As of September 30, 2013, total unrecognized stock-based compensation expense related to non-vested stock options and non-vested restricted stock awards was approximately $1.4 million, which is expected to be recognized over approximately 3.68 years.

The following table presents information about stock option and restricted stock activity during the nine months ended September 30, 2013:

	Restricted Stock Awards and Units	Weighted-Average Grant Date Fair  Value		Stock Options	Weighted-Average Exercise Price
Balance at December 31, 2012	446,946	$	6.25	1,877,500	$	11.02
Granted	54,907		3.84	129,119		3.89
Forfeited	(10,436)		5.61	(1,236,167)		12.81
Vested	(249,107)		7.97	N/A		N/A
Exercised	N/A		N/A	(1,121)		4.52
Balance at September 30, 2013	242,310	$	5.79	769,331	$	6.95

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Investments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Investments and Fair Value Measurements [Abstract]

Fair value of investments

The following tables summarize the composition of our investments at September 30, 2013 and December 31, 2012 (in thousands):

								Classification on Balance Sheet
September 30, 2013	Amortized Cost			Unrealized Gains (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term  available-for-sale securities		Long-term available-for- sale securities
Auction rate securities (“ARS”), greater than one year	$	1,000	$	(283	)	$	717	$	-	$	-	$	717
Money market funds, ninety days or less		269		-			269		269		-		-
Municipal securities1
Short term municipal securities funds2		27,343		(117	)		27,226		-		27,226		-
One year or less		775		3			778		-		778		-
After one year through three years		2,482		4			2,486		-		2,486		-
Greater than three years		5,879		(129	)		5,750		-		5,750		-
Total	$	37,748	$	(522	)	$	37,226	$	269	$	36,240	$	717
								Classification on Balance Sheet
December 31, 2012	Amortized Cost			Unrealized Gains  (Losses)		Aggregate Fair Value		Cash and cash equivalents		Short-term available-for-sale securities		Long-term available-for- sale securities
ARS, greater than one year	$	1,000	$	(277	)	$	723	$	-	$	-	$	723
Money market funds, ninety days or less		1,150		-			1,150		1,150		-		-
Municipal securities1
Short term municipal securities funds2		26,095		(3	)		26,092		-		26,092		-
One year or less		790		2			792		-		792		-
After one year through three years		1,345		7			1,352		-		1,352		-
Greater than three years		3,884		2			3,886		-		3,886		-
Total	$	34,264	$	(269	)	$	33,995	$	1,150	$	32,122	$	723

1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fair value by balance sheet grouping

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Non-financial assets:
Property and equipment, net	$	10,954	$	-	$	-		$	10,954
			Fair Value Measurements at Reporting Date Using
September 30, 2013	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	717	$	-	$	-		$	717
Money market funds		269		269		-			-
Municipal securities1		36,240		36,240		-			-
Foreign currency exchange contracts		116		-		116			-
Total financial assets	$	37,342	$	36,509	$	116		$	717
Financial liabilities:
Foreign currency exchange contracts		206		-		206			-
Total financial liabilities	$	206	$	-	$	206		$	-
			Fair Value Measurements at Reporting Date Using
December 31, 2012	Fair Market Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial assets:
ARS	$	723	$	-	$	-		$	723
Money market funds		1,150		1,150		-			-
Municipal securities1		32,122		32,122		-			-
Foreign currency exchange contracts		952		-		952			-
Total financial assets	$	34,947	$	33,272	$	952		$	723
Financial liabilities:
Foreign currency exchange contracts		115		-		115			-
Total financial liabilities	$	115	$	-	$	115		$	-

1 At September 30, 2013, municipal securities consisted of a 75/14/11 percent split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. At December 31, 2012, municipal securities consisted of an 82/12/6 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at September 30, 2013 and December 31, 2012 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively.

Fair value of Level 3 assets measured on a recurring basis

The following table presents a reconciliation for the three and nine months ended September 30, 2013 and 2012, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2013		2012		2013			2012
Beginning balance	$	716	$	714	$	723		$	700
Total realized / unrealized losses:
Included in earnings		-		-		-			-
Included in OCI		1		5		(6	)		19
Sales and settlements		-		-		-			-
Transfers into Level 3, net		-		-		-			-
Ending balance	$	717	$	719	$	717		$	719

Summary of AOCI balances for Available for Sale Securities

For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):

 

	Accumulated Other Comprehensive Income (Loss)
	Available-for-sale securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Balance, beginning of period	$	(366	)	$	108		$	(180	)	$	135
Change before reclassification		(24	)		66			(216	)		193
Reclassification into interest and dividend (income) loss		70			(364	)		79			(602	)
Effect of incomes taxes		(25	)		127			(28	)		211
Other comprehensive income (loss), net of income taxes		21			(171	)		(165	)		(198	)
Balance, end of period	$	(345	)	$	(63	)	$	(345	)	$	(63	)

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition

We invoice delegates in advance of travel, and payments made are recorded as deferred liabilities for participant deposits. The use of cash collected from participant deposits is not restricted by agreement or law, therefore is not reported as restricted cash. We also pay for certain program costs in advance of travel, including but not limited to airfare, hotel, and transportation services. Those advanced payments are recorded as prepaid program costs.

For non-directly delivered programs, we do not actively manage the operations of each program, and therefore, recognize revenue and anticipated costs from these programs on a net basis within total revenue when travel programs begin. For directly delivered programs in which we organize and operate all activities, we recognize the gross revenue and cost of sales of these programs over the period the programs operate.

We charge administrative fees under our withdrawal policy for any delegate who enrolls on our programs but does not ultimately travel. The amount of the administrative fee will vary depending on when the withdrawal occurs. We recognize withdrawal fees concurrent with the revenue recognition from the related programs.

Revenue from fees charged to access internet content is recognized at the point of sale while advertising revenues are recognized in conjunction with an advertisement being viewed on the BookRags site. Revenue from subscriptions for website content access is deferred and recognized monthly over the term of the subscription. Cost of internet content sales include amortization of intangible assets and licensing agreement costs.

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 for the year ended December 31, 2012 on March 11, 2013.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 31, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	AMBASSADORS GROUP INC
Entity Central Index Key	0001162315
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		16,983,331
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013

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Restructuring Costs (Tables)

9 Months Ended

Sep. 30, 2013

Restructuring Costs [Abstract]

Summary of changes in restructuring cost liability

The following table summarizes costs incurred as part of the restructuring plan and balance of the restructuring cost liability as of September 30, 2013 (in thousands):

	Contract Termination Fees		Transition-related costs			Total
Balance as of July 1, 2013	$	-	$	-		$	-
Restructuring costs incurred		1,550		206			1,756
Restructuring costs paid		-		(177	)		(177	)
Balance as of September 30, 2013	$	1,550	$	29		$	1,579