Delaware
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No. 0-33347
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91-1957010
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(State or Other Jurisdiction
of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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AM AMBASSADORS GROUP, INC.
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Date July 30, 2014
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By: By:
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/s/
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Philip B. Livingston
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ChJ. Philip B. Livingston
Chief Executive Officer, Chief Financial Officer
(Principal ExecutiveFinancial Officer)
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Exhibit
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Number
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Description
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99.1
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Press Release, dated July 30, 2014
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NEWS FOR IMMEDIATE RELEASE
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July 30, 2014
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Investor Relations:
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●
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For the first six months of 2014, net income before special items of $2.2 million compared to $1.3 million in the 2013 period. Net loss of $11.7 million compared to net income of $33 thousand in the prior year period.
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●
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Gross revenue, from all sources including non-directly delivered programs, of $59.4 million during the first six months of 2014 compared to $65.4 million in the prior year period. In 2014, the Company traveled 8,903 delegates compared to 9,800 delegates in the same period in 2013.
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●
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Year-to-date gross margin of 35.1 percent compared to 37.0 percent in 2013, the current year was impacted by unfavorable Euro and British Pound foreign exchange rates and a program merchandise write-down.
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●
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Goodwill write-down associated with BookRags, our online education-oriented research subsidiary, resulting in pre-tax charges totaling $9.7 million.
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●
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Subsequent to the balance sheet date, we anticipate executing a purchase and sale agreement for the corporate headquarters building listed for sale since April 2012. The Company recorded a $2.0 million in pre-tax asset impairment at June 30, 2014.
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●
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Year-to-date, special items totaled $14.7 million, including $12.7 million of non-cash items, for asset impairments, restructuring charges and separation costs.
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●
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Operating expenses for the six month period, excluding the impact of special items, of $18.9 million, a decrease of $3.4 million, or 15.2 percent, year-over-year.
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●
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Cash and cash equivalents and available-for-sale securities balance of $57.5 million compared to $55.9 million at the same point in 2013.
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●
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Enrolled revenue for 2014 programs down 7.2 percent year-over-year for all programs and 9.7 percent year-over-year for core Student Ambassadors Programs. Prior year enrolled travelers for Discovery Student Adventures and People to People China programs have been excluded for year-over-year comparability given the Company’s decision during the third quarter of 2013 to no longer operate these programs in 2014.
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UNAUDITED
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|||||||||||||||
Quarter ended June 30,
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Six months ended June 30,
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||||||||||||||
2014
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2013
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2014
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2013
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||||||||||||
Gross revenue, all travel programs
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$ | 56,805 | $ | 61,476 | $ | 57,365 | $ | 63,370 | |||||||
BookRags revenue
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$ | 1,055 | $ | 1,029 | $ | 2,063 | $ | 2,028 | |||||||
Gross revenue, all sources
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$ | 57,860 | $ | 62,505 | $ | 59,428 | $ | 65,398 | |||||||
Gross margin, all travel programs
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$ | 18,869 | $ | 21,900 | $ | 19,049 | $ | 22,422 | |||||||
Gross margin, BookRags
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$ | 937 | $ | 903 | $ | 1,813 | $ | 1,773 | |||||||
Gross margin, all sources
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$ | 19,806 | $ | 22,803 | $ | 20,862 | $ | 24,195 | |||||||
Gross margin percentage
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34.2 | % | 36.5 | % | 35.1 | % | 37.0 | % | |||||||
Operating expense
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$ | 23,333 | $ | 10,261 | $ | 33,574 | $ | 24,446 | |||||||
Operating expense, before special items
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$ | 8,913 | $ | 10,258 | $ | 18,865 | $ | 22,253 | |||||||
Net income before special items
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$ | 9,461 | $ | 8,094 | $ | 2,151 | $ | 1,303 | |||||||
Net income (loss)
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$ | (4,185 | ) | $ | 8,092 | $ | (11,736 | ) | $ | 33 | |||||
Income per diluted share before special items
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$ | 0.56 | $ | 0.48 | $ | 0.13 | $ | 0.08 | |||||||
Income (loss) per diluted share
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$ | (0.25 | ) | $ | 0.48 | $ | (0.70 | ) | $ | - |
UNAUDITED
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|||||||
Six months ended June 30,
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|||||||
2014
|
2013
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||||||
Net cash provided by operating activities
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$ | 12,988 | $ | 23,415 | |||
Purchases of property, equipment and intangibles
|
(1,098 | ) | (1,963 | ) | |||
Free cash flow
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11,890 | 21,452 | |||||
Net proceeds from purchase of available-for-sale securities
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(10,656 | ) | (19,515 | ) | |||
Dividend payments to shareholders
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- | (1,017 | ) | ||||
Repurchase of common stock
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(186 | ) | (486 | ) | |||
Other cash flows, net
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(109 | ) | (2,090 | ) | |||
Net increase (decrease) in cash and cash equivalents
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$ | 939 | $ | (1,656 | ) | ||
Net proceeds from sale (purchase) of available-for-sale securities
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●
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Consolidated gross revenues for all programs and operations to be between $100 million and $105 million;
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●
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Consolidated gross margin as a percentage of gross revenue for all programs and operations of 35 percent to 36 percent; and
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●
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Net loss before any special items of between $2.0 million and $0.
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UNAUDITED
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|||||||||||||||
Quarter ended June 30,
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|||||||||||||||
2014
|
2013
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$ Change
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% Change
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||||||||||||
Net revenue, non-directly delivered programs (1)
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$ | 18,092 | $ | 21,183 | $ | (3,091 | ) | -15 | % | ||||||
Gross revenue, directly delivered programs (2)
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3,565 | 2,270 | 1,295 | 57 | % | ||||||||||
Internet content and advertising revenue
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1,055 | 1,029 | 26 | 3 | % | ||||||||||
Total revenue
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22,712 | 24,482 | (1,770 | ) | -7 | % | |||||||||
Cost of sales, directly delivered programs (2)
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2,234 | 1,553 | 681 | 44 | % | ||||||||||
Cost of sales, internet content and advertising
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118 | 126 | (8 | ) | -6 | % | |||||||||
Cost of sales, program merchandise markdown
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554 | - | 554 | 100 | % | ||||||||||
Gross margin (3)
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19,806 | 22,803 | (2,997 | ) | -13 | % | |||||||||
Operating expenses:
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|||||||||||||||
Selling and marketing
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6,159 | 7,323 | (1,164 | ) | -16 | % | |||||||||
General and administration
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3,510 | 2,938 | 572 | 19 | % | ||||||||||
Restructuring costs
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11,664 | - | 11,664 | 100 | % | ||||||||||
Asset impairments
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2,000 | - | 2,000 | 100 | % | ||||||||||
Total operating expenses
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23,333 | 10,261 | 13,072 | 127 | % | ||||||||||
Operating income (loss)
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(3,527 | ) | 12,542 | (16,069 | ) | -128 | % | ||||||||
Other income (expense):
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|||||||||||||||
Interest and dividend income
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142 | 160 | (18 | ) | -11 | % | |||||||||
Foreign currency and other income
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5 | 1 | 4 | 400 | % | ||||||||||
Total other income
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147 | 161 | (14 | ) | -9 | % | |||||||||
Income (loss) before income tax provision
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(3,380 | ) | 12,703 | (16,083 | ) | -127 | % | ||||||||
Income tax provision
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(805 | ) | (4,611 | ) | 3,806 | 83 | % | ||||||||
Net income (loss)
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$ | (4,185 | ) | $ | 8,092 | $ | (12,277 | ) | -152 | % | |||||
Weighted average shares outstanding – basic
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16,823 | 16,960 | (137 | ) | -1 | % | |||||||||
Weighted average shares outstanding – diluted
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16,823 | 16,960 | (137 | ) | -1 | % | |||||||||
Net income (loss) per share — basic
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$ | (0.25 | ) | $ | 0.48 | $ | (0.73 | ) | -152 | % | |||||
Net income (loss) per share — diluted
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$ | (0.25 | ) | $ | 0.48 | $ | (0.73 | ) | -152 | % |
(1)
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Net revenue, non-directly delivered programs consists of gross revenue, less program pass-through expenses for non-directly delivered programs because we primarily engage third-party operators to perform these services.
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UNAUDITED
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|||||||||
Quarter ended June 30,
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|||||||||
2014
|
2013
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% Change
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|||||||
Gross revenue
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$ | 53,241 | $ | 59,210 | -10 | % | |||
Cost of sales
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35,149 | 38,027 | -8 | % | |||||
Net revenue
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$ | 18,092 | $ | 21,183 | -15 | % |
(2)
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Gross revenue and cost of sales for directly delivered programs are reported as separate items because we plan, organize and operate all activities, including speakers, facilitators, events, accommodations and transportation.
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(3)
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Gross margin is calculated as the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue less cost of sales non-directly delivered programs, costs of sales directly delivered programs and cost of sales internet content and advertising. Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue.
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UNAUDITED
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|||||||||||||||
Six months ended June 30,
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|||||||||||||||
2014
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2013
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$ Change
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% Change
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||||||||||||
Net revenue, non-directly delivered programs (1)
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$ | 18,208 | $ | 21,183 | $ | (2,975 | ) | -14 | % | ||||||
Gross revenue, directly delivered programs (2)
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3,838 | 4,164 | (326 | ) | -8 | % | |||||||||
Internet content and advertising revenue
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2,063 | 2,028 | 35 | 2 | % | ||||||||||
Total revenue
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24,109 | 27,375 | (3,266 | ) | -12 | % | |||||||||
Cost of sales, directly delivered programs (2)
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2,443 | 2,925 | (482 | ) | -16 | % | |||||||||
Cost of sales, internet content and advertising
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250 | 255 | (5 | ) | -2 | % | |||||||||
Cost of sales, program merchandise markdown
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554 | - | 554 | 100 | % | ||||||||||
Gross margin (3)
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20,862 | 24,195 | (3,333 | ) | -14 | % | |||||||||
Operating expenses:
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|||||||||||||||
Selling and marketing
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13,152 | 15,842 | (2,690 | ) | -17 | % | |||||||||
General and administration
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6,650 | 8,604 | (1,954 | ) | -23 | % | |||||||||
Restructuring costs
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11,772 | - | 11,772 | 100 | % | ||||||||||
Asset impairments
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2,000 | - | 2,000 | 100 | % | ||||||||||
Total operating expenses
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33,574 | 24,446 | 9,128 | 37 | % | ||||||||||
Operating loss
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(12,712 | ) | (251 | ) | (12,461 | ) | -4965 | % | |||||||
Other income (expense):
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|||||||||||||||
Interest and dividend income
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273 | 287 | (14 | ) | -5 | % | |||||||||
Foreign currency and other income
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8 | 21 | (13 | ) | -62 | % | |||||||||
Total other income
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281 | 308 | (27 | ) | -9 | % | |||||||||
Income (loss) before income tax benefit (provision)
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(12,431 | ) | 57 | (12,488 | ) | -21909 | % | ||||||||
Income tax benefit (provision)
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695 | (24 | ) | 719 | 2996 | % | |||||||||
Net income (loss)
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$ | (11,736 | ) | $ | 33 | $ | (11,769 | ) | -35664 | % | |||||
Weighted average shares outstanding – basic
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16,789 | 16,980 | (191 | ) | -1 | % | |||||||||
Weighted average shares outstanding – diluted
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16,789 | 16,980 | (191 | ) | -1 | % | |||||||||
Net loss per share — basic
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$ | (0.70 | ) | $ | - | $ | (0.70 | ) | -100 | % | |||||
Net loss per share — diluted
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$ | (0.70 | ) | $ | - | $ | (0.70 | ) | -100 | % |
(1)
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Net revenue, non-directly delivered programs consists of gross revenue, less program pass-through expenses for non-directly delivered programs because we primarily engage third-party operators to perform these services.
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UNAUDITED
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|||||||||
Six months ended June 30,
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|||||||||
2014
|
2013
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% Change
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|||||||
Gross revenue
|
$ | 53,528 | $ | 59,210 | -10 | % | |||
Cost of sales
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35,320 | 38,027 | -7 | % | |||||
Net revenue
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$ | 18,208 | $ | 21,183 | -14 | % |
(2)
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Gross revenue and cost of sales for directly delivered programs are reported as separate items because we plan, organize and operate all activities, including speakers, facilitators, events, accommodations and transportation.
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(3)
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Gross margin is calculated as the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue less cost of sales non-directly delivered programs, costs of sales directly delivered programs and cost of sales internet content and advertising. Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue.
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UNAUDITED
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AUDITED
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|||||||||
June 30,
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December 31,
|
|||||||||
2014
|
2013
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2013
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||||||||
Assets
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Current assets:
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Cash and cash equivalents
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$ | 10,412 | $ | 4,494 | $ | 9,473 | ||||
Available-for-sale securities
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47,088 | 51,358 | 36,174 | |||||||
Foreign currency exchange contracts
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60 | - | - | |||||||
Prepaid program cost and expenses
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17,918 | 26,354 | 7,069 | |||||||
Accounts receivable
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1,421 | 905 | 1,792 | |||||||
Deferred tax assets
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- | 583 | 1,295 | |||||||
Total current assets
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76,899 | 83,694 | 55,803 | |||||||
Property and equipment, net
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14,633 | 25,656 | 18,452 | |||||||
Available-for-sale securities
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729 | 716 | 719 | |||||||
Intangibles
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3,462 | 3,540 | 3,522 | |||||||
Goodwill
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70 | 9,781 | 9,781 | |||||||
Other long-term assets
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85 | 83 | 82 | |||||||
Total assets
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$ | 95,878 | $ | 123,470 | $ | 88,359 | ||||
Liabilities and Stockholders’ Equity
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Current liabilities:
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||||||||||
Accounts payable and accrued expenses
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$ | 7,145 | $ | 6,668 | $ | 3,587 | ||||
Participants’ deposits
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41,043 | 47,785 | 26,362 | |||||||
Foreign currency exchange contracts
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- | 358 | 244 | |||||||
Deferred tax liabilities
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77 | - | - | |||||||
Other liabilities
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103 | 77 | 119 | |||||||
Total current liabilities
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48,368 | 54,888 | 30,312 | |||||||
Participants’ deposits
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1,822 | 1,673 | - | |||||||
Foreign currency exchange contracts
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- | 53 | 52 | |||||||
Deferred tax liabilities
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19 | 4,333 | 2,087 | |||||||
Total liabilities
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50,209 | 60,947 | 32,451 | |||||||
Stockholders’ equity
|
45,669 | 62,523 | 55,908 | |||||||
Total liabilities and stockholders’ equity
|
$ | 95,878 | $ | 123,470 | $ | 88,359 |
UNAUDITED
|
|||||||
June 30, | |||||||
2014 |
2013
|
||||||
Cash flows from operating activities:
|
|||||||
Net income (loss)
|
$ | (11,736 | ) | $ | 33 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|||||||
Depreciation and amortization
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2,977 | 2,711 | |||||
Stock-based compensation
|
1,168 | 1,957 | |||||
Deferred income tax benefit
|
(805 | ) | (275 | ) | |||
Loss on disposition and impairment of property and equipment
|
2,000 | 7 | |||||
Loss on impairment of goodwill
|
9,711 | - | |||||
Program merchandise writedown
|
554 | - | |||||
Excess tax shortfall from stock-based compensation
|
109 | 2,095 | |||||
Change in assets and liabilities:
|
|||||||
Accounts receivable and other assets
|
368 | (53 | ) | ||||
Prepaid program costs and expenses
|
(11,403 | ) | (9,189 | ) | |||
Accounts payable, accrued expenses, and other current liabilities
|
3,542 | 2,406 | |||||
Participants’ deposits
|
16,503 | 23,723 | |||||
Net cash provided by operating activities
|
12,988 | 23,415 | |||||
Cash flows from investing activities:
|
|||||||
Purchase of available-for-sale securities
|
(24,517 | ) | (26,844 | ) | |||
Proceeds from sale of available-for-sale securities
|
13,861 | 7,329 | |||||
Purchase of property and equipment
|
(952 | ) | (1,799 | ) | |||
Purchase of intangibles
|
(146 | ) | (164 | ) | |||
Net cash used in investing activities
|
(11,754 | ) | (21,478 | ) | |||
Cash flows from financing activities:
|
|||||||
Repurchase of common stock
|
(186 | ) | (486 | ) | |||
Dividend payment to shareholders
|
- | (1,017 | ) | ||||
Proceeds from exercise of stock options
|
- | 5 | |||||
Excess tax shortfall from stock-based compensation
|
(109 | ) | (2,095 | ) | |||
Net cash used in financing activities
|
(295 | ) | (3,593 | ) | |||
Net increase (decrease) in cash and cash equivalents
|
939 | (1,656 | ) | ||||
Cash and cash equivalents, beginning of period
|
9,473 | 6,150 | |||||
Cash and cash equivalents, end of period
|
$ | 10,412 | $ | 4,494 |
UNAUDITED
|
||||||||||||||
Net Income (Loss)
|
EPS
|
|||||||||||||
Three months ended June 30,
|
Three months ended June 30,
|
|||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||
Amount before special items
|
$ | 9,461 | $ | 8,094 | $ | 0.56 | $ | 0.48 | ||||||
Asset impairments
|
(2,000 | ) | - | (0.12 | ) | - | ||||||||
Restructuring costs
|
(11,664 | ) | - | (0.69 | ) | - | ||||||||
Legal and other fees
|
(92 | ) | 45 | (0.01 | ) | - | ||||||||
Separation payments
|
(664 | ) | (48 | ) | (0.04 | ) | - | |||||||
Tax impact
|
774 | 1 | 0.05 | - | ||||||||||
Amount per consolidated statement of operations
|
$ | (4,185 | ) | $ | 8,092 | $ | (0.25 | ) | $ | 0.48 |
UNAUDITED
|
|||||||||||||||
Net Income (Loss)
|
EPS
|
||||||||||||||
Six months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||||||
Amount before special items
|
$ | 2,151 | $ | 1,303 | $ | 0.13 | $ | 0.08 | |||||||
Asset impairments
|
(2,000 | ) | - | (0.12 | ) | - | |||||||||
Restructuring costs
|
(11,772 | ) | - | (0.70 | ) | - | |||||||||
Legal and other fees
|
(273 | ) | 593 | (0.02 | ) | 0.03 | |||||||||
Separation payments
|
(664 | ) | (2,786 | ) | (0.05 | ) | (0.16 | ) | |||||||
Tax impact
|
822 | 923 | 0.05 | 0.05 | |||||||||||
Amount per consolidated statement of operations
|
$ | (11,736 | ) | $ | 33 | $ | (0.71 | ) | $ | - |
UNAUDITED
|
|||||||||||
June 30,
|
December 31,
|
||||||||||
2014
|
2013
|
2013
|
|||||||||
Cash, cash equivalents and short-term available-for-sale securities
|
$ | 57,500 | $ | 55,852 | $ | 45,647 | |||||
Prepaid program cost and expenses
|
17,918 | 26,354 | 7,069 | ||||||||
Less: Participants’ deposits
|
(42,865 | ) | (49,458 | ) | (26,362 | ) | |||||
Less: Accounts payable / accruals / other liabilities
|
(7,248 | ) | (6,745 | ) | (3,706 | ) | |||||
Deployable cash
|
$ | 25,305 | $ | 26,003 | $ | 22,648 |