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Ambassadors International Inc – ‘10-Q’ for 3/31/08

On:  Tuesday, 5/6/08, at 9:29pm ET   ·   As of:  5/7/08   ·   For:  3/31/08   ·   Accession #:  1362310-8-2466   ·   File #:  0-26420

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/07/08  Ambassadors International Inc     10-Q        3/31/08    5:333K                                   Bowne - BPC/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    287K 
 2: EX-31.1     Certification per Sarbanes-Oxley Act (Section 302)  HTML     13K 
 3: EX-31.2     Certification per Sarbanes-Oxley Act (Section 302)  HTML     13K 
 4: EX-32.1     Certification per Sarbanes-Oxley Act (Section 906)  HTML      9K 
 5: EX-32.2     Certification per Sarbanes-Oxley Act (Section 906)  HTML      9K 


10-Q   —   Quarterly Report
Document Table of Contents

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11st Page   -   Filing Submission
"Table of Contents
"Part I Financial Information
"Item 1. Financial Statements
"Condensed Consolidated Balance Sheets at March 31, 2008 (unaudited) and December 31, 2007
"Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007 (unaudited)
"Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (unaudited)
"Notes to Condensed Consolidated Financial Statements (unaudited)
"Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3. Quantitative and Qualitative Disclosures About Market Risk
"Item 4. Controls and Procedures
"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
"Item 5. Other Information
"Item 6. Exhibits
"Signatures
"Exhibit Index

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  Filed by Bowne Pure Compliance  

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 March 31, 2008
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
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
1071 Camelback Street
Newport Beach, California 92660
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: (949) 759-5900
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller Reporting Company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Yes o    No þ
The number of shares of the registrant’s Common Stock outstanding as of April 29, 2008 was 11,141,067.
 
 

 

 



 

AMBASSADORS INTERNATIONAL, INC.
FORM 10-Q QUARTERLY REPORT
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 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2

 

 



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)
                 
    March 31,     December 31,  
    2008     2007  
    (unaudited)          
Assets:
               
Current assets:
               
Cash and cash equivalents
  $ 17,292     $ 21,998  
Restricted cash
    32,528       31,084  
Available-for-sale securities
    2,396       2,514  
Accounts and other receivables, net of allowance of $2,436 at March 31, 2008 and $2,332 at December 31, 2007
    34,585       40,798  
Costs in excess of billings on construction contracts
    9,236       8,410  
Premiums receivable
    8,493       10,188  
Reinsurance recoverable
    660       1,148  
Inventory
    6,592       5,751  
Deferred income taxes, net
    1,244       1,262  
Prepaid costs and other current assets
    12,009       8,530  
 
           
Total current assets
    125,035       131,683  
Property, vessels and equipment, net
    220,804       219,793  
Goodwill
    9,181       9,181  
Other intangibles, net
    10,008       11,152  
Other assets
    4,474       4,680  
 
           
Total assets
  $ 369,502     $ 376,489  
 
           
 
               
Liabilities:
               
Current liabilities:
               
Accounts payable
  $ 31,298     $ 36,564  
Passenger and participant deposits
    61,002       47,067  
Accrued expenses
    14,663       16,175  
Billings in excess of costs on construction contracts
    14,418       13,108  
Loss and loss adjustment expense reserves
    5,089       6,674  
Current portion of long term debt
    4,587       5,479  
 
           
Total current liabilities
    131,057       125,067  
Long term debt, net of current portion and net of discount of $2,335 and $2,479, respectively
    159,604       161,584  
Long term deferred tax liabilities
    1,635       1,676  
Long term passenger and participant deposits
    305       35  
 
           
Total liabilities
    292,601       288,362  
 
               
Commitments 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; 10,891,067 and 10,888,655 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively
    108       108  
Additional paid-in capital
    98,057       97,634  
Accumulated deficit
    (23,147 )     (11,170 )
Accumulated other comprehensive income
    1,883       1,555  
 
           
Total stockholders’ equity
    76,901       88,127  
 
           
Total liabilities and stockholders’ equity
  $ 369,502     $ 376,489  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1



Table of Contents

Ambassadors International, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
                 
    Three Months  
    Ended March 31,  
    2008     2007  
    (unaudited)  
Revenues:
               
Passenger ticket revenue
  $ 18,783     $ 4,843  
Onboard and other cruise revenue
    4,974       359  
Marine revenue
    29,352       23,484  
Travel, incentive and event related
    3,726       3,524  
Net insurance premiums earned
    5       654  
 
           
 
    56,840       32,864  
 
           
 
               
Costs and operating expenses:
               
Cruise operating expenses:
               
Compensation and benefits
    4,611       1,812  
Passenger expenses
    1,380       759  
Materials and services
    9,875       3,035  
Repairs and maintenance
    2,229       317  
Commissions and other cruise operating expenses
    2,506       1,078  
 
           
 
    20,601       7,001  
Cost of marine revenue
    22,545       19,444  
Selling and tour promotion
    6,416       6,524  
General and administrative
    14,999       11,320  
Depreciation and amortization
    3,476       1,560  
Loss and loss adjustment expenses, insurance acquisition costs and other operating expenses
    97       715  
 
           
 
    68,134       46,564  
 
           
 
               
Operating loss
    (11,294 )     (13,700 )
 
           
 
               
Other income (expense):
               
Interest and dividend income
    467       692  
Interest expense
    (2,073 )     (1,005 )
Realized gains (losses) on sale of available-for-sale securities, net
          (48 )
Other, net
    817       (190 )
 
           
 
    (789 )     (551 )
 
           
Loss before benefit for income taxes
    (12,083 )     (14,251 )
Benefit for income taxes
    (106 )     (5,689 )
 
           
Net loss
  $ (11,977 )   $ (8,562 )
 
           
 
               
Earnings (loss) per share:
               
Basic
  $ (1.10 )   $ (0.77 )
Diluted
  $ (1.10 )   $ (0.77 )
 
               
Weighted-average common shares outstanding:
               
Basic
    10,890       11,089  
Diluted
    10,890       11,089  
 
               
Dividends per common share
  $     $ 0.10  
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

Ambassadors International, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
                 
    Three Months Ended  
    March 31,  
    2008     2007  
    (unaudited)  
Cash flows from operating activities:
               
Net loss
  $ (11,977 )   $ (8,562 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation and amortization
    3,476       1,560  
Amortization of debt discount and offering costs
    166        
Share-based compensation and amortization
    402       537  
Undistributed loss (earnings) from equity investments
    41       (553 )
Deferred income taxes
    (24 )     (40 )
Loss on sale of available-for-sale securities
          48  
Foreign currency translation
    337       244  
Change in assets and liabilities, net of effects of business acquisitions and dispositions:
               
Accounts and other receivables
    6,213       (1,362 )
Costs in excess of billings on construction contracts
    (826 )     (808 )
Premiums receivable
    1,695       1,567  
Deferred policy acquisition costs
          239  
Reinsurance recoverable
    488       524  
Prepaid insurance premiums
          182  
Inventory
    (841 )     (368 )
Prepaid costs and other current assets
    (3,501 )     (9,383 )
Other assets
    159       148  
Accounts payable and accrued expenses
    (6,254 )     (1,188 )
Passenger and participant deposits
    14,205       24,944  
Billings in excess of costs on construction contracts
    1,310       3,428  
Loss and loss adjustment expense reserves
    (1,585 )     (1,792 )
Unearned premiums
          (886 )
Deferred gain on retroactive insurance
          (12 )
 
           
Net cash provided by operating activities
    3,484       8,467  
 
           
 
               
Cash flows from investing activities:
               
Proceeds from sale of available-for-sale securities
    200       30,534  
Purchase of available-for-sale securities
    (91 )     (183 )
Restricted cash
    (2,341 )     (12,607 )
Purchase of property, vessels and equipment
    (3,414 )     (5,782 )
 
           
Net cash provided by (used in) investing activities
    (5,646 )     11,962  
 
           
 
               
Cash flows from financing activities:
               
Proceeds from exercise of stock options
    21       55  
Common stock dividends paid
          (1,084 )
Payments on long term debt
    (2,565 )     (1,670 )
 
           
Net cash used in financing activities
    (2,544 )     (2,699 )
 
           
Net increase (decrease) in cash and cash equivalents
    (4,706 )     17,730  
Cash and cash equivalents, beginning of period
    21,998       8,246  
 
           
Cash and cash equivalents, end of period
  $ 17,292     $ 25,976  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements

 

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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
 
    Ambassadors International, Inc. (the “Company”) was founded in 1967 as a travel services company incorporated in Washington and reincorporated in Delaware in 1995. The Company operates through four wholly-owned subsidiaries: (i) Ambassadors, LLC (“Ambassadors”), which commenced operations in 1996; (ii) Cypress Reinsurance, Ltd (“Cypress Re”), which commenced operations in 2004; (iii) Ambassadors Marine Group, LLC (“AMG”), which commenced operations in 2006; and (iv) Ambassadors Cruise Group, LLC (“ACG”), which commenced operations in 2006. ACG formed a wholly-owned subsidiary, Ambassadors International Cruise Group, LLC (“AICG”) which acquired Windstar Sail Cruises Limited (“Windstar Cruises”) in April 2007.
 
    The Company operates in the following four business segments: (i) cruise, which includes the operations of ACG, (ii) marine, which includes the operations of AMG, (iii) travel and events, which includes the operations of Ambassadors, and (iv) corporate and other, which consists of general corporate assets (primarily cash and cash equivalents and investments), the operations of Cypress Re and other activities which are not directly related to the Company’s cruise, marine and travel and events operating segments.
 
    The following further describes the operations of the Company’s business segments:
    Cruise – This segment operates Majestic America Line and Windstar Cruises brands within ACG. Majestic America Line is a domestic provider of overnight passenger cruises along inland rivers and coastal waterways of North America. The Company acquired seven U.S.-flagged cruise ships under the Majestic America Line brand, including the 223-passenger Empress of the North, the 142-passenger Queen of the West, the 436-passenger American Queen®, the 412-passenger Mississippi Queen®, the 176-passenger Delta Queen®, the 48-passenger Contessa, and the 150-passenger Columbia Queen. The Company acquired its U.S. cruise operations through a series of acquisitions. In January 2006, ACG acquired American West Steamboat Company, LLC (“American West”), a cruise company that offers cruises through Alaska’s Inside Passage and on the Columbia and Snake rivers. In April 2006, the Company acquired the cruise-related assets of Delta Queen Steamboat Company, Inc. (“Delta Queen”). On April 2, 2007, ACG, through its wholly-owned subsidiary, AICG, acquired Windstar Cruises, an international-flagged small 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 2008 cruise schedule includes cruises through Alaska’s Inside Passage onboard the Empress of the North, and on the Columbia and Snake Rivers onboard the Empress of the North, Columbia Queen and Queen of the West. The Company also offers historical cruises onboard the American Queen®, Delta Queen® and Mississippi Queen® on many American rivers, including the Mississippi, Ohio, Tennessee, Cumberland and Arkansas Rivers, with stops at many American historic cities, battle grounds and estates, including New Orleans, Memphis and St. Louis. Each of the Company’s cruises offers an onboard historian and naturalist and shore excursions to enhance passengers’ understanding of the wildlife, history and cultures of the areas traveled. The Company’s 2008 cruise schedule also includes destinations in the Greek Isles, Caribbean Islands and Costa Rica and cruises on the Mediterranean, the Adriatic, and the Panama Canal on one of the three Windstar Cruises ships.
 
    Marine – This segment includes marina design, manufacturing and construction services. The Company also offers marine operations, shipyard services, management and consulting services to marina owners. The Company’s marine operations primarily consist of Bellingham Marine Industries, Inc. (“Bellingham Marine”) acquired on July 21, 2006 and BellPort Group, Inc. (“BellPort”), acquired in February 2005. Bellingham Marine is a global marina builder, providing design and construction services to marina owners throughout the world. The Company’s marine business’ customer base is widespread and geographically diverse, and includes corporations, government agencies and private individuals. In February 2008, in order to further expand the Company’s shipyard operations, BellPort purchased certain assets related to Anacapa Marine Services, a shipyard business located in Channel Islands Harbor in Oxnard, California, for $0.4 million.

 

4



Table of Contents

Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    Travel and Events – Operating under the Ambassadors, LLC brand, this segment develops, markets, and manages meetings and incentive programs for a nationwide roster of corporate clients utilizing incentive travel, merchandise award programs and corporate meeting management services. It provides comprehensive hotel reservation, registration and travel services for meetings, conventions, expositions and trade shows. It also develops, markets, and distributes event portfolio management technology solutions for corporations and large associations.
 
    Corporate and Other – This segment consists of general corporate assets (primarily cash and cash equivalents and investments), the operations of Cypress Re and other activities which are not directly related to the Company’s cruise, marine or travel and events segments. Cypress Re reinsures property and casualty risks written by licensed United States insurers. The lines of business that are currently being reinsured include commercial auto liability, commercial physical damage and workers’ compensation. These risks are associated with members of highly selective affinity groups or associations.
    Seasonality
 
    The Company’s businesses are seasonal. Prior to 2006, the majority of the Company’s operating results were recognized in the first and second quarters of each fiscal year, which corresponds to the busy season for the Company’s travel and events services. As a result of the acquisitions within the Company’s cruise segment and the size of its cruise operations in relation to its overall operations, since 2006, a majority of the Company’s operating results have been recognized in the second and third quarters of each fiscal year, which coincides with the cruising season.
 
    Basis of Presentation
 
    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008 or any other future periods.
 
    The condensed consolidated balance sheet at December 31, 2007 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain reclassifications have been made to the 2007 condensed consolidated financial statements to conform to the 2008 presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2007.
 
    Fair Value Measurements
 
    Effective January 1, 2008, the Company implemented the requirements of SFAS No. 157, Fair Value Measurements (‘‘SFAS No. 157’’) for its financial assets and liabilities. SFAS No. 157 refines the definition of fair value, expands disclosure requirements about fair value measurements and establishes specific requirements as well as guidelines for a consistent framework to measure fair value. SFAS No. 157 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. Further, SFAS No. 157 requires the Company to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.

 

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Table of Contents

Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:
    Level 1 – quoted prices for identical instruments in active markets;
 
    Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
 
    Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
    The Company measures fair value using a set of standardized procedures that are outlined herein for all financial assets and liabilities which are required to be measured at fair value. When available, the Company utilizes quoted market prices from an independent third party source to determine fair value and classifies such items in Level 1. In some instances where a market price may be available, but in an inactive or over-the-counter market where significant fluctuations in pricing could occur, the Company would consistently choose the dealer (market maker) pricing estimate and classify the financial asset or liability in Level 2.
 
    If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads, etc. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, a financial asset or liability could be classified in either Level 2 or 3 even though there may be some significant inputs that are readily observable. Internal models and techniques used by the Company include discounted cash flow and Black-Scholes-Merton option valuation models. The adoption of SFAS No. 157 did not have a material impact on the Company’s consolidated financial position or results of operations.
 
    On February 12, 2008, the FASB amended the implementation of SFAS No. 157 related to non-financial assets and liabilities until fiscal periods beginning after November 15, 2008. As a result, the Company has not applied the above fair value procedures to its goodwill and long-lived asset impairment analyses during the current period. The Company believes that the adoption of SFAS No. 157 for non-financial assets and liabilities will not have a material impact on its consolidated financial position or results of operations upon implementation for fiscal periods beginning after November 15, 2008.
 
    The following table illustrates the Company’s fair value measurements of its financial assets and liabilities as classified in the fair value hierarchy, associated unrealized and realized gains and losses, as well as purchases, sales, issuances, settlements (net) or transfers out of a Level 1 classification. Realized gains and losses are recorded in other income, net on the Company’s consolidated statement of operations (in thousands):
                                 
                    Change in        
    Fair Value     Fair Value     Unrealized     Realized  
Fair Value Hierarchy   March 31, 2008     December 31, 2007     Gain/(Loss)(1)     Gain/(Loss)(1)  
 
Level 1
  $ 2,396     $ 2,514     $ 1     $  
 
Level 2
                       
 
Level 3
                       
 
(1)   Settlements (net) or transfers out of Level I during the three months ended March 31, 2008 amounted to $119.

 

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Table of Contents

Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    Restricted Cash
 
    The Company’s cruise passenger deposits are primarily received through credit card transactions. At December 31, 2007, the Company had $17.1 million of restricted cash held by banks in cash equivalents and a certificate of deposit in order to secure its processing of passenger deposits through credit cards. The restricted amounts were negotiated between the Company and the bank based on a percentage of the expected future volume of credit card transactions within a standard twelve-month period. At March 31, 2008, the total amount of restricted cash held by banks was $19.4 million.
 
    On March 27, 2007, the Company amended its credit facility with a bank to reduce its revolving line of credit from $20.0 million to $12.5 million and established a $12.5 million certificate of deposit with the bank to secure its outstanding letters of credit. The certificate amount was based on the Company’s current letters of credit then outstanding.
 
    As of March 31, 2008 and December 31, 2007, the Company also had $0.6 million and $1.5 million, respectively, included in restricted cash representing principal and interest payments made to a depository account which was used to pay bondholders of certain of the Company’s vessel debt in August 2008 as required under the loan agreement.
 
    Revenue Recognition
 
    The Company recognizes revenue in accordance with GAAP, including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” and EITF 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent.” The Company recognizes revenue when persuasive evidence of an arrangement exists, the service fee is fixed or determinable, collectibility is reasonably assured and delivery has occurred.
 
    Passenger Ticket Revenue and Onboard and Other Cruise Revenues
 
    The Company records passenger ticket revenue net of applicable discounts and recognizes passenger ticket revenue and related costs of revenue when the cruise is completed. The Company generally receives from its customers a partially refundable deposit within one week of booking a tour, with the balance typically remitted 60 days prior to the departure date. If customers cancel their trip, the nonrefundable portion of their deposit is recognized as revenue on the date of cancellation. Passenger revenue representing travel insurance purchased at the time of reservation is recognized upon the completion of the cruise or passenger cancellation, whichever is earlier and the Company’s obligation has been met. Onboard and other cruise revenue consisting of beverage and souvenir sales and optional shore excursions are deferred and recognized as revenue when the cruise is completed.
 
    Marine Revenue
 
    The Company recognizes revenue for marine and related services, and shipyard related revenue in accordance with the American Institute of Certified Public Accountants Statement of Position No. 81-1 “Accounting for Performance of Construction-Type and Production-Type Contracts.”
 
    Revenues from fixed-price marine construction contracts are recognized on the percentage-of-completion method, whereby a portion of the contract revenue, based on contract costs incurred to date compared with total estimated costs at completion (based on Company’s estimates), is recognized as revenue each period. Revenues from cost-plus contracts are recognized on the basis of costs incurred, plus the fee earned. Estimates of fees earned are based on negotiated fee amounts or management’s assessment of the fee amounts that are likely to be earned. Each of these methods approximates percentage of completion revenue recognition based on contract costs incurred to date compared with total estimated costs at completion. The Company uses the completed contract method for shipyard related contracts for which reasonably dependable estimates cannot be made.
 
    On occasion, the Company or its customers may seek to modify a contract to accommodate a change in the scope of the work, such as changes in specifications, method or manner of performance, equipment, materials, or period of performance, or to account for customer-caused delays, errors in specifications or design, contract terminations, or other causes of unanticipated additional costs. Such change orders or claims are evaluated according to their characteristics and the circumstances under which they occur, taking into consideration such factors as the probability of recovery, the Company’s experience in negotiating change orders and claims, and the adequacy of documentation substantiating the costs of such change order or claim. Costs attributable to unpriced change orders and claims are accounted for as costs of contract performance in the period in which the costs are incurred, and revenue is recognized to the extent of costs incurred. Revenue in excess of costs attributable to unpriced change orders is recorded when realization is assured beyond a reasonable doubt, based on the Company’s experience with the customer or when a bona fide pricing offer has been provided by the customer. Receivables related to unpriced change orders and claims are not material.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    The Company follows these revenue recognition methods because reasonably dependable estimates of the revenue, costs and profits applicable to various stages of a contract can generally be made. Recognized revenues and profit are subject to revisions as the contract progresses to completion. If the Company does not accurately estimate the resources required or the scope of work to be performed, or does not manage its projects properly within the planned periods of time, or satisfy its obligations under the contracts, then profit may be significantly and negatively affected or losses on contracts may need to be recognized. On a regular basis, the Company reviews contract performance, costs incurred, and estimated costs to complete. Revisions to revenue and profit estimates are reflected in income in the period in which the facts that give rise to the revisions become known. Provisions for anticipated losses on contracts are reflected in income in the period in which the loss becomes known.
 
    A contract may be regarded as substantially completed if remaining costs and potential risks are insignificant in amount. The Company considers a contract to be substantially completed upon delivery of the product, acceptance by the customer and compliance with contract performance specifications.
 
    The asset, “costs in excess of billings on construction contracts,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs on construction contracts,” represents billings in excess of revenues recognized.
 
    Travel, Incentive and Event Related
 
    The Company bills travel participants, mainly consisting of large corporations, in advance, of which the cash received is recorded as a participant deposit. The Company pays for certain direct program costs such as airfare, hotel and other program costs in advance of travel, which are recorded as prepaid program costs. Travel revenue and related costs are recognized when travel convenes and such revenue is classified as travel and incentive related. This revenue is reported on a net basis, reflecting the net effect of gross billings to the client less any direct program costs.
 
    The Company recognizes revenue from hotel reservation, registration and related travel services when the convention operates. Revenue from the sale of merchandise is recognized when the merchandise is shipped, the service has been provided or when the redemption periods have expired. The Company defers revenue from prepaid, certificate-based merchandise incentive programs until the Company’s obligations are fulfilled or upon management’s estimates (based upon historical trends) that it is remote that the certificate will be redeemed. These revenues are reported on a net basis, reflecting the net effect of gross billings to the client less any direct program or merchandise costs.
 
    Net Insurance Premiums Earned
 
    Insurance premiums are recognized as revenue over the period of the insurance contracts in proportion to the amount of the insurance coverage provided. The insurance contracts are typically twelve months in duration and are considered short-duration contracts. Unearned premiums represent the unearned portion of the insurance contracts as of the balance sheet date.
 
    Ceded reinsurance premiums relate to reinsurance purchased (excess of loss and aggregate stop loss) to mitigate potential losses from severe adverse loss development, both on a per accident claim basis and in the aggregate. These ceded reinsurance transactions are recognized as a reduction of premium revenue in the same manner in which the insurance contract is recognized as premium revenue.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    Property, Vessels and Equipment
 
    Property, vessels and equipment are stated at cost, net of accumulated depreciation. The Company expenses the cost of maintenance and repairs that do not improve or extend the lives of the respective assets when incurred. Major additions and betterments are capitalized. The Company’s ships are capitalized and depreciated using the straight-line method over the expected useful life ranging up to 30 years, net of a residual value that generally is approximately 15%. Ship replacement parts are capitalized and depreciated upon being placed in service. Office and shop equipment is capitalized and depreciated using the straight-line method over the expected useful life of the equipment, ranging up to 10 years. Leasehold improvements are amortized using the straight-line method over the lesser of the expected useful life of the improvement or the term of the related lease.
 
    The Company performs reviews for the impairment of property, vessels and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When property, vessels and equipment are sold or retired, the Company removes the related cost and accumulated depreciation from the accounts and recognizes any gain or loss in the statement of operations. Judgments and estimates made related to property, vessels and equipment are affected by factors such as economic conditions, changes in resale values and changes in operating performance. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, the Company may be required to record impairment charges for these assets.
 
    Long-lived Assets including Intangible Assets
 
    Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired. The Company’s management evaluates recoverability using both subjective and objective factors. Subjective factors include the evaluation of industry and product trends and the Company’s strategic focus. Objective factors include management’s best estimates of projected future earnings and cash flows. The Company uses a discounted cash flow model to estimate the fair market value of each of its reporting units when it tests goodwill for impairment. Assumptions used include growth rates for revenues and expenses, investment yields on deposits, any future capital expenditure requirements and appropriate discount rates. The Company established reporting units based on its current reporting structure. For purposes of testing goodwill for impairment, goodwill was allocated to these reporting units to the extent it related to each reporting unit. Intangible assets with finite lives are tested for impairment using an undiscounted cash flow model. The Company amortizes intangible assets with finite lives over their estimated useful lives and reviews them for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired. The majority of the Company’s intangible assets were assigned lives based on contract values associated with each intangible asset. The Company amortizes its acquired intangible assets with finite lives over a period ranging from five to 20 years. No impairment charges were recorded for the periods ended March 31, 2008 and 2007, respectively.
 
    Income Taxes
 
    The Company accounts for income taxes in accordance with the provisions of SFAS No. 109, which requires an asset and liability approach that requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
    Drydocking
 
    The Company capitalizes drydocking costs as incurred and amortizes such costs over the period to the next scheduled drydock. The Company believes that the deferral method provides a better matching of revenues and expenses. Drydocking costs are included in prepaid and other current assets and in long term assets in the accompanying balance sheet and are amortized over the cruising season between scheduled drydockings. As of March 31, 2008, the Company had approximately $3.4 million in unamortized drydock costs that related to the 2008 season and beyond, of which, approximately $2.6 million is included in prepaid costs and other current assets and approximately $0.8 million is included in other long term assets in the accompanying balance sheet and will be amortized over the period to the next scheduled drydock.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    Accounting for Stock Options
 
    In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004) “Share Based Payment” (“SFAS No. 123R”). SFAS No. 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the fair value approach in SFAS No. 123R is similar to the fair value approach described in SFAS No. 123. In 2005, the Company used the Black-Scholes-Merton formula to estimate the fair value of stock options granted to employees. The Company adopted SFAS No. 123R, using the modified-prospective method, beginning January 1, 2006. Based on the terms of the Company’s plans, the Company was not required to record a cumulative effect related to its plans. The Company also elected to continue to estimate the fair value of stock options using the Black-Scholes-Merton formula.
 
    The following table details the stock-based compensation costs included in general and administrative expense (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Compensation cost related to stock options
  $ 202     $ 214  
Compensation cost related to restricted stock
    200       323  
 
           
Total stock-based compensation costs
  $ 402     $ 537  
 
           
    As of March 31, 2008, total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the stock option plans expected for the remainder of 2008 and in future years through 2011, respectively, were approximately $0.5 million and $0.4 million. This expected cost does not include the impact of any future stock-based compensation awards. During the quarter ended March 31, 2008 and 2007, there were no grants of stock options or restricted stock.
 
    Dividends Declared
 
    On September 2, 2003, the Company’s board of directors authorized a new dividend policy of paying stockholders $0.40 per share annually, distributable at $0.10 per share on a quarterly basis. The Company and its board of directors intend to continually review the dividend policy to ensure compliance with capital requirements, regulatory limitations, the Company’s financial position and other conditions which may affect the Company’s desire or ability to pay dividends in the future. Subsequent to the dividend declared in May 2007, the Company’s board of directors did not approve any additional dividends for 2007 or for the first quarter of 2008.
 
    The following dividends were declared in 2007 on the dates indicated (in thousands):
             
Record Date   Payment Date   Dividend Amount  
  March 19, 2007   $ 1,084  
  May 31, 2007     1,084  
      Recent Accounting Pronouncements
 
      The FASB issued a FSP APB14-a, an interpretation of APB Opinion No. 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” The proposed FSP would require an issuer of convertible debt instruments commonly referred to as Instruments B and C from EITF Issue No. 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion,” and any other convertible instruments that allow for settlement in any combination of cash and shares at the issuer’s option to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The proposed effective date for the FSP is for fiscal years beginning after December 15, 2008 and does not permit early application. However, the proposed transition guidance requires retrospective application to all periods presented, and does not grandfather existing instruments. The Company has not yet completed its evaluation of the potential impact of adopting this proposed FSP, if issued in final form but anticipates a material increase to interest expense beginning in 2009 when it adopts the FSP in its final form.
 
      In December 2007, the FASB issued SFAS No. 141 (R) “Business Combinations.” SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008. The Company is evaluating SFAS No. 141(R) and has not yet determined the impact the adoption will have on its consolidated financial statements.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 changes the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests and classified as a component of equity. SFAS No. 160 is effective on a prospective basis for business combinations that occur in fiscal years beginning after December 15, 2008. The Company anticipates the adoption of SFAS No. 160 will not have a material impact on its consolidated financial statements.
 
    In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an Amendment of FASB Statement No. 133.” SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities, specifically how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS No. 161 encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company anticipates the adoption of SFAS No. 161 will not have a material impact on its consolidated financial statements.
 
2.   Business Acquisitions and Investments
 
    BellPort has a 50% ownership interest in Deer Harbor WI, LLC (“DHWI”). DHWI owns a marina facility in Deer Harbor, Orcas Island, Washington. The Company recorded its proportional share of its losses from DHWI of approximately $41,000 and $51,000 for the three months ended March 31, 2008 and March 31, 2007, respectively, which are included in other income, net. As of March 31, 2008 and December 31, 2007, BellPort had a note receivable from DHWI for approximately $1.9 million and $1.9 million, respectively, that is classified in other assets in the accompanying balance sheet. The note is secured by a deed of trust on property and bears interest at a variable rate equal to the London Interbank Offered Rate plus 2.75% per year, adjusted annually. As of December 31, 2007, the interest rate was 8.06%. All unpaid principal and accrued and unpaid interest is due no later than November 30, 2011. The Company accounts for its investment in DHWI on the equity method. At March 31, 2008 and December 31, 2007, the other investments represented $1.4 million and $1.4 million, respectively.
 
    In order to expand its cruise offerings to include international cruise offerings, on April 2, 2007, the Company, through its wholly-owned subsidiary AICG, completed its acquisition of all of the issued and outstanding shares of Windstar Cruises from HAL Antillen N.V., a unit of Carnival Corporation, plc. Under the terms of the purchase agreement, the Company paid approximately $11.3 million in cash, $60 million in seller financing and assumed approximately $28.5 million in liabilities. The $60 million in seller financing was payable over ten years at 7% and was collateralized by each of the three Windstar Cruises’ ships.
 
    The Windstar Cruises purchase price was approximately $72.1 million. The following table summarizes the components of the Windstar Cruises purchase price (in thousands):
         
Cash consideration
  $ 11,289  
Seller financing
    60,000  
Acquisition costs incurred
    802  
 
     
Purchase price
  $ 72,091  
 
     

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    In accordance with SFAS No. 141, “Business Combinations,” the acquisition has been accounted for under the purchase method of accounting. The estimates of fair value of the assets acquired and liabilities assumed are based on management’s estimates. The following table summarizes the final estimated fair value of net assets acquired (in thousands):
         
Cash and cash equivalents
  $ 1,137  
Accounts receivable
    5  
Prepaid and other current assets
    811  
Inventory
    965  
Vessels and equipment
    90,825  
Intangible assets
    7,282  
 
     
Total assets acquired
    101,025  
 
     
Passenger deposits
    (22,966 )
Accounts payable and accrued and other expenses
    (5,995 )
Long term debt
    (60,000 )
 
     
Total liabilities assumed
    (88,961 )
 
     
Net assets acquired
  $ 12,064  
 
     
    On April 18, 2007, the Company paid off $60 million in seller financing and accrued interest of $0.1 million using proceeds from its convertible senior notes offering discussed in Note 6 “Long term obligations.”
 
    The following unaudited pro forma information presents the Company’s summarized results of operations for the three months ended March 31, 2007 as if the acquisition of Windstar Cruises had occurred as of January 1, 2007 instead of April 2, 2007 (in thousands, except per share data):
                         
            Pro Forma        
            Windstar     Pro Forma  
    As Reported     Cruises     Combined  
Revenues
  $ 32,864     $ 17,463     $ 50,327  
 
                 
Net (loss) income
  $ (8,562 )   $ 1,080     $ (7,482 )
 
                 
Loss per share – basic
  $ (0.77 )           $ (0.67 )
 
                   
Loss per share – diluted
  $ (0.77 )           $ (0.67 )
 
                   
3.   Reinsurance
 
    In December 2003, the Company formed Cypress Re and registered it as a Class 3 Reinsurer pursuant to Section 4 of the Bermuda Monetary Authority Act to carry on business in that capacity subject to the provisions of that Act.
 
    The Company reinsures property and casualty risks written by licensed United States insurers through Cypress Re. The lines of business that are being reinsured include commercial auto liability, commercial physical damage and workers’ compensation. These risks are associated with members of highly selective affinity groups or associations. Members whose risk is reinsured under a program must meet certain loss control program qualifications. A member of a group must pass certain pre-qualification criteria that are part of the underwriting review by a third party.
 
    The assumed reinsurance transactions are typically reinsured through a quota share agreement in which Cypress Re agrees to accept a certain fixed percentage of premiums written from the ceding company and in general assumes the same percentage of purchased reinsurance, direct acquisition costs and ultimate incurred claims.
 
    Cypress Re retains the first layer of risk on a per policy basis, which ranges from $250,000 to $500,000 and the third party reinsurer (through excess of loss reinsurance) retains the next layer up to the policy limits of $1.0 million. Cypress Re retains losses up to the aggregate reinsurance limit, which varies with each quota share reinsurance agreement and the third party reinsurer then pays losses in excess of Cypress Re’s aggregate reinsurance limit up to $5.0 million. Cypress Re is responsible for any additional losses in excess of the aggregate reinsurance limit.
 
    In 2004, the Company transferred its investment interest in two insurance programs to Cypress Re. On March 29, 2004, Cypress Re entered into a reinsurance agreement that incorporated the terms and conditions of the above interest of these programs. The quota share reinsurance agreement covered a retroactive period from July 1, 2002 through March 29, 2004, as well as a prospective period from March 29, 2004 to June 30, 2004. The reinsurance agreement meets the requirements of SFAS No. 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts and has both prospective and retroactive elements.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
    During 2004, Cypress Re entered into additional quota share reinsurance agreements. These reinsurance agreements represent participation in selective property and casualty programs. The reinsurance agreements meet the requirements of SFAS No. 113. One of the quota share reinsurance agreements covers a retroactive period from January 1, 2003 through May 31, 2004 and a prospective period from June 1, 2004 through December 31, 2004. The other agreements contain only prospective components.
 
    Accounting for prospective reinsurance transactions results in premiums and related acquisition costs being recognized over the remaining period of the insurance contracts reinsured. As of March 31, 2008, there were no balances in unearned premium reserves, deferred policy acquisition costs or ceded prepaid reinsurance premiums.
 
    Accounting for retroactive reinsurance transactions results in the reinsurer reimbursing the ceding company for liabilities incurred as a result of past insurable events covered by the underlying policies reinsured. Loss and loss adjustment expenses are initially recorded at the estimated ultimate payout amount and any gain from any such transaction is deferred and amortized into income. Loss and loss adjustment expense reserves are adjusted for changes in the estimated ultimate payout and the original deferred gain is recalculated and reamortized to the balance that would have existed had the changes in estimated ultimate payout been available at the inception of the transaction, resulting in a corresponding charge or credit to income in the period that the changes in estimated ultimate payout are made. As of March 31, 2008, the deferred gain on retroactive reinsurance was fully amortized and Cypress Re recognized in income $11,000 of the previously deferred gain on March 31, 2007.
 
    As of March 31, 2008, premiums receivable, reinsurance recoverable and loss and loss adjustment expense reserves of $1.2 million, $0.2 million and $1.6 million, respectively, related to retroactive reinsurance were recorded on the Company’s balance sheet. The March 31, 2008 loss and loss adjustment expense reserves balance includes $1.3 million for incurred but not reported claims.
 
    Cypress Re retrocedes risk to the ceding company under specific excess and aggregate loss treaties. Cypress Re remains obligated for amounts ceded in the event that the reinsurer does not meet its obligations.
 
    Premiums receivable at March 31, 2008 consists of funds held in trust by the ceding company of approximately $8.1 million and deferred and not yet due premiums from the ceding company of approximately $0.4 million. The funds held in trust primarily consist of high grade corporate bonds, government bonds and money market funds.
 
    As of March 31, 2008, reinsurance recoverable and prepaid reinsurance premiums of $0.7 million and zero, respectively, relate to a single reinsurer. Cypress Re’s exposure to credit loss in the event of non-payment or non-performance is limited to these amounts.
 
    The effect of reinsurance on premiums written and earned for the three months ended March 31, 2008 was as follows (in thousands):
                 
    Three Months Ended  
    March 31, 2008  
    Written     Earned  
Assumed
  $ 5     $ 5  
Ceded
           
 
           
Net premiums
  $ 5     $ 5  
 
           
    As of March 31, 2008, the Company had issued approximately $10.7 million in letters of credit related to property and casualty insurance programs that expire at various dates through 2008.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
4.   Inventory
 
    The Company maintains inventory of marine construction materials, fuel, supplies, souvenirs and food and beverage products. Inventories are stated at the lower of cost or market, using standard costs, which approximates the first-in, first-out method. The components of inventory as of March 31, 2008 and December 31, 2007 were as follows (in thousands):
                 
    March 31, 2008     December 31, 2007  
Marine construction materials
  $ 2,892     $ 2,630  
Food, souvenirs and supplies
    2,477       2,390  
Fuel
    1,223       731  
 
           
 
  $ 6,592     $ 5,751  
 
           
5.   Prepaid costs and other current assets
 
    The components of prepaid costs and other current assets as of March 31, 2008 and December 31, 2007 were as follows (in thousands):
                 
    March 31, 2008     December 31, 2007  
Current portion of prepaid drydocking costs
  $ 2,609     $ 997  
Income tax receivable
    2,515       2,385  
Prepaid program and tour costs
    2,035       1,064  
Current portion of prepaid offering costs
    75       78  
Other prepaid costs and other current assets
    4,775       4,006  
 
           
 
  $ 12,009     $ 8,530  
 
           
6.   Long term obligations
 
    Long term obligations as of March 31, 2008 and December 31, 2007 were as follows (in thousands):
                 
    March 31, 2008     December 31, 2007  
Loans secured by ship mortgages at fixed rates varying from 2.3% to 6.5% due through July 2028
  $ 67,628     $ 69,743  
Secured note payable to bank at a fixed interest rate of 8.245%, due May 2010
    1,642       1,656  
Amounts outstanding under $2.1 million secured line of credit with an Australian bank
          877  
Loans outstanding with New Zealand banks
    40       50  
3.75% Convertible Senior Notes, net of unamortized discount and offering costs of $2,335 and $2,479, respectively
    94,665       94,521  
Equipment leases
     216       217  
 
           
 
    164,191       167,063  
Less: current portion
    4,587       5,479  
 
           
Non-current portion
  $ 159,604     $ 161,584  
 
           
    At March 31, 2008 and December 31, 2007, the Company’s cash-secured revolving credit facility with a bank in the amount of $12.5 million and $12.5 million respectively, had no balances outstanding at the end of each of the respective periods.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
Loans Secured by Ship Mortgages
In conjunction with ACG’s acquisition of American West, the Company assumed $41.5 million in fixed-rate, 4.63% debt payable through 2028 and guaranteed by the United States Government through the United States Maritime Administration (“MARAD”) under Title XI, Merchant Marine Act, 1936, as amended, and is secured by a First Preferred Ship Mortgage on the Empress of the North. Annual principal payments of $1.8 million plus accrued interest are required through July 18, 2028.
In conjunction with ACG’s acquisition of the cruise-related assets of Delta Queen, the Company assumed $35.0 million of fixed-rate, 6.5% debt payable through 2020 and guaranteed by MARAD under Title XI, Merchant Marine Act, 1936, as amended, and secured by a First Preferred Ship Mortgage on the American Queen®. Semi-annual principal payments accumulating to $2.4 million annually plus accrued interest are required through June 2020.
Bellingham Marine Debt
Bellingham Marine has a note payable to a bank with a balance of $1.6 million at March 31, 2008, secured by property, payable in monthly installments of $16,000 including interest at a fixed rate of 8.245%, subject to certain limitations and various financial covenants, due May 10, 2010. As of March 31, 2008, the Company was in compliance with the financial covenants.
Bellingham Marine’s international operations have a $2.1 million line of credit for its Australian subsidiary with National Australia Bank Limited. Interest is payable monthly at an annual adjustable rate that is adjusted quarterly and is collateralized by substantially all of the subsidiary’s assets, including any uncalled or unpaid capital. The interest rate at March 31, 2008 was 8.1%. As of March 31, 2008, the balance on the line of credit was zero. Bellingham Marine’s New Zealand operations have two bank loans at an average interest rate of 11.3% and outstanding amounts totaling $40,000. In addition, the international operations have equipment leases with balances of $216,000 and $217,000 at March 31, 2008 and December 31, 2007, respectively, secured by the respective equipment payable in monthly installments aggregating $3,200, including interest, through July 2012.
3.75% Convertible Senior Notes
On April 3, 2007, the Company closed the sale of $97.0 million of 3.75% Convertible Senior Notes due 2027 (“Notes”) to Thomas Weisel Partners LLC (“Initial Purchaser”), in a private offering, pursuant to a purchase agreement dated March 28, 2007. A portion of the proceeds from the sale of the Notes was used to retire the $60 million in seller financing incurred in connection with the acquisition of Windstar Cruises as discussed in Note 2 “Business Acquisitions and Investments.” The remaining proceeds were to be used for general corporate purposes and future growth of the Company.
The Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 17.8763 shares per $1,000 principal amount of the Notes (which is equivalent to an initial conversion price of approximately $55.94 per share), subject to adjustment upon the occurrence of certain events. Interest on the Notes is payable semi-annually in arrears on April 15 and on October 15 in each year, commencing October 15, 2007. The Company may redeem the Notes in whole or in part after April 15, 2012. After April 20, 2010 and prior to April 15, 2012, the Company may redeem all or a portion of the Notes only if the price of the Company’s common stock reaches certain thresholds for a specified period of time. Holders of the Notes may require the Company to purchase all or a portion of the Notes, in cash, on April 15, 2012, April 15, 2017 and April 15, 2022 or upon the occurrence of specified fundamental changes (as defined in the purchase agreement dated March 28, 2007). If a holder elects to convert Notes in connection with a specified fundamental change that occurs prior to April 15, 2012, the Company will in certain circumstances increase the conversion rate by a specified number of additional shares.
In connection with the issuance of the Notes, the Initial Purchaser withheld $2.9 million in fees from the proceeds of the offering which amount is classified as debt discount and amortized over a five-year period, the earliest term when the note holders have an option to require the Company to redeem the Notes. The Company also incurred debt offering costs of $0.5 million. Both the debt discount and debt offering costs are being amortized over the five-year period using the effective interest rate method. The unamortized debt discount is included as a component of long-term debt. The unamortized offering costs are included as a component of prepaid costs and other current assets or other assets, respectively, depending on whether the unamortized balance is of a short-term or long-term nature.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
Principal payments on the Company’s debt are scheduled to be paid as follows:
         
Year Ended December 31,        
2008 (remaining nine months)
  $ 2,464  
2009
    4,593  
2010
    5,807  
2011
    4,266  
2012
    101,279  
Thereafter
    48,117  
 
     
 
    166,526  
Less: Unamortized discount and offering costs
    (2,335 )
Less: current portion
    (4,587 )
 
     
Non-current portion
  $ 159,604  
 
     
7.   Comprehensive loss
The components of comprehensive loss are as follows (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Net loss
  $ (11,977 )   $ (8,562 )
Change in unrealized gain on foreign currency translation
    327       244  
Change in unrealized gain (loss) on available-for-sale securities, net of income tax expense of $0 and $32
          58  
 
           
 
  $ (11,650 )   $ (8,260 )
 
           
8.   Earnings (Loss) Per Share
Basic earnings (loss) per share (EPS) is computed by dividing net income (loss) by the weighted average common shares outstanding. Diluted EPS includes the effect of any potential shares outstanding, which for the Company consists of dilutive stock options and shares issuable under convertible notes (“Notes). The dilutive effect of stock options is calculated using the treasury stock method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense. The dilutive effect of the Notes is calculated by adding back interest expense and amortization offering costs, net of taxes, which would not have been incurred assuming conversion. Diluted EPS for the three months ended March 31, 2008 and 2007 does not include the dilutive effect of stock options and conversion of the Notes into the Company’s common shares since their inclusion would be anti-dilutive.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
The table below details the components of the basic and diluted EPS calculations (in thousands, except per share amounts):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Numerator:
               
Net loss
  $ (11,977 )   $ (8,562 )
 
           
 
               
Denominator:
               
Weighted-average shares outstanding – basic
    10,890       11,089  
Effect of dilutive securities:
               
Stock options
           
Convertible debt
           
 
           
Weighted-average shares outstanding – diluted
    10,890       11,089  
 
           
 
               
Earnings (loss) per share:
               
Basic
  $ (1.10 )   $ (0.77 )
 
           
Diluted
  $ (1.10 )   $ (0.77 )
 
           
9.   Business Segments
In January 2007, the Company realigned its business segments into the following four business segments: (i) cruise, which includes the operations of ACG; (ii) marine, which includes the operations of AMG; (iii) travel and events, which includes the operations of Ambassadors; and (iv) corporate and other, which consists of general corporate assets (primarily cash and cash equivalents and investments), the insurance operations of Cypress Re and other activities that are not directly related to the Company’s cruise, marine and travel and events operating segments.
Summary of business segment information is as follows (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Revenue:
               
Cruise
  $ 23,757     $ 5,202  
Marine
    29,352       23,484  
Travel and events
    3,726       3,524  
Corporate and other
    5       654  
 
           
Total revenue
  $ 56,840     $ 32,864  
 
           
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Operating income (loss):
               
Cruise
  $ (11,393 )   $ (12,542 )
Marine
    968       226  
Travel and events
    375       361  
Corporate and other
    (1,244 )     (1,745 )
 
           
Total operating loss
  $ (11,294 )   $ (13,700 )
 
           

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
10.   Income Taxes
The Company recorded an income tax benefit of $0.1 million for the three months ended March 31, 2008, compared to $5.7 million for the three months ended March 31, 2007. The Company continues to record a full valuation allowance on its domestic deferred tax assets.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years before 2004; state and local income tax examinations before 2003; and foreign income tax examinations before 2003.
The Company is not currently under Internal Revenue Service, state, local or foreign jurisdiction tax examinations.
During the three months ended March 31, 2008, the Company recognized approximately $6,000 in potential interest and penalties associated with uncertain tax positions. The Company does not expect any significant increases or decreases to its unrecognized tax benefits within 12 months of this reporting date.
11.   Commitments and Contingencies
The Office of the Attorney General for the State of Florida is conducting a review of the Company’s fuel supplement that it implemented in the fourth quarter of 2007 on its Majestic America Line and Windstar Cruises brands. The Attorney General is conducting an investigation to determine whether there is or has been a violation of state or federal anti-trust laws in connection with the fuel supplements set by the Company and other cruise line operators. The Company is cooperating with the Attorney General’s office in connection with this review and investigation and is not able, at this time, to estimate the impact of this review and investigation on the Company.
On February 26, 2008, the Company and several of its subsidiaries were named in a complaint by David Giersdorf, the former President of ACG in the Superior Court of Washington for King County. Mr. Giersdorf has alleged he was improperly terminated and has claimed damages which appear to be in excess of $70.0 million. Mr. Giersdorf’s claims, based on verbal agreements, include the following: (i) he left a tenured position with Holland America Line (“HAL”), which well-positioned him to be the President of HAL earning a multi-million dollar annual salary until retirement; (ii) he was denied the opportunity to vest in 87,500 option shares and 30,000 restricted stock grants, which should be valued at a $47 per share stock price; (iii) his assistance in acquiring Windstar and his work in the transition of its vendors and employees entitles him to approximately $54.0 million; (iv) he is owed compensation for future acquisitions; and (v) he is owed sums for reputation and emotional damage. The Company believes all of Mr. Giersdorf’s claims lack merit and will defend them vigorously, but is not able at this time to estimate the outcome of this proceeding.
12.   Impairment or Disposal of Long-Lived Assets
Since 1968, Congress has granted the Delta Queen® eight consecutive exemptions from the Safety at Sea Act requirement because of fire prevention and safety enhancements made to the ship and the historic status of the Delta Queen®. The current exemption has been extended to November 1, 2008. The Company’s ability to operate the Delta Queen® was dependent upon retaining the current Congressional exemption and obtaining additional exemptions subsequent to 2008. In July 2007, the Company was made aware that the Congressional exemption would not be extended beyond 2008 and announced 2008 as the farewell season for the Delta Queen®. The Company reviewed the remaining vessel value of the Delta Queen® for impairment. Management evaluated the recoverability using both subjective and objective factors. Subjective factors included the evaluation of industry and product trends and the Company’s strategic focus. Objective factors included management’s best estimates of projected future earnings and cash flows. The Company used a discounted cash flow model using assumptions including expected revenues and expenses, investment yields on deposits, any future capital expenditure requirements and appropriate discount rates. Based on the analysis performed, the Company believes that the remaining vessel value on the Delta Queen® is recoverable and no impairment charge has been recorded as of March 31, 2008.
The Company has decided not to operate the 48-passenger Contessa in 2008 and anticipates selling the vessel in the near future. The Company believes that the remaining vessel value on the Contessa is recoverable and no impairment charge has been recorded as of March 31, 2008.

 

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Ambassadors International, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
13.   Subsequent Events
Queen of the West
In April 2008, a small fire occurred in the engine room of the Queen of the West, while the vessel was cruising between The Dalles and John Day Locks in Oregon. The fire was quickly extinguished with no injuries to guests. The Columbia Queen was brought into service in April, which was earlier than originally scheduled in order to accommodate guests while the Queen of the West was undergoing repairs. The incident sailing and one additional sailing were cancelled. Future impacted sailings have not been determined at this time and will be contingent on the completion of the vessel repairs.
The Company expects to incur costs related to relocating passengers and crew, vessel repair costs and refund passenger deposits. In addition, the Company lost revenue as a result of the cancellations of the two sailings. The Company is in the process of seeking insurance related recoveries with respect to this incident.
Majestic America Line
On April 29, 2008, the Company announced that it plans to sell its Majestic America Line division. The Company is planning to operate the 2008 season of Majestic America Line while conducting the exit of the business in an orderly and effective manner.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report. This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, those identified under “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2007.
We are a cruise, marine and travel and events company. Our cruise operations include U.S.-flagged cruise ships that sail along the inland rivers and coastal waterways of North America and international-flagged ships that sail to destinations in the Caribbean, Europe, the Americas and the Greek Isles.
Through our marine business, we are a global provider of marina design, manufacturing and construction services. Our marine business also offers marine operations, management and consulting services to marina owners.

Through our travel and events business, we provide event services to corporations, associations and trade show companies. In addition, we develop, market and manage performance improvement programs utilizing travel incentives and merchandise awards designed to achieve specific corporate objectives, including achieving sales goals, improving productivity and attracting and retaining qualified employees. Our clients include Fortune 1000 companies and other large and small businesses.
We also reinsure property and casualty risks written by licensed U.S. insurers. The lines of business that are currently being reinsured include commercial auto liability, commercial physical damage and workers’ compensation. These risks are associated with members of highly selective affinity groups or associations.
In 2006 and 2007, we completed several major acquisitions in the cruise and marine segments. In 2007, we successfully completed the integration of the marine acquisitions, as well the Windstar Cruises acquisition. The integration of the domestic cruise operations proved to be more challenging than anticipated.
On April 29, 2008, we announced our plans to sell Majestic America Line. We are planning to operate the 2008 season of Majestic America Line while conducting the exit of the business in an orderly and effective manner.
In 2008, we are focused on improving our business performance and have identified three major areas for improvement as follows:
    Improve our marketing and pricing strategy by creating a multi-channel marketing approach that embraces the travel agent community, opens up international markets, caters to charter and incentive business and pursues a strong group support for our unique offerings;
 
    Reduce our selling expenses by focusing our sales force and targeting our direct mail campaigns, which enable us to scale our campaign to a level more appropriate for a company of our size;
 
    Improve our operational execution by partnering with V.Ships to reduce costs while enhancing the onboard guest experience.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and costs and expenses during the period. We evaluate our estimates and judgments, including those that affect our most critical accounting policies, on an ongoing basis. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, within the framework of current accounting literature.
Our businesses are seasonal. Historically, we have recognized the majority of our operating results in the first and second quarters of each fiscal year. As a result of our cruise-related acquisitions and the size of our cruise operations, the majority of our operating results will be recognized in the second and third three-month periods of our fiscal year which coincides with our cruising season. Our annual results would be adversely affected if our revenue were to be substantially below seasonal norms during the second and third quarters of our fiscal year.

 

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The following is a list of the accounting policies that we believe require the most significant judgments and estimates, and that could potentially result in materially different results under different assumptions or conditions.
Revenue Recognition
We recognize revenues The Company recognizes revenue in accordance with GAAP, including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” and EITF 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent.” The Company recognizes revenue when persuasive evidence of an arrangement exists, the service fee is fixed or determinable, collectibility is reasonably assured and delivery has occurred. We recognize revenue when persuasive evidence of an arrangement exists, the service fee is fixed or determinable, collectibility is reasonably assured and delivery has occurred.
Passenger Ticket Revenue and Onboard and Other Cruise Revenues
We record passenger ticket revenue net of applicable discounts. We recognize passenger ticket revenue and related costs of revenue when the cruise is completed. We generally receive from our customers a partially refundable deposit within one week of booking a tour, with the balance typically remitted 60 days prior to the departure date. If customers cancel their trip, the nonrefundable portion of their deposit is recognized as revenue on the date of cancellation. Passenger revenue representing travel insurance purchased at the time of reservation is recognized upon the completion of the cruise or passenger cancellation, whichever is earlier and our obligation has been met. Onboard and other cruise revenue consisting of beverage and souvenir sales and optional shore excursions are deferred and recognized as revenue when the cruise is completed.
Marine Revenue
We recognize revenue for marine and related services and shipyard related revenues in accordance with the American Institute of Certified Public Accountants Statement of Position No. 81-1, “Accounting for Performance of Construction-Type and Production-Type Contracts.” Contract costs include direct labor, materials, subcontractors and other direct costs, plus estimated indirect costs such as equipment rental, repairs and depreciation and overhead. General and administrative costs are expensed as incurred.
We recognize revenues on fixed price marine construction contracts using the percentage of completion method, whereby a portion of the contract revenue, based on contract costs incurred to date compared with total estimated costs at completion (based on our estimates), is recognized as revenue each period. Revenues on cost-plus contracts are recognized on the basis of costs incurred, plus the estimated fee earned. Estimates of fees earned are based on negotiated fee amounts or our assessment of the fee amounts that are likely to be earned. Each of these methods approximate percentage of completion revenue recognition based on contract costs incurred to date compared with total estimated costs at completion. We use the completed-contract method for shipyard related contracts for which reasonably dependable estimates cannot be made.
On occasion, we or our customers may seek to modify a contract to accommodate a change in the scope of the work, such as changes in specifications, method or manner of performance, equipment, materials, or period of performance, or to account for customer-caused delays, errors in specifications or design, contract terminations, or other causes of unanticipated additional costs. Such change orders or claims are evaluated according to their characteristics and the circumstances under which they occur, taking into consideration such factors as the probability of recovery, our experience in negotiating change orders and claims, and the adequacy of documentation substantiating the costs of such change order or claim. Costs attributable to unpriced change orders and claims are accounted for as costs of contract performance in the period in which the costs are incurred, and revenue is recognized to the extent of costs incurred. Revenue in excess of costs attributable to unpriced change orders is recorded when realization is assured beyond a reasonable doubt, based on our experience with the customer or when a bona fide pricing offer has been provided by the customer. Receivables related to unpriced change orders and claims are not material.
We follow these revenue recognition methods because reasonably dependable estimates of the revenue, costs and profits applicable to various stages of a contract can generally be made. Recognized revenues and profit are subject to revisions as the contract progresses to completion. If we do not accurately estimate the resources required or the scope of work to be performed, or do not manage our projects properly within the planned periods of time, or satisfy our obligations under the contracts, then profit may be significantly and negatively affected or losses on contracts may need to be recognized. We review contract performance, costs incurred, and estimated costs to complete on a regular basis. Revisions to revenue and profit estimates are reflected in income in the period in which the facts that give rise to the revisions become known. Provisions for anticipated losses on contracts are reflected in income in the period in which the loss becomes known.
A contract may be regarded as substantially completed if remaining costs and potential risks are insignificant in amount. We consider a contract to be substantially completed upon delivery of the product, acceptance by the customer and compliance with contract performance specifications.

 

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The asset, “costs plus earnings in excess of billings on construction contracts,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs plus earnings on construction contracts,” represents billings in excess of revenues recognized.
Travel, Incentive and Event Related
We bill travel participants, mainly consisting of large corporations, in advance, of which the cash received is recorded as a participant deposit. We pay for certain direct program costs such as airfare, hotel and other program costs in advance of travel, which are recorded as prepaid program costs. We recognize travel revenue and related costs when travel convenes and classify such revenue as travel and incentive related. This revenue is reported on a net basis, reflecting the net effect of gross billings to the client less any direct program costs.
We recognize revenue from hotel reservation, registration and related travel services when the convention operates. We recognize revenue from the sale of merchandise when the merchandise is shipped, the service has been provided or when the redemption periods have expired. We defer revenue from pre-paid, certificate-based merchandise incentive programs until our obligations are fulfilled or upon management’s estimates (based upon historical trends) that it is remote that the certificate will be redeemed. We report these revenues on a net basis, reflecting the net effect of gross billings to the client less any direct program or merchandise costs.
Net Insurance Premiums Earned
Insurance premiums are recognized as revenue over the period of the insurance contracts in proportion to the amount of the insurance coverage provided. The insurance contracts are typically twelve months in duration and are considered short-duration contracts. Unearned premiums represent the unearned portion of the insurance contracts as of the balance sheet date.
Ceded reinsurance premiums relate to reinsurance purchased (excess of loss and aggregate stop loss) to mitigate potential losses from severe adverse loss development, both on a per accident claim basis and in the aggregate. These ceded reinsurance transactions are recognized as a reduction of premium revenue in the same manner in which the insurance contract is recognized as premium revenue.
Property, Vessels and Equipment
Property, vessels and equipment are stated at cost, net of accumulated depreciation. We expense as incurred the cost of maintenance and repairs that do not improve or extend the lives of the respective assets. We capitalize major additions and betterments. Our ships are capitalized and depreciated using the straight-line method over the expected useful life ranging up to 30 years, net of a residual value that generally is approximately 15%. Ship replacement parts are capitalized and depreciated upon being placed in service. Office and shop equipment is capitalized and depreciated using the straight-line method over the expected useful life of the equipment, ranging up to 10 years. We amortize leasehold improvements using the straight-line method over the lesser of the expected useful life of the improvement or the term of the related lease.
We perform reviews for the impairment of property, vessels and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When property and equipment are sold or retired, we remove the related cost and accumulated depreciation from the accounts and recognize any gain or loss in the statement of operations. Judgments and estimates made related to property and equipment are affected by factors such as economic conditions, changes in resale values and changes in operating performance. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets.
Drydocking
We capitalize drydocking costs as incurred and amortize such costs over the period to the next scheduled drydock. We believe that the deferral method provides a better matching of revenues and expenses. Drydocking costs are included in prepaid and other current assets and in long term assets in the accompanying balance sheet and are amortized over the cruising season between scheduled dry dockings.

 

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Long-Lived Assets Including Intangibles
We test goodwill and intangible assets with indefinite useful lives for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired. Management evaluates recoverability using both subjective and objective factors. Subjective factors include the evaluation of industry and product trends and our strategic focus. Objective factors include management’s best estimates of projected future earnings and cash flows. We use a discounted cash flow model to estimate the fair market value of each of our reporting units and indefinite lived intangibles when performing our impairment tests. Assumptions used include growth rates for revenues and expenses, investment yields on deposits, any future capital expenditure requirements and appropriate discount rates. We established reporting units based on our current reporting structure. For purposes of testing goodwill for impairment, we allocated goodwill to these reporting units to the extent it related to each reporting unit. We amortize intangible assets with definite lives over their estimated useful lives and review them for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired. The majority of our intangible assets were assigned lives based on contract values associated with each intangible asset. We amortize our acquired intangible assets with definite lives over periods ranging from five to 20 years depending on the contract term where applicable.
Reserve for Loss and Loss Adjustment Expenses
The liability for losses and loss adjustment expenses includes an amount determined from loss reports and individual cases and an amount for losses incurred but not reported. Such liabilities are based on estimates and, while we believe that the amount is adequate, the ultimate liability may be in excess of or less than the amounts provided. Anticipated deductible recoveries from insureds are recorded as reinsurance recoverables at the time the liability for unpaid claims is established. Other recoveries on unsettled claims, such as salvage and subrogation, are estimated by management and adjusted upon collection.
Reinsurance
In the normal course of our reinsurance business, we seek to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. Amounts recoverable from reinsurers are estimated in a manner consistent with the reinsured policy.
With respect to retroactive reinsurance contracts, the amount by which the liabilities associated with the reinsured policies exceed the amounts paid is amortized to income over the estimated remaining settlement period. We account for the effects of subsequent changes in estimated or actual cash flows by adjusting the previously deferred amount to the balance that would have existed had the revised estimate been available at the inception of the reinsurance transaction, with a corresponding charge or credit to income.
Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the fair value approach in SFAS No. 123R is similar to the fair value approach described in SFAS No. 123. In 2005, we used the Black-Scholes-Merton formula to estimate the fair value of stock options granted to employees. We adopted SFAS No. 123R, using the modified-prospective method, beginning January 1, 2006. Based on the terms of our plans, we did not have a cumulative effect of accounting change related to our plans. We also elected to continue to estimate the fair value of stock options using the Black-Scholes-Merton formula.
Using the Black-Scholes-Merton formula to estimate the fair value of stock-based compensation requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them, risk free interest rates, our dividend yield and the volatility of our common stock price over the expected term. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized on our consolidated statements of operations.

 

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On November 10, 2005 the FASB issued FSP SFAS No. 123R-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards.” We have elected to adopt the alternative transition method provided in SFAS No. 123R-3 for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee stock-based compensation expense, and to determine the subsequent impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that were outstanding at our adoption of SFAS No. 123R. In addition, in accordance with SFAS No. 123R, SFAS No. 109, “Accounting for Income Taxes,” and EITF Topic D-32, “Intraperiod Tax Allocation of the Tax Effect of Pretax Income from Continuing Operations,” we have elected to recognize excess income tax benefits from stock option exercises in additional paid-in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to us. We measure the tax benefit associated with excess tax deductions related to stock-based compensation expense by multiplying the excess tax deductions by the statutory tax rates.
Income Taxes
We account for income taxes in accordance with the provisions of SFAS No. 109, which requires an asset and liability approach that requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Statistical Terminology and Information for Cruise Operations
Available Passenger Cruise Days (“APCD”)
APCD’s are our measurement of capacity and represent double occupancy per cabin multiplied by the number of cruise days for the period.
Occupancy
Occupancy, in accordance with the cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.
Passenger Cruise Days
Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days in their respective cruises.
Selected cruise operations statistical information is as follows:
                 
    Three Months  
    Ended March 31,  
    2008     2007  
    (unaudited)  
Passengers Carried
    9,155       3,055  
Occupancy Percentage
    90 %     82 %
Passenger Cruise Days
    63,243       17,964  
APCD
    70,199       21,858  
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008 TO THE THREE MONTHS ENDED MARCH 31, 2007
Revenue
Total revenue for the three months ended March 31, 2008 was $56.8 million, compared to $32.9 million for the three months ended March 31, 2007. For the quarter ended March 31, 2008, the increase in revenue was primarily related to increases within our cruise and marine operations. Our cruise revenue increased $18.6 million primarily due to the $19.4 million in revenue from Windstar Cruises which was acquired in April 2007. Our marine revenues increased $5.9 million due to increased sales in our marina operations at Bellingham Marine that we acquired in July 2006. Our travel, incentive and events related revenue increased $0.2 primarily due to an increase in program volume. These increases were partially offset by a decrease of $0.6 million in premiums earned on existing insurance programs as a result of not entering into new programs in 2008.

 

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Cruise Operating Expenses
Cruise operating expenses were $20.6 million for the three months ended March 31, 2008 compared to $7.0 million for the three months ended March 31, 2007. The increase in cruise operating expenses is due to the addition of $14.1 million associated with Windstar Cruises which was acquired in April 2007.
Cost of Marine Revenue
Cost of marine revenue was $22.5 million for the three months ended March 31, 2008 compared to $19.4 million for the three months ended March 31, 2007. As a percentage of marine revenue, cost of marine revenue decreased to 76.8% during the three months ended March 31, 2008 from 82.8% during the three months ended March 31, 2007.
Selling and Tour Promotion Expenses
Selling and tour promotion expenses decreased to $6.4 million for the three months ended March 31, 2008 from $6.5 million for the three months ended March 31, 2007. As a percentage of total revenue, selling and tour promotion decreased to 11.3% during the three months ended March 31, 2008 from 19.9% during the three months ended March 31, 2007.
General and Administrative Expenses
General and administrative expenses were $15.0 million for the three months ended March 31, 2008 compared to $11.3 million for the three months ended March 31, 2007. The increase is primarily due to $2.0 million in higher general and administrative expenses incurred by the marine group and $1.4 million incurred by Windstar Cruises acquired in April 2007. As a percentage of total revenues, general and administrative expenses decreased to 26.4% for the three months ended March 31, 2008 from 34.4% for the three months ended March 31, 2007.
Depreciation and Amortization
Depreciation and amortization expenses were $3.5 million for the three months ended March 31, 2008 compared to $1.6 million for the three months ended March 31, 2007. The increase is related to the additional depreciation expense during the three months ended March 31, 2008 due to the increase in property, vessels and equipment, predominantly consisting of vessels acquired as a result of the Windstar Cruises acquisition.
Loss and Loss Adjustment Expenses, Insurance Acquisition Costs and Other Operating Expenses
Loss and loss adjustment expenses, insurance acquisition costs and other operating expenses were $0.1 million for the three months ended March 31, 2008, compared to $0.7 million for the three months ended March 31, 2007. The decrease is related to the decrease in net insurance premiums earned in 2008 compared to 2007.
Operating Loss
We recorded an operating loss of $11.3 million for the three months ended March 31, 2008, compared to $13.7 million for the three months ended March 31, 2007. The change is the result of the changes described above.
Other Income (Expense)
Other expense for the three months ended March 31, 2008 was $0.8 million, compared to $0.6 million for the three months ended March 31, 2007. The increase in other expense was mainly the result of approximately $1.1 million of interest expense on our convertible notes issued in April 2007, partially offset by insurance recoveries of $0.6 million for the Queen of the West and the Empress of the North related to incidents in 2006 and 2007, respectively, and $0.2 million in recovery from a marine group contract that was written off in 2007.

 

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Income Taxes
We recorded an income tax benefit of $0.1 million for the three months ended March 31, 2008, compared to a tax benefit of $5.7 million for the three months ended March 31, 2007. In accordance with SFAS No. 109, during the fourth quarter of 2007 we established a full valuation allowance on our domestic deferred tax assets. As a result of the valuation allowance, no tax benefit was provided for the three months ended March 31, 2008 for our consolidated domestic losses.
The Company will continue to assess its valuation allowance in future periods based on the provisions within SFAS No. 109. Future tax provision and benefits recorded will be affected by the presence of the valuation allowance.
Net Loss
Net loss for the three months ended March 31, 2008 was $12.0 million, compared to $8.6 million for the comparable period in 2007. The change is the result of the changes described above.
Liquidity and Capital Resources
In making an assessment of our liquidity, we believe that the items in our financial statements that are most relevant are our cash and cash equivalents and cash generated from our operating and financing activities.
Net cash provided by operating activities for the three months ended March 31, 2008 was approximately $3.5 million, compared to $8.5 million for the three months ended March 31, 2007. The change in net cash primarily relates to timing differences in the collection of current assets and the payment of current liabilities, an increase in net loss and a decrease in accounts payable and accrued expenses and passenger deposits. This decrease was partially offset by an increase in the non-cash charges during the period and an increase in accounts and other receivables.
Net cash used in investing activities for the three months ended March 31, 2008 was $5.6 million compared to cash provided by investing activities of $12.0 million for three months ended March 31, 2007. The change is primarily due to a decrease in proceeds from sale of securities, offset by a decrease in restricted cash funding as a result of higher holdbacks by our credit card processors, and expenditures for purchase of property, vessels and equipment. In April 2008, we received notification that our credit card processor intends to increase our restricted cash by an additional $5 million which raised the target level of restricted cash for Majestic America Line to $20 million. The exact timing of removal of this restriction and return of this restricted cash is under discussions with the credit card processor. A failure or a significant delay in removing the restrictions and returning this restricted cash could significantly impact our operations.
As of March 31, 2008, we have incurred significant capital expenditures and cost for improvements to and maintenance of our ships, and we anticipate that these expenditures and costs will not materially change during the remainder of 2008. We do not have any material commitments for capital expenditures in our marine, travel and events or insurance businesses in 2008.
On January 13, 2006, ACG acquired American West. Under the terms of the agreement, ACG acquired the membership interests of American West for one dollar, repaid debt of approximately $4.3 million and assumed approximately $41.5 million in fixed-rate, 4.63% debt payable through 2028 and guaranteed by the United States Maritime Administration. In addition, the transaction consideration consisted of 250,000 shares of our restricted common stock, which is subject to forfeiture to us if certain future financial targets are not met during the four years following the close of the transaction.
On April 25, 2006, ACG acquired the cruise-related assets and liabilities of Delta Queen for $1.8 million in cash, the assumption of passenger deposits and the assumption of approximately $35.0 million of fixed-rate, 6.50% debt payable through 2020 and guaranteed by the United States Maritime Administration. In addition, the transaction included contingent consideration of 100,000 shares of our common stock, to be granted to Delta Queen Steamboat Company, Inc. if certain future financial targets are met in any of the three years following the close of the transaction. No shares related to the contingent consideration were issued in 2006, 2007 or the three months ended March 31, 2008.
On February 13, 2006, BellPort purchased certain assets related to the Newport Harbor Shipyard for $0.5 million. Concurrent with the asset purchase, BellPort entered into a long term agreement to lease and operate the shipyard facility beginning April 1, 2006 and ending March 31, 2011.
In July 2006, we acquired Bellingham Marine through the acquisition by our Ambassadors Marine Group LLC subsidiary of 100% of the outstanding stock of Nishida Tekko America Corporation from its parent company, Nishida Tekko Corporation. In addition, Ambassadors Marine Group and Nishida Tekko Corporation entered into an option agreement pursuant to which Nishida Tekko Corporation was granted a five year option to acquire 49% of the outstanding stock of Nishida Tekko America Corporation for $3.4 million plus 7% simple interest. The effect of the option exercise would give Nishida Tekko Corporation an approximate 25% interest in Bellingham Marine.

 

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In April 2007, we consummated our acquisition of Windstar cruises for a total consideration of $72.1 million of which $12.1 million was paid in cash and $60.0 million in seller financing.
On April 2, 2007, ACG, through its wholly-owned subsidiary, AICG acquired Windstar Cruises for $11.3 million in cash, $60 million in seller financing and assumed approximately $28.5 million in liabilities. The $60 million in seller financing was subsequently paid off on April 17, 2007, with the proceeds from the convertible note offering by which we had raised $97.0 million in April 2007.
The 3.75% senior convertible notes are due on April 15, 2027. Interest on the notes is payable semi-annually in arrears on April 15 and October 15 in each year, commencing October 15, 2007. The notes are convertible into shares of Ambassadors’ common stock, par value $0.01 per share, at an initial conversion rate of 17.8763 shares per $1,000 principal amount of the notes (which is equivalent to an initial conversion price of approximately $55.94 per share), subject to adjustment upon the occurrence of certain events. We may redeem the notes in whole or in part after April 15, 2012. We may also redeem all or a portion of the notes after April 20, 2010 and prior to April 15, 2012, only if the price of our common stock reaches certain thresholds for a specified period of time. Holders of the notes may require us to purchase all or a portion of the notes, in cash, on April 15, 2012, April 15, 2017 and April 15, 2022 or upon the occurrence of specified fundamental changes as defined in the purchase agreement dated March 28, 2007. If a holder elects to convert notes in connection with a specified fundamental change that occurs prior to April 15, 2012, we will in certain circumstances increase the conversion rate by a specified number of additional shares.
On April 29, 2008, we announced our plans to sell Majestic America Line. We are planning to operate the 2008 season of Majestic America Line while conducting the exit of the business in an orderly and effective manner. Several credible parties have expressed a sincere interest in acquiring some or all the assets of Majestic America Line and building upon the efforts and investments we have made in delivering unique cruise experiences that celebrate American history, culture and our magnificent waterways.
We are currently seeking financing in which we can leverage the assets of Windstar Cruises. If we are successful in both the sale of Majestic America Line and the financing of Windstar Cruises, we will once again be in a position to allocate capital. We see investment opportunities in both international small ship cruising and in our marine segment. In addition to investing into these businesses, we want to be in the position which allows us the opportunity to repurchase our stock if it remains at its current prices and also have the ability to purchase our convertible bonds if they continue to trade at a significant discount.
Net cash used by financing activities for three months ended March 31, 2008 was $2.5 million, compared to $2.7 million for the three months ended March 31, 2007. Activity for the three months ended March 31, 2008 included $2.6 million in payments on long term debt compared to $1.7 million during the three months ended March 31, 2007. Net cash used by financing activity during the three months ended March 31, 2007 also included $1.1 million of cash dividends totaling $0.10 per common share.
On September 2, 2003, the Company’s board of directors authorized a new dividend policy of paying stockholders $0.40 per share annually, distributable at $0.10 per share on a quarterly basis. We and our board of directors intend to continually review the dividend policy to ensure compliance with capital requirements, regulatory limitations, our financial position and other conditions which may affect our desire or ability to pay dividends in the future. Subsequent to the dividend declared in May 2007, our board of directors did not approve any additional dividends for 2007 or for the first quarter of 2008.
The following dividends were declared in 2007 on the dates indicated (in thousands):
             
Record Date   Payment Date   Dividend Amount  
  March 19, 2007   $ 1,084  
  May 31, 2007     1,084  
In the ordinary course of business we may from time to time be required to enter into letters of credit related to our insurance programs and for our travel related programs with airlines, travel providers and travel reporting agencies. As of March 31, 2008, we had outstanding approximately $10.7 million in letters of credit related to property and casualty insurance programs which are scheduled to expire at various dates through 2008. As of March 31, 2008, we had outstanding approximately $0.9 million in letters of credit related to cruise business operations which expire in 2008. As of March 31, 2008, we had outstanding approximately $0.1 million in letters of credit related to travel and event business operations that expire at various dates through 2008.
Under Bermuda regulations, Cypress Re is required to maintain a surplus of 20% of gross written premiums or 10% of loss and loss adjustment expense reserves or a minimum statutory capital and surplus required for a Class 3 Company of $1.0 million, whichever is greater. As of March 31, 2008, Cypress Re had $4.1 million of contributed capital from us, which is in excess of the required statutory capital, and surplus of $1.0 million. In April 2008, we reduced our capital by $3.3 million based on authority from Bermuda.
In November 1998, our board of directors authorized the repurchase of up to an aggregate of $20.0 million of our common stock in the open market or through private transactions. In August 2006, our board of directors authorized an additional $10.0 million for the repurchase of our common stock in the open market or through private tractions, providing for an aggregate of $30.0 million. This repurchase program is ongoing and as of March 31, 2008, we had repurchased 1,102,650 shares for approximately $14.0 million. No shares were repurchased during the three months ended March 31, 2008 and 2007. We do not believe that any future repurchases will have a significant impact on our liquidity.

 

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We believe that cash, cash equivalents, available-for-sale securities and cash flows from operations will be sufficient to meet our anticipated operating cash needs for at least the next twelve months. We continue to pursue further acquisitions of related travel and performance improvement, service and other businesses, although no assurance can be given that definitive agreements for any acquisition will be entered into or, if they are entered into, that any acquisition will be consummated on terms favorable to us. We could use cash and financing sources discussed herein, or financing sources that subsequently become available, to fund additional acquisitions or investments. In addition, we may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt, or for general corporate purposes. If a material acquisition or investment is completed, our operating results and financial condition could change materially in future periods. However, no assurance can be given that additional funds will be available on satisfactory terms, or at all, to fund such activities.
Trends and Uncertainties
The results of operations and financial position of our business may be affected by a number of trends or uncertainties that have, or that we reasonably expect could have, a material effect on income from continuing operations, cash flows and financial position. Such trends and uncertainties include the repercussions of the war in Iraq or terrorist acts, our acquisition of or investment in complementary businesses and significant changes in estimates for potential claims or other general estimates related to our reinsurance business. We will also, from time to time, consider the acquisition of or investment in businesses, services and technologies that might affect our liquidity requirements.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this quarterly report on Form 10-Q that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A forward-looking statement may contain words such as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” “continue,” and variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward looking statements. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. Such risks and uncertainties include, among others:
    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 industries in which we operate;
 
    marketing expenses;
 
    extreme weather conditions;
 
    timing of and costs related to acquisitions;
 
    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;
 
    the availability of raw materials;
 
    our ability to enter into profitable marina construction contracts;
 
    changes in relationships with certain travel providers;
 
    changes in vacation industry capacity;
 
    the mix of programs and events, program destinations and event locations;
 
    the introduction and acceptance of new programs and program and event enhancements by us and our competitors;
 
    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.

 

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The information contained in this document is not a complete description of our business or the risks associated with an investment in our common stock. Before deciding to buy or maintain a position in our common stock, you should carefully review and consider the various disclosures we made in this report, and in our other materials filed with the Securities and Exchange Commission that discuss our business in greater detail and that disclose various risks, uncertainties and other factors that may affect our business, results of operations or financial condition. In particular, you should review our annual report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission and the “Risk Factors” we included in that report.
Any of the factors described above could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.
We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to changes in financial market conditions in the normal course of business due to our use of certain financial instruments. Market risk generally represents the risk that losses may occur in the values of financial instruments as a result of movements in interest rates and equity prices.
There have been no material changes in the reported market risks or the overall credit risk of our portfolio since December 31, 2007. See further discussion of these market risks and related financial instruments in our annual report on Form 10-K for the year ended December 31, 2007.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.
As required by Securities and Exchange Commission Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes during the quarter ended March 31, 2008 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.

 

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Office of the Attorney General for the State of Florida is conducting a review of our fuel supplement that we implemented in the fourth quarter of 2007 on our Majestic America Line and Windstar Cruises brands. The Attorney General is conducting an investigation to determine whether there is or has been a violation of state or federal anti-trust laws in connection with the setting by us and other cruise line operators of our respective fuel supplements. We are cooperating with the Attorney General’s office in connection with this review and investigation. We are not able at this time to estimate the impact of this review and investigation on us.
On February 26, 2008, we and several of our subsidiaries were named in a complaint by David Giersdorf, the former President of ACG in the Superior Court of Washington for King County. Mr. Giersdorf has alleged he was improperly terminated and has claimed damages which appear to be in excess of $70.0 million. Mr. Giersdorf’s claims, based on verbal agreements, include the following: (i) he left a tenured position with Holland America Line (“HAL”), which well-positioned him to be the President of HAL earning a multi-million dollar annual salary until retirement; (ii) he was denied the opportunity to vest in 87,500 option shares and 30,000 restricted stock grants, which should be valued at a $47 per share stock price; (iii) his assistance in acquiring Windstar and his work in the transition of its vendors and employees entitles him to approximately $54.0 million; (iv) he is owed compensation for future acquisitions; and (v) he is owed sums for reputation and emotional damage. We believe all of Mr. Giersdorf’s claims lack merit and will defend them vigorously, but are not able at this time to estimate the outcome of this proceeding.
Item 1A. Risk Factors.
Item 1A of Part I of our Form 10-K for the year ended December 31, 2007, summarizes various material risks that investors should carefully consider before deciding to buy or maintain an investment in our securities. Any of those risks, if they actually occur, would likely harm our business, financial condition and results of operations and could cause the trading price of our common stock to decline. There are no material changes to the risk factors set forth in the above-referenced report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.

 

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Item 6. Exhibits.
     
Exhibit No.   Description
   
 
31.1  
Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, 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 amended, 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.

 

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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  AMBASSADORS INTERNATIONAL, INC.
(Registrant)
 
 
Date: May 6, 2008  By:   /s/ Blake T. Barnett    
    Blake T. Barnett   
    Chief Financial Officer,
(Principal Financial Officer and Duly Authorized Officer) 
 

 

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Exhibit Index
     
Exhibit No.   Description
   
 
31.1  
Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, 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 amended, 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.

 

33


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
7/18/28
4/15/27
4/15/22
4/15/17
4/15/12
11/30/118-K
3/31/114
5/10/103,  4
4/20/10
12/31/0810-K,  NT 10-K
12/15/084,  8-K
11/15/08
11/1/0810-Q
Filed as of:5/7/084,  8-K
Filed on:5/6/08
4/29/08
For Period End:3/31/08
2/26/08
2/12/08
1/1/08
12/31/0710-K
10/15/07
5/31/07
5/21/07
4/18/07DEF 14A
4/17/078-K
4/3/078-K
4/2/078-K,  8-K/A,  PRE 14A
3/31/0710-Q
3/28/078-K
3/27/078-K
3/19/07
3/12/07
1/1/07
7/21/068-K,  8-K/A
4/25/068-K,  8-K/A
4/1/06
2/13/06SC 13G/A
1/13/064,  8-K,  8-K/A
1/1/06
11/10/05SC 13D/A
12/31/0410-K,  5
6/30/0410-Q,  3
6/1/04
5/31/04
3/29/0410-K/A
9/2/034,  8-K
1/1/03
7/1/02
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