##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-26420
 
 AMBASSADORS INTERNATIONAL, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 
 Delaware
    
    91-1688605(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 2101 4 th Avenue, suite 210
 Seattle, Washington 98121
 (Address of Principal Executive Offices)
 Registrants Telephone Number, Including Area Code: (206) 292-9606
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 Yes o No þ
 The number of shares of the registrants Common Stock outstanding as of August 7, 2009 was
11,173,267.




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##### 



AMBASSADORS INTERNATIONAL, INC.  FORM 10-Q QUARTERLY REPORT
 TABLE OF CONTENTS
 PART I FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at June 30, 2009 (unaudited) and December 31, 2008
    
    
    2Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30,
2009 and 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30,
2009 and 2008 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28Item 4T. Controls and Procedures
    
    
    28PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    31EXHIBIT INDEX
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 Ambassadors International, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except share and per share data)
 June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Assets:Current assets:Cash and cash equivalents
    
    $
    5,484
    
    
    $
    10,105Restricted cash
    
    
    15,592
    
    
    
    16,625Accounts and other receivables, net of allowance of $42 at June
30, 2009 and $20 at December 31, 2008
    
    
    1,195
    
    
    
    2,367Inventory
    
    
    1,405
    
    
    
    1,839Prepaid costs and other current assets
    
    
    4,522
    
    
    
    3,522Assets held for sale
    
    
    5,706
    
    
    
    28,593Total current assets
    
    
    33,904
    
    
    
    63,051Property, vessels and equipment, net
    
    
    110,852
    
    
    
    130,461Goodwill
    
    
    
    
    
    
    6,275Deferred income taxes
    
    
    746
    
    
    
    746Other intangibles, net
    
    
    7,282
    
    
    
    7,282Other assets
    
    
    1,110
    
    
    
    541Total assets
    
    $
    153,894
    
    
    $
    208,356Liabilities:Current liabilities:Accounts payable
    
    $
    13,019
    
    
    $
    15,663Passenger and participant deposits
    
    
    15,873
    
    
    
    17,221Accrued expenses
    
    
    4,669
    
    
    
    11,186Current portion of long term debt
    
    
    948
    
    
    
    948Deferred income taxes
    
    
    746
    
    
    
    746Liabilities related to assets held for sale
    
    
    3,888
    
    
    
    14,978Total current liabilities
    
    
    39,143
    
    
    
    60,742Long term debt net of discount of $8,851 at June 30, 2009 and $12,436 at
December 31, 2008, respectively
    
    
    88,149
    
    
    
    86,679Total liabilities
    
    
    127,292
    
    
    
    147,421Commitments and contingencies (Note 11)Stockholders equity:Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $.01 par value; 40,000,000 shares authorized; 11,173,267
shares issued and outstanding at June 30, 2009 and December 31, 2008,
respectively
    
    
    109
    
    
    
    108Additional paid-in capital
    
    
    110,823
    
    
    
    111,246Accumulated deficit
    
    
    (84,331
    )
    
    
    (50,872
    )Accumulated other comprehensive income
    
    
    1
    
    
    
    453Total stockholders equity
    
    
    26,602
    
    
    
    60,935Total liabilities and stockholders equity
    
    $
    153,894
    
    
    $
    208,356
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  2




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##### Table of Contents



Ambassadors International, Inc.
 
 Condensed Consolidated Statements of Operations (unaudited)
 (in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Passenger ticket revenue
    
    $
    11,529
    
    
    $
    38,009
    
    
    $
    23,981
    
    
    $
    56,766Onboard and other cruise revenue
    
    
    2,524
    
    
    
    6,426
    
    
    
    5,473
    
    
    
    11,672Travel, incentive and event related
    
    
    192
    
    
    
    4,607
    
    
    
    1,948
    
    
    
    8,33414,245
    
    
    
    49,042
    
    
    
    31,402
    
    
    
    76,772Costs and operating expenses:Cruise operating expenses:Compensation and benefits
    
    
    2,147
    
    
    
    8,639
    
    
    
    4,181
    
    
    
    13,250Passenger expenses
    
    
    672
    
    
    
    2,983
    
    
    
    1,775
    
    
    
    4,363Materials and services
    
    
    5,822
    
    
    
    16,998
    
    
    
    12,430
    
    
    
    27,119Repairs and maintenance
    
    
    2,161
    
    
    
    3,721
    
    
    
    3,831
    
    
    
    5,950Commissions and other
cruise operating expenses
    
    
    1,192
    
    
    
    3,849
    
    
    
    2,323
    
    
    
    6,35511,994
    
    
    
    36,190
    
    
    
    24,540
    
    
    
    57,037Selling and tour promotion
    
    
    2,312
    
    
    
    2,617
    
    
    
    4,162
    
    
    
    9,033General and administrative
    
    
    2,842
    
    
    
    8,342
    
    
    
    5,984
    
    
    
    17,764Impairment charge
    
    
    14,000
    
    
    
    
    
    
    
    16,684
    
    
    
    Depreciation and amortization
    
    
    2,703
    
    
    
    3,665
    
    
    
    5,461
    
    
    
    6,87933,851
    
    
    
    50,814
    
    
    
    56,831
    
    
    
    90,713Operating loss from continuing operations
    
    
    (19,606
    )
    
    
    (1,772
    )
    
    
    (25,429
    )
    
    
    (13,941
    )Other income (expense):Interest and dividend income
    
    
    19
    
    
    
    237
    
    
    
    44
    
    
    
    539Interest expense
    
    
    (1,684
    )
    
    
    (2,122
    )
    
    
    (3,333
    )
    
    
    (4,668
    )Other, net
    
    
    135
    
    
    
    (97
    )
    
    
    406
    
    
    
    535(1,530
    )
    
    
    (1,982
    )
    
    
    (2,883
    )
    
    
    (3,594
    )Loss from continuing operations before
income taxes
    
    
    (21,136
    )
    
    
    (3,754
    )
    
    
    (28,312
    )
    
    
    (17,535
    )Income tax provision (benefit)
    
    
    (194
    )
    
    
    9
    
    
    
    (191
    )
    
    
    4Loss from continuing operations
    
    
    (20,942
    )
    
    
    (3,763
    )
    
    
    (28,121
    )
    
    
    (17,539
    )Income (loss) from discontinued
operations, net of tax (Note 2)
    
    
    (1,105
    )
    
    
    842
    
    
    
    (5,338
    )
    
    
    2,107Net loss
    
    $
    (22,047
    )
    
    $
    (2,921
    )
    
    $
    (33,459
    )
    
    $
    (15,432
    )Earnings (loss) per share from continuing
operations:Basic
    
    $
    (1.92
    )
    
    $
    (0.35
    )
    
    $
    (2.53
    )
    
    $
    (1.61
    )Diluted
    
    $
    (1.92
    )
    
    $
    (0.35
    )
    
    $
    (2.53
    )
    
    $
    (1.61
    )Weighted-average common shares outstanding:Basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Diluted
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889
 (continued on next page)
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  3




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Ambassadors International, Inc.  Condensed Consolidated Statements of Operations (unaudited) (continued from previous page)
 (in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Earnings (loss) per share from discontinued operations:Basic
    
    $
    (0.10
    )
    
    $
    0.08
    
    
    $
    (0.48
    )
    
    $
    0.19Diluted
    
    $
    (0.10
    )
    
    $
    0.08
    
    
    $
    (0.48
    )
    
    $
    0.19Weighted-average common shares outstanding:Basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Diluted
    
    
    10,918
    
    
    
    11,142
    
    
    
    11,117
    
    
    
    11,148Earnings (loss) per share:Basic
    
    $
    (2.02
    )
    
    $
    (0.27
    )
    
    $
    (3.01
    )
    
    $
    (1.42
    )Diluted
    
    $
    (2.02
    )
    
    $
    (0.27
    )
    
    $
    (3.01
    )
    
    $
    (1.42
    )Weighted-average common shares outstanding:Basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Diluted
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889
 The accompanying notes are an integral part of these condensed consolidated financial statements.
  4




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##### Table of Contents



Ambassadors International, Inc.
 
 Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (33,459
    )
    
    $
    (15,432
    )Less: Income (loss) from discontinued operations
    
    
    (5,338
    )
    
    
    2,107Loss from continuing operations
    
    
    (28,121
    )
    
    
    (17,539
    )Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    5,461
    
    
    
    6,879Amortization of debt discount and offering costs
    
    
    1,503
    
    
    
    1,412Gain on disposal of fixed assets
    
    
    (9
    )
    
    
    Share-based compensation expense (benefit)
    
    
    (427
    )
    
    
    745Impairment Loss
    
    
    16,684
    
    
    
    Unrealized (gain) loss on investments
    
    
    (9
    )
    
    
    2Change in assets and liabilities, net of effects of business acquisitions and
dispositions:Accounts and other receivables
    
    
    (378
    )
    
    
    (2,427
    )Inventory
    
    
    434
    
    
    
    (899
    )Prepaid costs and other current assets
    
    
    (1,079
    )
    
    
    (4,611
    )Other assets
    
    
    (579
    )
    
    
    145Accounts payable and accrued expenses
    
    
    (7,840
    )
    
    
    2,955Passenger and participant deposits
    
    
    2,322
    
    
    
    11,835Discontinued operations
    
    
    7,688
    
    
    
    2,662Net cash (used in) provided by operating activities
    
    
    (4,350
    )
    
    
    1,159Cash flows from investing activities:Restricted cash
    
    
    1,033
    
    
    
    (10,337
    )Purchase of property, vessels and equipment
    
    
    (153
    )
    
    
    (2,053
    )Proceeds from sale of divisions
    
    
    500
    
    
    
    Discontinued operations
    
    
    (1,699
    )
    
    
    986Net cash used in investing activities
    
    
    (319
    )
    
    
    (11,404
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    
    
    
    
    21Payments on long term debt
    
    
    
    
    
    
    (1,663
    )Discontinued operations
    
    
    48
    
    
    
    (451
    )Net cash used in financing activities
    
    
    48
    
    
    
    (2,093
    )Net decrease in cash and cash equivalents
    
    
    (4,621
    )
    
    
    (12,338
    )Cash and cash equivalents, beginning of period
    
    
    10,105
    
    
    
    21,998Cash and cash equivalents, end of period
    
    $
    5,484
    
    
    $
    9,660
 The
accompanying notes are an integral part of these condensed consolidated financial statements.
  5




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##### Table of Contents



Ambassadors
International, Inc.
 
 Notes to Condensed Consolidated Financial Statements (unaudited)
 1.
    
    Description of the Company and Basis of Presentation
 The Company
   
    
    Cruise This segment operates the Windstar Cruises brand within ACG. ACG, through
its wholly-owned subsidiary, AICG, acquired Windstar Cruises, an international-flagged
small luxury ship cruise line that operates a three-ship fleet that includes the
312-passenger Wind Surf, 148-passenger Wind Spirit, and 148-passenger Wind Star. The
Companys 2009 Windstar Cruises schedule includes destinations in the Greek Isles,
Caribbean Islands and Costa Rica and cruises on the Mediterranean, the Adriatic, and the
Panama Canal.
 Empress of the North American Queen ®
 
    
    Travel and Events Operating under the Ambassadors, LLC brand, this segment
develops and manages meetings and incentive programs for corporate clients utilizing
incentive travel, merchandise award programs and corporate meeting management services.
Through March 31, 2009, it also provided a comprehensive hotel reservation, registration
and travel services for meetings, conventions, expositions and trade shows referred to
as Housing. In February 2009, the Company announced its intention to sell the Travel
and Events business. As of March 31, 2009, the Company evaluated the recoverability of
goodwill related to its travel and events segment and recorded an impairment charge of
$2.7 million. On April 16, 2009, certain assets of Housing were sold and the buyer
assumed certain liabilities associated with the division. Housing comprised the
majority of Travel and Events revenue and earnings. The Company will complete all
scheduled programs associated with the residual
business throughout 2009. After the completion of the scheduled events, the Company will
exit the business in an orderly fashion.
  6




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 Liquidity
  Seasonality
  Basis of Presentation
   Reclassifications
   Fair Value Measurements
   7




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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
    Restricted Cash
  June 30,
    
    
    December 31,2009
    
    
    2008Restricted cash to secure credit card processing
    
    $
    9,611
    
    
    $
    10,644Restricted cash to secure letters of credit
    
    
    5,981
    
    
    
    5,981Balance
    
    $
    15,592
    
    
    $
    16,625
  Revenue Recognition
  Passenger Ticket Revenue and Onboard and Other Cruise Revenues
   8




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 Travel, Incentive and Event Related
   Property, Vessels and Equipment
   Long-lived Assets including Intangible Assets
   9




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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 Income Taxes
  Drydocking
  Accounting for Stock Options
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Compensation cost related to stock options
    
    $
    295
    
    
    $
    174
    
    
    $
    369
    
    
    $
    394Compensation cost related to restricted stock
    
    
    47
    
    
    
    151
    
    
    
    (776
    )
    
    
    351Total stock-based compensation costs
    
    $
    342
    
    
    $
    325
    
    
    $
    (407
    )
    
    $
    745
  Recent Accounting Pronouncements
   10




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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 Interim Disclosures
about Fair Value of Financial Instruments
     11




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 2.
    
    Discontinued Operations
  Six Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2008Revenue from discontinued operations
    
    $
    23,732
    
    
    $
    60,671Income (loss) from discontinued operations before taxes
    
    
    (4,947
    )
    
    
    2,018Income tax (expense) benefit
    
    
    (391
    )
    
    
    89Income (loss) from discontinued operations, net of taxes
    
    $
    (5,338
    )
    
    $
    2,107
  June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Assets held for saleAccounts receivable, net
    
    $
    
    
    
    $
    15,311Costs in excess of billings
    
    
    
    
    
    
    5,283Insurance receivables
    
    
    5,204
    
    
    
    6,313All other assets
    
    
    502
    
    
    
    1,686$
    5,706
    
    
    $
    28,593Liabilities related to assets held for sale:Accounts payable and accrued expenses
    
    $
    
    
    
    $
    4,137Billings in excess of costs
    
    
    
    
    
    
    4,253Long term debt
    
    
    
    
    
    
    1,927All other liabilities, including case reserves
    
    
    3,888
    
    
    
    4,661$
    3,888
    
    
    $
    14,978
  3.
    
    Impairment
 Loss on Impairment and Fair Value Measurements
     12




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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
    Level 1:
 Level 2:
 Level 3:
  QuotedPrices in
    
    
    SignificantValue
    
    
    Active
    
    
    Other
    
    
    SignificantJune 30, 2009 or
    
    
    Markets for
    
    
    Observable
    
    
    Unobservable
    
    
    Totallast measurement
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    GainsDescription
    
    date
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Long-lived assets
held and usedMajestic
America Line
    
    $
    34,150
    
    
    
    
    
    
    
    
    
    
    $
    20,150
    
    
    $
    (14,000
    )Long-lived assets
held for saleBMI
    
    $
    10,000
    
    
    $
    5,000
    
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Cypress Re
    
    $
    3,284
    
    
    
    
    
    
    
    
    
    
    $
    2,784
    
    
    
    (500
    )Goodwill
    
    $
    6,275
    
    
    $
    3,591
    
    
    
    
    
    
    
    
    
    
    
    (2,684
    )
  13




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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 4.
    
    Inventory
  June 30, 2009
    
    
    December 31, 2008Food, souvenirs and supplies
    
    $
    1,157
    
    
    $
    1,519Fuel
    
    
    248
    
    
    
    320$
    1,405
    
    
    $
    1,839
 5.
    
    Prepaid costs and other current assets
  June 30, 2009
    
    
    December 31, 2008Current portion of prepaid drydocking costs
    
    $
    1,572
    
    
    $
    1,266Prepaid program costs
    
    
    239
    
    
    
    312Current portion of prepaid offering costs
    
    
    68
    
    
    
    50Deferred costs
    
    
    863
    
    
    
    Other prepaid costs and other current assets
    
    
    1,780
    
    
    
    1,894$
    4,522
    
    
    $
    3,522
 6.
    
    Goodwill
  June 30, 2009
    
    
    December 31, 2008Goodwill, beginning of the period
    
    $
    6,275
    
    
    $
    9,181Addition to discontinued operations
    
    
    
    
    
    
    10Disposed in sale
    
    
    (3,591
    )
    
    
    Impairment
    
    
    (2,684
    )
    
    
    (2,916
    )Goodwill, end of the period
    
    $
    
    
    
    $
    6,275
 7.
    
    Long term obligations
  June 30, 2009
    
    
    December 31, 2008Guaranteed principal payment to MARAD
    
    $
    948
    
    
    $
    9483.75% Convertible Senior Notes, net
of unamortized discount and offering
costs of $8,851 and $12,436,
respectively
    
    
    88,149
    
    
    
    86,67989,097
    
    
    
    87,627Less: current portion
    
    
    948
    
    
    
    948Non-current portion
    
    $
    88,149
    
    
    $
    86,679
  14




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 Guaranteed Principal Payment
 American Queen ® American Queen ®
 3.75% Convertible Senior Notes
      Year Ended December 31,2009 (remaining six months)
    
    $
    9482010
    
    
    2011
    
    
    2012
    
    
    97,00097,948Less: Unamortized discount and offering costs
    
    
    (8,851
    )Less: current portion
    
    
    (948
    )Non-current portion
    
    $
    88,149
  15




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 8.
    
    Comprehensive loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (22,047
    )
    
    $
    (2,921
    )
    
    $
    (33,459
    )
    
    $
    (15,432
    )Change in
unrealized gain
(loss) on foreign
currency
translation
    
    
    (283
    )
    
    
    397
    
    
    
    (437
    )
    
    
    724Change in
unrealized gain
(loss) on available
for sale securities
    
    
    
    
    
    
    14
    
    
    
    (14
    )
    
    
    13$
    (22,330
    )
    
    $
    (2,510
    )
    
    $
    (33,911
    )
    
    $
    (14,695
    )
 9.
    
    Earnings (Loss) Per Share
   16




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Loss from continuing operations
    
    $
    (20,942
    )
    
    $
    (3,763
    )
    
    $
    (28,121
    )
    
    $
    (17,539
    )Denominator:Weighted-average shares outstanding
 basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Weighted-average shares outstanding
 diluted
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Loss per share from continuing operations:Basic and diluted
    
    $
    (1.92
    )
    
    $
    (0.35
    )
    
    $
    (2.53
    )
    
    $
    (1.61
    )Numerator:Income (loss) from discontinued
operations
    
    $
    (1,105
    )
    
    $
    842
    
    
    $
    (5,338
    )
    
    $
    2,107Denominator:Weighted-average shares outstanding
 basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Weighted-average shares outstanding
 diluted
    
    
    10,918
    
    
    
    11,142
    
    
    
    11,117
    
    
    
    11,148Earnings (loss) per share from
discontinued operations:Basic and diluted
    
    $
    (0.10
    )
    
    $
    0.08
    
    
    $
    (0.48
    )
    
    $
    0.19Numerator:Net loss
    
    $
    (22,047
    )
    
    $
    (2,921
    )
    
    $
    (33,459
    )
    
    $
    (15,432
    )Denominator:Weighted-average shares outstanding
 basic
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Weighted-average shares outstanding
 diluted
    
    
    10,918
    
    
    
    10,891
    
    
    
    11,117
    
    
    
    10,889Earnings (loss) per share from
discontinued operations:Basic and diluted
    
    $
    (2.02
    )
    
    $
    (0.27
    )
    
    $
    (3.01
    )
    
    $
    (1.42
    )
 10.
    
    Business Segments
   17




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue from continuing operations:Cruise
    
    $
    14,053
    
    
    $
    44,435
    
    
    $
    29,454
    
    
    $
    68,438Travel and events
    
    
    192
    
    
    
    4,607
    
    
    
    1,948
    
    
    
    8,334Revenue from continuing operations
    
    $
    14,245
    
    
    $
    49,042
    
    
    $
    31,402
    
    
    $
    76,772
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating income (loss) from
continuing operations:Cruise
    
    $
    (3,799
    )
    
    $
    (1,840
    )
    
    $
    (7,133
    )
    
    $
    (13,233
    )Majestic vessel impairment
    
    
    (13,484
    )
    
    
    
    
    
    
    (13,484
    )Travel and events (1)
    
    
    (283
    )
    
    
    1,038
    
    
    
    (3,119
    )
    
    
    1,413Corporate and other
    
    
    (2,040
    )
    
    
    (970
    )
    
    
    (1,693
    )
    
    
    (2,121
    )Operating loss from
continuing operations
    
    $
    (19,606
    )
    
    $
    (1,772
    )
    
    $
    (25,429
    )
    
    $
    (13,941
    )
 1.
    
    Includes $2,684 in impairment of goodwill related to Travel and events segment
recorded during the three months ended March 31, 2009. 11.
    
    Income Taxes
     18




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##### Table of Contents



Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
 12.
    
    Commitments and Contingencies
  13.
    
    Subsequent Events
     19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Wind Surf Wind Spirit Wind Star
     
    
    Increase our sales and marketing efficiencies to drive more sales, which will enable us
to scale our campaigns to a level appropriate for a company of our size;
 
    
    Increase onboard margins and guest satisfaction by replacing and/or directly managing
key onboard services;
 
    
    Reduce operational costs by renegotiating key vendor contracts or eliminating certain
third party relationships that will allow for significant direct cost savings, efficiency
gain and product improvements.
 Critical Accounting Policies
    20




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##### Table of Contents



Revenue Recognition
  Passenger Ticket Revenue and Onboard and Other Cruise Revenues
  Travel, Incentive and Event Related
   Property, Vessels and Equipment
   Drydocking
   21




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##### Table of Contents



Long-Lived Assets Including Intangibles
  Income Taxes
  Statistical Terminology and Information for Cruise Operations
 Available Passenger Cruise Days (APCD)
  Occupancy
  Passenger Cruise Days
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Passengers Carried
    
    
    5,165
    
    
    
    5,727
    
    
    
    11,621
    
    
    
    12,838Occupancy Percentage
    
    
    73.9
    %
    
    
    77.9
    %
    
    
    81.1
    %
    
    
    85.6
    %Passenger Cruise Days
    
    
    37,739
    
    
    
    43,118
    
    
    
    84,497
    
    
    
    92,895APCD
    
    
    51,072
    
    
    
    55,328
    
    
    
    104,216
    
    
    
    108,584
  22




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##### Table of Contents



COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2009 TO THE THREE MONTHS ENDED JUNE 30,
2008
 Revenue
  Cruise Operating Expenses
  Selling and Tour Promotion Expenses
  General and Administrative Expenses
  Impairment charge
  Depreciation and Amortization
  Operating Loss
   23




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##### Table of Contents



Other Income (Expense)
  Income Taxes
  Net Income (Loss) from Discontinued Operations
  Net Loss
  COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2009 TO THE SIX MONTHS ENDED JUNE 30, 2008
 Revenue
  Cruise Operating Expenses
  Selling and Tour Promotion Expenses
   24




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##### Table of Contents



General and Administrative Expenses
  Impairment charge
  Depreciation and Amortization
  Operating Loss
  Other Income (Expense)
 Queen of the West Empress of the North Queen of the West
 Income Taxes
  Net Income (Loss) from Discontinued Operations
  Net Loss
   25




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Liquidity and Capital Resources
           26




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##### Table of Contents



Events of Default under Debt Agreements
   Trends and Uncertainties
  Cautionary Note Regarding Forward-Looking Statements
  
    
    our ability to effectively and efficiently operate our cruise operations;
 
    
    our ability to effectively and expeditiously divest Majestic America Line;
 
    
    customer cancellation rates;
 
    
    competitive conditions in the industry in which we operate;
 
    
    marketing expenses;
 
    
    extreme weather conditions;
 
    
    the impact of new laws and regulations affecting our business;
 
    
    negative incidents involving cruise ships, including those involving the health
and safety of passengers;
 
    
    cruise ship maintenance problems and emergency ship repairs;
 
    
    reduced consumer demand for vacations and cruise vacations;
 
    
    changes in fuel, food, payroll, insurance and security costs;
 
    
    changes in relationships with certain travel providers;
  27




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##### Table of Contents




    
    changes in vacation industry capacity;
 
    
    other economic and geo-political factors and other considerations affecting the
travel industry;
 
    
    changes in United States maritime tax laws;
 
    
    potential claims related to our reinsurance business; and
 
    
    the potentially volatile nature of the reinsurance business.
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
  
 Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
    28




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  (a)
    
    Election of Directors to hold office for a three-year term or until their respective
successors are duly elected and qualified:
 Nominee
    
    Votes For
    
    
    Votes WithheldDaniel J. Englander
    
    
    8,821,352
    
    
    
    317,767
   29




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##### Table of Contents



(b)
    
    To effect a reverse stock split and reduce the number of authorized shares:
 Votes For
    
    Votes Against
    
    
    Abstain
    
    
    Broker Non-vote8,949,029
    
    
    267,727
    
    
    
    22,362
    
    
    
    0
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)31.2
    
    
    Certification of Chief Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (1)32.2
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (1)
 
 (1)
    
    Attached hereto.  30




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##### Table of Contents



Signatures
  AMBASSADORS INTERNATIONAL, INC.
(Registrant)Date: August 14, 2009
    By:
    /s/ Mark T. DetillionMark T. DetillionChief Financial Officer,

(Principal Financial Officer
and Duly Authorized Officer)  31




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Exhibit Index
 Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)31.2
    
    
    Certification of Chief Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (1)32.2
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (1)
 
 (1)
    
    Attached hereto.  32