AMBASSADORS GROUP INC
NEWS FOR IMMEDIATE RELEASE Novem ber 5, 2014
Inves tor Relations : Lis a Netz
Am bas s adors Group, Inc.
(509) 568-7800
Spokane, WA, Novem ber 5, 2014 - Am bas s adors Group, Inc. (NASDAQ:EPAX), a leading provider of educational tra vel, today announced its res ults for the third quarter ended Septem ber 30, 2014.
Overview
For the firs t nine m onths of 2014, net incom e before s pecial item s of $6.4 m illion com pared to $4.7 m illion in the 2013 period.
After the im pact of res tructuring charges and the write -down of certain as s ets , the Com pany incurred a net los s of $9.4 m illion com pared to a net los s of $1.6 m illion in the prior year period.
Gros s revenue from continuing operations , including non-directly delivered program s , of $97.0 m illion during the firs t nine m onths of 2014 com pared to $110.3 m illion in the prior year period. Through Septem ber 30, 2014, the Com pany traveled
15,711 delegates com pared to 17,940 delegates in the s am e period in 2013.
Year-to-date gros s m argin from continuing operations of 33.4 percent com pared to 36.0 percent in 2013, as the current year was im pacted by unfavorable Euro and Britis h Pound foreign exchange rates , lower traveler to leader ratios , and a program m erchandis e write-down.
Special item s in 2014 include goodwill write-down and other res tructuring cos ts as s ociated with the dis pos ition of BookRags , Inc. an online education s ubs idiary. The dis pos ition and res tructuring process res ulted in pre-tax charges totaling $9.7 m illion.
Special item s in 2014 als o include the write-down of the Com pany's corporate headquarters building . That s ale is under contract and anticipated to clos e during the fourth quarter of 2014 . The s ale will yield approxim ately $8.4 m illion in net cas h proceeds . The Com pany has recorded $2.4 m illion in pre-tax as s et im pairment charges year-to-date to lower its carrying value to the anticipated s ales price les s clos ing cos ts .
Year-to-date, s pecial item s totaled $14.5 m illion for dis continued operations , as s et im pairm ents , res tructuring charges , s eparation cos ts , and legal and other.
Operating expens es for the nine-m onth period, excluding s pecial item s, totaled $28.4 m illion, a decreas e of $4.2 m illion, or 13.0 percent, year-over-year.
Cas h totaled $47.1 m illion at Septem ber 30, 2014 com pared to $41.0 m illion on Septem ber 30, 2013. Deployable cas h, as defined on page 10, totaled $33.6 m illion com pared to $29.1 m illion in the prior year period.
Enrolled revenue for 2015 program s down 34.6 percent year-over-year for all program s and 35.8 percent year-over-year for core Student Am bas s adors Program s .
Financial Highlights
(in thousands except percent and per share data)UNAUDITED
Quarter ended September 30, Nine months ended September 30,
2014 2013 2014 2013
Gross revenue, all travel programs $ 39,615 $ 46,893 $ 96,969 $ 110,267
Gross margin, all travel programs $ 13,342 $ 17,239 $ 32,391 $ 39,661
Operating expense from continuing operations $ 11,354 $ 20,117 $ 33,621 $ 43,499
Operating expense from continuing operations, before special items $ 10,667 $ 11,479 $ 28,442 $ 32,668
Income (loss) from continuing operations $ 1,912 $ (1,803) $ (1,284) $ (2,190) Income from continuing operations before special items $ 2,599 $ 6,835 $ 3,895 $ 8,641
Income (loss) from discontinued operations $ 426 $ 189 $ (8,114) $ 609
Net income (loss) $ 2,338 $ (1,614) $ (9,398) $ (1,581) Net income before special items $ 2,650 $ 3,649 $ 6,383 $ 4,660
Income (loss) per diluted share $ 0.14 $ (0.10) $ (0.56) $ (0.09)
Income per diluted share before special items $ 0.16 $ 0.21 $ 0.37 $ 0.27
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Am bas s ador's Group Interim Chief Executive Officer, Philip B. Livings ton com m ented on the Com pany's res ults and the outlook for
2015:
"Firs t and forem os t, once again the People To People team of teacher -leaders and com pany as s ociates delivered another travel s eas on of outs tanding and life-changing experiences for clos e to 16,000 travelers . The detailed travel planning by our s taff and the thous ands of orientation m eetings conducted by largely volunteer teacher -leaders was the key. Young people that participate in our cus tom er journey grow im m ens ely through the interview proces s , the financial dis cus s ion with their fam ily, the leader's pre -travel les s on plans addres s ing cus tom s and com m erce at their des tination, and eventually the trip its elf that includes local fam ily hom e s tays , s chool vis its , s ervice and com m unity im m ers ion, and cultural and his torical program s . The level of cus tom er s atis faction reported im proved again this year, and our online independently m onitored cus tom er reviews are 4.7 on a 5.0 s cale. We want to thank the approxim ately 2,000 teacher-leaders that interview and enroll our travelers , prepare them to travel, and s afely lead our trips . Our leaders cons istently report that the opportunity to teach s tudents through experiential learning cannot be replica ted in the clas s room ."
Livings ton continued, "During the quarter we form ally contracted to s ell our corporate office building and we clos ed the s ale of BookRags . We are pleas ed thos e projects are com pleted and behind us . During the firs t half of 2015, we will m ove into s m aller office s pace that is m ore appropriate for our bus iness. Together, the two trans actions will have added approxim ately $12 m illion to our cas h balance. We are debt free and continue to have a s trong balance s heet, and we intend to protect our cas h res ources carefully, while adjus ting our s trategy going forward."
"The num ber of enrollm ents resulting from our fall 2014 m arketing cam paign indicate another decline in net travelers for 2015. Our fall m arketing cam paign has not yielded the res ults we had hoped for. Our product rem ains s tr ong with real value to our cus tom ers , and our net prom oter s core from our pos t-s um mer 2014 s urvey was 74. However, our product pos itioning and m arketing tactics are
not in s ync with the current generation of travelers . There are 29 m illion 5 th through 11th grade s tudents in the U.S. m arket today. They and their parents s hop and analyze products differently than they did five years ago. Authenticity, deep cus tom er explo ration
and control of the buying proces s , abs olute value and product pers onalization a re all s trong m arket conditions that we need to
addres s in our s trategy."
Livings ton concluded, "The s trategic and operating plans we are developing will enable us to build upon People to People's fundam ental s trengths and com petitive pos ition, reinforce our cus tom er appeal, and increas e our co ns um er outreach in different ways than we have operated in the pas t. The future of our bus ines s requires changes in order to deliver s olid, broad -bas ed financial res ults , a continued s trong balance s heet and growth to our s hareholders . While we have taken s om e m eas ures thus far to focus all our res ources on our core Student Am bas s ador Program s and flatten our organizational s tructure, our efforts will continue in order to realize the Com pany's long -term earnings potential."
Third Quarter 2014 Results
During the third quarter of 2014, the Com pany traveled 6,808 delegates , com pared to 8,140 delegates during the prior year quarter
prim arily due to lower delegate counts on the Com pany's core Student Am bas s adors programs. The prior year period includes 536
Dis covery Student Adventures ("DSA") and People to People China ("China") traveled s tudents affecting year-over-year
com parability given the Com pany's decis ion during the third quarter of 2013 to no longer operate thes e program s in 2014. Total revenue from continuing operations of $16.7 m illion declined 21.8 percent from $21.4 m illion in the prior year quarter driven by the lower traveler count year-over-year. Gros s m argin from continuing operations for the quarter was $13.3 m illion com pared to $17.2 m illion in the third quarter of 2013, and gros s m argin percentage was 33.7 percent com pared to 36.8 percent in the prior year period. Gros s m argin is calculated as the s um of gros s revenue non -directly delivered program s and gros s revenue directly delivered program s les s cos t of s ales non -directly delivered program s and cos ts of s ales directly delivered program s . The lower current period gros s m argin percentage is reflective of higher foreign exchange rates , a higher ratio of teacher leaders to traveling s tudents , and lower overall traveling group s izes negatively im pacting fixed cos ts year-over-year.
Third quarter operating expens es from continuing operations were $11.4 m illion com pared to $20.1 m illion in the prior year period. Excluding s pecial item s , third quarter 2014 operating expens es were $10.7 m illion, a decline of $0.8 m illion, or 7.1 percent, com pared to the s am e tim e in 2013 . Operating expenditures were down due to a reduction in m arketing s pend as well as cos ts no longer incurred by DSA and China travel program s .
During the third quarter of 2014, the Com pany announced it had cons um mated the s ale of its wholly-owned s ubs idiary BookRags . All activities related to BookRags are reflected as dis continued operations for all periods pres ented, and for com parability of ongoing bus ines s activities , are included within s pecial item s . Special item s are m ore fully des cribed in a table to this rele as e.
The Com pany reported net incom e during the third quarter of 2014 of $2.3 m illion, or $0.11 per diluted s hare, com pared to a net los s of $1.6 m illion, or $0.11 per diluted s hare, in the prior year period. Third quarter 2014 net incom e before s pecial item s was
$2.7 m illion com pared to $3.6 m illion in 2013.
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Nine Months Ended September 30, 2014 Results
During the nine m onths ended Septem ber 30, 2014, the Com pany traveled 15,711 delegates com pared to 17,940 delegates during the s am e period in the prior year. The prior year period includes 816 DSA and China traveled s tudents affecting year-over-year com parability given the Com pany's decis ion to no t operate thes e program s in 2014. Total revenue from continuing operations of
$38.8 m illion declined 17.0 percent from $46.7 m illion in the s am e period las t year driven by the decline in travelers . Gros s m argin from continuing operations for the nine m onths ended Septem ber 30, 2014 was $32.4 m illion, down from $39.7 m illion in the s am e period las t year, with gros s m argin percentage at 33.5 percent com pared to the prior year at 36.0 percent. The lower current period gros s m argin percentage is reflective of higher land vendor program cos ts as discussed above, as well as a program m erchandis e write-down of $0.6 m illion in the current nine m onth period. Excluding the im pact of the decline in delegates traveled year -over-year, the Com pany experienced a decreas e of approxim ately $2.5 m illion in Student Am bas s ador program gros s m argin.
Year-to-date, operating expens es from continuing operations excluding s pecial item s decreas ed $4.2 m illion, or 12.9 percent, com pared to the prior year period , to $28.4 m illion. The $4.2 m illion in s avings over the prior year is the res ult of the Com pany's s tream lining of operations to focus on its core Student Am bas s ador program s and cos t cutting in itiatives .
Special item s of $14.5 m illion, before tax im pact, for the firs t nine m onths of 2014 are m ore fully des cribed in a table to this rele as e, and include dis continued operations from the third quarter 2014 s ale of BookRags , res tructuring charges , an as s et im pairm ent charge of $2.4 m illion to lower the carrying value of the Com pany's corporate hea dquarters to the anticipated s ales price les s cos ts to s ell, and s eparation and other related benefit cos ts from the workforce reduction and other pers onnel changes .
During the s econd quarter of 2014, the Com pany recorded a valuation allowance on its deferred tax as s ets , res ulting in a reduced deferred tax benefit of $0.8 m illion for the year-to-date period. The Com pany does not anticipate having current tax expens e until its net operating los s carryforward has been abs orbed.
Net los s for the nine m onths ended Septem ber 30, 2014 was $9.4 m illion, or $0.56 per diluted s hare, com pared to a net los s of $1.6 m illion, or $0.09 per diluted s hare, in the prior year period.
Balance Sheet and Liquidity
Total as s ets at Septem ber 30, 2014 were $64.4 m illion com pared to $82.7 m illion one year ago. C as h, cas h equivalents and s hort- term available-for-s ale s ecurities increas ed $6.1 m illion to $47.1 m illion at Septem ber 30, 2014 com pared to the balance at Septem ber 30, 2013. The Com pany s old BookRags during the third quarter of 2014 for $5.0 m illion, increas ing its cas h and available-for-s ale s ecurities balances. Long-term as sets totaled $5.2 m illion prim arily reflecting bus iness, technology, hardware and s ys tem s us ed to deliver s ervices . The Com pany's office building is anticipated to s ell during the fourth quarter of 2014, and therefore has been lis ted as an as s et held for s ale and recorded as a current as s et at its anticipated s ales price les s cos ts to s ell of
$8.4 m illion. Total liabilities were $16.9 m illion, including $9.5 m illion in participant depos its for future travel. Deployable cas h at
Septem ber 30, 2014, totaled $33.6 m illion, and is a non-GAAP m eas ure defined in the attached s chedules .
The below table s um m arizes the cas h flows as further dis closed in the accom panying financial s tatem ents . Free cas h flow, a non - GAAP m eas ure is defined as cas h flow from operations les s purchas e of property, equipm ent and intangibles , is als o noted (in thous ands ). We believe this non-GAAP m eas urem ent is us eful to inves tors in unders tanding the cas h generated or dis tributed within the current period for future us e in operations .
UNAUDITED
Nine months ended September 30,
2014 2013
Net cash provided by (used in) operating activities $ (1,712) $ 9,256
Purchases of property, equipment and intangibles (1,391) (2,664) Free cash flow (3,103) 6,592
Net purchase of available-for-sale securities (7,151) (4,366) Dividend payments to shareholders - (1,017) Repurchase of common stock (188) (486) Proceeds from sale of discontinued operations 4,600 - Other cash flows, net (81) (2,098)
Net decrease in cash and cash equivalents $ (5,923) $ (1,375)
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2015 Travel Season
As of Novem ber 2, 2014, enrolled revenue for 2015 travel program s was $77.5 m illion, down 34.6 percent from the s am e point las t year, bas ed on enrolled travelers of 12,115 com pared to 17,955. Enrolled revenue for the Com pany's core product, Student Am bas s adors , is down 35.8 percent to $72.4 m illion com pared to $112.9 m illion at the s am e date las t year, bas ed on enrolled travelers of 10,246 com pared to 15,853.
Enrolled revenue cons is ts of es tim ated gros s receipts to be recognized upon travel of an enrolled participant and revenue recognized for any delegates who have com pleted travel for the travel year referenced . Reported net enrollm ents cons is t of all participants who have enrolled in the Com pany's program s les s tho s e that have already withdrawn, including travel th at has been com pleted. Enrolled revenue m ay not res ult in actual gros s receipts eventually recognized by the Com pany due to both withdrawals from the Com pany's program s and expected future enrollm ents .
About Ambassadors Group, Inc.
Am bas s adors Group, Inc. (NASDAQ: EPAX) is an education and s tudent travel com pany located in Spokane, Was hington. Additional inform ation about Am bas s adors Group, Inc. is available at www.peopletopeople.comand www.ambass adors group.com. In this pres s releas e, "Com pany", "we", "us ", and "our" refer to Am bas s adors Group, Inc. and its s ubs idiaries .
Forward-Looking Statements
This pres s release contains forward -looking s tatem ents regarding actual and expected financial perform ance and the reas ons for variances between period-to-period results. Forward-looking s tatements , which are included per the "s afe harbor" provis ions of the Private Securities Litigation Reform Act of 1995, m ay involve known and unknown ris ks , uncertainties and other factors that m ay caus e actual res ults and perform ance in future periods to be m aterially different from any future res ults or perform ance s ugg es ted by the forward-looking s tatem ents in this releas e. Such forward-looking s tatem ents s peak only as of the date of this releas e and m ay not reflect ris ks related to international unres t, outbreak of dis eas e, conditions in the travel indus try, the direct m ar keting environm ent, changes in econom ic conditions, changes in foreign currency rates and changes in the com petitive environm ent. We expres s ly dis claim any obligation to provide public updates or revis ions to any forward -looking s tatem ents to reflect any changes in expectations or any change in events . Although we believe the expectations reflected in s uch forward -looking s tatements are based upon reas onable as s um ptions , we can give no as s urance that our expectations will be m et. For a m ore com plete dis cus s ion of certain ris ks and uncertainties that could caus e actual res ults to differ m aterially from anticipated res ults , pleas e refer to the Am bas s adors Group, Inc. 10-K filed with the SEC on March 27, 2014, and its proxy s tatem ent filed with the SEC on April 11, 2014.
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AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)UNAUDITED
Quarter ended September 30,
2014 | 2013 | $ Change | % Change | |
Net revenue, non-directly delivered programs (1) | $ 10,818 | $ 15,071 | $ (4,253) | -28% |
Gross revenue, directly delivered programs (2) | 5,896 | 6,296 | (400) | -6% |
Total revenue | 16,714 | 21,367 | (4,653) | -22% |
Cost of sales, directly delivered programs (2) | 3,372 | 4,128 | (756) | -18% |
Gross margin (3) | 13,342 | 17,239 | (3,897) | -23% |
Operating expenses: | ||||
Selling and marketing | 8,369 | 9,224 | (855) | -9% |
General and administration | 2,418 | 2,676 | (258) | -10% |
Restructuring costs | 217 | 1,756 | (1,539) | -88% |
Asset impairments | 350 | 6,461 | (6,111) | -95% |
Total operating expenses | 11,354 | 20,117 | (8,763) | -44% |
Operating income (loss) | 1,988 | (2,878) | 4,866 | 169% |
Other income (expense): | ||||
Interest and dividend income | 84 | 70 | 14 | 20% |
Foreign currency and other income | (2) | 1 | (3) | -300% |
Total other income | 82 | 71 | 11 | 15% |
Income (loss) before tax benefit (provision) from continuing operations | 2,070 | (2,807) | 4,877 | 174% |
Income tax benefit (provision) (158) 1,004 (1,162) -116%
Income (loss) from continuing operations 1,912 (1,803) 3,715 206%
Discontinued operations:
Income from operations of discontinued segment | 196 | 250 | (54) | -22% |
Income tax benefit (provision) | 230 | (61) | 291 | 477% |
Income from discontinued operations | 426 | 189 | 237 | 125% |
Net income (loss) | $ 2,338 | $ (1,614) | $ 3,952 | 245% |
Weighted average shares outstanding - basic | 17,041 | 16,984 | 57 | 0% |
Weighted average shares outstanding - diluted | 17,046 | 16,984 | 62 | 0% |
Net income (loss) from continuing operations per share - basic | $ 0.11 | $ (0.11) | $ 0.22 | 200% |
Net income (loss) from continuing operations per share - diluted | $ 0.11 | $ (0.11) | $ 0.22 | 200% |
Net income from discontinued operations per share - basic | $ 0.03 | $ 0.01 | $ 0.02 | 215% |
Net income from discontinued operations per share - diluted | $ 0.03 | $ 0.01 | $ 0.02 | 214% |
(1) Net revenue, non-directly delivered programs consists of gross revenue, less program pass -through expenses f or non-directly delivered programs because w e primarily engage third-party operators to perf orm these services.
UNAUDITED
Quarter ended September 30,
2014 2013
% Change
Gross revenue $ 33,719 $ 40,597 -17% Cost of sales 22,901 25,526 -10% Net revenue $ 10,818 $ 15,071 -28%
(2) Gross revenue and cost of sales f or directly delivered programs are reported as separate items because w e plan, organize and operate all activities, including speakers, f acilitators, events, accommodations and transportation.
(3) Gross margin is calculated as the sum of gross revenue non-directly delivered programs and gross revenue directly delivered programs less cost of sales non-directly delivered programs and costs of sales directly delivered programs. Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs and gross revenue directly delivered programs.
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AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)UNAUDITED
Nine months ended September 30,
2014 2013 $ Change
% Change
Net revenue, non-directly delivered programs (1) $ 29,027 $ 36,254 $ (7,227) -20% Gross revenue, directly delivered programs (2) 9,734 10,460 (726) -7% Total revenue 38,761 46,714 (7,953) -17%
Cost of sales, directly delivered programs (2) 5,816 7,053 (1,237) -18% Cost of sales, program merchandise markdown 554 - 554 100% Gross margin (3) 32,391 39,661 (7,270) -18%
Operating expenses:
Selling and marketing 20,868 24,275 (3,407) -14% General and administration 8,647 11,007 (2,360) -21% Restructuring costs 1,756 1,756 - 0% Asset impairments 2,350 6,461 (4,111) -64% Total operating expenses 33,621 43,499 (9,878) -23%
Operating loss (1,230) (3,838) 2,608 68%
Other income (expense):
Interest and dividend income 356 357 (1) 0% Foreign currency and other income 6 22 (16) -73% Total other income 362 379 (17) -4%
Loss before tax provision from continuing operations (868) (3,459) 2,591 75%
Income tax benefit (provision) (416) 1,269 (1,685) -133%
Loss from continuing operations (1,284) (2,190) 906 41%
Discontinued operations:
Loss from operations of discontinued segment, including impairment and
loss on disposal of $9.7 million (9,298) 959 (10,257) -1070% Income tax benefit (provision) 1,184 (350) 1,534 438% Income (loss) from discontinued operations (8,114) 609 (8,723) -1432%
Net loss $ (9,398) $ (1,581) $ (7,817) -494%
Weighted average shares outstanding - basic 16,827 16,982 60 0%
Weighted average shares outstanding - diluted 16,827 16,982 60 0%
Net loss from continuing operations per share - basic $ (0.08) $ (0.13) $ 0.05 38% Net loss from continuing operations per share - diluted $ (0.08) $ (0.13) $ 0.05 38%
Net income (loss) from discontinued operations per share - basic $ (0.48) $ 0.04 $ (0.51) -1428% Net income (loss) from discontinued operations per share - diluted $ (0.48) $ 0.04 $ (0.51) -1428%
(1) Net revenue, non-directly delivered programs consists of gross revenue, less program pass -through expenses f or non-directly delivered programs because w e primarily engage third-party operators to perf orm these services.
UNAUDITED
Nine months ended September 30,
2014 2013
% Change
Gross revenue $ 87,235 $ 99,807 -13% Cost of sales 58,208 63,553 -8%
Net revenue $ 29,027 $ 36,254 -20%
(2) Gross revenue and cost of sales f or directly delivered programs are reported as separate items because w e plan, organize and operate all activities, including speakers, f acilitators, events, accommodations and transportation.
(3) Gross margin is calculated as the sum of gross revenue non-directly delivered programs and gross revenue directly delivered programs less cost of sales non-directly delivered programs and costs of sales directly delivered programs. Gross margin percentage is calculated as gross marg in divided by the sum of gross revenue non-directly delivered programs and gross revenue directly delivered programs.
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AMBASSADORS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) UNAUDITED AUDITEDAssets
Current assets:
September 30, December 31,Cash and cash equivalents $ 3,550 $ 4,775 $ 9,473
Available-for-sale securities 43,586 36,240 36,174
Prepaid program costs and expenses 2,597 7,090 7,069
Accounts receivable 1,071 1,022 1,792
Deferred tax assets - 547 1,295
Assets held for sale 8,400 - -
Property and equipment, net 3,821 18,948 18,452
Available-for-sale securities 724 717 719
Deferred tax assets 125 - - Intangibles - 3,529 3,522
Goodwill 70 9,781 9,781
Other long-term assets 483 82 82
Liabilit ies and St ockholder s' Equit y
Current liabilities:
Accounts payable and accrued expenses $ 6,646 $ 9,035 $ 3,587
Participants' deposits 9,303 9,847 26,362
Foreign currency exchange contracts 625 90 244
Deferred tax liabilities 149 - - Other liabilities - 94 119
Total current liabilities 16,723 19,066 30,312Participants' deposits 190 - - Foreign currency exchange contracts - - 52
Deferred tax liabilities - 2,330 2,087
Stockholders' equity 47,514 61,335 55,908
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AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)Cash flows from operating activities:
UNAUDITED September 30,
2014 2013
Net loss $ (9,398) $ (1,581) Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 4,496 4,088
Stock-based compensation 1,305 2,161
Deferred income tax benefit (877) (2,373) Impairment and loss on sale of discontinued operations 9,298 - Loss on disposition and impairment of property and equipment 2,364 6,461
Program merchandise writedown 554 - Excess tax shortfall from stock-based compensation 109 2,103
Change in assets and liabilities:
Accounts receivable and other assets | 663 | (169) |
Prepaid program costs and expenses | 3,890 | 9,652 |
Accounts payable, accrued expenses, and other current liabilities | 2,753 | 4,802 |
Participants' deposits | (16,869) | (15,888) |
Net cash provided by (used in) operating activities | (1,712) | 9,256 |
Cash flows from investing activities: | ||
Purchase of available-for-sale securities | (29,733) | (27,297) |
Proceeds from sale of available-for-sale securities | 22,582 | 22,931 |
Proceeds from sale of BookRags, Inc. | 4,600 | - |
Purchase of property and equipment | (1,202) | (2,413) |
Proceeds from sale of property and equipment | 28 | - |
Purchase of intangibles | (189) | (251) |
Net cash used in investing activities | (3,914) | (7,030) |
Cash flows from financing activities: | ||
Repurchase of common stock | (188) | (486) |
Dividend payment to shareholders | - | (1,017) |
Proceeds from exercise of stock options | - | 5 |
Excess tax shortfall from stock-based compensation | (109) | (2,103) |
Net cash used in financing activities | (297) | (3,601) |
Net decrease in cash and cash equivalents | (5,923) | (1,375) |
Cash and cash equivalents, beginning of period | 9,473 | 6,150 |
Cash and cash equivalents, end of period | $ 3,550 | $ 4,775 |
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Special Items
During the third quarter of 2013, the Com pany initiated a corporate res tructuring plan aim ed at s tream lining its cos t s tructure and focus ing the bus ines s prim arily on its core Student Am bas s ador Program s in order to prom ote the long -term health of the organization. At that tim e, the Com pany announced its decis ion to res tructure two of its travel program s believed no longer financially viable in their current form - Dis covery Student Adventures and People to People China.
As part of the Com pany's res tructuring plan and as previous ly announced, during the s econd quarter of 2014 the Com pany com pleted a workforce reduction and incurred pre-tax charges of approxim ately $1.6 m illion for s everance benefits and other related expens es that is included within res tructuring cos ts in the table below . Of the $1.6 m illion in expens e, a $0.4 m illion non- cas h expens e reflected accelerated ves ting of previous ly awarded s tock options and s tock grants . In addition, the Com pany has incurred other res tructuring charges including accelerated depreciation on as s ets to be replaced.
During the third quarter of 2014, and in furtherance to its res tructuring plan, the Com pany announced it cons um m ated a s ale o f its wholly-owned s ubs idiary BookRags . All activities related to BookRags are reflected as dis continued operations for all periods pres ented, and for com parability of ongoing bus iness activities , are included in s pecial item s below. Dis continued operations for the current year-to-date period include the goodwill im pairm ent of $9.7 m illion that was recorded d uring the s econd quarter of 2014.
The Com pany anticipates clos ing the s ale of its corporate headquarters , lis ted for s ale s ince April 2012, during the fourth quarter of
2014 for $8.8 m illion. During the s econd quarter of 2014 , the Com pany recorded an as s et im pairm ent of $2.0 m illion to lower its
carrying value to the anticipated s ales price. As part of the trans action, the Com pany anticipates incurring approxim ately $0.4 m illion in clos ing fees .
In connection with the previous ly announced term ination of the Com pany's form er interim chief executive officer, during the s econd quarter of 2014 the Com pany incurred pre-tax charges of approxim ately $0.7 m illion for s everance benefits and other related expens es , including a non-cas h expens e of approxim ately $0.3 m illion to reflect accelerated ves ting of previous ly awarded s tock options and s tock grants under the term s of the executive's s eparation agreem ent. During the firs t quarter of 2013, the Com pany incurred s eparation expens e of approxim ately $2.7 m illion upon the res ignation of two executives .
As a res ult of thes e events , the operations as pres ented in the accom panying financial s tatem ents for the three m onths and nine m onths ended Septem ber 30, 2014 and 2013 do not reflect a m eaningful com paris on between periods or in relation to the operational activities of the Com pany. In order to provide m ore m eaningful dis closure, the following table repres ents a reco nciliation of certain earnings m easures before s pecial item s to thos e s am e item s after the im pact of s pecial item s (in thous ands except per s hare data):
UNAUDITED
Net Income (Loss) EPS
Three months ended September 30,
2014 2013
Three months ended September 30,
2014 2013
Amount before special items $ 2,650 $ 3,649 $ 0.16 0.21
Discontinued operations 196 250 0.01 0.01
Asset impairments (350) (6,461) (0.02) (0.38) Restructuring costs (217) (1,756) (0.01) (0.10) Legal and other fees (120) (422) (0.01) (0.02) Separation payments - 1 - 0.00
Tax impact 179 3,125 0.01 0.18
Amount per consolidated statement of operations $ 2,338 $ (1,614) $ 0.14 $ (0.10)
UNAUDITED
Net Income (Loss) EPS
Nine months ended September 30, Nine months ended September 30,
2014 2013 2014 2013
Amount before special items $ 6,383 $ 4,660 $ 0.37 0.27
Discontinued operations (9,298) 958 (0.55) 0.06
Asset impairments (2,350) (6,461) (0.14) (0.38) Restructuring costs (1,756) (1,756) (0.10) (0.10) Legal and other fees (409) 171 (0.02) 0.01
Separation payments (664) (2,785) (0.04) (0.16)
Tax impact (1,304) 3,632 (0.09) 0.21
Amount per consolidated statement of operations $ (9,398) $ (1,581) $ (0.56) $ (0.09)
9
Deployable GashDeployable cash is a non-GAAP liquidity measurement and is calculated as the sum of cash and cash equivalents, short-term available-for-salesecurities, and prepaid program costs and expenses, less the sum ofaccounts payable, accrued expenses and other short-term liabilities (exciuding deferred taxes) and participantdeposits. We believe this non -GAAP measurement is useful to investors in understanding important characteristics of our business.
The following summarizes deployable cash at September 30, 2014 and 2013, and December 31, 2013 (in thousands):
UNAUDITED September 30, December 31,Cash, cash equivalents and short-term available-for-sale securities | $ 47,136 | $ 41,015 | $ 45,647 |
Prepaid program cost and expenses | 2,597 | 7,090 | 7,069 |
Less: Participan1s' deposi1s | (9,493) | (9,847) | (26,362) |
Less: Accounts payable l accruals l other liabilities | (6,646) | (9,129) | (3, 706) |
Deployable cash | $ 33,594 | $ 29,129 | $ 22,648 |
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