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Ambassadors Group Inc. (NASDAQ:EPAX)

Q4 2008 Earnings Call

February 06, 2009; 11:30 am ET

Executive

Jeff Thomas - President & Chief Executive Officer

Peg Thomas - President of Operating Subsidiary Ambassador Programs

Chadwick Byrd - Chief Financial Officer

William Sennett - Director of Strategic Planning

Analyst

Lisa Rapuano - Lane Five Capital Management

Greg McKinley - Dougherty & Co.

Gary McLaughlin - Private Investor

Sriram Rangamony - Singular Research

James Bellessa - DA Davidson & Co

Andrew Ward - Fennymore

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter Ambassadors Group Incorporation earnings conference call. My name is [Dimali] and I’ll be your operator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions)

I would now like to turn the presentation over to your host for today’s conference Mr. William Sennett, Director of Market Research. Please proceed.

William Sennett

Thank you to Dimali. Good morning. On the call with me today is Jeff Thomas, President and Chief Executive Officer of Ambassadors Group; Peg Thomas, President of the Operating Subsidiary Ambassador Programs; and Chadwick Byrd, Chief Financial Officer of Ambassadors Group.

First, before we proceed into the call, I will read the Safe Harbor statements regarding forward-looking statements. Statements contained in this press conference and related comments by Ambassadors Group’s management which are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

These forward-looking statements include without limitation, statements that relate to expectations concerning matters that are not historical facts. Word such as projects, believes, anticipates, plans, expects, intends, estimates and other similar words and expressions are intended to identify forward-looking statements.

These forward-looking statements reflect our beliefs or current expectations with respect to among other things, trends in the travel industry, our business and growth strategies, our ability to integrate acquire businesses, future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies such as legal proceedings, financial results and fluctuations in our results of operations.

Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from anticipated results. These and other risks are discussed in greater detail in the Ambassador Group’s periodic reports filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these factors and all related cautionary statements. We do not undertake any obligation to update any forward-looking statements.

With that I will hand the call over to Jeff.

Jeff Thomas

Thank you. Good morning and thank you for joining in our call. This morning we Peg Thomas, Chadwick Byrd and myself will discuss our Q4 2008 operating results, our full year 2008 operating results and our outlook for 2009.

We are obviously operating in a challenging economic environment. During our previous call we reported that our net enrolments for 2009 were approximately 29,500 compared to 30,700 on the same date one year ago. This represented a difference of 4%. Over the cause of the last quarter we so some deterioration in the net enrolments number. At this point for 2009 we have 34,800 net enrolments compared to 42,400 one year ago, a difference of 18%.

We believe that this enrolment gap is a result of two primary factors. First, although we had higher than expected attendances at our meetings in the fall, we converted a lower percentage of the audience in applications than we expected. More specifically the application tail that each meeting normally provides did not materialize.

Second, in late 2008 and early 2009 we experienced a significantly higher than normal withdrawal rate. We attributed both of these issues to the worsening economy. In order to bring expenses in to line with anticipated revenue for 2009, we have been taking a series of expense management action. The most significant is reduction in force of approximately 16% of our work force in January.

Perhaps most important, even though our results are down, we did achieve a profitable 2008 and we generate $19.7 million of free cash flow. We have allocated over 19% of this back to our shareholders in the form of dividends and share repurchases.

At this point I’ll turn the call over to Peg Thomas for the further discussion of the operating results.

Peg Thomas

Good morning and thank you for joining us this morning. For the year 2008, we traveled almost 42,000 delegates to 49 countries, compared to 52,600 delegates and 44 countries in 2007. In the fourth quarter of 2008, we traveled approximately 3000 delegates in comparison to 28,000 one year ago in the same period. The delegate in the fourth quarter traveled on a combination of domestic and international programs.

Some highlights from 2008 would include achieving some of our highest quality ratings ever, contributing over 86,000 service hours around the globe through student programs including cleaning the environment, writing to American soldiers, working in orphanages and learning about global warming and lastly we’ll be having our student leaders meet with the Iraqi ambassadors to the United Nations while they’ve been in the D.C area this last year.

Travel for 2009 has begun. We expect to travel to 46 countries during the upcoming year. We had one of our largest single events ever with over 2,200 travelers held during the presidential inauguration in Washington D.C. We began our spring student programs in DC the last week of February. These are leadership programs for young people from all over the world.

In fact in 2008, we had students representing 80 different countries on these programs. The programs are one week in length and run through out the spring in the DC area. At this time, we have almost 36,500 delegates enrolled for 2009 travel in comparison to approximately 45,600 for 2008 on this date, one year ago. This 20% decrease is already net of withdrawals to-date.

As Jeff discussed in his opening, the economy has impacted our enrollments for the current year. We are specifically seeing more families at our information meetings than we did last year. However, we are not seeing the same rates of conversion to enrollment from these meetings. After many discussions with these families, we believe our customers are in a wait-and-see mode, depending upon job security or the general feel within the economy. In this economy we may not have an enrollment out of some of these families, but we do feel that we’re building relationships for potential future enrollment.

Jeff mentioned our expense management efforts and we’re continuing to scrutinize our expenses both in the cost of goods sold and daily expenses. We’re doing more or with less resource’s as we continue to look for efficiencies in our processes and continuing to push more marketing collateral to our website.

Our mission continued to expand at the impact and relevance as the world changes. I took two of our children to the 2009 presidential inauguration as a part of our program this past month. I was able to see first hand how valuable it is to show your child history in the making, to watch them look outside their own local boundaries and imagine the possibilities that await them.

It was clearly a powerful event, but it was also life changing for me as a mom, as I watch my own children experience some of our own people-to-people magic. They met many other students, some from different countries, some from right down the road, but they were exposed to something so different than any of their own peers, because of the people-to-people opportunity.

Our market is not going away. At this time of year, we speak to thousands of parents around the country and they all face the same challenge; how to raise the child in a global and volatile economy, while preparing them for competitions down the road. We know that we provide a safe and valuable solution to this challenge.

Thank you for your time and attention time this morning. I’ll now turn the call over to Chadwick for the financial review.

Chadwick Byrd

Thank you, Peg and Good morning. Today I’ll be discussing our 2008 results, our balance sheet and cash flows before providing guidance on 2009.

During the fourth quarter we traveled 3009 delegates compared to 2805 delegates one year ago. A 7% increase for the quarter. The increase in delegates came from our international professional programs. Gross receipt increased $1.5 million or 11% quarter-over-quarter due to the increased delegates in addition to nearly $1 million in gross receipt from BookRags.

Our gross margin for the fourth quarter increased $1.8 million or 50% due to nearly $900,000 of gross margin from BookRags, improved performance of both our domestic and international programs traveling in the quarter and increased international delegates. Gross margin as a percent of gross program receipt increased from 27.9% to 37.7% quarter-over-quarter. Gross margin for 2008 and 2007 were 34.4% and 34.6% respectively.

Selling and marketing cost increased 14% in the quarter, as we experienced increased initial interest for our 2009 travel programs. General and administrative costs decreased 38% during the quarter, primarily in lower annual incentive pay, general cost cutting measures implemented throughout the year and non-recurring lease termination charges experienced in the fourth quarter of 2007.

While selling and marketing expenses increased 5% for the year, general and administrative cost decreased 18% in line with decreased annual revenues. Total annual operating expenses for the year decreased $807,000 or 1%.

In addition to the cost cuts implemented in 2008, our expense management efforts continue in 2009. These efforts include but are not limited to executive salary freezes, limiting the average salary increases approved for associates to less than 1% for 2009 and a 17% drift, implemented on the 23, January in an effort to right size the company with the current market conditions.

At the end of the fourth quarter, we recorded an $800,000 loss on foreign currency contracts held at year end. The company’s long standing policy has been to enter into foreign currency contracts once we have priced our international programs, usually one year in advance of travel.

Our policy is to be 80% to 100% hedged at year end for following year travel. This allows us to forecast our cash flows in the following year and reduce fluctuations in our reported gross margin. At the end of 2008 however, the company was approximately 20% over hedged on our estimated foreign currency needs due to the decline in enrolments and lower program costs than we estimated during the summer of 2008. Since this time, the US dollar also strengthened causing an $800,000 variance in the market value of this over head position.

We may incur further losses on the over hedge position, if our estimated diligence account continue to decline, the U.S dollar continues to strengthen, as it has since beginning of the year and we continue to decrease program costs. These losses would flow through the other income and expense line.

As of today these contracts have an additional unrealized loss for approximately $1 million. We are considering all of our options with these foreign currency contracts, including exiting the position to bring the hedge position down to 100%. Our effective tax rate for the quarter was 32%, due to the predominant amount of tax exempt interest income received during the quarter.

Our balance sheet and cash flows continue to be a strength to the company. We have no debt and the majority of our balance sheet is in cash and short-term investments. Total assets increased 2% to $124.3 million, 60% of which is in cash and short-term investments. Participant deposits which reflect amounts received from our delegates for future period travel, increased 3% year-on-year despite lower enrolled participants.

The positive increase is due to higher initial deposits required to enroll on our International programs, a higher number of fully paid delegates that traveled with us on the presidential inauguration program in January and improved collection efforts.

During the year, the company generated $19.7 million in free cash flow and allocated $19 million back to our share holders in the form of dividends and stock repurchases. Deployable cash decreased $10.5 million to $29.9 million. During the fourth quarter, we repurchased approximately 35,000 shares at an average price of $8.34. For the year, we repurchased approximately 642,500 shares at an average cost of $15.81. The company has approximately $19.7 million remaining on our share repurchase authorization.

Our guidance for 2009 has a wider range than we have typically provided due to the economic uncertainty in the world these days. We do however have enrolments that will provide positive cash generations and lead us to another profitable year.

Based upon enrollment, our on-going marketing efforts, expense reduction implemented last year and already in 2009, we anticipate earnings to be between $0.65 and $0.90 per share. Again, we are cautious in our guidance due to the uncertain state of the economy, the impact it will have on future withdrawal rates, decreased interest rates and the value of the dollar as it relates to our un-hedged currency position.

I thank you for your time today, and I will now turn the call back over Jeff.

Jeffrey Thomas

Thank you, Chadwick. Demali at this point we would like to go ahead and take some questions.

Question-And-Answer Session

Operator

(Operator Instructions) Your first question comes from Lisa Rapuano - Lane Five Capital Management.

Lisa Rapuano – Lane Five Capital Management

I was wondering if you could comment on your intensions for use of free cash flow in the coming year. Are there still a 90% return to shareholders on that?

Jeff Thomas

Lisa the back part of your question trailed off, I heard the first part of that comment on use of cash flow in 2009, I didn’t hear the second part?

Lisa Rapuano – Lane Five Capital Management

Just whether the intension was to continue to return it to shareholders and what you’re thinking about dividend versus share repurchase?

Jeff Thomas

Yes, thanks for your question Lisa Rapuano. Again, we like our position right now with our cash on our balance sheet. We think having cash on the balance sheet at this time during tough economic times is a good thing. We continue, not only on a quarterly basis but on a monthly basis to evaluate repurchases as well as our dividend policy and will continue to do that and I think right now, during these times we will analyze that more than we ever have.

Operator

Your next question comes from Greg McKinley – Dougherty & Co.

Greg McKinley - Dougherty & Co.

Guys, I’m wondering, if you could comment a little bit about how you view the pricing end margin environment for 2009 travel relative to the environment you’ve been operating in the last couple of years. Just from a currency, head wind perspective as well as just general cost of delivery be it coach rental and fuel charges, air fares etc, is that giving you an ability to earn similar margin dollars off of lower priced itineraries or nothing force to raise prices to maintain margin. Could to talk a little bit about that?

William Sennett

Sure. I think we look at this, one is pricing of our 2009 programs done in 2008. Obviously those were done in a different environment than we are today, at the same time we are also entering into contracts with our overseas vendors for the delivery of those programs. We do have and as you’ve seen from our comments on the unhedged foreign currency position is that we have been able to get some positive margin expansion due to decreased cost overseas.

At the same time where very fairly hedged or we’re unhedged on our foreign currency needs at this time. There is other thing such as air cost that are continuing to come down in certain environments such as fuel surcharge, but we also see in certain areas they are also going up. So it is a little bit volatile right now, but we see opportunities that will help alleviate some of the pressures as we have decreased enrollments. Going into 2010, is where I think the first time we would be able to take some of these advantages into our pricing.

Greg McKinley - Dougherty & Co.

Okay. So ’09 you’re still working for relatively stable margin environment just because you had already locked into itinerary price and your delivery cost.

Jeff Thomas

Correct, but I’d add and if I gave an example, we had an airline come to us the other day. They moved their fuel surcharge down from over $400 to under a $100 and that’s obviously the general trend right. Well, to us there are a surprisingly few airlines and particular segments have actually moved their fuel surcharge up and we’re obviously trying to figure out how that could be or figure out how to go with another carrier.

As you pointed out, we’re trying to take it advantage of opportunities that present themselves to negotiate for lower costs. I think everyone sees that air travel is down, hotel usage is down but a lot of our rates are contracted in, but it should set up better for 2010 for us.

Greg McKinley - Dougherty & Co.

Yes and I think I’ve backed into about a 4% increase, at least as of February 1, in terms of gross program receipts per enrollee; is that how you would expect ’09 as the whole to shake out?

Jeff Thomas

I think that’s a good proxy for 2009.

Greg McKinley - Dougherty & Co.

Okay and then, I think my last question is in terms of your corporate cost infrastructure, do you think you’ve sort of made your most difficult and biggest decisions there that have to be made or is it still just pending on how the environment continues to unfold?

William Sennett

No, I think what we’ve done is we’ve right sized our company as it stand in the current market conditions. So we think that we’ve taken the front of the vote already and we’ll experience those benefits going forward.

Operator

Your next question comes from Gary Mclaughlin – Private Investor.

Gary Mclaughlin – Private Investor

I’m an independent share holder and my question is with regard to what is the status or progress towards establishing a dividend reinvestment plan on our common stock.

William Sennett

Thank you, Gary. We’ve looked at that in the past and I think as we continue to evaluate and reevaluate our dividend policy, we can look that again. Also, in the phase of changing tax environment, we need to consider what benefits those and see if those benefits outweigh the cost of implementing such a structure.

Operator

Your next question comes from Sriram Rangamony - Singular Research.

Sriram Rangamony - Singular Research

I was wondering, if you could give more details about how stronger dollar and lower cost is making you book higher losses this time or did I not understand you properly?

William Sennett

No, I think that it’s correct. It’s a fairly complex situation, but really what we are trying to do is hedge our foreign currency needs for 2009. As we did that, we found our self in our hedged positions. So, we had more currency contracts than we will actually need for 2009.

In doing so, the accounting rules require us to take a loss on the contracts that are over hedged. So that really came around from three things, we have due delegates, which is leading to an over hedged positions, we have decreased program costs in international currency and as the U.S dollar strengthened against those currencies, it’s requiring us to take the $100,000 loss.

Sriram Rangamony - Singular Research

And how will it unwind it self over the next year? Will unwind itself or is it a loss that has been booked?

William Sennett

It is a loss that’s been booked. It would take quit a bit for that to unwind at this time as the U.S dollar has strengthened so much, but it does have an opportunity to draw back some of it, but at this point in time we don’t see that. In fact we have an additional $1 million unrealized loss yet to take and if those contracts were eliminated to-date that would hit our income statement in the first quarter of 2009.

Sriram Rangamony - Singular Research

And you said it would help you in 2010, would that be because you would be changing your policy of hedging.

William Sennett

No, we still believe our policy on hedging is appropriate, but with the U.S dollars strengthening it will allow us to enter into more favorable forms contract for 2010 needs.

Sriram Rangamony - Singular Research

Another question I had with respect to your right sizing, what could be the financial impact of the reduction in personnel, in terms of your administrative cost next year in 2009? Do you have some kind of a dollar figure or something?

William Sennett

We obviously do. Obviously it’s going to decrease, in essence to just over 45 associates until they have an associated cost with that. We think its well over $1 million in decrease for ’09.

Sriram Rangamony - Singular Research

If I recollect right, one year back you said you were maintaining a marketing cost in 2008, despite the lower enrollments. Is that your policy in 2009 going forward?

William Sennett

I’m sorry, can you repeat the question?

Sriram Rangamony - Singular Research

If I recollect right, one year back when the enrollment dropped for 2008 as compared to 2007, you said you were going to maintain your marketing expenditure at the earlier year level, so that you would continue to gain market share. Is that a marketing strategy for 2010 also going to be the same, in terms of maintaining marketing expenditure?

William Sennett

Yes, you’re correct. What we said at that time is that actually our marketing expenditure would increase in 2008 as it has increased 5%. For 2009, we see that there is a couple of things that are going on. We see that with fewer delegates enrolled, the cost of marketing to them after they have enrolled should decrease and as Peg also mentioned, we’re really trying to move a lot of our marketing expenditure online, so that will and obviously the benefit of doing that is hopefully reaching more consumers, but also had a much lower cost. So, we do think that those costs would be coming down in the future as well.

Operator

Your next question comes from James Bellessa - DA Davidson & Co.

James Bellessa - DA Davidson & Co

On your $0.65 to $0.90 guidance range, does that include the unrealized loss of the foreign exchange position that you talked about, that you may have to take?

William Sennett

That, it does.

James Bellessa - DA Davidson & Co

And in terms of your G&A line item, you just had the $12.6 million recorded. With your expectation with your reduction implement and so forth, the other cost control with that line item should be down in ’09.

William Sennett

And that’s correct as well.

James Bellessa - DA Davidson & Co

And your selling inter promotion expenses, you just chatted about subject but is it likely to be down in ’09 versus ’08 or are you still pushing that to help maintain your position in the travel industry.

William Sennett

I think you bring up a good point; obviously we are going to try and reduce in all the appropriate areas, but if we find marketing tactics that work and continue to deliver future value to the company, then we are going to expand that. In general, our cost should be coming down for 2009.

Peg Thomas

So Jim, I think the majority of the cost decrease you’ll see in the G&T and not obviously in the S&G. We’re trying to keep most of our costs in that area in S&T obviously, that’s where we see our growth opportunity going forward.

James Bellessa - DA Davidson & Co

And you talked about the buyback in most recent quarter and my pen was lying underneath, I couldn’t find it immediately. What was the fourth quarter number of shares and average price?

William Sennett

That was approximately 35,000 shares at an average price of $8.34.

Operator

Your next question comes from Greg Mckinley – Doughert & Co.

Greg Mckinley - Dougherty & Co.

Just a quick question, when you are looking at itinerary pricing and sort of product mix shift, I know ‘09 you’ve already marketed and you for competitive reasons may not want to comment on this but I’ll ask you to see, and that is, are you thinking about broadening your product offering at lower price structures, may be shorter itineraries overseas or a larger mix of domestic offerings, so that the fertile rates for customers to sign up for these programs may not be as high?

Peg Thomas

Well, maybe you should come work for us, because that sounds a lot like what we’re trying to do.

Greg Mckinley - Dougherty & Co.

Are pursuing those actions, are you just considering those issues.

Peg Thomas

We are obviously not yet in the market for 2010, but we are reviewing all of those offering, trying to get across the board, whether it’s shorter programs, longer programs, short or lower price, domestically, internationally, we’ve been looking at all of those opportunities to see what resonates with our current customers, what resonates with the people that are yet enrolling with us, because obviously we have data base of people that we go to from a questioner survey opportunity.

Greg McKinley - Dougherty & Co.

And do you think the way you would market on lower price itinerary would be different, in other words, I know some of the competitors who are focused more on domestic travel; they are often marketing directly through a teacher student relationship, whereas your approach is more direct marketing. Is there some think about that model that works better for lower price points versus the direct marketing approach or would your approach need a change that all do you think?

Peg Thomas

I think it could change Greg. I think it’s probably a little bit of both. I think it doesn’t hurt to look at all the different channels that work in and then ask ourselves is there more of an opportunity as a lower prices in a different channel or should we be expanding our channels anyway I don’t think we yet have an answer for that.

Operator

Your next question comes from Lisa Rapuano - Lane Five Capital Management.

Lisa Rapuano - Lane Five Capital Management.

I had a question about deposit rates. You had tinkered with those a little bit last year to see how that affected people’s tendency to enroll and tendency to withdraw. I look like just tinkering with the numbers you may have increased it again, the deposit rate; I was wondering if you had any changes in that area.

Jeff Thomas

No. you are correct. Last year we changed on a certain portion of our delegates. We did a test at the beginning of the 2008 campaign, a $95 versus the $400 deposit. The $95 although it increased the initial enrollment, it did have a tail to it which led to increased patrol rates.

So net-net it did not work out and so this year we went back to the $400 deposit. So as of the end of the year in 2007, approximately half of those delegates were on to $95 deposit versus the $400 deposit. This year all of our student program enrollments would be on $400 deposit.

Lisa Rapuano - Lane Five Capital Management.

Okay. So it’s back to $400, but no change from the old structure.

Jeff Thomas

That is correct.

Lisa Rapuano - Lane Five Capital Management.

Okay and then just said restate this one more time; I’m pretty sure you answered this question, but it wasn’t asked in exactly this way. The head count reduction, what was the split between selling and marketing versus general administrative people?

William Sennett

So the split was towards the selling and marketing, but the head counts were across both lines.

Lisa Rapuano - Lane Five Capital Management.

Okay and relatively even.

William Sennett

I’m sorry, I think I reversed that.

Lisa Rapuano - Lane Five Capital Management.

Yes they were tilted towards G&A.

William Sennett

Correct more towards G&A.

Lisa Rapuano - Lane Five Capital Management.

Okay, tilted towards G&A, but there were some selling to marketing people, just either because volume was lower and they are not necessary I guess, correct?

William Sennett

Well actually, if you look at the selling marketing, they are about 75% of our headcount, so.

Lisa Rapuano - Lane Five Capital Management.

Okay and the comment that you made about hoping to use or consenting to use online marketing as a lower cost way, is that more for follow-up from meeting people or the people that have attended the meetings or is it to prospect for people to go to meetings; can you give us a little bit more understanding of how your experimenting with that?

Jeff Thomas

Sure. Over the years, we keep moving towards more of a system where we are doing more and more on mind, but it’s more of a gradual shift rather than a revolution if you will and we basically started at the backend of the process and it continued to kind of move upstream in the process.

The direct marketing approach we use, we still obviously are primarily a male driven channel, but each year we do more and more and we are more involved interacting with our customers and potential customers online. I think we rolled out a new or we did roll out a new website last fall, I can’t remember exactly the timing on it, but if you go there, you’ll see it significantly upgraded and it’s created a bit more kind of excitement in the market place.

Lisa Rapuano - Lane Five Capital Management.

Right, but again the objective is to get the people to the meetings. You are not actually selling to anyone directly online.

Jeff Thomas

Correct.

Lisa Rapuano - Lane Five Capital Management

Okay and so going back to when you’re talking about the fine end and the backend. Just that I understand into my own terminology, that means sort of front end actually generating leads, people to whom you should reach out to, rather than just the traditional direct marketing list that you used previously. Is that right?

Jeff Thomas

Correct.

Lisa Rapuano - Lane Five Capital Management

So, generating leads from online and then, when you talk about moving upstream, that means after you get somebody to the meeting, like giving them more reasons to come to the website and therefore increasing their capacity to buy. Is that what you mean?

Jeff Thomas

Correct

Lisa Rapuano - Lane Five Capital Management

And then last, what is the actual ending share count on the quarter that will be on the front of the Q.

Jeff Thomas

Well, $19 million.

Lisa Rapuano - Lane Five Capital Management

Then just back to the share we purchased, one more time. I’m try to interpret what you are saying a little bit. So you guys have plenty of cash sitting on your balance sheet and you are telling me that you like having that cash, right? But you also generate cash at least at the mid point of your guidance, which will be well in excess of your current dividends.

So, are you trying to call us that very conscious and prudent and you don’t want to be aggressive, I get that, but do you believe that the best of use of excess cash is repurchased beyond the dividend or you actually kind of reversing that and saying the best use of cash to build the balance sheets in order to maintain caution.

Jeff Thomas

I think right now and particularly last fall we took a stance that was better to wait and see how the markets play out. Obviously we all experienced a great deal of volatility, so we were conservative in buying back our shares. We obviously think there is some great buying opportunities out there right now and we’re just trying it more comfortable with the direction in the market place and what’s going on with our client base for 2009.

Obviously we don’t have that on our balance sheet. We think that has provided us great strength in operating right now and I think as Chadwick said, at each Bard meeting we view our dividend share buy back policy and I think it will get a great deal of excess scrutiny this quarter as we look at what the alternatives are in terms of deploying the cash.

I think historically, particularly over the last several years and I think this year particular we deployed back almost a 100% of the cash regenerated. So we definitely want to figure out the ways to return the cash to the shares owners would have wanted to figure out the efficient ways to do that.

William Sennett

And then Lisa let me also go back on the 19,000 share count, it’s actually $19, 56,000.

Operator

(Operator Instruction) Your next question comes from Sriram Rangamony - Singular Research.

Sriram Rangamony - Singular Research

Could you give us some idea about what you feel that your competitors are doing .Are you gaining market share against them or maintaining it or losing it?

Jeff Thomas

It’s tough to get a competitive window look into our competitors right now. They are private we are public and so we relay on a bunch of anecdotal stories. We heard through social network in a few will, that a lot of our competitors, particular in the overseas segment are down 25% to 35%, we don’t know that’s reliable or not and so it look like we are doing a doing a little better than they are in some cases. Domestically we’ve seen some of our competitors come out of the gate pretty strong and not be down may be in the single digits.

So it’s tough to get visibility right now in terms of what’s going. The think that they we’re very comforted by as I think Peg mentioned is we’ve had very high interest in our programs and people expressing a lot and even a lot of people who are still sitting on the fence, and they are not sure if they are going to apply or enroll this year to travel and we’re working on developing relationships with them, because we think there are great prospects to target in the coming year.

Sriram Rangamony – Singular Research

Okay and just one more question. How does BookRag fit into your plans for ’09?

Jeff Thomas

BookRags fit in a couple of different ways. One, is the audience that they are masking is very similar to the audience that we speak to in terms of our travel programs and one month last fall, we had over were 5 million visitors and very similar demographic which we’re trying to target with our travel programs.

They allow us to have a web presence in a different way, obviously under a different brand, but they have a significant number of international visitors to their site and that’s one of our longer term plans and so we look to them to continue to build their business what they have done. They built their audience quite well. Like other internet companies, there are suffering from a decline in advertising rates, but the ability in our audience and we look for long term to continue to find ways to integrate the names and databases that they develop.

Operator

Your next question comes from Andrew Ward – [Fennymore.]

Andrew Ward - Fennymore

I just want to ask you about is there any M&A opportunities for some of these competitors or any of them struggling enough that might make sense for them to exit the business or did they really have nothing to sell at that point.

Jeff Thomas

We’re obviously looking at opportunities out there, but a lot of the ones that are smaller and struggle are I think as you point out, the asset is going to go away if they get too small in terms of where they are, but we obviously have our eyes and ears out there and we’ll see how this plays out.

Operator

Your last question comes from James Bellessa - DA Davidson & Co.

James Bellessa - DA Davidson & Co

Will you please review with me the 2007 and 2008 withdrawal rates and then explain what you mean by much higher rates on program withdrawals again incurring the experience and why would that be in the case of the $400 deposit that you moved, whereas the lower deposit was causing the higher withdrawal rates.

Peg Thomas

Okay Jim, the withdraw rates for 2008 ended up at the mid 30% range and I think we talked about that before. It was higher than 2007, but similar. For 2009 we are projecting a higher still rate closer to the 40% rate right now, but just like so many other metrics in our society, it’s pretty hard to get a hand on this and so I think we have a lot of historical data that right now that isn’t applying at all. So I’m going to put that caveat out there.

In terms of the withdrawal around the $95 deposit versus the $400 deposit; in the testing we did a year before, the $95 deposit we had a higher enrollment rates out of the gate from those families, but higher withdrawal rates also and obviously the theory is that we had a low barrier when we should we get into the program, but then they were unable to fulfill the financial requirement around travel and on the program.

Jeff Thomas

And Jeff I’ll go add, in December if you looked at our withdraw rate, if you kind of straight lined the trends, it would have said that we would have had more withdrawals than we had enrollments and obviously it’s come down significantly since then and as Peg said the kind of historical numbers that we compared to just aren’t really that

relevant. So, our best estimate right now is significantly higher means of a move from the low to mid 30s may be up into the 40% range, but it’s hard to tell. It’s improved a little bit since late December or early January, but it may worsen as well.

Again when I think why are people withdrawing at a higher rate when they deposit at $400 compared to $95 year ago, I think in a big press shoot they say because trillions of dollars of wealth has been wiped out across America and there is job loss. I think the unemployment report is 7.5% this morning and that’s what we attribute most of this stuff too.

So first of all, thank you for everyone for being on our call this morning and thank you for the questions you‘ve asked. I think they help us focus the call and make sure that we are being responsive to your questions and concerns. As we said, we look forward to speaking with you next quarter and working through the issues here and maintaining a strong focus on expense management as well as falling upon the lead that we have for 2009 and working on developing those leads, if they don’t convert into 2009 into relationships that will help us grow our business in 2010. Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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