**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-K**

** **

**ý****Annual Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934**

 

**For thefiscal year ended December 31, 2003**

 

**o****Transition Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**for thetransition period from                        to**

 

**Commissionfile number 001-16531**

 

**GENERAL MARITIME CORPORATION**

(Exact name of registrantas specified in its charter)

 
| **Republic of the Marshall Islands**                             |   | **06-159-7083**                       |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |   |                                  |
| **35 West 56th Street, New York, New  York**                     |   | **10019**                             |
| (Address of principal  executive office)                         |   | (Zip Code)                            |

 

Registrant’s telephone number,including area code:**(212) 763-5600**

** **

Securities of the Registrant registered pursuant to Section 12(b) ofthe Act:

 

**CommonStock, par value $.01 per share**

 

  Securities of the Registrantregistered pursuant to Section 12(g) of the Act:

 

**None**

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) and (2) has been subjectto such filing requirements for the past 90 days. YesýNo o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein and willnot be contained, to the best of the registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. o

 

The aggregate market value of the voting stock of theRegistrant held by non-affiliates of the Registrant as of March 8, 2004 wasapproximately $781.5 million, based on the closing price of $20.69 per share.

 

The number of shares outstanding of the Registrant’scommon stock as of March 8, 2004 was 37,772,645 shares.

 

DOCUMENTS INCORPORATED BYREFERENCE

 

Proxy Statement for the Annual Meeting of Shareholdersto be held on May 20, 2004 (Part III)

 

 

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**PART I**

 

**ITEM1.  BUSINESS**

** **

**OVERVIEW**

** **

We are a leading provider of international seabornecrude oil transportation services.  Ourcurrent fleet, which excludes one double-bottom Aframax tanker which was heldfor sale as of December 31, 2003, consists of 42 tankers, of which 23 areAframax tankers and 19 are Suezmax tankers, making us the second largestmid-sized tanker operator in the world. Our current fleet has a total of more than 5.1 million dwt, only21% of which is single-hulled, compared to a worldwide average as ofDecember 31, 2003 of 33% single-hull tankers. Please refer to the section“INTERNATIONAL MARITIME ORGANIZATION” for information regarding an impairmentcharge taken on five of our single-hull tankers and a reduction in the usefullives of our nine single-hull tankers. The average age of the tankers in our current fleet as of December 31,2003 was 11.8 years and only four of the tankers in our current fleet wereolder than 15 years of age at that time. Many of the tankers in our fleetare “sister ships”, which provide us with operational and schedulingflexibility, as well as economies of scale in their operation and maintenance.

 

With the majority of our tankers currently operatingin the Atlantic basin, we have one of the largest fleets in this region, whichincludes ports in the Caribbean, South and Central America, the United States,Western Africa, the Mediterranean, Europe and the North Sea. Transportation ofcrude oil to the U.S. Gulf Coast and other refining centers in the UnitedStates requires vessel owners and operators to meet more stringentenvironmental regulations than in other regions of the world.  We have focused our operations in theAtlantic basin because we believe that these stringent operating and safetystandards act as a barrier to entry for potential competitors.  We have established a niche in the regiondue to our high quality tankers, of which 79% are either double-hulled ordouble-sided, our commitment to safety and many years of experience in theindustry.  Although the majority of ourtankers operate in the Atlantic basin, we also currently operate tankers in theBlack Sea, the Far East and in other regions, which we believe enables us bothto take advantage of market opportunities and to position our tankers inanticipation of drydockings.  Ourcustomers include most of the major international oil companies such asChevronTexaco Corporation, CITGO Petroleum Corp., Shell Oil Company, BPAmoco,Exxon Mobil Corporation, ConocoPhillips and Sun International Ltd.

 

We actively manage the deployment of our tankersbetween spot market voyage charters, which generally last from several days toseveral weeks, and time charters, which can last up to several years.  We continuously and actively monitor marketconditions in an effort to take advantage of changes in charter rates and tomaximize our long-term cash flow by changing this chartering deploymentprofile.  We design our fleet deploymentto provide greater cash flow stability through the use of time charters forpart of our fleet, while maintaining the flexibility to benefit fromimprovements in market rates by deploying the balance of tankers in the spotmarket.

 

Our net voyage revenues, which are voyage revenuesminus voyage expenses, have grown from $12.0 million in 1997 to $336.6 millionin 2003. Net voyage revenues increased by $191.0 million, or 146%, to $336.6million for the year ended December 31, 2003 compared to $145.6 million for theyear ended December 31, 2002.  $111.7million of this increase is due to the acquisition of 14 Suezmax tankers andfive Aframax tankers during 2003.  Wehave also grown our fleet of tankers from six as of December 31, 1997 to 28 asof December 31, 2002, to our current fleet of 42 tankers.  We consummated our initial public offeringin June 2001.

 

**BUSINESSSTRATEGY**

** **

Our strategy is to employ our existing competitivestrengths to enhance our position within the industry and maximize long-termcash flow.  Our strategic initiativesinclude:

 

•                                *ManagingEnvironmentally Safe, Yet Cost Efficient Operations.*  We aggressively manage our operating andmaintenance costs.  At the same time,our fleet has an excellent safety and environmental record that we maintainthrough acquisitions of high-quality tankers and regular

 

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maintenance and inspection of our fleet. We maintainoperating standards for all of our tankers that emphasize operational safety,quality maintenance, continuous training of our officers and crews andcompliance with U.S. and international environmental and safetyregulations.  Our in-house safety staffoversees many of these services.  Webelieve the age and quality of the tankers in our fleet, coupled with ourexcellent safety and environmental record, position us favorably within thesector with our customers and for future business opportunities.

 

•                                *BalancingTanker Deployment to Maximize Fleet Utilization and Cash Flows*.  We actively manage the deployment of ourfleet between time charters and spot market voyage charters.  Our tanker deployment strategy is designedto provide greater cash flow stability through the use of time charters forpart of our fleet, while maintaining the flexibility to benefit fromimprovements in market rates by deploying the balance of our tankers in thespot market.  Our goal is to be thefirst choice of our customers for crude oil transportation services.  We constantly monitor the market and seek toanticipate our customers crude oil transportation needs and to respond quicklywhen we recognize attractive chartering opportunities.

 

•                                *Growing OurFleet and Maintaining a Prudent Capital Structure*.  We are an industry consolidator focused onopportunistically acquiring high-quality, second-hand, mid-sized vessels.  During the past six years we have grown ourfleet from 6 tankers to our current fleet of 42 tankers.  We are continuously and actively monitoringthe market in an effort to take advantage of expansion and growthopportunities.  At the same time, we arecommitted to maintaining prudent financial policies aimed at preservingfinancial stability and increasing long-term cash flow.  During the year ended December 31,2002, our debt to capitalization ratio declined from 40.6% to 36.8%.  As of March 31, 2003, after giving effect tothe $525.0 million acquisition costs of the 19 tankers from MetrostarManagement Corporation and the financing of those tankers, our debt tocapitalization ratio would have been 59.9% and as of December 31, 2003 therewas a reduction to 53.5%.  During 2003,we repaid $91.6 million of term indebtedness and $54.1 million on our revolvingcredit facilities.  As of December 31,2003 we had the ability to draw down an additional $124.5 million on our tworevolving credit facilities.  We expectthe acquisition of these tankers to increase our cash flow generation, whichwill enable us to further reduce this ratio towards our historical levels.

 

**OUR FLEET**

** **

Our current fleet consists of 42 tankers and iscomprised of 23 Aframax tankers and 19 Suezmax tankers. The following chartprovides information regarding our 42 tankers.

 
|                   |   | **YARD**     |   | **YEAR  BUILT** |   | **YEAR  ACQUIRED** |   | **TYPE** |   | **DEADWEIGHT  TONS** |   | **EMPLOYMENT  STATUS** |   | **FLAG**         |   | **SISTER  SHIPS(4)** |   |
|------------------------|--------|--------------|--------|-----------------|--------|--------------------|--------|----------|--------|----------------------|--------|------------------------|--------|------------------|--------|----------------------|--------|
| OUR CURRENT FLEET      |   |         |   |            |   |               |   |     |   |                 |   |                   |   |             |   |                 |   |
| AFRAMAX TANKERS        |   |         |   |            |   |               |   |     |   |                 |   |                   |   |             |   |                 |   |
| Genmar Ajax(1)         |   | Samsung      |   | 1996            |   | 1998               |   | DH       |   | 96,183               |   | Spot                   |   | Liberia          |   | A                    |   |
| Genmar Agamemnon(1)    |   | Samsung      |   | 1995            |   | 1998               |   | DH       |   | 96,226               |   | Spot                   |   | Liberia          |   | A                    |   |
| Genmar Minotaur(1)     |   | Samsung      |   | 1995            |   | 1998               |   | DH       |   | 96,226               |   | Spot                   |   | Liberia          |   | A                    |   |
| Genmar Constantine(1)  |   | S. Kurushima |   | 1992            |   | 1998               |   | DH       |   | 102,335              |   | TC                     |   | Liberia          |   | B                    |   |
| Genmar Alexandra(1)    |   | S. Kurushima |   | 1992            |   | 2001               |   | DH       |   | 102,262              |   | TC                     |   | Marshall Islands |   | B                    |   |
| Genmar Champ *(2)      |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Hector *(1)     |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Marshall Islands |   | C                    |   |
| Genmar Pericles *(1)   |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Marshall Islands |   | C                    |   |
| Genmar Spirit *(2)     |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Star *(2)       |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Trust *(2)      |   | Hyundai      |   | 1992            |   | 2001               |   | DH       |   | 96,027               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Challenger *(2) |   | Hyundai      |   | 1991            |   | 2001               |   | DH       |   | 96,043               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Endurance *(2)  |   | Hyundai      |   | 1991            |   | 2001               |   | DH       |   | 96,043               |   | TC                     |   | Liberia          |   | C                    |   |
| Genmar Trader *(2)     |   | Hyundai      |   | 1991            |   | 2001               |   | DH       |   | 96,043               |   | TC                     |   | Malta            |   | C                    |   |
| Genmar Leonidas(2)     |   | Koyo         |   | 1991            |   | 2001               |   | DS       |   | 97,002               |   | Spot                   |   | Marshall Islands |   | D                    |   |
| Genmar Gabriel(1)      |   | Koyo         |   | 1990            |   | 1999               |   | DS       |   | 94,993               |   | Spot                   |   | Marshall Islands |   | D                    |   |
| Genmar Nestor(2)       |   | Imabari      |   | 1990            |   | 2001               |   | DS       |   | 97,112               |   | Spot                   |   | Marshall Islands |   | D                    |   |
| Genmar George(1)       |   | Koyo         |   | 1989            |   | 1997               |   | DS       |   | 94,955               |   | Spot                   |   | Liberia          |   | D                    |   |
| Genmar Commander(1)    |   | Sumitomo     |   | 1989            |   | 1997               |   | SH       |   | 96,578               |   | Spot                   |   | Liberia          |   | D                    |   |
| Genmar Boss(1)         |   | Kawasaki     |   | 1985            |   | 1997               |   | DS       |   | 89,601               |   | Spot                   |   | Marshall Islands |   | E                    |   |
| Genmar Sun(1)          |   | Kawasaki     |   | 1985            |   | 1997               |   | DS       |   | 89,696               |   | Spot                   |   | Marshall Islands |   | E                    |   |
| Genmar Princess(3)     |   | Sumitomo     |   | 1991            |   | 2003               |   | DH       |   | 96,765               |   | TC                     |   | Liberia          |   | F                    |   |
| Genmar Progress(3)     |   | Sumitomo     |   | 1991            |   | 2003               |   | DH       |   | 96,765               |   | TC                     |   | Liberia          |   | F                    |   |
|                   |   |         |   |            |   |               |   | TOTAL    |   | 2,210,990            |   |                   |   |             |   |                 |   |

 

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| SUEZMAX  TANKERS      |   |         |   |   |   |   |   |   |   |      |   |   |   |             |   |   |   |
|-----------------------|--------|--------------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|------------------|--------|--------|--------|
| Genmar Spartiate(1)   |   | Ishikawajima |   | 1991   |   | 2000   |   | SH     |   | 155,150   |   | Spot   |   | Marshall Islands |   | G      |   |
| Genmar Zoe(1)         |   | Ishikawajima |   | 1991   |   | 2000   |   | SH     |   | 152,402   |   | Spot   |   | Marshall Islands |   | G      |   |
| Genmar Macedon(1)     |   | Ishikawajima |   | 1990   |   | 2000   |   | SH     |   | 155,527   |   | Spot   |   | Marshall Islands |   | G      |   |
| Genmar Alta(1)        |   | Mitsubishi   |   | 1990   |   | 1997   |   | SH     |   | 146,251   |   | Spot   |   | Liberia          |   |   |   |
| Genmar Harriet(1)     |   | Kawasaki     |   | 1989   |   | 1997   |   | SH     |   | 146,184   |   | Spot   |   | Liberia          |   |   |   |
| Genmar Prometheus(3)  |   | Daewoo       |   | 1988   |   | 2003   |   | DS     |   | 152,412   |   | Spot   |   | Marshall Islands |   | H      |   |
| Genmar Sky(3)         |   | Daewoo       |   | 1988   |   | 2003   |   | DS     |   | 151,803   |   | Spot   |   | Marshall Islands |   | H      |   |
| Genmar Ariston(3)     |   | Daewoo       |   | 1989   |   | 2003   |   | DS     |   | 151,910   |   | Spot   |   | Greece           |   | H      |   |
| Genmar Kestrel(3)     |   | Daewoo       |   | 1989   |   | 2003   |   | DS     |   | 152,470   |   | Spot   |   | Greece           |   | H      |   |
| Genmar Transporter(3) |   | Split        |   | 1989   |   | 2003   |   | SH     |   | 149,999   |   | Spot   |   | Marshall Islands |   | I      |   |
| Genmar Centaur(3)     |   | Split        |   | 1990   |   | 2003   |   | SH     |   | 142,999   |   | Spot   |   | Greece           |   | I      |   |
| Genmar Traveller(3)   |   | Split        |   | 1990   |   | 2003   |   | SH     |   | 142,031   |   | Spot   |   | Marshall Islands |   | I      |   |
| Genmar Gulf(3)        |   | Daewoo       |   | 1991   |   | 2003   |   | DH     |   | 163,038   |   | Spot   |   | Marshall Islands |   |   |   |
| Genmar Phoenix(3)     |   | Halla        |   | 1999   |   | 2003   |   | DH     |   | 153,015   |   | Spot   |   | Greece           |   |   |   |
| Genmar Horn(3)        |   | Daewoo       |   | 1999   |   | 2003   |   | DH     |   | 159,475   |   | Spot   |   | Marshall Islands |   | J      |   |
| Genmar Hope(3)        |   | Daewoo       |   | 1999   |   | 2003   |   | DH     |   | 159,539   |   | Spot   |   | Marshall Islands |   | J      |   |
| Genmar Spyridon(3)    |   | Hyundai      |   | 2000   |   | 2003   |   | DH     |   | 159,959   |   | Spot   |   | Marshall Islands |   | K      |   |
| Genmar Argus(3)       |   | Hyundai      |   | 2000   |   | 2003   |   | DH     |   | 159,500   |   | Spot   |   | Marshall Islands |   | K      |   |
| Genmar Orion(3)       |   | Samsung      |   | 2002   |   | 2003   |   | DH     |   | 160,000   |   | TC     |   | Greece           |   |   |   |
|                  |   |         |   |   |   |   |   | TOTAL  |   | 2,913,664 |   |   |   |             |   |   |   |
|                  |   |         |   |   |   | FLEET  |   | TOTAL  |   | 5,124,654 |   |   |   |             |   |   |   |

 

DH = Double-hull tanker; DS = Double-sided tanker; SH = Single-hulltanker, TC = Time Chartered

 

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*              Oil/Bulk/Orecarrier (O/B/O)

(1)           Collateral for $300million credit facility

(2)           Collateral for $165million credit facility

(3)           Collateral for $275million credit facility

(4)           Each letterindicates a group of tankers that are "sister ships".

 

We acquired 48 vessels as well as our two management companysubsidiaries in a series of transactions outlined below. These consisted of thefollowing:

 

•                                          Ouracquisition, in June 2001, of seven limited partnerships owning 14 vessels andof five special purpose entities, each owning one vessel, in exchange forshares of our common stock.

 

•                                          Ouracquisition, in June and July 2001, of seven vessels from unaffiliated partiesfor cash.

 

•                                          Ouracquisition, in August 2001, of three vessels from unaffiliated parties forcash and shares of our common stock.

 

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•                                          Ouracquisition, as of June 12, 2001, of all the issued and outstanding shares ofcommon stock of two vessel management companies. One of these companies wasacquired for cash and the other in exchange for shares of our common stock.

 

•                                          Ouracquisition between March 2003 and May 2003 of five Aframax tankers and 14Suezmax tankers from an unaffiliated party for cash.

 

Our predecessor entities began operations in 1997 andtheir fleet had grown to 14 tankers by the time of our initial public offeringon June 12, 2001. All of our historical financial and operating informationfrom before the initial public offering reflects only those original 14tankers. In connection with the initial public offering, we acquired 15additional tankers. Of those, five were acquired simultaneously with theclosing of the offering and the remaining ten were acquired in the ten weeksfollowing the offering and successfully integrated into our fleet. At the timeof the offering, we also acquired General Maritime Management (Hellas) Ltd.(formerly United Overseas Tankers Ltd.), located in Piraeus, Greece, whichconducts our technical management operations such as officer staffing andmaintenance for most of our tankers. During November 2002, we sold our oldest tanker, *Stavanger Prince*, for scrap.During March 2003 and December 2003 we sold the *Kentucky* and the *West**Virginia*,respectively.  During November 2003,December 2003 and February 2004, we sold three double-bottomed 1986-builtAframax tankers that we acquired during 2003. Commercial management for our tankers is provided through ourwholly-owned subsidiary, General Maritime Management LLC, and our indirectwholly-owned subsidiary, General Maritime Management (UK) LLC, which was formedin March 2003.

 

**FLEETDEPLOYMENT**

** **

We strive to optimize the financial performance of ourfleet by deploying our vessels on time charters and in the spot market. Webelieve that our fleet deployment strategy provides us with the ability tobenefit from increases in tanker rates while at the same time maintaining ameasure of stability through cycles in the industry. The following tabledetails the percentage of our fleet operating on time charters and in the spotmarket during the past three years.

 
|                          |   | **TIME  CHARTER VS. SPOT MIX  (as% of operating days)  YEAR ENDED  DECEMBER 31,** |   |
|-------------------------------|--------|-----------------------------------------------------------------------------------|--------|
|                          |   | **2003**                                                                          |   | **2002** |   | **2001** |   |
| Percent in Time  Charter Days |   | 19.7                                                                              | %      | 14.9 | % | 27.0 | % |
| Percent in Spot  Days         |   | 80.3                                                                              | %      | 85.1 | % | 73.0 | % |
| Total Vessel  Operating Days  |   | 14,267                                                                            |   | 10,010 |   | 7,374 |   |

 

Tankers operating on time charters may be charteredfor several months or years whereas tankers operating in the spot markettypically are chartered for a single voyage that may last up to several weeks.Tankers operating in the spot market may generate increased profit marginsduring improvements in tanker rates, while tankers operating on time chartersgenerally provide more predictable cash flows. Accordingly, we actively monitormacroeconomic trends and governmental rules and regulations that may affecttanker rates in an attempt to optimize the deployment of our fleet. Our currentfleet has 14 tankers on time charter contracts expiring on dates between March2004 and February 2005.

 

**CLASSIFICATIONAND INSPECTION**

** **

All of our tankers have been certified as being“in-class” by Det Norske Veritas, the American Bureau of Shipping or Lloyd’sRegistry. Each of these classification societies is a member of the InternationalAssociation of Classification Societies. Every commercial vessel’s hull andmachinery is evaluated by a classification society authorized by its country ofregistry. The classification society certifies that the vessel has been builtand maintained in accordance with the rules of the classification society andcomplies with applicable rules and regulations of the

 

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vessel’s country ofregistry and the international conventions of which that country is a member.Each vessel is inspected by a surveyor of the classification society in threesurveys of varying frequency and thoroughness: every year for the annualsurvey, every two to three years for the intermediate survey and every four tofive years for special surveys. Vessels that are 15 years old or older arerequired, as part of the intermediate survey process, to be drydocked every 24to 30 months for inspection of the underwater portions of the vessel and fornecessary repairs stemming from the inspection. Special surveys always requiredrydocking.

 

In addition to the classification inspections, many ofour customers regularly inspect our tankers as a precondition to charteringthem for voyages. We believe that our well-maintained, high-quality tankersprovide us with a competitive advantage in the current environment ofincreasing regulation and customer emphasis on quality.

 

We have implemented the International SafetyManagement Code, which was promulgated by the IMO to establish pollution preventionrequirements applicable to tankers. Prior to July 1, 1998, we obtaineddocuments of compliance for our offices and safety management certificates forall of our tankers for which the certificates are required by the IMO.

 

**OPERATIONSAND SHIP MANAGEMENT**

** **

We employ experienced management in all functionscritical to our operations, aiming to provide a focused marketing effort, tightquality and cost controls and effective operations and safety monitoring.  Through our wholly owned subsidiaries, GeneralMaritime Management LLC, General Maritime Management (UK) LLC and GeneralMaritime Management (Hellas) Ltd. (formerly United Overseas Tankers Ltd.), wecurrently provide the commercial and technical management necessary for theoperations of most of our vessels, which include ship maintenance, officerstaffing, technical support, shipyard supervision, and risk management servicesthrough our wholly owned subsidiaries.

 

Our crews inspect our tankers and perform ordinarycourse maintenance, both at sea and in port. We regularly inspect our tankers.We examine each tanker and make specific notations and recommendations forimprovements to the overall condition of the tanker, maintenance of the tankerand safety and welfare of the crew. We have an in-house safety staff to overseethese functions and retain Admiral Robert North (Ret.), formerly of the U.S.Coast Guard, as a safety and security consultant.

 

The following services are performed by General Maritime Management LLCand General Maritime Management (Hellas) Ltd. (formerly United Overseas TankersLtd.).:

 

•                                          supervisionof routine maintenance and repair of the tanker required to keep each tanker ingood and efficient condition, including the preparation of comprehensivedrydocking specifications and the supervision of each drydocking;

 

•                                          oversightof compliance with applicable regulations, including licensing andcertification requirements, and the required inspections of each tanker toensure that it meets the standards set forth by classification societies andapplicable legal jurisdictions as well as our internal corporate requirementsand the standards required by our customers;

 

•                                          engagementand provision of qualified crews (masters, officers, cadets and ratings) andattendance to all matters regarding discipline, wages and labor relations;

 

•                                          arrangementto supply the necessary stores and equipment for each tanker; and

 

•                                          continualmonitoring of fleet performance and the initiation of necessary remedialactions to ensure that financial and operating targets are met.

 

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Our chartering staff, which is currently located inNew York City and in London, monitors fleet operations, tanker positions andspot market voyage charter rates worldwide. We believe that monitoring thisinformation is critical to making informed bids on competitive brokeredcharters.

 

**CREWINGAND EMPLOYEES**

** **

As of December 31, 2003, we employed approximately 105office personnel. Approximately 45 of these employees manage the commercial operationsof our business, of which 42 employees are located in New York City and threeemployees are located in London, England. The other 60 employees are located in Piraeus, Greece and manage thetechnical operations of our business. Our 60 employees located in Greece aresubject to Greece’s national employment collective bargaining agreement whichcovers terms and conditions of their employment.

 

As of December 31, 2003, we employed approximately 240seaborne personnel to crew our fleet of 43 tankers that we owned at that time,consisting of captains, chief engineers, chief officers and first engineers aswell as other crew personnel on our five Greek-flag tankers. The balance ofeach crew is staffed by employees of a third party to whom we contract for crewmanagement services. We believe that we could obtain a replacement provider forthese services, or could provide these services internally, without any adverseimpact on our operations.

 

We place great emphasis on attracting qualified crewmembers for employment on our tankers. Recruiting qualified senior officers hasbecome an increasingly difficult task for tanker operators. We pay competitivesalaries and provide competitive benefits to our personnel. We believe that thewell-maintained quarters and equipment on our tankers help to attract andretain motivated and qualified seamen and officers. Our crew managementservices contractors have collective bargaining agreements that cover all thejunior officers and seamen whom they provide to us.

 

**CUSTOMERS**

** **

Our customers include most oil companies, oil traders, tanker ownersand others.  During the years endedDecember 31, 2003 and 2002, no single customer accounted for more than 10% ofour voyage revenues.  During the yearended December 31, 2001, Skaugen PetroTrans, Inc., accounted for 12.6% of ourvoyage revenues.

 

**COMPETITION**

** **

International seaborne transportation of crude oil andother petroleum products is provided by two main types of operators: fleetsowned by independent companies and fleets operated by oil companies (bothprivate and state-owned). Many oil companies and other oil trading companies,the primary charterers of the tankers we own, also operate their own tankersand transport oil for themselves and third party charterers in direct competitionwith independent owners and operators. Competition for charters is intense andis based upon price, tanker location, the size, age, condition andacceptability of the tanker, and the quality and reputation of the tanker’soperator.

 

We compete principally with other Aframax and Suezmaxowners. However, competition in the Aframax and Suezmax markets is alsoaffected by the availability of alternative size tankers. Panamax size tankerscan compete for many of the same charters for which we compete. Because ULCCsand VLCCs cannot enter the ports we serve due to their large size, they rarelycompete directly with our tankers for specific charters.

 

Other significant operators of multiple Aframax and Suezmax tankers inthe Atlantic basin include American Eagle Tankers, Inc. Limited, OMICorporation, Overseas Shipholding Group, Inc. and Teekay Shipping Corporation.There are also numerous, smaller tanker operators in the Atlantic basin.

 

**INSURANCE**

** **

The operation of any ocean-going vessel carries aninherent risk of catastrophic marine disasters and property losses caused byadverse weather conditions, mechanical failures, human error, war, terrorismand other circumstances or events. In addition, the transportation of crude oilis subject to the risk of spills, and business interruptions due to politicalcircumstances in foreign countries, hostilities, labor strikes and boycotts.OPA has

 

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made liability insurancemore expensive for ship owners and operators imposing potentially unlimitedliability upon owners, operators and bareboat charterers for oil pollutionincidents in the 200-mile United States exclusive economic zone. We believethat our current insurance coverage is adequate to protect us against theprincipal accident-related risks that we face in the conduct of our business.

 

Our protection and indemnity insurance, or P&Iinsurance, covers third-party liabilities and other related expenses from,among other things, injury or death of crew, passengers and other thirdparties, claims arising from collisions, damage to cargo and other third-partyproperty and pollution arising from oil or other substances. Our currentP&I insurance coverage for pollution is the maximum commercially availableamount of $1.0 billion per tanker per incident and is provided by mutualprotection and indemnity associations. Each of the tankers currently in ourfleet is entered in a protection and indemnity association which is a member ofthe International Group of Protection and Indemnity Mutual AssuranceAssociations. The 14 protection and indemnity associations that comprise theInternational Group insure approximately 90% of the world’s commercial tonnageand have entered into a pooling agreement to reinsure each association’sliabilities. Each protection and indemnity association has capped its exposureto this pooling agreement at $4.3 billion. As a member of protection andindemnity associations, which are, in turn, members of the International Group,we are subject to calls payable to the associations based on its claim recordsas well as the claim records of all other members of the individualassociations and members of the pool of protection and indemnity associationscomprising the International Group.

 

Our hull and machinery insurance covers risks ofactual or constructive loss from collision, fire, grounding and enginebreakdown. Our war risk insurance covers risks of confiscation, seizure,capture, vandalism, sabotage and other war-related risks. Our loss-of-hire insurancecovers loss of revenue for up to 90 days resulting from tanker off hire foreach of our tankers.

 

**ENVIRONMENTALAND OTHER REGULATION**

** **

Government regulation significantly affects theownership and operation of our tankers. They are subject to internationalconventions, national, state and local laws and regulations in force in thecountries in which our tankers may operate or are registered. We cannot predictthe ultimate cost of complying with these requirements, or the impact of theserequirements on the resale value or useful lives of our tankers.

 

Various governmental and quasi-governmental agenciesrequire us to obtain permits, licenses and certificates for the operation ofour tankers.

 

We believe that the heightened level of environmentaland quality concerns among insurance underwriters, regulators and charterers isleading to greater inspection and safety requirements on all tankers and mayaccelerate the scrapping of older tankers throughout the industry. Increasingenvironmental concerns have created a demand for tankers that conform to thestricter environmental standards. We maintain operating standards for all ofour tankers that emphasize operational safety, quality maintenance, continuoustraining of our officers and crews and compliance with U.S. and internationalregulations.  Webelieve that the operation of our tankers are in substantial compliance withapplicable environmental laws and regulations; however, because such laws andregulations are frequently changed and may impose increasingly stricterrequirements, we cannot predict the ultimate cost of complying with theserequirements, or the impact of these requirements on the resale value or usefullives of our tankers.

** **

Our tankers are subject to both scheduled andunscheduled inspections by a variety of governmental and private entities, eachof which may have unique requirements. These entities include the local portauthorities (U.S. Coast Guard, harbor master or equivalent), classificationsocieties, flag state administration (country of registry) and charterers,particularly terminal operators and oil companies. Failure to maintainnecessary permits or approvals could require us to incur substantial costs ortemporarily suspend operation of one or more of our tankers.

 

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**INTERNATIONALMARITIME ORGANIZATION**

** **

In 1992, the InternationalMaritime Organization, or IMO (the United Nations agency for maritimesafety and the prevention of marine pollution by ships) adopted regulations which set forthpollution prevention requirements applicable to tankers. These regulations,which have been implemented in many jurisdictions in which our tankers operate,provide, in part, that:

 

•                                          25-yearold tankers must be of double-hull construction or of a mid-deck design withdouble-sided construction, unless:

 

(1)                                  theyhave wing tanks or double-bottom spaces not used for the carriage of oil whichcover at least 30% of the length of the cargo tank section of the hull orbottom; or

 

(2)                                  theyare capable of hydrostatically balanced loading (loading less cargo into atanker so that in the event of a breach of the hull, water flows into thetanker, displacing oil upwards instead of into the sea);

 

•              30-year old tankers must be ofdouble-hull construction or mid-deck design with double-sided construction; and

 

•              all tankers will be subject toenhanced inspections.

 

Also, under IMO regulations, a tanker must be ofdouble-hull construction or a mid-deck design with double-sided construction orbe of another approved design ensuring the same level of protection against oilpollution if the tanker:

 

•              is the subject of a contract for amajor conversion or original construction on or after July 6, 1993;

 

•              commences a major conversion orhas its keel laid on or after January 6, 1994; or

 

•              completes a major conversion or isa newbuilding delivered on or after July 6, 1996.

 

Our tankers are also subject to regulatoryrequirements, including the phase-out of single-hull tankers, imposed by theIMO. Effective September 2002, the IMO accelerated its existing timetablefor the phase-out of single-hull oil tankers. These regulations require thephase-out of most single-hull oil tankers by 2015 or earlier, depending on theage of the tanker and whether it has segregated ballast tanks. After 2007, themaximum permissible age for single-hull tankers will be 26 years. Our ninesingle-hull tankers were built in 1985 or later. Under current regulations,retrofitting will enable a vessel to operate until the earlier of 25 yearsof age and the anniversary date of its delivery in 2017. However, as a resultof the oil spill in November 2002 relatingto the loss of the *M.T. Prestige*, which was owned by acompany not affiliated with us, in December 2003 the Marine EnvironmentalProtection Committee of the IMO adopted a proposed amendment to theInternational Convention for the Prevention of Pollution from Ships toaccelerate the phase-out of certain single-hull tankers from 2015 to 2010unless the flag state extends the date to 2015. This proposed amendment willcome into effect in April 2005 unless objected to by a sufficient numberof member states.  The proposedamendment will shorten the useful lives of our single-hull tankers and, startingin 2010, will adversely affect our ability to generate income from them bylimiting the ports to which they may trade. Due to this amendment, during the fourth quarter of 2003, we haverecorded an $18.8 million impairment on five of our nine single-hull tankersand shortened the useful lives of all nine of the single-hull tankers forfinancial reporting purposes.  Thereduction in the useful lives of these tankers will result in an annualincrease in depreciation expense of $8.5 million through 2009.

 

InSeptember 1997, the IMO adopted Annex VI to the International Conventionfor the Prevention of Pollution from Ships to address air pollution fromships.  Annex VI is expected to beratified during 2004, and will become effective 12 months after ratification.  Annex VI, when it becomes effective, willset limits on sulfur oxide and nitrogen oxide emissions from ship exhausts andprohibit deliberate emissions of ozone depleting substances,

 

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such as chlorofluorocarbons. Annex VI also includesa global cap on the sulfur content of fuel oil and allows for special areas tobe established with more stringent controls on sulfur emissions.  We are currently formulating a plan tocomply with the Annex VI regulations once they come into effect. Compliancewith these regulations could require us to install emission control systems onsome or all of our tankers and could have an adverse financial impact on theoperation of our vessels.

** **

The requirements contained in the International SafetyManagement Code, or ISM Code, promulgated by the IMO, also affect ouroperations. The ISM Code requires the party with operational control of avessel to develop an extensive safety management system that includes, amongother things, the adoption of a safety and environmental protection policysetting forth instructions and procedures for operating its vessels safely anddescribing procedures for responding to emergencies. We intend to rely upon thesafety management system that we and our third party technical managers have developed.

 

The ISM Code requires that vessel operators obtain asafety management certificate for each vessel they operate. This certificateevidences compliance by a vessel’s management with code requirements for asafety management system. No vessel can obtain a certificate unless its managerhas been awarded a document of compliance, issued by each flag state, under theISM Code. We have obtained documents of compliance for our offices and safetymanagement certificates for all of our tankers for which the certificates arerequired by the IMO. We are required to renew these documents of compliance andsafety management certificates annually.

 

Noncompliance with the ISM Code and other IMOregulations may subject the shipowner or bareboat charterer to increasedliability, may lead to decreases in available insurance coverage for affectedvessels and may result in the denial of access to, or detention in, some ports.The U.S. Coast Guard and European Union authorities have indicated that vesselsnot in compliance with the ISM Code by the applicable deadlines will beprohibited from trading in U.S. and European Union ports, as the case may be.

 

The IMO has negotiated international conventions thatimpose liability for oil pollution in international waters and a signatory’sterritorial waters. Additional or new conventions, laws and regulations may beadopted which could limit our ability to do business and which could have amaterial adverse effect on our business and results of operations.

 

Although the United Statesis not a party to these conventions, many countries have ratified and followthe liability plan adopted by the IMO and set out in the InternationalConvention on Civil Liability for Oil Pollution Damage of 1969. Under this convention and depending on whether thecountry in which the damage results is a party to the 1992 Protocol to theInternational Convention on Civil Liability for Oil Pollution Damage, avessel’s registered owner is strictly liable for pollution damage caused in theterritorial waters of a contracting state by discharge of persistent oil,subject to certain complete defenses. Under an amendment to the Protocol that became effective on November 1,2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for thetotal enclosed spaces within a vessel), liability will be limited toapproximately $6.5 million plus $907 foreach additional gross ton over 5,000. For vessels of over 140,000 gross tons,liability will be limited to approximately $122.5 million.The current maximum amount under the 1992 protocol is approximately $81.2 million.As the convention calculates liability in terms of a basket of currencies, thesefigures are based on currency exchange rates onOctober 29, 2003. The right to limit liability is forfeited underthe International Convention on Civil Liability for Oil Pollution Damage wherethe spill is caused by the owner’s actual fault and under the 1992 Protocolwhere the spill is caused by the owner’s intentional or reckless conduct.Vessels trading to states that are parties to theseconventions must provide evidence of insurance covering the liability of theowner. In jurisdictions where the International Convention on Civil Liabilityfor Oil Pollution Damage has not been adopted, various legislative schemes orcommon law govern, and liability is imposed either on the basis of fault or ina manner similar to that convention. We believe that our P&I insurance will cover the liability under the plan adopted by the IMO.

 

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**U.S. OILPOLLUTION ACT OF 1990 AND COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATIONAND LIABILITY ACT**

** **

OPA established an extensive regulatory and liabilityregime for environmental protection and cleanup of oil spills. OPA affects allowners and operators whose vessels trade with the United States or itsterritories or possessions, or whose vessels operate in the waters of theUnited States, which include the U.S. territorial sea and the 200 nautical mileexclusive economic zone around the United States. The ComprehensiveEnvironmental Response, Compensation and Liability Act, or CERCLA, applies tothe discharge of hazardous substances (other than oil) whether on land or atsea. Both OPA and CERCLA impact our operations.

 

Under OPA, vessel owners, operators and bareboatcharterers are “responsible parties” who are jointly, severally and strictlyliable (unless the spill results solely from the act or omission of a thirdparty, an act of God or an act of war) for all containment and clean-up costsand other damages arising from oil spills from their vessels. These otherdamages are defined broadly to include:

 

•                                          naturalresource damages and related assessment costs;

 

•                                          realand personal property damages;

 

•                                          netloss of taxes, royalties, rents, profits or earnings capacity;

 

•                                          netcost of public services necessitated by a spill response, such as protectionfrom fire, safety or health hazards; and

 

•                                          lossof subsistence use of natural resources.

 

OPA limits the liabilityof responsible parties to the greater of $1,200 per gross ton or $10 millionper tanker that is over 3,000 gross tons (subject to possible adjustment forinflation). The act specifically permits individual states to impose their ownliability regimes with regard to oil pollution incidents occurring within theirboundaries, and some states have enacted legislation providing for unlimitedliability for discharge of pollutants within their waters. In some cases,states which have enacted this type of legislation have not yet issued implementingregulations defining tanker owners’ responsibilities under these laws. CERCLA,which applies to owners and operators of vessels, contains a similar liabilityregime and provides for cleanup, removal and natural resource damages.Liability under CERCLA is limited to the greater of $300 per gross ton or $5million.

 

These limits of liabilitydo not apply, however, where the incident is caused by violation of applicableU.S. federal safety, construction or operating regulations, or by theresponsible party’s gross negligence or willful misconduct. These limits do notapply if the responsible party fails or refuses to report the incident or tocooperate and assist in connection with the substance removal activities. OPAand CERCLA each preserve the right to recover damages under existing law,including maritime tort law. We believe that we are in substantial compliancewith OPA, CERCLA and all applicable state regulations in the ports where ourtankers call.

 

OPA requires owners andoperators of vessels to establish and maintain with the U.S. Coast Guardevidence of financial responsibility sufficient to meet the limit of theirpotential strict liability under the act. The U.S. Coast Guard has enactedregulations requiring evidence of financial responsibility in the amount of$1,500 per gross ton for tankers, coupling the OPA limitation on liability of$1,200 per gross ton with the CERCLA liability limit of $300 per gross ton.Under the regulations, evidence of financial responsibility may be demonstratedby insurance, surety bond, self-insurance or guaranty. Under OPA regulations,an owner or operator of more than one tanker is required to demonstrateevidence of financial responsibility for the entire fleet in an amount equalonly to the financial responsibility requirement of the tanker having thegreatest maximum strict liability under OPA and CERCLA. We have providedrequisite guarantees and received certificates of financial responsibility fromthe U.S. Coast Guard for each of our tankers required to have one.

 

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We insure each of ourtankers with pollution liability insurance in the maximum commerciallyavailable amount of $1.0 billion. A catastrophic spill could exceed theinsurance coverage available, in which event there could be a material adverseeffect on our business.

 

Under OPA, with certainlimited exceptions, all newly-built or converted vessels operating in U.S.waters must be built with double-hulls, and existing vessels that do not complywith the double-hull requirement will be prohibited from trading in U.S. watersover a 20-year period (1995-2015) based on size, age and place of discharge,unless retrofitted with double-hulls. Notwithstanding the prohibition to tradeschedule, the act currently permits existing single-hull and double-sidedtankers to operate until the year 2015 if their operations within U.S. watersare limited to discharging at the Louisiana Offshore Oil Port or off-loading bylightering within authorized lightering zones more than 60 miles off-shore.Lightering is the process by which vessels at sea off-load their cargo tosmaller vessels for ultimate delivery to the discharge port.

 

Applying the most stringent of requirements of the IMOor OPA, the prohibition to trade schedule for our nine single-hull and tendouble-sided tankers is currently as follows:

 
| **TANKER**            |   | **YEAR** |   |
|-----------------------|--------|----------|--------|
| **Aframax  tankers**  |   |     |   |
| *Genmar  Commander*   |   | 2010     |   |
| *Genmar  Boss*        |   | 2010     |   |
| *Genmar  Sun*         |   | 2010     |   |
|                  |   |     |   |
| *Genmar  Leonidas*    |   | 2015     |   |
| *Genmar  Gabriel*     |   | 2015     |   |
| *Genmar  Nestor*      |   | 2015     |   |
| *Genmar  George*      |   | 2014     |   |
|                  |   |     |   |
| **Suezmax  tankers**  |   |     |   |
| *Genmar  Spartiate*   |   | 2010     |   |
| *Genmar  Zoe*         |   | 2010     |   |
| *Genmar  Macedon*     |   | 2010     |   |
| *Genmar  Alta*        |   | 2010     |   |
| *Genmar  Harriet*     |   | 2010     |   |
| *Genmar  Transporter* |   | 2010     |   |
| *Genmar  Centaur*     |   | 2010     |   |
| *Genmar  Traveller*   |   | 2010     |   |
|                  |   |     |   |
| *Genmar  Ariston*     |   | 2014     |   |
| *Genmar  Kestrel*     |   | 2014     |   |
| *Genmar  Prometheus*  |   | 2013     |   |
| *Genmar  Sky*         |   | 2013     |   |

 

Owners or operators oftankers operating in the waters of the United States must file vessel responseplans with the U.S. Coast Guard, and their tankers are required to operate incompliance with their U.S. Coast Guard approved plans. These response plansmust, among other things:

 

•                                          addressa “worst case” scenario and identify and ensure, through contract or otherapproved means, the availability of necessary private response resources torespond to a “worst case discharge”;

 

•                                          describecrew training and drills; and

 

•                                          identifya qualified individual with full authority to implement removal actions.

 

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We have obtained vesselresponse plans approved by the U.S. Coast Guard for our tankers operating inthe waters of the United States. In addition, the U.S. Coast Guard hasannounced it intends to propose similar regulations requiring certain vesselsto prepare response plans for the release of hazardous substances.

 

**OTHERREGULATION**

** **

In July 2003, inresponse to the m.t. *Prestige* oil spill in November 2002,the European Union adopted legislation that prohibits all single hull tankersfrom entering into its ports or offshore terminals by 2010. The European Unionhas also banned all single hull tankers carrying heavy grades of oil fromentering or leaving its ports or offshore terminals or anchoring in areas underits jurisdiction. Commencing in 2005, certain single hull tankers above15 years of age will also be restricted from entering or leaving EuropeanUnion ports or offshore terminals and anchoring in areas under European Unionjurisdiction. The European Union is also considering legislation that would: (1) banmanifestly sub-standard vessels (defined as those over 15 years old that havebeen detained by port authorities at least twice in a six month period) fromEuropean waters and create an obligation of port states to inspect vesselsposing a high risk to maritime safety or the marine environment and (2) providethe European Union with greater authority and control over classificationsocieties, including the ability to seek to suspend or revoke the authority ofnegligent societies. The sinking of the m.t. *Prestige* and resulting oilspill in November 2002 has lead to the adoption of other environmentalregulations by certain European Union nations, which could adversely affect theremaining useful lives of all of our tankers and our ability to generate incomefrom them. It is impossible to predict what legislation or additionalregulations, if any, may be promulgated by the European Union or any othercountry or authority.

 

In addition, most U.S.states that border a navigable waterway have enacted environmental pollutionlaws that impose strict liability on a person for removal costs and damagesresulting from a discharge of oil or a release of a hazardous substance. Theselaws may be more stringent than U.S. federal law.

 

**ADDITIONALFACTORS THAT MAY AFFECT FUTURE RESULTS**

** **

The following riskfactors and other information included in this report should be carefullyconsidered. The risks and uncertainties described below are not the only oneswe face. Additional risks and uncertainties not presently known to us or thatwe currently deem immaterial also may impair our business operations. If any ofthe following risks occur, our business, financial condition, operating resultsand cash flows could be materially adversely affected and the trading price ofour common stock could decline.

 

### **Our secured creditfacilities and the indenture for our senior notes impose, and it is possiblethat any indenture for additional debt securities we issue will impose,significant operating and financial restrictions that may limit our ability tooperate our business.**

### ** **

Our secured creditfacilities and the indenture for our senior notes currently impose, and it ispossible that any indenture for additional debt securities that we issue willimpose, significant operating and financial restrictions on us.  These restrictions will limit our abilityto, among other things:

 

•                  incur additionaldebt;

 

•                  pay dividends ormake other restricted payments;

 

•                  create or permitcertain liens;

 

•                  sell tankers orother assets;

 

•                  create or permitrestrictions on the ability of our restricted subsidiaries to pay dividends ormake other distributions to us;

 

•                  engage intransactions with affiliates; and

 

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•                  consolidate ormerge with or into other companies or sell all or substantially all of ourassets.

* *

These restrictions couldlimit our ability to finance our future operations or capital needs, makeacquisitions or pursue available business opportunities.

 

In addition, our creditfacilities require us to maintain specified financial ratios and satisfyfinancial covenants.  We may be requiredto take action to reduce our debt or to act in a manner contrary to ourbusiness objectives to meet these ratios and satisfy these covenants.  Events beyond our control, including changesin the economic and business conditions in the markets in which we operate, mayaffect our ability to comply with these covenants.  We cannot assure you that we will meet these ratios or satisfythese covenants or that our lenders will waive any failure to do so.  A breach of any of the covenants in, or ourinability to maintain the required financial ratios under, our creditfacilities would prevent us from borrowing additional money under thefacilities and could result in a default under them.  If a default occurs under our credit facilities, the lenderscould elect to declare that debt, together with accrued interest and otherfees, to be immediately due and payable and proceed against the collateralsecuring that debt, which constitutes all or substantially all of ourassets.  Moreover, if the lenders undera credit facility or other agreement in default were to accelerate the debtoutstanding under that facility, it could result in a default under our otherdebt obligations, including our debt securities.

 

**We couldincur a substantial amount of debt, which could materially and adversely affectour financial condition, results of operations and business prospects andprevent us from fulfilling our obligations under our debt securities.**

* *

Our secured creditfacilities and the indenture for our senior notes permit us to incur additionaldebt, subject to some limitations.  Ifwe incur additional debt, our increased leverage could:

 

•                  make it moredifficult for us to satisfy our obligations under debt securities or otherindebtedness and, if we fail to comply with the requirements of theindebtedness, could result in an event of default;

 

•                  require us todedicate a substantial portion of our cash flow from operations to requiredpayments on indebtedness, thereby reducing the availability of cash flow forworking capital, capital expenditures and other general business activities;

 

•                  limit ourability to obtain additional financing in the future for working capital,capital expenditures, acquisitions, if any, and other general corporateactivities;

 

•                  limit ourflexibility in planning for, or reacting to, changes in our business and theindustry in which we operate or detract from our ability to successfullywithstand a downturn in our business or the economy generally; and

 

•                  place us at acompetitive disadvantage against other less leveraged competitors.

 

The occurrence of any oneof these events could have a material adverse effect on our business, financialcondition, results of operations, prospects and ability to satisfy ourobligations under our secured credit facilities and debt securities.

 

**We are aholding company, and we depend on the ability of our subsidiaries to distributefunds to us in order to satisfy our financial and other obligations.**

* *

We are a holding company,and our subsidiaries conduct all of our operations and own all of ourtankers.  We have no significant assetsother than the equity interests of our subsidiaries.  As a result, our ability to make required payments on our debtsecurities depends on the performance of our subsidiaries and their ability todistribute funds to us.  The ability ofour subsidiaries to make distributions to us may be restricted by, among otherthings, restrictions under our debt facilities, applicable corporate andlimited liability company laws of the jurisdictions of their incorporation ororganization and other laws and regulations. If we are unable to obtain funds

 

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from our subsidiaries,we will not be able to pay interest or principal on the notes or make paymenton our credit facilities unless we obtain funds from other sources.  We cannot assure you that we will be able toobtain the necessary funds from other sources.

 

**Anincrease in the supply of tanker capacity without an increase in demand fortanker capacity could cause charter rates to decline, which could materiallyand adversely affect our financial performance.**

** **

Historically, the tankerindustry has been cyclical. The profitability of companies and asset values inthe industry have fluctuated based on changes in the supply of, and demand for,tanker capacity. The supply of tankers generally increases with deliveries ofnew tankers and decreases with the scrapping of older tankers, conversion oftankers to other uses, such as floating production and storage facilities, andloss of tonnage as a result of casualties. If the number of new vesselsdelivered exceeds the number of tankers being scrapped and lost, tankercapacity will increase. If the supply of tanker capacity increases and thedemand for tanker capacity does not increase correspondingly, the charter ratespaid for our tankers could materially decline.

 

**Adecline in demand for crude oil or a shift in oil transport patterns couldmaterially and adversely affect our revenues.**

 

The demand for tankercapacity to transport crude oil depends upon world and regional oil markets. Anumber of factors influence these markets, including:

 

•      global and regional economic conditions;

 

•      increases and decreases in production ofand demand for crude oil;

 

•      developments in international trade;

 

•      changes in seaborne and othertransportation patterns;

 

•      environmental concerns and regulations;and

 

•      weather.

 

Historically, the crudeoil markets have been volatile as a result of the many conditions and eventsthat can affect the price, demand, production and transport of oil, includingcompetition from alternative energy sources. Decreased demand for oiltransportation may have a material adverse effect on our revenues, cash flowsand profitability.

 

**Adecline in charter rates or an increase in costs could materially and adverselyaffect our financial performance.**

** **

Our revenues depend onthe rates that charterers pay for transportation of crude oil by Aframax andSuezmax tankers. Because many of the factors influencing the supply of anddemand for tanker capacity are unpredictable, the nature, timing and degree ofchanges in charter rates are unpredictable.

 

For the year endedDecember 31, 2003, the average daily rate in the spot market for our Aframaxtankers was $21,719 and the average daily rate in the spot market for ourSuezmax tankers was $27,569.  During theyear ended December 31, 2002, the average daily rate in the spot marketfor our Aframax tankers was $13,318 and the average daily rate in the spotmarket for our Suezmax tankers was $15,410. During the year endedDecember 31, 2001, the average daily rate in the spot market for ourAframax tankers was $20,118 and the average daily rate in the spot market forour Suezmax tankers was $27,032. If charter rates fall, our revenues, cashflows and profitability could be materially and adversely affected.

 

Our vessel operatingexpenses are comprised of a variety of costs including crew costs, provisions,deck and engine stores, lubricating oil, insurance, maintenance and repairs,many of which are beyond our control and

 

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affect the entireshipping industry. Some of these costs, particularly relating to crew andmaintenance costs, are denominated in Euros, which result in higher costsduring periods in which the U.S. dollar is weaker against the Euro.  Also, costs such as insurance and enhancedsecurity measures implemented after September 11, 2001, are increasing.The terrorist attack on the VLCC *Limburg* in Yemen during October 2002has resulted in even more emphasis on security and pressure on insurance rates.If costs continue to rise, that could materially and adversely affect our cashflows and profitability.

 

**Themarket for crude oil transportation services is highly competitive and we maynot be able to effectively compete.**

 

Our tankers are employedin a highly competitive market. Our competitors include the owners of otherAframax and Suezmax tankers and, to a lesser degree, owners of other sizetankers. Both groups include independent oil tanker companies as well as oilcompanies. We do not control a sufficiently large share of the market toinfluence the market price charged for crude oil transportation services.

 

Our market share maydecrease in the future. We may not be able to compete profitably as we expandour business into new geographic regions or provide new services. New marketsmay require different skills, knowledge or strategies than we use in ourcurrent markets, and the competitors in those new markets may have greaterfinancial strength and capital resources than we do.

 

**Fluctuationsin the market value of our fleet may adversely affect our liquidity and mayresult in breaches under our financing arrangements and sales of tankers at aloss.**

* *

The market value oftankers fluctuates depending upon general economic and market conditionsaffecting the tanker industry, the number of tankers**in the world fleet, theprice of constructing new tankers, or newbuildings, types and sizes of tankers,and the cost of other modes of transportation. The market value of our fleet may decline as a result of a downswing inthe historically cyclical shipping industry or as a result of the aging of ourfleet.  Declining tanker values couldaffect our ability to raise cash by limiting our ability to refinance vesselsand thereby adversely impact our liquidity. In addition, declining vessel values could result in a breach of loancovenants, which could give rise to events of default under our creditfacilities.  Due to the cyclical natureof the tanker market, the market value of one or more of our tankers may atvarious times be lower than their book value, and sales of those tankers duringthose times would result in losses.  Ifwe determine at any time that a tanker’s future limited useful life andearnings require us to impair its value on our financial statements, that couldresult in a charge against our earnings and the reduction of our shareholders’equity. Please refer to the section “INTERNATIONAL MARITIME ORGANIZATION” for adiscussion of an impairment charge taken on five of our single-hull tankers anda reduction in the useful lives of our nine single-hull tankers.  If for any reason we sell tankers at a timewhen tanker prices have fallen, the sale may be at less than the tanker’scarrying amount on our financial statements, with the result that we would alsoincur a loss and a reduction in earnings.

 

**Compliancewith safety, environmental and other governmental requirements and relatedcosts may adversely affect our operations.**

* *

The shipping industry ingeneral, our business and the operation of our tankers in particular, areaffected by a variety of governmental regulations in the form of numerousinternational conventions, national, state and local laws and national andinternational regulations in force in the jurisdictions in which such tankersoperate, as well as in the country or countries in which such tankers areregistered. These regulations include:

 

•                  the U.S. OilPollution Act of 1990, or OPA, which imposes strict liability for the dischargeof oil into the 200-mile United States exclusive economic zone, the obligationto obtain certificates of financial responsibility for vessels trading inUnited States waters and the requirement that newly constructed tankers thattrade in United States waters be constructed with double-hulls;

 

•                  theInternational Convention on Civil Liability for Oil Pollution Damage of 1969entered into by many countries (other than the United States) relating tostrict liability for pollution damage caused by the discharge of oil;

 

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•                  theInternational Maritime Organization, or IMO, International Convention for thePrevention of Pollution from Ships with respect to strict technical andoperational requirements for tankers;

 

•                  the IMOInternational Convention for the Safety of Life at Sea of 1974, or SOLAS, withrespect to crew and passenger safety;

 

•                  the InternationalConvention on Load Lines of 1966 with respect to the safeguarding of life andproperty through limitations on load capability for vessels on internationalvoyages; and

 

•                  the U.S. MarineTransportation Security Act of 2002.

 

More stringent maritimesafety rules are also more likely to be imposed worldwide as a result of theoil spill in November 2002 relating to the loss of the *M.T.Prestige*, a 26-year old single-hull tanker owned by a company notaffiliated with us. Additional laws and regulations may also be adopted thatcould limit our ability to do business or increase the cost of our doingbusiness and that could have a material adverse effect on our operations. Inaddition, we are required by various governmental and quasi-governmental agenciesto obtain certain permits, licenses and certificates with respect to ouroperations. In the event of war or national emergency, our tankers may besubject to requisition by the government of the flag flown by the tankerwithout any guarantee of compensation for lost profits. We believe our tankersare maintained in good condition in compliance with present regulatoryrequirements, are operated in compliance with applicable safety/environmentallaws and regulations and are insured against usual risks for such amounts asour management deems appropriate. The tankers’ operating certificates andlicenses are renewed periodically during each tanker’s required annual survey.However, government regulation of tankers, particularly in the areas of safetyand environmental impact may change in the future and require us to incursignificant capital expenditures on our ships to keep them in compliance.

 

**Shippingis an inherently risky business and our insurance may not be adequate.**

 

Our tankers and theircargoes are at risk of being damaged or lost because of events such as marinedisasters, bad weather, mechanical failures, human error, war, terrorism,piracy and other circumstances or events. In addition, transporting crude oilcreates a risk of business interruptions due to political circumstances inforeign countries, hostilities, labor strikes and boycotts. Any of these eventsmay result in loss of revenues , increased costs and decreased cash flows.  In addition, following the terrorist attackin New York City on September 11, 2001, and the military response of the UnitedStates, the likelihood of future acts of terrorism may increase, and ourtankers may face higher risks of attack. Future hostilities or other political instability, as shown by theattack on the *Limburg*in Yemen in October 2002, could affect our tradepatterns and adversely affect our operations and our revenues, cash flows andprofitability.

 

We carry insurance toprotect against most of the accident-related risks involved in the conduct of ourbusiness. We currently maintain $1 billion in coverage for each of our tankersfor liability for spillage or leakage of oil or pollution.  We also carry insurance covering lostrevenue resulting from tanker off-hire for all of our tankers.  Nonetheless, risks may arise against whichwe are not adequately insured. For example, a catastrophic spill could exceedour insurance coverage and have a material adverse effect on our financialcondition. In addition, we may not be able to procure adequate insurancecoverage at commercially reasonable rates in the future and we cannot guaranteethat any particular claim will be paid. In the past, new and stricterenvironmental regulations have led to higher costs for insurance coveringenvironmental damage or pollution, and new regulations could lead to similarincreases or even make this type of insurance unavailable. Furthermore, even ifinsurance coverage is adequate to cover our losses, we may not be able totimely obtain a replacement ship in the event of a loss. We may also be subjectto calls, or premiums, in amounts based not only on our own claim records butalso the claim records of all other members of the protection and indemnityassociations through which we receive indemnity insurance coverage for tort liability.Our payment of these calls could result in significant expenses to us whichcould reduce our cash flows and place strains on our liquidity and capitalresources.

 

**Ouroperating results may fluctuate seasonally.**

 

We operate our tankers inmarkets that have historically exhibited seasonal variations in tanker demandand, as a result, in charter rates. Tanker markets are typically stronger in the fall and winter months (thefourth and first

 

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quarters of thecalendar year) in anticipation of increased oil consumption in the northernhemisphere during the winter months. Unpredictable weather patterns and variations in oil reserves disruptvessel scheduling.  While thisseasonality has not materially affected our operating results since 1997, itcould materially affect operating results in the future.

 

**Wemay not be able to grow or to effectively manage our growth.**

 

A principal focus of ourstrategy is to continue to grow by taking advantage of changing marketconditions, which may include expanding our business in the Atlantic basin, theprimary geographic area and market where we operate, by expanding into otherregions, or by increasing the number of tankers in our fleet. Our future growthwill depend upon a number of factors, some of which we can control and some ofwhich we cannot. These factors include our ability to:

 

•                                          identifybusinesses engaged in managing, operating or owning tankers for acquisitions orjoint ventures;

 

•                                          identifytankers and/or shipping companies for acquisitions;

 

•                                          integrateany acquired businesses or tankers successfully with our existing operations;

 

•                                          hire,train and retain qualified personnel to manage and operate our growing businessand fleet;

 

•                                          identifyadditional new markets outside of the Atlantic basin;

 

•                                          improveour operating and financial systems and controls; and

 

•                                          obtainrequired financing for our existing and new operations.

 

The failure to effectively identify, purchase, developand integrate any tankers or businesses could adversely affect our business,financial condition and results of operations.

 

**If wedefault under any of our loan agreements, we could forfeit our rights in ourtankers and their charters.**

 

We have pledged all of our tankers and relatedcollateral as security to the lenders under our loan agreements. Default underany of these loan agreements, if not waived or modified, would permit thelenders to foreclose on the mortgages over the tankers and the relatedcollateral, and we could lose our rights in the tankers and their charters.

 

When final payments are due under our loan agreements,we must repay any borrowings outstanding, including balloon payments. To theextent that our cash flows are insufficient to repay any of these borrowings, wewill need to refinance some or all of our loan agreements or replace them withan alternate credit arrangement. We may not be able to refinance or replace ourloan agreements at the time they become due. In addition, the terms of anyrefinancing or alternate credit arrangement may restrict our financial andoperating flexibility.

 

**If welose any of our customers or a significant portion of our revenues, ouroperating results could be materially adversely affected.**

 

We derive a significant portion of our voyage revenuesfrom a limited number of customers, although during the years ended December31, 2003 and 2002, no single customer accounted for more than 10% of our voyagerevenues. During the year ended December 31, 2001, Skaugen PetroTrans, Inc.accounted for 12.6% of our voyage revenues. If we lose a significant customer,or if a significant customer decreases the amount of business it transacts withus, our revenues, cash flows and profitability could be materially andadversely affected.

 

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**As ourfleet ages, the risks associated with older vessels could adversely affect ouroperations.**

 

In general, the costs to maintain a tanker in goodoperating condition increase as the tanker ages. As of December 31, 2003, theaverage age of the 42 tankers in our current fleet was 11.8 years. Due toimprovements in engine technology, older vessels typically are lessfuel-efficient than more recently constructed vessels. Cargo insurance ratesincrease with the age of a vessel, making older vessels less desirable tocharterers.

 

Governmental regulations, safety or other equipmentstandards related to the age of tankers may require expenditures foralterations or the addition of new equipment to our tankers, and may restrictthe type of activities in which our tankers may engage. We cannot assure youthat, as our tankers age, market conditions will justify any requiredexpenditures or enable us to operate our tankers profitably during theremainder of their useful lives.

 

**Anacceleration of the current prohibition to trade deadlines for ournon-double-hull tankers could adversely affect our operations.**

** **

Under the U.S. Oil Pollution Act of 1990, all oiltankers that do not have double-hulls will not be permitted to come to U.S.ports or trade in U.S. waters by 2015. Our current 42-tanker fleet, excluding one vessel we have contracted tosell, consists of 23 double-hull tankers, ten double-sided tankers and ninesingle-hull tankers.

 

Our nine single-hull and ten double-sided tankers, allof which were built in 1985 or later, are currently eligible to trade in U.S.waters until the year their year of prohibition when they would not be eligibleto carry oil as cargo within the 200-mile United States exclusive economiczone, except that they may trade in U.S. waters until 2015 if their operationsare limited to discharging their cargoes at the Louisiana Offshore Oil Port oroff-loading by lightering within authorized lightering zones more than 60miles-offshore.

 

Our tankers are also subject to regulatoryrequirements, including the phase-out of single-hull tankers, imposed by theInternational Maritime Organization, or the IMO. Effective September 2002,the IMO accelerated its existing timetable for the phase-out of single-hull oiltankers. These regulations require the phase-out of most single-hull oiltankers between 2010 and 2015 or earlier, depending on the age of the tankerand whether it has segregated ballast tanks. After 2007, the maximumpermissible age for single-hull tankers will be 26 years. Our ninesingle-hull tankers were built in 1985 or later. Under the IMO’s currentregulations, these tankers and our ten double-sided tankers will be able tooperate until between 2010 and 2015 before being required to be scrapped orretrofitted to conform to international environmental standards. Under currentregulations, retrofitting will enable a vessel to operate until the earlier of25 years of age and the anniversary date of its delivery in 2017. However, as aresult of the oil spill in November 2002 relating to the loss of the *M.T.Prestige*, which was owned by a company not affiliated with us, inDecember 2003 the Marine Environmental Protection Committee of the IMO adopteda proposed amendment to the International Convention for the Prevention ofPollution from Ships to accelerate the phase-out of certain single-hull tankersfrom 2015 to 2010 unless the flag state extends the date to 2015.  This proposed amendment will come intoeffect in April 2005 unless objected to by a sufficient number of memberstates.  Because of this proposedamendment, we believe that our nine single-hull tankers will be precluded frommost trading in 2010.

 

In addition, in July 2003, in response to the *M.T.Prestige* oil spill in November 2002, the European Union adoptedlegislation that prohibits all single-hull tankers from entering into its portsor offshore terminals by 2010. The European Union has also banned allsingle-hull tankers carrying heavy grades of oil from entering or leaving itsports or offshore terminals or anchoring in areas under its jurisdiction.Commencing in 2005, certain single-hull tankers above 15 years of age willalso be restricted from entering or leaving European Union ports or offshoreterminals and anchoring in areas under European Union jurisdiction.  The European Union is also consideringlegislation that would: (1) ban manifestly sub-standard vessels (definedas those over 15 years old that have been detained by port authorities atleast twice in a six month period) from European waters and create anobligation of port states to inspect vessels posing a high risk to maritimesafety or the marine environment; and (2) provide the European Union withgreater authority and control over classification societies, including theability to seek to suspend or revoke the authority of negligent societies. Thesinking of the *M.T. Prestige* and the resulting oil spill in November 2002has lead to the adoption of other environmental regulations by certain EuropeanUnion nations, which could adversely affect the remaining useful lives of ournon-double hull tankers and our ability to generate

 

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income from them. It isimpossible to predict what legislation or additional regulations, if any, maybe promulgated by the European Union or any other country or authority.

 

**Ourrevenues may be adversely affected if we do not successfully employ ourtankers.**

 

We seek to deploy our tankers between spot marketvoyage charters and time charters in a manner that maximizes long-term cashflow. Currently, 14 or our tankers are contractually committed to timecharters, with the remaining terms of these charters expiring on dates betweenMarch 2004 and February 2005. Although these time charters generally providereliable revenues, they also limit the portion of our fleet available for spotmarket voyages during an upswing in the tanker industry cycle, when spot marketvoyages might be more profitable.

 

We earned approximately 82.6% of our net voyage revenuefrom spot charters for the year ended December 31, 2003. The spot chartermarket is highly competitive, and spot market voyage charter rates mayfluctuate dramatically based on tanker and oil supply and demand and otherfactors. We cannot assure you that future spot market voyage charters will beavailable at rates that will allow us to operate our tankers profitably.

 

**There maybe risks associated with the purchase and operation of secondhand tankers.**

* *

Our current business strategy includes additional growththrough the acquisition of additional secondhand tankers. Although we inspectsecondhand tankers prior to purchase, this does not normally provide us withthe same knowledge about their condition that we would have had if such tankershad been built for and operated exclusively by us. Therefore, our futureoperating results could be negatively affected if some of the tankers do notperform as we expect. Also, we do not receive the benefit of warranties fromthe builders if the tankers we buy are older than one year, which is the casefor the 19 tankers acquired in the first half of 2003.

 

**We mayface unexpected repair costs for our tankers.**

 

Repairs and maintenance costs are difficult to predictwith certainty and may be substantial. Many of these expenses are not coveredby our insurance. Large repair expenses could decrease our cash flow andprofitability and reduce our liquidity.

 

**Arrestsof our tankers by maritime claimants could cause a significant loss of earningsfor the related off hire period.**

 

Crew members, suppliers of goods and services to avessel, shippers of cargo and other parties may be entitled to a maritime lienagainst a vessel for unsatisfied debts, claims or damages. In manyjurisdictions, a maritime lienholder may enforce its lien by “arresting” or“attaching” a vessel through foreclosure proceedings. The arrest or attachmentof one or more of our tankers could result in a significant loss of earningsfor the related off-hire period.

 

In addition, in jurisdictions where the “sister ship”theory of liability applies, a claimant may arrest both the vessel which issubject to the claimant’s maritime lien and any “associated” vessel, which isany vessel owned or controlled by the same owner. In countries with “sistership” liability laws, claims might be asserted against us, any of oursubsidiaries or our tankers for liabilities of other vessels that we own.

 

**Ourtankers may be requisitioned by governments without adequate compensation.**

 

A government could requisition for title or seize ourtankers. In the case of a requisition for title, a government takes control ofa vessel and becomes its owner. Also, a government could requisition ourtankers for hire. Under requisition for hire, a government takes control of avessel and effectively becomes its charterer at dictated charter rates.Generally, requisitions occur during a period of war or emergency. Although we,as owner, would be entitled to compensation in the event of a requisition, theamount and timing of payment would be uncertain.

 

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**We depend on our key personnel and may have difficultyattracting and retaining skilled employees.**

 

The loss of the servicesof any of our key personnel or our inability to successfully attract and retainqualified personnel, including ships' officers, in the future could have amaterial adverse effect on our business, financial condition and operatingresults. Our future success depends particularly on the continued service ofPeter C. Georgiopoulos, our Chairman, President and Chief Executive Officer. 

 

**Portions of our income may be subject to U.S. tax.**

 

If we do not qualify for an exemption pursuant toSection 883 of the U.S. Internal Revenue Code of 1986, or the Code, then wewill be subject to U.S. federal income tax on our shipping income that is derivedfrom U.S. sources.  If we are subject tosuch tax, our net income and cash flow would be reduced by the amount of suchtax.  

 

We will qualify for exemption under Section 883 if,among other things, our stock is treated as primarily and regularly traded onan established securities market in the United States.  Under the final Section 883 regulations, wemight not satisfy this publicly-traded requirement in any taxable year in which50% or more of our stock is owned at any time during that year by persons whoactually or constructively own  5% ormore of our stock, or 5% shareholders. 

 

We believe that based on the ownership of our stock in2003, we satisfied the publicly-traded requirement under the final Section 883regulations. However, we can give no assurance that future changes and shiftsin the ownership of our stock by 5% shareholders would permit us to qualify forthe Section 883 exemption in 2004 or in the future. 

 

If we do not qualify forthe Section 883 exemption, our shipping income derived from U.S. sources, or50% of our gross shipping income attributable to transportation beginning orending in the United States, would be subject to a 4% tax imposed withoutallowance for deductions. For the fiscal year of 2003, the vast majority ourrevenues were attributable to transportation beginning or ending in the UnitedStates. If we were subject to this 4% tax on our gross shipping income during2003, such tax would be approximately $9.1 million. 

 

**Increases in tonnage taxes on our tankers would increase thecosts of our operations.**

 

Our tankers are currentlyregistered under the following flags: the Republic of Liberia, Malta, Greeceand the Republic of the Marshall Islands. These jurisdictions impose taxesbased on the tonnage capacity of each of the vessels registered under theirflag. The tonnage taxes imposed by these countries could increase, which wouldcause the costs of our operations to increase. 

 

**Our incorporation under the laws of the Republic of theMarshall Islands may limit the ability of our shareholders to protect theirinterests.**

 

Our corporate affairs aregoverned by our amended and restated articles of incorporation and by-laws andby the Republic of the Marshall Islands Business Corporations Act. Theprovisions of the Republic of the Marshall Islands Business Corporations Actresemble provisions of the corporation laws of a number of states in the UnitedStates. However, there have been few judicial cases in the Republic of theMarshall Islands interpreting the Republic of the Marshall Islands BusinessCorporations Act. For example, the rights and fiduciary responsibilities ofdirectors under the laws of the Republic of the Marshall Islands are not asclearly established as the rights and fiduciary responsibilities of directors understatutes or judicial precedent in existence in certain U.S. jurisdictions.Although the Republic of the Marshall Islands Business Corporations Act doesspecifically incorporate the non-statutory law, or judicial case law, of theState of Delaware and other states with substantially similar legislativeprovisions, our public shareholders may have more difficulty in protectingtheir interests in the face of actions by management, directors or controllingshareholders than would shareholders of a corporation incorporated in a U.S.jurisdiction. 

 

**It may not be possible for our investors to enforce U.S.judgments against us.**

 

We are incorporated inthe Republic of the Marshall Islands and most of our subsidiaries are organizedin the Republic of Liberia and the Republic of the Marshall Islands.Substantially all of our assets and those of our 

 

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subsidiaries are locatedoutside the United States. As a result, it may be difficult or impossible forU.S. investors to serve process within the United States upon us or to enforcejudgment upon us for civil liabilities in U.S. courts. In addition, you shouldnot assume that courts in the countries in which we or our subsidiaries areincorporated or where our assets or the assets of our subsidiaries are located(1) would enforce judgments of U.S. courts obtained in actions against us orour subsidiaries based upon the civil liability provisions of applicable U.S.federal and state securities laws or (2) would enforce, in original actions,liabilities against us or our subsidiaries based upon these laws. 

 

**Anti-takeover provisions in our financing agreements and ourorganizational documents could have the effect of discouraging, delaying orpreventing a merger or acquisition, which could adversely affect the marketprice of our common stock.**

 

Several of our existingfinancing agreements impose restrictions on changes of control of our companyand our ship-owning subsidiaries. These include requirements that we obtain thelenders' consent prior to any change of control and that we make an offer toredeem certain indebtedness before a change of control can take place. 

 

Several provisions of ouramended and restated articles of incorporation and our by-laws could discourage,delay or prevent a merger or acquisition that shareholders may considerfavorable. These provisions include: 

 

•                                          authorizingour board of directors to issue "blank check" preferred stock withoutshareholder approval; 

 

•                                          providing fora classified board of directors with staggered, three-year terms; 

 

•                                          prohibitingus from engaging in a "business combination" with an "interestedshareholder" for a period of three years after the date of the transactionin which the person became an interested shareholder unless certain provisionsare met; 

 

•                                          prohibitingcumulative voting in the election of directors; 

 

•                                          authorizingthe removal of directors only for cause and only upon the affirmative vote ofthe holders of at least 80% of the outstanding shares of our common stockentitled to vote for the directors; 

 

•                                          prohibitingshareholder action by written consent unless the written consent is signed byall shareholders entitled to vote on the action; 

 

•                                          limiting thepersons who may call special meetings of shareholders; and 

 

•                                          establishingadvance notice requirements for nominations for election to our board ofdirectors or for proposing matters that can be acted on by shareholders atshareholder meetings. 

 

**Our common stock price may be highly volatile and aninvestment in our common stock could decline in value.**

 

The market price of ourcommon stock may fluctuate significantly in response to many factors, many ofwhich are beyond our control. Investors in our common stock may not be able toresell their shares at or above their purchase price due to those factors,which include the risks and uncertainties set forth in this report. In thepast, following periods of volatility in the market price of a particularcompany's securities, securities class action litigation has often been broughtagainst the company. We may become involved in this type of litigation in thefuture. Litigation of this type could be extremely expensive and divertmanagement's attention and resources from running our company. 

 

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**Future sales of our common stock could cause the market priceof our common stock to decline.**

 

The market price of ourcommon stock could decline due to sales of a large number of shares in themarket, including sales of shares by our large shareholders, or the perceptionthat these sales could occur. These sales could also make it more difficult orimpossible for us to sell equity securities in the future at a time and pricethat we deem appropriate to raise funds through future offerings of commonstock. We have entered into registration rights agreements with thesecurityholders who received shares in our recapitalization transactions thatentitle them to have an aggregate of 29,000,000 shares registered for sale inthe public market. In addition, those shares became eligible for sale in thepublic markets beginning on June 12, 2002, pursuant to Rule 144 under theSecurities Act. We also registered on Form S-8 an aggregate of 2,900,000 sharesissuable upon exercise of options we have granted to purchase common stock orreserved for issuance under our equity compensation plans. 

 

**ITEM 2.  PROPERTIES**

 

Welease three properties, all of which house offices used in the administrationof our operations: a property of approximately 11,000 square feet in New York,New York , a property of approximately 11,100 square feet in Piraeus, Greece,and a property of approximately 2,000 square feet in London, England. We do notown or lease any production facilities, plants, mines or similar realproperties.  

 

**ITEM 3.  LEGAL PROCEEDINGS**

** **

**LEGAL PROCEEDINGS**

 

Exceptas set forth below, we are not aware of any material pending legal proceedings,other than ordinary routine litigation incidental to our business, to which weor our subsidiaries is a party or of which our property is the subject. In thefuture, we may be subject to legal proceedings and claims in the ordinarycourse of business, principally personal injury and property casualty claims.Those claims, even if lacking merit, could result in the expenditure by us ofsignificant financial and managerial resources. 

 

On September 19, 2003 approximately 130 kilograms ofcocaine were found inside an underwater access hatch on board the *Crude Princess* by a task force of the USCustoms Drug Enforcement Administration when she docked in Yabucoa, PuertoRico.  We received a Notice of Penaltyin the amount of approximately $4.6 million from the United States CustomsService relating to an incident involving one of our vessels, the *Crude Princess*. The *Crude Princess* was permitted to leaveYabucoa, Puerto Rico and resume her scheduled route on September 20, 2003.  The Notice of Penalty was imposed only forthe failure to declare narcotics on the vessel’s cargo manifest.  No other allegations were made against us orany member of the *Crude Princess’*crew.  We have received writtenconfirmation that the cost of appealing the penalty and the amount of anypenalty ultimately payable will be covered by our protection andindemnification policy, subject to our applicable deductible, and we intend toappeal the imposition of the penalty and expect that the penalty will besignificantly reduced or waived.

 

On February 19, 2004, the *Genmar Alexandra*, a 1992-built double-hull Aframax tanker,was struck by the bulk carrier *Bright State*operated by Hong Kong-based Cosco Shipping, while docked at a terminal in St.Charles, Louisiana.  As a result of thecollision, approximately 500 barrels of the *GenmarAlexandra's* fuel oil were released into the surrounding water. Therewere no injuries and none of the *GenmarAlexandra’s* cargo was lost. Our emergency response plan, in conjunction with the U.S. Coast Guard,largely contained the released bunker fuel oil.  An investigation into the incident is currently pending, butbecause we believe that *Genmar Alexandra*was properly docked at the time of the incident, we do not expect to be heldliable. We have entered into an agreement with the owners of the *Bright State* whereby they accept allresponsibility and clean up costs.

 

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**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

Nomatter was submitted to a vote of security holders, through the solicitation ofproxies or otherwise, during the fourth quarter of the fiscal year endedDecember 31, 2003.

 

**PART II**

 

**ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY ANDRELATED STOCKHOLDER MATTERS**

 

**MARKET INFORMATION, HOLDERS ANDDIVIDENDS**

 

Ourcommon stock has traded on the New York Stock Exchange under the symbol "GMR"since our initial public offering on June 12, 2001. The following table setsforth for the periods indicated the high and low prices for the common stock asof the close of trading as reported on the New York Stock Exchange:

 
| **FISCAL  YEAR ENDED DECEMBER 31, 2003** |   | **HIGH** |   | **LOW** |   |
|------------------------------------------|--------|----------|--------|---------|--------|
| 1st Quarter                              |   | $        | 9.24   |    | $      | 7.40 |   |
| 2nd Quarter                              |   | $        | 11.41  |    | $      | 7.25 |   |
| 3rd Quarter                              |   | $        | 14.20  |    | $      | 9.77 |   |
| 4th Quarter                              |   | $        | 17.75  |    | $      | 11.38 |   |

 

Asof December 31, 2003, there were approximately 37 holders of record of ourcommon stock. 

 

Wehave never declared or paid any cash dividends on our capital stock. GeneralMaritime currently intends to retain all available earnings for use in itsbusiness and does not anticipate paying any cash dividends in the foreseeablefuture. The credit facilities and indenture for our senior notes imposelimitations or prohibitions on the payment of dividends without the lenders'consent or in conjunction with a subsidiary's failure to comply with variousfinancial covenants.

 

We did not repurchase any of our outstanding equitysecurities during the three month period ending December 31, 2003.

 

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**ITEM 6.  SELECTED CONSOLIDATED FINANCIAL AND OTHERDATA**

** **

Setforth below are selected historical consolidated and other data of GeneralMaritime Corporation at the dates and for the fiscal years shown.   

 

 
|                                                              |   | **Year Ended  December 31,** |    |
|-------------------------------------------------------------------|--------|------------------------------|---------|
|                                                              |   | **2003**                     |    | **2002** |   | **2001** |   | **2000** |   | **1999** |   |
| **INCOME STATEMENT DATA**                                         |   |                         |    |   |   |   |   |   |   |   |   |
| (Dollars in  thousands, except per share data)                    |   |                         |    |   |   |   |   |   |   |   |   |
| Voyage revenues                                                   |   | $                            | 454,456 |   | $ | 226,357 |   | $ | 217,128 |   | $ | 132,012 |   | $ | 71,476 |   |
| Voyage expenses                                                   |   | (117,810                     | )       | (80,790 | ) | (52,099 | ) | (23,996 | ) | (16,742 | ) |
| Net voyage  revenue                                               |   | 336,646                      |    | 145,567 |   | 165,029 |   | 108,016 |   | 54,734 |   |
| Direct vessel  operating expenses                                 |   | 91,981                       |    | 55,241 |   | 42,140 |   | 23,857 |   | 19,269 |   |
| General and  administrative expenses                              |   | 22,866                       |    | 12,026 |   | 9,550 |   | 4,792 |   | 3,868 |   |
| Other                                                             |   | —                       |    | — |   | — |   | 5,272 |   | — |   |
| Gain on sale of  vessels                                          |   | (1,490                       | )       | (266 | ) | — |   | — |   | — |   |
| Impairment  charge                                                |   | 18,803                       |    | 13,366 |   | — |   | — |   | — |   |
| Depreciation and  amortization                                    |   | 84,925                       |    | 60,431 |   | 42,820 |   | 24,808 |   | 19,810 |   |
| Operating income                                                  |   | 119,561                      |    | 4,769 |   | 70,519 |   | 49,287 |   | 11,787 |   |
| Net interest  expense                                             |   | 35,043                       |    | 14,511 |   | 16,292 |   | 19,005 |   | 16,525 |   |
| Other expense                                                     |   | —                       |    | — |   | 3,006 |   | — |   | — |   |
| Net income (loss)                                                 |   | $                            | 84,518  |   | $ | (9,742 | ) | $ | 51,221 |   | $ | 30,282 |   | $ | (4,738 | ) |
| Earnings (loss)  per common share:                                |   |                         |    |   |   |   |   |   |   |   |   |
| Basic                                                             |   | $                            | 2.29    |   | $ | (0.26 | ) | $ | 1.70 |   | $ | 1.60 |   | $ | (0.33 | ) |
| Diluted                                                           |   | $                            | 2.26    |   | $ | (0.26 | ) | $ | 1.70 |   | $ | 1.60 |   | $ | (0.33 | ) |
|                                                              |   |                         |    |   |   |   |   |   |   |   |   |
| Weighted average  basic shares outstanding, thousands:            |   |                         |    |   |   |   |   |   |   |   |   |
| Basic                                                             |   | 36,967                       |    | 36,981 |   | 30,145 |   | 18,877 |   | 14,238 |   |
| Diluted                                                           |   | 37,356                       |    | 36,981 |   | 30,145 |   | 18,877 |   | 14,238 |   |
| **BALANCE SHEET DATA, at end of  period**                         |   |                         |    |   |   |   |   |   |   |   |   |
| (Dollars in  thousands)                                           |   |                         |    |   |   |   |   |   |   |   |   |
| Cash                                                              |   | $                            | 38,905  |   | $ | 2,681 |   | $ | 17,186 |   | $ | 23,523 |   | $ | 6,842 |   |
| Current assets,  including cash                                   |   | 102,473                      |    | 43,841 |   | 45,827 |   | 37,930 |   | 13,278 |   |
| Total assets                                                      |   | 1,263,578                    |    | 782,277 |   | 850,521 |   | 438,922 |   | 351,146 |   |
| Current  liabilities, including current portion of long-term debt |   | 89,771                       |    | 77,519 |   | 83,970 |   | 41,880 |   | 28,718 |   |
| Current portion  of long-term debt                                |   | 59,553                       |    | 62,003 |   | 73,000 |   | 33,050 |   | 20,450 |   |
| Total long-term  debt, including current portion                  |   | 655,670                      |    | 280,011 |   | 339,600 |   | 241,785 |   | 202,000 |   |
| Shareholders'  equity                                             |   | 568,880                      |    | 481,636 |   | 495,690 |   | 186,910 |   | 125,878 |   |
| **OTHER FINANCIAL DATA**                                          |   |                         |    |   |   |   |   |   |   |   |   |
| (Dollars in  thousands)                                           |   |                         |    |   |   |   |   |   |   |   |   |
| EBITDA (1)                                                        |   | $                            | 204,486 |   | $ | 65,200 |   | $ | 110,333 |   | $ | 74,095 |   | $ | 31,597 |   |
| Net cash  provided by operating activities                        |   | 178,112                      |    | 43,637 |   | 83,442 |   | 47,720 |   | 12,531 |   |
| Net cash  provided (used) by investing activities                 |   | (502,919                     | )       | 2,034 |   | (261,803 | ) | (85,865 | ) | (18,688 | ) |
| Net cash  provided (used) by financing activities                 |   | 361,031                      |    | (60,176 | ) | 172,024 |   | 54,826 |   | 6,588 |   |
| Capital expenditures                                              |   |                         |    |   |   |   |   |   |   |   |   |
| Vessel sales  (purchases), gross including deposits               |   | (501,242                     | )       | 2,251 |   | (256,135 | ) | (85,500 | ) | (18,200 | ) |
| Drydocking or  capitalized survey or improvement costs            |   | (14,137                      | )       | (13,546 | ) | (3,321 | ) | (3,168 | ) | (4,074 | ) |
| Weighted average  long-term debt, including current portion       |   | 601,086                      |    | 313,537 |   | 283,255 |   | 233,010 |   | 219,008 |   |
| **FLEET DATA**                                                    |   |                         |    |   |   |   |   |   |   |   |   |
| Total number of  vessels at end of period                         |   | 43.0                         |    | 28.0 |   | 29.0 |   | 14.0 |   | 11.0 |   |
| Average number  of vessels (2)                                    |   | 40.6                         |    | 28.9 |   | 21.0 |   | 12.6 |   | 10.3 |   |
| Total voyage  days for fleet (3)                                  |   | 14,267                       |    | 10,010 |   | 7,374 |   | 4,474 |   | 3,603 |   |
| Total time  charter days for fleet                                |   | 2,804                        |    | 1,490 |   | 1,991 |   | 2,174 |   | 1,738 |   |
| Total spot  market days for fleet                                 |   | 11,463                       |    | 8,520 |   | 5,383 |   | 2,300 |   | 1,865 |   |
| Total calendar  days for fleet (4)                                |   | 14,818                       |    | 10,536 |   | 7,664 |   | 4,599 |   | 3,756 |   |
| Fleet  utilization (5)                                            |   | 96.3                         | %       | 95.0 | % | 96.2 | % | 97.3 | % | 95.9 | % |
| **AVERAGE DAILY RESULTS**                                         |   |                         |    |   |   |   |   |   |   |   |   |
| Time charter  equivalent (6)                                      |   | $                            | 23,596  |   | $ | 14,542 |   | $ | 22,380 |   | $ | 24,143 |   | $ | 15,191 |   |
| Direct vessel operating  expenses (7)                             |   | 6,207                        |    | 5,243 |   | 5,499 |   | 5,187 |   | 5,130 |   |
| General and  administrative expenses (8)                          |   | 1,543                        |    | 1,136 |   | 1,246 |   | 1,042 |   | 1,030 |   |
| Total vessel  operating expenses (9)                              |   | 7,750                        |    | 6,379 |   | 6,745 |   | 6,229 |   | 6,160 |   |
| EBITDA (10)                                                       |   | 13,800                       |    | 7,437 |   | 14,788 |   | 17,257 |   | 8,412 |   |

 

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|                                                    |   | **Year Ended  December 31,** |       |
|---------------------------------------------------------|--------|------------------------------|------------|
| **EBITDA  Reconciliation**                              |   | **2003**                     |       | **2002** |   | **2001** |   | **2000** |   | **1999** |   |
| (Dollars in  thousands)                                 |   |                         |       |   |   |   |   |   |   |   |   |
| **Net cash provided by operating  activities**          |   | $                            | 178,112    |   | $ | 43,637 |   | $ | 83,442 |   | $ | 47,720 |   | $ | 12,531 |   |
| -  Gain on sale of vessels and impairment  charges |   | 17,313                       |       | 13,100 |   | — |   | — |   |   |   |
| -  Other reconciling adjustments                   |   | 874                          |       | 52 |   | 1,184 |   | 250 |   | — |   |
| -  Changes in assets and liabilities               |   | (9,518                       | )          | (20,204 | ) | (11,783 | ) | (7,620 | ) | (2,541 | ) |
| +  Net interest expense                            |   | 35,043                       |       | 14,511 |   | 16,292 |   | 19,005 |   | 16,525 |   |
| **EBITDA**                                              |   | **204,486**                  | ** ** | **65,200** | ** ** | **110,333** | ** ** | **74,095** | ** ** | **31,597** |   |
|                                                         |        |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**(1)** EBITDA represents net cash provided by operating activities plus netinterest expense, adjusted for: (a) certain noncash adjustments to net incomesuch as gains and losses on sales of assets and amortization of restrictedstock awards and (b) changes in certain assets and liabilities. EBITDA isincluded because it is used by certain investors. EBITDA is not an itemrecognized by GAAP, and should not be considered as an alternative to net cashprovided by operating activities or any other indicator of a company'sperformance required by GAAP.

 

**(2)** Average number of vessels is the numberof vessels that constituted our fleet for the relevant year, as a measured bythe sum of the number of days each vessels was part of our fleet during theyear divided by the number of calendar days in the year.

 

**(3)** Voyage days for fleet are the totaldays our vessels were in our possession for the relevant year net of off hiredays associated with major repairs, dry docks or special or intermediate  surveys.

 

**(4)** Calendar days are the total days thevessels were in our possession for the relevant year including off hire days associatedwith major repairs, drydockings or special or intermediate surveys.

 

**(5)**Fleet utilization is the percentage oftime that our vessels were available for revenue generating voyage days, and isdetermined by dividing voyage days by calendar days for the relevant year.

 

**(6)**Time Charter Equivalent, or TCE, is ameasure of the average daily revenue performance of a vessel on a per voyagebasis.  Our method of calculating TCE isconsistent with industry standards and is determined by dividing net voyagerevenue by voyage days for the relevant time period.  Net voyage revenues are voyage revenues minus voyageexpenses.  Voyage expenses primarilyconsist of port and fuel costs that are unique to a particular voyage, whichwould otherwise be paid by the charterer under a time charter contract.

 

**(7)** Daily direct vessel operating expenses,or DVOE, is calculated by dividing DVOE, which includes crew costs, provisions,deck and engine stores, lubricating oil, insurance maintenance and repairs, bycalendar days for the relevant year.

 

**(8)** Daily general and administrativeexpense is calculated by dividing general and administrative expenses bycalendar days for the relevant year.

 

**(9)** Total Vessel Operating Expenses, orTVOE, is a measurement of our total expenses associated with operating ourvessels.  Daily TVOE is the sum of dailydirect vessel operating expenses, or DVOE, and daily general and administrativeexpenses.

 

**(10)** EBITDA per vessel is EBITDA divided bycalendar days for the relevant year.

 

**ITEM 7. MANAGEMENT'S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION**

 

Thefollowing is a discussion of our financial condition and results of operationscomparing the years ended December 31, 2003 and 2002 and the years endedDecember 31, 2002 and 2001. You should consider the foregoing when reviewingthe consolidated financial statements and this discussion. You should read thissection together with the consolidated financial statements including the notesto those financial statements for the years mentioned above.

 

Weare a leading provider of international seaborne crude oil transportationservices with one of the largest mid-sized tanker fleets in the world. As ofDecember 31, 2003 our fleet, excluding one double-bottom Aframax (classified asheld for sale as of December 31, 2003), that we sold in February 2004,consisted of 42 tankers (23 Aframax and 19 Suezmax tankers) with a total cargocarrying capacity of 5.1 million deadweight tons.  

 

Weactively manage the deployment of our fleet between spot market voyagecharters, which generally last from several days to several weeks, and timecharters, which can last up to several years. A spot market voyage charter isgenerally a contract to carry a specific cargo from a load port to a dischargeport for an agreed upon total amount. Under spot market voyage charters, we payvoyage expenses such as port, canal and fuel costs. A time charter is generallya contract to charter a vessel for a fixed period of time at a set daily rate.Under time charters, the charterer pays voyage expenses such as port, canal andfuel costs.

 

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Vesselsoperating on time charters provide more predictable cash flows, but can yieldlower profit margins than vessels operating in the spot market during periodscharacterized by favorable market conditions. Vessels operating in the spotmarket generate revenues that are less predictable but may enable us to captureincreased profit margins during periods of improvements in tanker ratesalthough we are exposed to the risk of declining tanker rates. We areconstantly evaluating opportunities to increase the number of our tankersdeployed on time charters, but only expect to enter into additional timecharters if we can obtain contract terms that satisfy our criteria.

 

Weprimarily operate in the Atlantic basin, which includes ports in the Caribbean,South and Central America, the United States, Western Africa, theMediterranean, Europe and the North Sea. We also currently operate tankers inthe Black Sea, the Far East and in other regions worldwide which we believeenables us to take advantage of market opportunities and to position ourtankers in anticipation of drydockings.

 

Weemploy experienced management in all functions critical to our operations,aiming to provide a focused marketing effort, tight quality and cost controlsand effective operations and safety monitoring.  Through our wholly owned subsidiaries, General Maritime ManagementLLC, General Maritime Management (UK) LLC and General Maritime Management(Hellas) Ltd. (formerly United Overseas Tankers Ltd.), we currently provide thecommercial and technical management necessary for the operations of most of ourvessels, which include ship maintenance, officer staffing, technical support,shipyard supervision, and risk management services through our wholly ownedsubsidiaries.

 

Fordiscussion and analysis purposes only, we evaluate performance using net voyagerevenues. Net voyage revenues are voyage revenues minus voyage expenses. Voyageexpenses primarily consist of port, canal and fuel costs that are unique to aparticular voyage, which would otherwise be paid by a charterer under a timecharter. We believe that presenting voyage revenues, net of voyage expenses,neutralizes the variability created by unique costs associated with particularvoyages or the deployment of tankers on time charter or on the spot market andpresents a more accurate representation of the revenues generated by ourtankers.

 

Ourvoyage revenues and voyage expenses are recognized ratably over the duration ofthe voyages and the lives of the charters, while direct vessel expenses arerecognized when incurred. We recognize the revenues of time charters thatcontain rate escalation schedules at the average rate during the life of thecontract. We calculate time charter equivalent, or TCE, rates by dividing netvoyage revenue by voyage days for the relevant time period. We also generatedemurrage revenue, which represents fees charged to charterers associated withour spot market voyages when the charterer exceeds the agreed upon timerequired to load or discharge a cargo. We allocate corporate income andexpenses, which include general and administrative and net interest expense, totankers on a pro rata basis based on the number of months that we owned atanker. We calculate daily direct vessel operating expenses and daily generaland administrative expenses for the relevant period by dividing the totalexpenses by the aggregate number of calendar days that we owned each tanker forthe period.

 

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**Results Of Operations**

 

Marginanalysis for the indicated items as a percentage of net voyage revenues for theyears ended December 31, 2003, 2002 and 2001 are set forth in the table below.

 

**INCOMESTATEMENT MARGIN ANALYSIS**

**(% OFNET VOYAGE REVENUES)**

 
|                                  |   | **YEAR ENDED  DECEMBER 31,** |   |
|---------------------------------------|--------|------------------------------|--------|
|                                  |   | **2003**                     |   | **2002** |   | **2001** |   |
| INCOME STATEMENT  DATA                |   |                         |   |   |   |   |   |
|                                  |   |                         |   |   |   |   |   |
| Net voyage  revenues(1)               |   | 100                          | %      | 100 | % | 100 | % |
| Direct vessel  expenses               |   | 27.3                         |   | 37.9 |   | 25.5 |   |
| General and  administrative           |   | 6.8                          |   | 8.3 |   | 5.8 |   |
| Impairment (gain  on sale) of vessels |   | 5.2                          |   | 9.0 |   | — |   |
| Depreciation and  amortization        |   | 25.2                         |   | 41.5 |   | 25.9 |   |
| Total operating  expenses             |   | 64.5                         |   | 96.7 |   | 57.2 |   |
| Operating income                      |   | 35.5                         |   | 3.3 |   | 42.8 |   |
| Net interest  expense                 |   | 10.4                         |   | 10.0 |   | 9.9 |   |
| Other expense                         |   | —                       |   | — |   | 1.8 |   |
| Net income                            |   | 25.1                         |   | -6.7 |   | 31.1 |   |

 

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(1)                                  Net voyagerevenues are voyage revenues minus voyage expenses. Voyage expenses primarilyconsist of port, canal and fuel costs that are unique to a particular voyage,which would otherwise be paid by a charterer under a time charter.

 
|                 |   | **YEAR ENDED  DECEMBER 31,** |                        |
|----------------------|--------|------------------------------|-----------------------------|
|                 |   | **2003**                     |                        | **2002** |   | **2001** |   |
|                 |   |                         | **(Dollars  in thousands)** |   |
| Voyage revenues      |   | $                            | 454,456                     |   | $ | 226,357 |   | $ | 217,128 |   |
| Voyage expenses      |   | (117,810                     | )                           | (80,790 | ) | (52,099 | ) |
| NET VOYAGE  REVENUES |   | $                            | 336,646                     |   | $ | 145,567 |   | $ | 165,029 |   |

 

**YEAR ENDED DECEMBER 31, 2003COMPARED TO THE YEAR ENDED DECEMBER 31, 2002**

 

VOYAGEREVENUES-Voyage revenues increased by $228.1 million, or 100%, to $454.5million for the year ended December 31, 2003 compared to $226.4 million for theprior year. $153.6 million of this increase is due to the acquisition of 14Suezmax tankers and five Aframax tankers during 2003.  In addition, voyage revenues increased by $74.5 million on the 28tankers which were part of our fleet prior to January 1, 2003 to $300.9 millionfor the year ended December 31, 2003 compared to $226.4 million during theprior year, primarily as a result of better freight rates.   The average size of our fleet increased 40.6%to 40.6 (25.4 Aframax, 15.2 Suezmax) tankers during the year ended December 31,2003 compared to 28.9 tankers (23.9 Aframax, 5.0 Suezmax) during the prioryear.

 

VOYAGEEXPENSES-Voyage expenses increased $37.0 million, or 45.8%, to $117.8 millionfor the year ended December 31, 2003 compared to $80.8 million for the prioryear. $41.9 million of this increase is due to the acquisition of 14 Suezmaxtankers and five Aframax tankers during 2003. In addition, voyage expenses decreased by $4.9 million on the tankerswhich were part of our fleet prior to January 1, 2003 to $75.9 million for theyear ended December 31, 2003 compared to $80.8 million during the prior year,due primarily to a 534 day increase in the number of days these vessels were ontime charter during 2003 as compared to 2002. Overall, the number of days that all of our tankers were under timecharter contracts increased to 2,804 days for the year ended December 31, 2003compared to 1,490 days for the prior year. The number of days that our tankers, including those acquired during2003, operated in the spot market increased to 11,463 for the year endedDecember 31, 2003 compared to

 

28

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8,520days for the prior year. Typically, tankers operating on the spot market incurhigher voyage expenses than those operating on time charter contract, as theowner, not the charterer, is responsible for voyage expenses.

 

NETVOYAGE REVENUES-****Net voyage revenues, which are voyage revenues minus voyageexpenses, increased by $191.0 million, or 131%, to $336.6 million for the yearended December 31, 2003 compared to $145.6 million for the prior year.  $111.7 million of this increase is due tothe acquisition of 14 Suezmax tankers and five Aframax tankers during2003.  In addition, net voyage revenuesincreased by $79.3 million on the tankers which were part of our fleet prior toJanuary 1, 2003 to $224.9 million for the year ended December 31, 2003 comparedto $145.6 million during the prior year, primarily as a result of betterfreight rates.  Our average TCE ratesimproved 62.3% to $23,596 during the year ended December 31, 2003 compared to$14,542 during the year ended December 31, 2002.    The average size of our fleet increased 40.6% to 40.6 tankers(25.4 Aframax, 15.2 Suezmax) for the year ended December 31, 2003 compared to28.9 tankers (23.9 Aframax, 5.0 Suezmax) for the prior year.

** **

**The following is additionaldata pertaining to net voyage revenues**:

 

•                                          Averagedaily time charter equivalent rate per tanker increased by $9,054, or 62.3%, to$23,596 ($21,568 Aframax, $27,034 Suezmax) for the year ended December 31, 2003compared to $14,542 ($14,352 Aframax, $15,410 Suezmax) for the prior year.

 

•                                          $58.7million, or 17.4%, of net voyage revenue was generated by time chartercontracts ($52.0 million Aframax, $6.7 million Suezmax) and $277.9 million, or82.6%, was generated in the spot market ($141.5 million Aframax, $136.4 millionSuezmax) for the year ended December 31, 2003, compared to $28.3 million, or 19.5%,of net voyage revenue was generated by time charter contracts ($28.3 millionAframax, Suezmax tankers did not operate on time charter during this period)and $117.2 million, or 80.5%, was generated in the spot market ($89.5 millionAframax, $27.7 million Suezmax) for the prior year.

 

•                                          Tankersoperated an aggregate of 2,804 days, or 19.7%, on time charter contracts (2,457days Aframax, 347 days Suezmax) and 11,463 days, or 80.3%, in the spot market(6,514 days Aframax, 4,949 days Suezmax) for the year ended December 31, 2003,compared to 1,490 days, or 14.9%, on time charter contracts (1,490 daysAframax, 0 days Suezmax) and 8,520 days, or 85.1%, in the spot market (6,722days Aframax, 1,798 days Suezmax) for the prior year.

 

•                                          Averagedaily time charter rates were $20,953 ($21,172 Aframax, $19,402 Suezmax) forthe year ended December 31, 2003 compared to average daily time charter ratesof $19,017 ($19,017 Aframax, Suezmax tankers did not operate on time charterduring this period) for the prior year. This increase is primarily due to thehigher rates earned during 2003 on our time charters that had floating ratesbased on spot market rates.

 

•                                          Averagedaily spot rates were $24,243 ($21,719 Aframax, $27,569 Suezmax) for the yearended December 31, 2003, compared to average daily spot rates of $13,760($13,318 Aframax, $15,410 Suezmax)  forthe prior year.

 

Weare constantly evaluating opportunities to increase the number of our tankersdeployed on time charters, but only expect to enter into additional timecharters if we can obtain contract terms that satisfy our criteria. Thefollowing table summarizes the portion of our fleet on time charter as of March1, 2004: 

 

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| **Vessel**             |   | **Vessel  Type** |   | **Expiration  Date**  |   | **Average  Daily Rate (1)** |   |
|------------------------|--------|------------------|--------|-----------------------|--------|-----------------------------|--------|
| Crude Progress         |   | Aframax          |   | March 15, 2004        |   | Market Rate (2)             |   |
| Crude Princess         |   | Aframax          |   | March 7, 2004         |   | Market Rate (2)             |   |
| Genmar  Constantine    |   | Aframax          |   | March 23, 2004        |   | Market Rate (3)             |   |
| Genmar Pericles  (4)   |   | Aframax          |   | October 2, 2004       |   | $19,700                     |   |
| Genmar Trust (4)       |   | Aframax          |   | October 13, 2004      |   | $19,700                     |   |
| Genmar Spirit  (4)     |   | Aframax          |   | October 15, 2004      |   | $19,700                     |   |
| Genmar Hector  (4)     |   | Aframax          |   | November 3, 2004      |   | $19,700                     |   |
| Genmar  Challenger (4) |   | Aframax          |   | December 6, 2004      |   | $19,700                     |   |
| Genmar Trader  (4)     |   | Aframax          |   | December 15, 2004     |   | $19,700                     |   |
| Genmar Champ (4)       |   | Aframax          |   | January 10, 2005      |   | $19,700                     |   |
| Genmar Star (4)        |   | Aframax          |   | January 24, 2005      |   | $19,700                     |   |
| Genmar Endurance  (4)  |   | Aframax          |   | February 12, 2005     |   | $19,700                     |   |
| Genmar Alexandra       |   | Aframax          |   | February 20, 2005 (5) |   | $25,000                     |   |
| Genmar Orion           |   | Suezmax          |   | May 14, 2004          |   | $20,500                     |   |

 

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**(1)** Before brokers'commissions.

 

**(2)** The charterprovides for a floating rate based on spot market rates which have no floor andrates above $17,000 per day must be shared with charterer.

 

**(3)** The charterprovides for a floating rate based on weekly spot market rates which can be noless than $16,000 per day and no more than $22,000 per day.

 

**(4)** Charterer hasthe option to extend the time charter for an additional year at the samerate.  If the charterer does notexercise the option, the Company can extend the time charter for an additionalyear, but at a rate reduced by approximately 20%.

 

**(5)** ThroughFebruary 20, 2004, the charter provides for a floating rate based on weeklyspot market rates which can be no less than $16,000 per day and no more than$22,000 per day. 

 

DIRECTVESSEL EXPENSES-****Direct vessel expenses, which include crew costs, provisions,deck and engine stores, lubricating oil, insurance, maintenance and repairsincreased by $36.8 million, or 66.5%, to $92.0 million for the year monthsended December 31, 2003 compared to $55.2 million for the prior year. Thisincrease is primarily due to the growth of our fleet, which increased 40.6% forthe same periods, as well as increases in maintenance and repairs, crew costsand insurance.  The increase inmaintenance and repairs is attributable to major repairs made on four tankersduring 2003 as well as an increase in the value of the Euro against the U.S. dollarwhich made Euro-denominated expenditures in 2003 more costly.  The increase in crew costs is attributableto Euro denominated crew and officer wages. The increase in insurance costs is due to increases in hull andmachinery and protection and indemnity which we believe are industry wide.  In addition, a portion of this 40.6%increase in the size of our fleet relates to the acquisition of Suezmax vesselswhich, although generally generating higher TCE rates, are more costly tooperate than Aframax vessels.  On adaily basis, direct vessel expenses per vessel increased by $964, or 18.4%, to$6,207 ($5,679 Aframax, $7,081 Suezmax) for the year ended December 31, 2003compared to $5,243 ($5,090 Aframax, $5,973 Suezmax) for the prior year,primarily as the result of an increase in maintenance and repairs, crew costsand insurance costs as well as the increase in the percentage of our fleet thatconsists of Suezmax vessels.  

 

GENERALAND ADMINISTRATIVE EXPENSES-****General and administrative expensesincreased by $10.9 million, or 90.1%, to $22.9 million for the year endedDecember 31, 2003 compared to $12.0 million for the prior year.  This increase is primarily attributable tothe growth of our fleet during 2003.  Inconnection with the 40.6% increase in the size of our fleet in 2003, there wasa $6.7 million increase in payroll expenses (salaries, benefits and incentivebonus), a $1.8 million increase in costs at General Maritime Management(Hellas) Ltd. (formerly United Overseas Tankers Ltd.) (much of which costs aredenominated in Euros), a $1.0 million increase in general and administrativeexpenses of our vessel owning subsidiaries, and $0.5 million in costs at anoffice we opened in the United Kingdom in connection with the growth of ourfleet during 2003.  General andadministrative expenses as a percentage of net voyage revenues decreased to6.8% for the year ended December 31, 2003 from 8.3% for the prior

 

30

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year.  Daily general and administrative expensesper vessel increased $407, or 35.8%, to $1,543 for the year ended December 31,2003 compared to $1,136 for the prior year. We anticipate that general and administrative expenses will increaseduring 2004 as a result of the increase in staff and infrastructure to managethe tankers we acquired in 2003 being in place for the full year in 2004 andbecause of rental payments and operating costs on an aircraft that we leasedfor five years commencing in February 2004. 

** **

IMPAIRMENTCHARGE/ GAIN ON SALE OF VESSELS-  During2003, we sold two vessels held for sale as of December 31, 2002, resulting inan aggregate gain on sale of vessels of $2.7 million.  Also during 2003, three double-bottom Aframax vessels acquired in2003 were sold for an aggregate loss on sale of vessels of $1.2 million.  Of these three vessels, two were deliveredto their new owners in 2003 and one was delivered to its new owner in February2004.

 

InDecember 2003, the IMO adopted a proposed amendment to the InternationalConvention for the Prevention of Pollution from Ships to accelerate thephase-out of certain single-hull tankers from 2015 to 2010 unless the flagstate extends the date to 2015. Management determined that the useful lives of its nine single-hulltankers would end in 2010, which is four to six years earlier than the 25-yearuseful lives the vessels had previously been ascribed.  Because of the reduction in the useful livesof these single-hull tankers and the consequent reduction in projected cashflows, it was determined that an aggregate impairment charge of $18.8 millionwas required on five tankers, which represented the amount by which thecarrying value of these tankers exceeded their fair value.

 

DEPRECIATIONAND AMORTIZATION-Depreciation and amortization, which include depreciation oftankers as well as amortization of drydocking, special survey and loan fees,increased by $24.5 million, or 40.5%, to $84.9 million for the year endedDecember 31, 2003 compared to $60.4 million for the prior year. This increaseis primarily due to the growth in the average number of tankers in our fleet,which increased 40.6% during the year ended December 31, 2003 compared to theprior year. Depreciation and amortization is anticipated to increase during2004 as a result of depreciation on tankers acquired during 2003 beingdepreciated for the full year in 2004 as well as an increase of approximately$8.5 million associated with accelerated depreciation of our nine single-hulltankers.

 

Amortizationof drydocking increased by $2.8 million, or 62.9%, to $7.1 million for the yearended December 31, 2003 compared to $4.3 million for the prior year. Thisincrease includes amortization associated with $14.1 million of capitalizedexpenditures relating to our tankers for the year ended December 31, 2003 aswell as a full year of amortization of associated with $13.5 million ofcapitalized drydocking for the prior year. We anticipate that the amortization associated with drydocking ourvessels will increase in the future, as vessels we acquired during 2001 and2003 are drydocked for the first time.**** 

 

Amortizationof deferred financing costs increased by $2.0 million, or 132%, to $3.5 millionfor the year ended December 31, 2003 compared to $1.5 million for the prioryear. This increase includes amortization associated with $14.6 million ofdeferred financing costs capitalized during 2003. 

 

NETINTEREST EXPENSE-Net interest expense increased by $20.5 million, or 141%, to$35.0 million for the year ended December 31, 2003 compared to $14.5 millionfor the prior year. $19.6 million of this increase in net interest expenseduring the year ended December 31, 2003 compared to the year ended December 31,2002 is due to the $250 million of Senior Notes we issued in March 2003 inconnection with the acquisition of 19 vessels, which have a 10% coupon which issignificantly higher than the interest rates on the remainder of our long-termdebt.  The remainder of this increase isthe result of a 30.9% increase in our weighted average outstanding debt(excluding the Senior Notes) of $411.1 million for the year ended December 31,2003 compared to $314.0 million for the year ended December 31, 2002.  

 

NETINCOME-Net income was $84.5 million for the year ended December 31, 2003compared to net loss of ($9.7) million for the prior year. 

 

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**YEAR ENDED DECEMBER 31, 2002COMPARED TO THE YEAR ENDED DECEMBER 31, 2001**

 

VOYAGEREVENUES-Voyage revenues increased by $9.2 million, or 4.3%, to $226.4 millionfor the year ended December 31, 2002 compared to $217.1 million for the prioryear. This increase is due to the increase in the average number of tankers inour fleet during the year ended December 31, 2002 compared to the prior year,offset by a weaker spot market during the year ended December 31, 2002 comparedto the prior year. The average size of our fleet increased 37.5% to 28.9tankers (23.9 Aframax, 5.0 Suezmax) during 2002 compared to 21.0 tankers (16.0Aframax, 5.0 Suezmax) during the prior year.

 

VOYAGEEXPENSES-Voyage expenses increased $28.7 million, or 55.1%, to $80.8 millionfor the year ended December 31, 2002 compared to $52.1 million for the prioryear. This increase is primarily due to the increase in the average number oftankers in our fleet for the year ended December 31, 2002 compared to the prioryear, as well as the mix of deployment of our tankers operating on time chartercontracts or in the spot market. The number of days that our tankers operatedin the spot market increased to 8,520 for the year ended December 31, 2002compared to 5,383 days for the prior year. Typically, tankers operating on thespot market incur higher voyage expenses than those operating on time chartercontract, as the owner, not the charterer, is responsible for voyage expenses.

 

NETVOYAGE REVENUES-Net voyage revenues, which are voyage revenues minus voyageexpenses, decreased by $19.5 million, or 11.8%, to $145.6 million for the yearended December 31, 2002 compared to $165.0 million for the prior year. Thisdecrease is the result of the overall weaker spot market during the year endedDecember 31, 2002 compared to the prior year. The magnitude of the decrease innet voyage revenues was mitigated by the growth in the average number oftankers in our fleet. The average size of our fleet increased 37.5% to 28.9tankers (23.9 Aframax, 5.0 Suezmax) for the year ended December 31, 2002compared to 21.0 tankers (16.0 Aframax, 5.0 Suezmax) for the prior year, whileour average TCE rates declined 35.0% to $14,542 compared to $22,380 for thesesame periods. The total decrease in our net voyage revenues of $19.5 millionresulted from a decrease of $44.9 million for tankers we owned since January 1,2001, to $79.8 million for the year ended December 31, 2002 from $124.7 millionfor the year ended December 31, 2001. This decrease is partially offset by an increase of $25.5 million fortankers we acquired during 2001, to $65.8 million for the year ended December31, 2002 from $40.3 million for the year ended December 31, 2001.  During 2001, we acquired the *GenmarAlexandra*, *Genmar Hector*, *Genmar Pericles*, W*est Virginia*,*Kentucky*,*GenmarSpirit* in June, the *Stavanger Prince*, *Genmar Nestor*, *Genmar Star*,*GenmarTrust*, *Genmar Champ* and *Genmar Leonidas* in July, and the *GenmarTrader*, *Genmar Endurance* and *Genmar Challenger* in August.We disposed of the *Stavanger Prince* during November 2002 andsold it for scrap (see Write Down of Vessels below). Our fleet consisted of 28tankers (23 Aframax, 5 Suezmax) on December 31, 2002 and 29 tankers (24 Aframax,5 Suezmax) on December 31, 2001. 

 

**On an Overall Fleet Basis:**

 

•                                          Averagedaily time charter equivalent rate per tanker decreased by $7,838, or 35.0%, to$14,542 ($14,352 Aframax, $15,410 Suezmax) for the year ended December 31, 2002compared to $22,380 ($21,053 Aframax, $26,905 Suezmax) for the prior year.

 

•                                          $28.3million, or 19.5%, of net voyage revenue was generated by time chartercontracts ($28.3 million Aframax, Suezmax tankers did not operate on timecharter during this period) and $117.2 million, or 80.5%, was generated in thespot market ($89.5 million Aframax, $27.7 million Suezmax) for the year endedDecember 31, 2002, compared to $45.8 million, or 27.8%, of our net voyagerevenue generated by time charter contracts ($43.4 million Aframax, $2.4million Suezmax), and $119.2 million, or 72.2%, generated in the spot market($76.6 million Aframax, $42.6 million Suezmax) for the prior year.

 

•                                          Tankersoperated an aggregate of 1,490 days, or 14.9%, on time charter contracts (1,490days Aframax, 0 days Suezmax) and 8,520 days, or 85.1%, in the spot market(6,722 days Aframax, 1,798 days Suezmax) for the year ended December 31, 2002,compared to 1,991 days, or 27.0%, on time charter contracts (1,894 daysAframax, 97 days Suezmax) and 5,383 days, or 73.0%, in the spot market (3,808days Aframax, 1,575 days Suezmax) for the prior year.

 

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•                                          Averagedaily time charter rates were $19,017 ($19,017 Aframax, Suezmax tankers did notoperate on time charter during this period) for the year ended December 31,2002 compared to average daily time charter rates of $23,025 ($22,932 Aframax,$24,851 Suezmax) for the prior year. This decrease is primarily due to theexpiration of some of our time charter contracts and the rates associated withour remaining time charter contracts.

 

•                                          Averagedaily spot rates were $13,760 ($13,318 Aframax, $15,410 Suezmax) for the yearended December 31, 2002, compared to average daily spot rates of $22,141($20,118 Aframax, $27,032 Suezmax) for the prior year.

 

Weare constantly evaluating opportunities to increase the number of our tankersdeployed on time charters, but only expect to enter into additional timecharters if we can obtain contract terms that satisfy our criteria. The followingtable summarizes the portion of our fleet on time charter as of March 1, 2003: 

 
| **VESSEL**           |   | **EXPIRATION  DATE**  |   | **AVERAGE  DAILY RATE****(1)** |   |
|----------------------|--------|-----------------------|--------|--------------------------------|--------|
| *Genmar Alexandra*   |   | February 20, 2004(2)  |   | Market Rate                    | (3)    |
| *Genmar George*      |   | May 24, 2003(4)       |   | $                              | 20,000 |   |
| *Genmar Ajax*        |   | August 12, 2003       |   | $                              | 23,000 |   |
| *Genmar Constantine* |   | March 7, 2004(2)      |   | Market Rate                    | (3)    |
| *Genmar Star*        |   | February 24, 2004 (4) |   | $                              | 19,000 |   |
| *Genmar Endurance*   |   | March 12, 2004(4)     |   | $                              | 19,000 |   |

 

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(1)                                  Beforereduction for brokers' commissions of 1.25%.

(2)                                  Terminationdate is plus or minus 15 days at the charterer’s election.

(3)                                  The charterprovides for a floating rate based on weekly spot market rates which can be noless than $16,000 per day and no more than $22,000 per day.

(4)                                  Terminationis plus or minus 30 days at the charterer’s election.

 

DIRECTVESSEL EXPENSES-Direct vessel expenses, which include crew costs, provisions,deck and engine stores, lubricating oil, insurance, maintenance and repairsincreased by $13.1 million, or 31.1%, to $55.2 million for the year endedDecember 31, 2002 compared to $42.1 million for the prior year. This increaseis primarily due to the growth in the average number of tankers in our fleet,which increased 37.5% for these same periods. On a daily basis, direct vesselexpenses per tanker decreased by $256, or 4.6%, to $5,243 ($5,090 Aframax,$5,973 Suezmax) for the year ended December 31, 2002 compared to $5,499 ($5,171Aframax, $6,547 Suezmax) for the prior year. This decrease is primarily theresult of the timing of purchases, repairs and services within the period.

 

GENERALAND ADMINISTRATIVE EXPENSES-General and administrative expenses increased by$2.4 million, or 25.9%, to $12.0 million for the year ended December 31, 2002compared to $9.6 million for the prior year. This increase is primarily due toan increase in payroll expenses including the increase in the number ofpersonnel in connection with the growth in average number of tankers in ourfleet, which increased 37.5%, for year ended December 31, 2002 compared to theprior year. Daily general and administrative expenses per tanker decreased$110, or 8.8%, to $1,136 for the year ended December 31, 2002 compared to$1,246 for the prior year. We anticipate that general and administrativeexpenses will increase during 2003 primarily as a result of our acquisition ofthe 19 Metrostar tankers and the need to increase staff and infrastructure tomanage these tankers as well as the non-cash expense associated with theissuance of restricted stock during the fourth quarter of 2002. The non-cashexpense associated with the issuance of restricted stock will result in apro-rated annual charge through November 2009 of $541,000. The non-cash expenseassociated with the issuance of restricted stock was $52,600 for the year endedDecember 31, 2002. 

 

IMPAIRMENTCHARGE/ GAIN ON SALEOF VESSEL- During September 2002, the Company decided toretire a 1979-built single-hull Aframax tanker through its sale for scrap. Thisdecision was based on management's

 

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assessmentof estimated charter rates for the vessel and the estimated daily operatingcosts as well as the cost of this vessel's next drydocking which was scheduledfor April 2003.  An impairment charge of$4.5 million was recognized during the year ended December 31, 2002, which wasthe amount by which the vessel's carrying value exceeded the estimated netproceeds to be received upon disposal. When the vessel was sold in November 2002, a $0.3 million gain wasrecognized for the amount by which net proceeds received upon sale of thevessel exceeded the vessel’s then carrying value.  

 

DuringDecember 2002, the Company decided to sell a 1980-built single-hull Aframaxtanker and a 1981-built single-hull Aframax tanker. This decision was based onmanagement's assessment of the projected cost associated with the vessels' nextdrydockings which were scheduled to occur during 2003 and the estimatedoperating revenues for the vessels over their remaining operating lives. Animpairment charge of $8.8 million was recorded during the year ended December31, 2002 that represents the difference between the vessels' book values andthe estimated proceeds from their anticipated sale. These vessels were writtendown to their estimated net selling price of $2.0 million  per vessel.

 

Nosuch impairment expense occurred during 2001 and there were no tankers soldduring 2001.

 

DEPRECIATIONAND AMORTIZATION-Depreciation and amortization, which include depreciation oftankers as well as amortization of drydocking, special survey and loan fees,increased by $17.6 million, or 41.1%, to $60.4 million for the year endedDecember 31, 2002 compared to $42.8 million for the prior year. This increaseis primarily due to the growth in the average number of tankers in our fleet,which increased 37.5% during the year ended December 31, 2002 compared to theprior year. Depreciation and amortization is anticipated to increase during2003 as a result of our acquisition of the 19 Metrostar tankers.

 

Amortizationof drydocking and other repair costs increased by $2.0 million, or 81.7%, to$4.3 million for the year ended December 31, 2002 compared to $2.4 million forthe prior year. This increase includes amortization associated with $13.5million of capitalized expenditures relating to our tankers for the year endedDecember 31, 2002 compared to $3.3 million of capitalized drydocking  for the prior year. Our capitalizedexpenditures of $13.5 million for 2002 have a weighted average amortizationperiod of approximately 3.5 years, $9.4 million of which relate to tankerswhich we are drydocking or capitalizing other repair costs for the first timesince we acquired them which have a weighted average amortization period ofapproximately 4.1 years. 

 

NETINTEREST EXPENSE-Net interest expense decreased by $1.8 million, or 10.9%, to$14.5 million for the year ended December 31, 2002 compared to $16.3 millionfor the prior year. This decrease occurred although we had a 10.9% increase inour weighted average outstanding debt of $314.0 million for the year endedDecember 31, 2002 compared to $283.0 million for the prior year. Therefinancing of our previous credit facilities in June 2001 and the overalllower interest rate environment during the year ended December 31, 2002compared to the prior year offset the effect of the increase of our weightedaverage outstanding debt on our net interest expense. 

 

OTHEREXPENSES-We incurred non-recurring expenses of $3.0 million during the yearended December 31, 2001. Of the $3.0 million in non-recurring expenses, $1.8million related to the termination of interest rate swap agreements associatedwith certain prior loans, which were refinanced by our two existing creditfacilities and $1.2 million related to the write off of remaining capitalizedloan costs associated with existing loans, which were refinanced by our twoexisting credit facilities. No such expense occurred during the year endedDecember 31, 2002.

 

NETINCOME-Net loss was $(9.7) million for the year ended December 31, 2002compared to net income of $51.2 million for the prior year. 

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Sinceour formation, our principal sources of funds have been equity financings,issuance of long-term debt securities, operating cash flows and long-term bankborrowings. Our principal use of funds has been capital expenditures toestablish and grow our fleet, maintain the quality of our tankers, comply withinternational shipping standards and environmental laws and regulations, fundworking capital requirements and make principal repayments on outstanding

 

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loanfacilities. We expect to rely on operating cash flows as well as long-termborrowings, and future offerings to implement our growth plan. We believe thatour current cash balance as well as operating cash flows and availableborrowings under our credit facilities will be sufficient to meet our liquidityneeds for the next year.

 

Our practice has been toacquire tankers using a combination of funds received from equity investors,bank debt secured by mortgages on our tankers and shares of the common stock ofour shipowning subsidiaries, and long-term debt securities. Our business iscapital intensive and its future success will depend on our ability to maintaina high-quality fleet through the acquisition of newer tankers and the selectivesale of older tankers. These acquisitions will be principally subject tomanagement's expectation of future market conditions as well as our ability toacquire tankers on favorable terms.

 

Cashincreased to $38.9 million as of December 31, 2003 compared to $2.7 million asof December 31, 2002. Working capital is current assets minus currentliabilities, including the current portion of long-term debt. Working capitalwas $12.7 million as of December 31, 2003, compared to a working capitaldeficit of $33.7 million as of December 31, 2002. The current portion oflong-term debt included in our current liabilities was $59.6 million and $62.0million as of December 31, 2003 and December 31, 2002, respectively.

 

We have three creditfacilities. The first ("First") closed on June 15, 2001, the second("Second") closed on June 27, 2001 and the third ("Third")closed on March 11, 2003. The First and Second credit facilities are comprisedof a term loan and a revolving loan and the Third is comprised of a term loan.The terms and conditions of the credit facilities require compliance withcertain restrictive covenants based on aggregate values and financial data forthe tankers associated with each credit facility. Under the financial covenantsof each of the credit facilities, the Company is required to maintain certainratios such as: tanker market value to loan commitment, EBITDA (as defined ineach credit facility) to net interest expense and to maintain minimum levels ofworking capital. Under the general covenants, subject to certain exceptions, weand our subsidiaries are not permitted to pay dividends. 

 

The First credit facilityis a $300 million facility, currently comprised of a $200 million term loan anda $96.5 million revolving loan and is collateralized by 17 tankers. The Secondcredit facility is a $165 million facility comprised of a $115 million termloan and a $50 million revolving loan and is collateralized by 9 tankers. TheThird credit facility is comprised of a $275 million term loan and iscollateralized by 16 tankers in our current fleet of 42 tankers.  All credit facilities have a five-yearmaturity with the term loans requiring quarterly principal repayments. Theprincipal of each revolving loan is payable upon maturity. The First and Secondcredit facilities and the revolving loans bear interest at a rate of 1.5% overLIBOR payable on the outstanding principal amount. We are required to pay anannual fee of 0.625% for the unused portion of each of the revolving loans on aquarterly basis. The Third credit facility bears interest at a rate of 1.625%over LIBOR payable on the outstanding principal amount.  The subsidiaries that own the tankers thatcollateralize each credit facility have guaranteed the loans made under theappropriate credit facility, and we have pledged the shares of thosesubsidiaries. We use interest rate swaps to manage the impact of interest ratechanges on earnings and cash flows. 

 

On March 20, 2003 weclosed a private offering of face amount $250 million in 10% Senior Notes due2013.  Interest on the Senior Notes,which are unsecured, accrues at the rate of 10% per annum, and is payablesemi-annually.  The Senior Notes, whichdo not amortize, are due on March 15, 2013. The Senior Notes are guaranteed by all of our present subsidiaries andour future “restricted” subsidiaries. The Senior Notes contain incurrence covenants which, among other things,restrict our future ability to incur future indebtedness and liens, to applythe proceeds of asset sales freely, to merge or undergo other changes ofcontrol and to pay dividends, and require us to apply a portion of our cashflow during 2003 to the reduction of our debt under our First, Second and Thirdfacilities.  We have applied theproceeds of the Senior Notes offering, together with proceeds of our Thirdfacility and cash on hand, to the purchase of the Metrostar tankers.

 

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The total outstandingamounts as of December 31, 2003 associated with our First, Second and Thirdcredit facilities and Senior Notes as well as their maturity dates are asfollows:

 

**TOTALOUTSTANDING DEBT (DOLLARS IN THOUSANDS)**

**ANDMATURITY DATE**

** **
|                    |   | **OUTSTANDING  DEBT** |   | **MATURITY  DATE** |      |
|-------------------------|--------|-----------------------|--------|--------------------|-----------|
| Total long-term  debt   |   |                  |   |               |      |
| First credit  facility  |   |                  |   |               |      |
| First term              |   | $                     | 86,866 |               | June 2006 |   |
| First revolver          |   | 13,000                |   | June 2006          |      |
| Second credit  facility |   |                  |   |               |      |
| Second term             |   | 53,000                |   | June 2006          |      |
| Second revolver         |   | 9,000                 |   | June 2006          |      |
| Third credit  facility  |   | 247,461               |   | March 2008         |      |
| Senior Notes            |   | 250,000               |   | March 2013         |      |
|                         |        |                       |        |                    |           |  |

 

The sale of the *StavangerPrince* during November 2002 resulted in net cash proceeds of $2.3million of which we were required to use $1.7 million to repay long term debtof our first credit facility associated with the tanker pursuant to our loanagreements. The sale also reduced the amount that we can draw under ourrevolving credit facility by $1.2 million.

 

The sale of the *Kentucky*during March 2003 resulted in net cash proceeds of $2.9 million of which we wererequired to use $1.4 million to repay long-term debt of our First creditfacility associated with the tanker pursuant to our loan agreements. The salealso reduced the amount that we can draw under our revolving credit facility by$1.2 million.   The sale of the WestVirginia during December 2003 resulted in net cash proceeds of $3.7 million ofwhich we were required to use $1.0 million to repay long-term debt of our Firstcredit facility associated with the tanker pursuant to our loan agreement.  The sale also reduced the amount we can drawunder our revolving credit agreement by $1.1 million.

 

In addition to tankeracquisition, other major capital expenditures include funding our maintenanceprogram of regularly scheduled in-water survey or drydocking necessary topreserve the quality of our tankers as well as to comply with internationalshipping standards and environmental laws and regulations. Managementanticipates that tankers which are younger than 15 years are required toundergo in-water surveys 2.5 years after a drydock and that tankers are to bedrydocked every five years, while tankers 15 years or older are to be drydockedevery 2.5 years in which case the additional drydocks take the place of thesein-water surveys.  During 2004, weanticipate that we will drydock between eight and 13 vessels and that theexpenditures to perform these drydocks will aggregate between $15 million to$20 million.  The ability to meet thismaintenance schedule will depend on our ability to generate sufficient cash flowsfrom operations, utilize our revolving credit facilities or to secureadditional financing. 

 

Net cash provided byoperating activities increased 308% to $178.1 million for the year endedDecember 31, 2003, compared to $43.6 million for the prior year. This increaseis primarily attributable to net income of $84.5 million, depreciation andamortization of $84.9 million and a non-cash impairment charge of $18.8 millionfor the year ended December 31, 2003 compared to net loss of $9.7 million,depreciation and amortization of $60.4 million and a non-cash impairment chargeof $13.4 million for the prior year.

 

Net cash used byinvesting activities was $502.9 million for the year ended December 31, 2003compared to net cash provided by investing activities of $2.0 million for theyear ended December 31, 2002. During the year ended December 31, 2003, weexpended $528.5 million for the purchase of 19 tankers and received $27.2million from the sale of four Aframax tankers. During the year ended December 31, 2002, we received $2.2 million fromthe sale of one Aframax tanker.

 

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Net cash provided byfinancing activities was $361.0 million for the year ended December 31, 2003compared to net cash used by financing activities of $60.2 million for the yearended December 31, 2002. The change in cash provided by financing activitiesrelates to the following:

** **

**•****                                         **Net proceedsfrom borrowing under long-term debt during the year ended December 31, 2003aggregated $521.2 million consisting of $246.2 million of proceeds from theissuance of Senior Notes and $275.0 million of borrowings under our ThirdCredit Facility.  

 

•                                          Principalrepayments of long-term debt during the year ended December 31, 2003 aggregated$145.7 million, which consisted of $91.6 million of principal repayments underour First, Second and Third Credit Facilities and $54.1 million of net paymentsmade under our revolving credit facilities. During the year ended December 31, 2002, principal repayments oflong-term debt aggregated $59.6 million, which consisted of  $74.6 million of scheduled principalrepayments under our First and Second Credit Facilities and $15.0 million ofnet borrowings made under our revolving credit facilities.

 

•                                          During theyears ended December 31, 2003 and 2002, payments for deferred financing costsaggregated $14.6 million and $0.1 million, respectively.

 

Netcash provided by operating activities decreased 47.7% to $43.6 million for theyear ended December 31, 2002, compared to $83.4 million for the prior year.This decrease is primarily attributable to a net loss of $9.7 million anddepreciation and amortization of $60.4 million for the year ended December 31,2002 compared to net income of $51.2 million and depreciation and amortizationof $42.8 million for the prior year.

 

Netcash provided by investing activities was $2.0 million for the year endedDecember 31, 2002 compared to net cash used by investing activities of $261.8million for the prior year. During the year ended December 31, 2001, weexpended $256.1 million for the purchase of 10 tankers, and $5.4 million forthe purchase of General Maritime Management (Hellas) Ltd. (formerly UnitedOverseas Tankers Ltd.).

 

Netcash used by financing activities was $60.2 million for the year ended December31, 2002 compared to net cash provided by financing activities of $172.0million for the prior year. The change in cash used by financing activitiesrelates to the following:

 

•                                          Net proceedsused from borrowing under long-term debt was $15.0 million which was drawn fromour revolving credit facility for the year ended December 31, 2002 compared to$386.1 million which was associated with our new credit facilities inconnection with the refinancing of our prior loans for the prior year.

 

•                                          Principalrepayments of long-term debt was $74.6 million for the year ended December 31,2002 associated with the payment of debt associated with the *StavangerPrince* as well as the principal repayment schedule of the term loansof our First and Second credit facilities compared to $334.1 million for theprior year associated with the refinancing of our prior loans, the repayment ofloans associated with five tankers which we acquired, and the scheduledprincipal repayments of our current first and second credit facilities.

 

•                                          Proceedsfrom the issuance of common stock from our initial public offering were $126.3million during the year ended December 31, 2001. We had no such proceeds during2002.

 

Our operation of ocean-goingtankers carries an inherent risk of catastrophic marine disasters and propertylosses caused by adverse severe weather conditions, mechanical failures, humanerror, war, terrorism and other circumstances or events. In addition, thetransportation of crude oil is subject to business interruptions due topolitical circumstances, hostilities among nations, labor strikes and boycotts.Our current insurance coverage includes (1) protection and indemnity insurancecoverage for tort liability, which is provided by mutual protection and indemnityassociations, (2) hull and machinery insurance for actual or constructive lossfrom collision, fire, grounding and engine

 

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breakdown, (3) war risk insurance for confiscation,seizure, capture, vandalism, sabotage and other war-related risks and (4) lossof hire insurance for loss of revenue for up to 90 days resulting from tankeroff hire for all of our tankers. In light of overall economic conditions aswell as recent international events, including the attack on the VLCC *Limburg*in Yemen in October 2002, and the related risks with respect to the operationof ocean-going tankers and transportation of crude oil, we expect that wewill be required to pay higher premiums with respect to our insurance coveragein 2004 and will be subject to increased supplemental calls with respect to itsprotection and indemnity insurance coverage payable to protection and indemnityassociations in amounts based on our own claim records as well as the claimrecords of the other members of those associations related to prior yearperiods of operations. We believe that the increase in insurance premiums andsupplemental calls is industry wide and do not foresee that it will have amaterial adverse impact on our tanker operations or overall financialperformance. To the extent such costs cannot be passed along to our customers,such costs will reduce our operating income.

 

**Critical Accounting Policies**

 

Thediscussion and analysis of our financial condition and results of operations isbased upon our consolidated financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States,or GAAP. The preparation of those financial statements requires us to makeestimates and judgments that affect the reported amount of assets andliabilities, revenues and expenses and related disclosure of contingent assetsand liabilities at the date of our financial statements. Actual results maydiffer from these estimates under different assumptions or conditions.

 

Criticalaccounting policies are those that reflect significant judgments oruncertainties, and potentially result in materially different results underdifferent assumptions and conditions. We have described below what we believeare our most critical accounting policies. Except for a change in the estimateduseful lives of our single-hull tankers, we believe that there has been nochange in or additions to our critical accounting policies since December 2001.

 

 

REVENUE RECOGNITION. Revenue is generally recorded when services are rendered, the Company has a signed charter agreement or other evidence of an arrangement, pricing is fixed or determinable and collection is reasonably assured.   Our revenues are earned under time charters or voyage contracts. Revenue from time charters is earned and recognized on a daily basis. Certain time charters contain provisions which provide for adjustments to time charter rates based on agreed-upon market rates.  Revenue for voyage contracts is recognized based upon the percentage of voyage completion. The percentage of voyage completion is based on the number of voyage days worked at the balance sheet date divided by the total number of days expected on the voyage.

 

ALLOWANCEFOR DOUBTFUL ACCOUNTS. We do not provide any reserve for doubtful accountsassociated with our voyage revenues because we believe that our customers areof high creditworthiness and there are no serious issues concerningcollectibility. We have had an excellent collection record during the past fouryears ended December 31, 2003. To the extent that some voyage revenues becomeuncollectable, the amounts of these revenues would be expensed at that time. Weprovide a reserve for our demurrage revenues based upon our historical recordof collecting these amounts. As of December 31, 2003, we provided a reserve ofapproximately 13% for these claims, which we believe is adequate in light ofour collection history. We periodically review the adequacy of this reserve sothat it properly reflects our collection history. To the extent that ourcollection experience warrants a greater reserve we will incur an expense as toincrease of this amount in that period.

 

DEPRECIATIONAND AMORTIZATION. We record the value of our tankers at their cost (whichincludes acquisition costs directly attributable to the tanker and expendituresmade to prepare the tanker for its initial voyage) less accumulateddepreciation. We depreciate our non-single hull tankers on a straight-linebasis over their estimated useful lives, estimated to be 25 years from date ofinitial delivery from the shipyard. The useful lives of our single-hull tankersrange from 19 to 21 years from the date of delivery, as we consider 2010 tocoincide with the end of their useful lives.   We believe that a 25-year depreciable life for double-hull anddouble-sided tankers  is consistent withthat of other ship owners. Depreciation is based on cost less the estimatedresidual scrap value. We estimate

 

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residualscrap value as the lightweight tonnage of each tanker multiplied by $125 scrapvalue per ton, which we believe approximates the historical average price ofscrap steel. An increase in the useful life of the tanker would have the effectof decreasing the annual depreciation charge and extending it into laterperiods. An increase in the residual value would decrease the amount of theannual depreciation charge. A decrease in the useful life of the tanker wouldhave the effect of increasing the annual depreciation charge. A decrease in theresidual value would increase the amount of the annual depreciation charge.

 

REPLACEMENTS,RENEWALS AND BETTERMENTS. We capitalize and depreciate the costs of significantreplacements, renewals and betterments to our tankers over the shorter of thetanker's remaining useful life or the life of the renewal or betterment. Theamount capitalized is based on our judgment as to expenditures that extend atanker's useful life or increase the operational efficiency of a tanker. Webelieve that these criteria are consistent with GAAP and that our policy ofcapitalization reflects the economics and market values of our tankers. Coststhat are not depreciated are written off as a component of direct vessel operatingexpense during the period incurred. Expenditures for routine maintenance andrepairs are expensed as incurred. If the amount of the expenditures wecapitalize for replacements, renewals and betterments to our tankers werereduced, we would recognize the amount of the difference as an expense.

 

DEFERREDDRYDOCK COSTS. Our tankers are required to be drydocked for major repairs andmaintenance that cannot be performed while the tankers are operatingapproximately every 30 to 60 months. We capitalize the costs associated withthe drydocks as they occur and amortize these costs on a straight line basisover the period between drydocks. Costs capitalized as part of the drydockinclude actual costs incurred at the drydock yard; cost of fuel consumedbetween the tanker's last discharge port prior to the drydock and the time thetanker leaves the drydock yard; cost of hiring riding crews to effect repairson a ship and parts used in making such repairs that are reasonably made inanticipation of reducing the duration or cost of the drydock; cost of travel,lodging and subsistence of our personnel sent to the drydock site to supervise;and the cost of hiring a third party to oversee a drydock. We believe thatthese criteria are consistent with GAAP guidelines and industry practice, andthat our policy of capitalization reflect the economics and market values ofthe tankers.

 

IMPAIRMENTOF LONG-LIVED ASSETS. We evaluate the carrying amounts and periods over whichlong-lived assets are depreciated to determine if events have occurred whichwould require modification to their carrying values or useful lives. Inevaluating useful lives and carrying values of long-lived assets, we reviewcertain indicators of potential impairment, such as undiscounted projectedoperating cash flows, tanker sales and purchases, business plans and overallmarket conditions. We determine undiscounted projected net operating cash flowsfor each tanker and compare it to the tanker carrying value. In the event thatimpairment occurred, we would determine the fair value of the related asset andwe record a charge to operations calculated by comparing the asset's carryingvalue to the estimated fair value. We estimate fair value primarily through theuse of third party valuations performed on an individual tanker basis.

 

**Recent AccountingPronouncements**

 

In January 2003, theFinancial Accounting Standards Board (“FASB”) issued FIN 46,"Consolidation of Variable Interest Entities," which clarified theapplication of Accounting Research Bulletin No. 51, "ConsolidatedFinancial Statements," to address perceived weaknesses in accounting forentities commonly known as special-purpose or off-balance sheet entities.    It provides guidance for identifying theparty with a controlling financial interest resulting from arrangements orfinancial interests rather than voting interests.  It requires consolidation of Variable Interest Entities (“VIEs”)only if those VIEs do not effectively disperse the risks and benefits amountthe various parties involved.  In October2003, the effective date of FIN No. 46 was deferred for variable interests heldby public companies in all entities that were acquired prior to February 1,2003. This deferral is to allow time for certain implementation issues to beaddressed through the issuance of a potential modification to theinterpretation. The deferral revised the effective date for consolidation ofthese entities for the Company to the quarter ended January 3, 2004.   Based on the current rules, the Companydoes not believe it will be required to consolidate any variable interestentities as a result of FIN 46.  

 

39

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In April 2003,the FASB issued Statement of Financial Standards ("SFAS")  No. 149, "Amendment to Statement 133 onDerivative Instruments and Hedging Activities."  SFAS No. 149 amends and clarifies accounting for derivativeinstruments, including certain derivative instruments embedded in othercontracts, and for hedging activities under SFAS No. 133. SFAS No. 149 isapplied prospectively and is effective for contracts entered into or modifiedafter June 30, 2003, except for SFAS No. 133 implementation issues that havebeen effective for fiscal quarters that began prior to June 15, 2003 andcertain provisions relating to forward purchases and sales on securities thatdo not yet exist. The adoption of this standard did not have a material effecton the Company’s financial position and results of operations.

 

InMay 2003, the FASB issued SFAS No. 150, “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity.” SFAS No. 150changes the accounting guidance for certain financial instruments that, underprevious guidance, could have been classified as either a liability or equity.SFAS No. 150 now requires those instruments to be classified as liabilities (oras assets under some circumstances) in the statement of financial position.SFAS No. 150 also requires the terms of those instruments and any settlementalternatives to be disclosed. SFAS No. 150 is effective for all financialinstruments entered into or modified after May 31, 2003. Otherwise, it iseffective at the beginning of the first interim period beginning after June 15,2003. The adoption of SFAS No. 150 did not have a material impact on theCompany’s financial position and results of operations.

 

**ITEM 7A. QUANTITATIVE ANDQUALITATIVE DISCLOSURE OF MARKET RISK**

** **

**INTEREST RATE RISK**

 

Weare exposed to various market risks, including changes in interest rates. Theexposure to interest rate risk relates primarily to our debt. At December 31,2003, we had $409.3 million of floating rate debt with a margins over LIBORranging from 1.5% to 1.625% compared to $280.0 million for the prior year. Weuse interest rate swaps to manage the impact of interest rate changes onearnings and cash flows. The differential to be paid or received under theseswap agreements is accrued as interest rates change and is recognized as anadjustment to interest expense. As of December 31, 2003 and December 31, 2002,we were party to interest rate swap agreements having aggregate notionalamounts of $71.5 million and $102.8 million, respectively, which effectivelyfixed LIBOR on a like amount of principal at rates ranging from 3.985% to4.75%. If we terminate these swap agreements prior to their maturity, we may berequired to pay or receive an amount upon termination based on the prevailinginterest rate, time to maturity and outstanding notional principal amount atthe time of termination. As of December 31, 2003 the fair value of these swapswas a liability to us of $2.5 million. A one percent increase in LIBOR wouldincrease interest expense on the portion of our $337.8 million outstandingfloating rate indebtedness that is not hedged by approximately $3.4 million peryear from December 31, 2003.

 

**FOREIGN EXCHANGE RATE RISK**

 

Theinternational tanker industry's functional currency is the U.S. dollar.Virtually all of the Company’s revenues and most of its operating costs are inU.S. dollars. The Company incurs certain operating expenses, drydocking,and overhead costs in foreign currencies, the most significant of which is theEuro, as well as British Pounds, Japanese Yen, Singapore Dollars, AustralianDollars and Norwegian Kroner. During the year ended December 31, 2003, atleast 17% of the Company’s direct vessel operating expenses were denominated inthese currencies. 

 

40

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**Item8.  FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

 

**GENERAL MARITIME CORPORATION**

 

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 
| CONSOLIDATED  FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003   AND 2002, AND FOR THE YEARS ENDED DECEMBER 31, 2003, 2002  AND 2001. |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                        |   |
| Independent Auditors’ Report                                                                                                           | F-2    |
|                                                                                                                                        |   |
| Consolidated Balance Sheets                                                                                                                 | F-3    |
|                                                                                                                                        |   |
| Consolidated Statements of Operations                                                                                                       | F-4    |
|                                                                                                                                        |   |
| Consolidated Statements of Shareholders’  Equity                                                                                       | F-5    |
|                                                                                                                                        |   |
| Consolidated Statements of Cash Flows                                                                                                       | F-6    |
|                                                                                                                                        |   |
| Notes to Consolidated Financial Statements                                                                                                  | F-7    |

 

F-1

----

 

**INDEPENDENTAUDITORS’ REPORT**

 

To the Board of Directors andShareholders of

General Maritime Corporation

 

 

We have audited theconsolidated balance sheets of General Maritime Corporation and itssubsidiaries (the “Company”) as of December 31, 2003 and December 31, 2002, andthe related consolidated statements of operations, shareholders’ equity, andcash flows for each of the three years in the period ended December 31,2003.  These consolidated financialstatements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements based on our audits.

 

We conducted our audits inaccordance with auditing standards generally accepted in the United States ofAmerica.  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the consolidatedfinancial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well evaluating the overall consolidated financialstatement presentation.  We believe thatour audits provide a reasonable basis for our opinion.

 

In our opinion, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of General Maritime Corporation and its subsidiaries atDecember 31, 2003 and December 31, 2002, and the results of their operationsand their cash flows for each of the three years in the period ended December31, 2003, in conformity with accounting principles generally accepted in theUnited States of America.

 
| /s/ Deloitte  & Touche LLP |   |
|--------------------------------|--------|

 

 

February 27, 2004

New York, New York

 

F-2

----

 

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31,2003 AND 2002**

**(Dollars inthousands except per share data)**

 
|                                                                                                                                                                                       |   | **2003**  |      | **2002** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|-----------|----------|--------|
| ASSETS                                                                                                                                                                                     |   |      |      |     |   |
| CURRENT ASSETS:                                                                                                                                                                            |   |      |      |     |   |
| Cash                                                                                                                                                                                       |   | $         | 38,905    |     | $      | 2,681 |   |
| Due from charterers                                                                                                                                                                        |   | 36,209    |      | 25,008   |   |
| Vessels held for sale                                                                                                                                                                      |   | 10,388    |      | 4,000    |   |
| Prepaid expenses and other  current assets                                                                                                                                                 |   | 16,971    |      | 12,152   |   |
| Total current assets                                                                                                                                                                       |   | 102,473   |      | 43,841   |   |
|                                                                                                                                                                                       |   |      |      |     |   |
| NONCURRENT ASSETS:                                                                                                                                                                         |   |      |      |     |   |
| Vessels, net of accumulated  depreciation of $217,228 and $145,411, respectively                                                                                                           |   | 1,114,978 |      | 711,344  |   |
| Other fixed assets, net                                                                                                                                                                    |   | 2,069     |      | 870      |   |
| Deferred drydock costs, net                                                                                                                                                                |   | 22,620    |      | 15,555   |   |
| Deferred financing costs,  net                                                                                                                                                             |   | 15,685    |      | 4,563    |   |
| Due from charterers                                                                                                                                                                        |   | —    |      | 351      |   |
| Goodwill                                                                                                                                                                                   |   | 5,753     |      | 5,753    |   |
| Total noncurrent assets                                                                                                                                                                    |   | 1,161,105 |      | 738,436  |   |
| TOTAL ASSETS                                                                                                                                                                               |   | $         | 1,263,578 |     | $      | 782,277 |   |
|                                                                                                                                                                                       |   |      |      |     |   |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                                                 |   |      |      |     |   |
| CURRENT LIABILITIES:                                                                                                                                                                       |   |      |      |     |   |
| Accounts payable and  accrued expenses                                                                                                                                                     |   | $         | 22,418    |     | $      | 15,157 |   |
| Accrued interest                                                                                                                                                                           |   | 7,800     |      | 359      |   |
| Current portion of  long-term debt                                                                                                                                                         |   | 59,553    |      | 62,003   |   |
| Total current liabilities                                                                                                                                                                  |   | 89,771    |      | 77,519   |   |
|                                                                                                                                                                                       |   |      |      |     |   |
| NONCURRENT LIABILITIES:                                                                                                                                                                    |   |      |      |     |   |
| Deferred voyage revenue                                                                                                                                                                    |   | 6,330     |      | 744      |   |
| Long-term debt                                                                                                                                                                             |   | 596,117   |      | 218,008  |   |
| Derivative liability for  cash flow hedge                                                                                                                                                  |   | 2,480     |      | 4,370    |   |
| Total noncurrent  liabilities                                                                                                                                                              |   | 604,927   |      | 223,122  |   |
| TOTAL LIABILITIES                                                                                                                                                                          |   | 694,698   |      | 300,641  |   |
|                                                                                                                                                                                       |   |      |      |     |   |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                                             |   |      |      |     |   |
|                                                                                                                                                                                       |   |      |      |     |   |
| SHAREHOLDERS’ EQUITY:                                                                                                                                                                 |   |      |      |     |   |
| Common stock, $0.01 par  value per share; Authorized 75,000,000 shares; Issued and outstanding  37,769,145 and 37,589,770 shares at December 31, 2003 and December 31, 2002,  respectively |   | 378       |      | 376      |   |
| Paid-in capital                                                                                                                                                                            |   | 420,987   |      | 418,782  |   |
| Restricted stock                                                                                                                                                                           |   | (5,113    | )         | (3,742   | )      |
| Retained earnings                                                                                                                                                                          |   | 155,108   |      | 70,590   |   |
| Accumulated other  comprehensive loss                                                                                                                                                      |   | (2,480    | )         | (4,370   | )      |
| Total shareholders’ equity                                                                                                                                                            |   | 568,880   |      | 481,636  |   |
| TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                                           |   | $         | 1,263,578 |     | $      | 782,277 |   |

 

See notes to consolidated financial statements.

 

F-3

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**FORTHE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001**

**(Dollarsin thousands except per share data)**

 
|                                          |   | **2003**   |    | **2002**   |   | **2001**   |   |
|-----------------------------------------------|--------|------------|---------|------------|--------|------------|--------|
| VOYAGE REVENUES:                              |   |       |    |       |   |       |   |
| Voyage  revenues                              |   | $          | 454,456 |       | $      | 226,357    |   | $ | 217,128 |   |
| OPERATING  EXPENSES:                          |   |       |    |       |   |       |   |
| Voyage  expenses                              |   | 117,810    |    | 80,790     |   | 52,099     |   |
| Direct  vessel expenses                       |   | 91,981     |    | 55,241     |   | 42,140     |   |
| General and  administrative                   |   | 22,866     |    | 12,026     |   | 9,550      |   |
| Depreciation  and amortization                |   | 84,925     |    | 60,431     |   | 42,820     |   |
| Gain on sale  of vessels                      |   | (1,490     | )       | (266       | )      | —     |   |
| Impairment  charge                            |   | 18,803     |    | 13,366     |   | —     |   |
| Total  operating expenses                     |   | 334,895    |    | 221,588    |   | 146,609    |   |
| OPERATING  INCOME                             |   | 119,561    |    | 4,769      |   | 70,519     |   |
| OTHER EXPENSE:                                |   |       |    |       |   |       |   |
| Interest  income                              |   | 462        |    | 236        |   | 1,436      |   |
| Interest  expense                             |   | (35,505    | )       | (14,747    | )      | (17,728    | )      |
| Other  expense                                |   | —     |    | —     |   | (3,006     | )      |
| Net other  expense                            |   | (35,043    | )       | (14,511    | )      | (19,298    | )      |
| Net income  (loss)                            |   | $          | 84,518  |       | $      | (9,742     | )      | $ | 51,221 |   |
|                                          |   |       |    |       |   |       |   |
| Earnings  (loss) per common share:            |   |       |    |       |   |       |   |
| Basic                                         |   | $          | 2.29    |       | $      | (0.26      | )      | $ | 1.70 |   |
| Diluted                                       |   | $          | 2.26    |       | $      | (0.26      | )      | $ | 1.70 |   |
|                                          |   |       |    |       |   |       |   |
| Weighted  average shares outstanding- basic   |   | 36,967,174 |    | 36,980,600 |   | 30,144,709 |   |
|                                          |   |       |    |       |   |       |   |
| Weighted  average shares outstanding- diluted |   | 37,355,764 |    | 36,980,600 |   | 30,144,709 |   |

 

See notes to consolidatedfinancial statements.

 

F-4

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATEDSTATEMENTS OF SHAREHOLDERS’ EQUITY**

**FOR THEYEARS ENDED DECEMBER 31, 2003, 2002 AND 2001**

**(Dollars inthousands except per share data)**

 

 
|                                                 |   | **Common  Stock** |   | **Paid-in  Capital** |   | **Restricted  Stock** |   | **Retained  Earnings** |   | **Accumulated  Other  Comprehensive  Income (Loss)** |   | **Comprehensive  Income  (Loss)** |    | **Total** |   |
|------------------------------------------------------|--------|-------------------|--------|----------------------|--------|-----------------------|--------|------------------------|--------|------------------------------------------------------|--------|-----------------------------------|---------|-----------|--------|
| Balance as of January 1,  2001                       |   | $                 | 215    |                 | $      | 157,584               |   |                   |   | $                                                    | 29,111 |                              |    |      |   |   | $ | 186,910 |   |
| Net Income                                           |   |              |   |                 |   |                  |   | 51,221                 |   |                                                 |   | $                                 | 51,221  |      | 51,221 |   |
| Cumulative effect of change  in Accounting principle |   |              |   |                 |   |                  |   |                   |   | $                                                    | (662   | )                                 | (662    | )         | (662   | ) |
| Unrealized derivative losses  on cash flow hedge     |   |              |   |                 |   |                  |   |                   |   | (445                                                 | )      | (445                              | )       | (445      | )      |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   | $                                 | 50,114  |      |   |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   |                              |    |      |   |
| Sale of common stock                                 |   | 80                |   | 126,201              |   |                  |   |                   |   |                                                 |   |                              |    | 126,281   |   |
| Common stock issued to  acquire assets               |   | 75                |   | 132,310              |   |                  |   |                   |   |                                                 |   |                              |    | 132,385   |   |
| Balance as of December 31,  2001                     |   | 370               |   | 416,095              |   |                  |   | 80,332                 |   | (1,107                                               | )      |                              |    | 495,690   |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   |                              |    |      |   |
| Net Loss                                             |   |              |   |                 |   |                  |   | (9,742                 | )      |                                                 |   | $                                 | (9,742  | )         | (9,742 | ) |
| Unrealized derivative losses  on cash flow hedge     |   |              |   |                 |   |                  |   |                   |   | (3,263                                               | )      | (3,263                            | )       | (3,263    | )      |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   | $                                 | (13,005 | )         |   |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   |                              |    |      |   |
| Issuance of 625,000 shares  of restricted stock      |   | 6                 |   | 3,788                |   | $                     | (3,794 | )                      |   |                                                 |   |                              |    |      | — |   |
| Restricted stock  amortization                       |   |              |   |                 |   | 52                    |   |                   |   |                                                 |   |                              |    | 52        |   |
| Purchase price adjustment                            |   |              |   | (634                 | )      |                  |   |                   |   |                                                 |   |                              |    | (634      | )      |
| Common stock issuance costs                          |   |              |   | (467                 | )      |                  |   |                   |   |                                                 |   |                              |    | (467      | )      |
| Balance as of December 31,  2002                     |   | 376               |   | 418,782              |   | (3,742                | )      | 70,590                 |   | (4,370                                               | )      |                              |    | 481,636   |   |
| Net Income                                           |   |              |   |                 |   |                  |   | 84,518                 |   |                                                 |   | $                                 | 84,518  |      | 84,518 |   |
| Unrealized derivative gains  on cash flow hedge      |   |              |   |                 |   |                  |   |                   |   | 1,890                                                |   | 1,890                             |    | 1,890     |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   | $                                 | 86,408  |      |   |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   |                              |    |      |   |
| Issuance of 155,000 shares  of restricted stock      |   | 2                 |   | 2,058                |   | (2,060                | )      |                   |   |                                                 |   |                              |    | —    |   |
|                                                 |   |              |   |                 |   |                  |   |                   |   |                                                 |   |                              |    |      |   |
| Restricted stock  amortization                       |   |              |   |                 |   | 689                   |   |                   |   |                                                 |   |                              |    | 689       |   |
| Exercise of stock options                            |   | —            |   | 147                  |   |                  |   |                   |   |                                                 |   |                              |    | 147       |   |
| Balance as of December 31,  2003                     |   | $                 | 378    |                 | $      | 420,987               |   | $                      | (5,113 | )                                                    | $      | 155,108                           |    | $         | (2,480 | ) |   |   | $ | 568,880 |   |

 

See notes to consolidated financialstatements.

 

F-5

----

 

**GENERALMARITIME CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FOR THEYEARS ENDED DECEMBER 31, 2003, 2002 AND 2001**

**(Dollars inthousands)**

 
|                                                                                      |   | **2003** |   | **2002** |   | **2001** |   |
|-------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                                                      |   |     |   |     |   |     |   |
| CASH FLOWS PROVIDED BY  OPERATING ACTIVITIES:                                             |   |     |   |     |   |     |   |
| Net income (loss)                                                                         |   | $        | 84,518 |     | $      | (9,742   | )      | $ | 51,221 |   |
| Adjustments to reconcile  net income (loss) to net cash provided by operating activities: |   |     |   |     |   |     |   |
| Gain on sale of vessels                                                                   |   | (1,490   | )      | (266     | )      | —   |   |
| Impairment charge                                                                         |   | 18,803   |   | 13,366   |   | —   |   |
| Depreciation and  amortization                                                            |   | 84,925   |   | 60,431   |   | 42,820   |   |
| Other expense                                                                             |   | —   |   | —   |   | 1,184    |   |
| Amortization of discount on  senior notes                                                 |   | 185      |   | —   |   | —   |   |
| Resticted stock  compensation expense                                                     |   | 689      |   | 52       |   | —   |   |
| Changes in assets and  liabilities:                                                       |   |     |   |     |   |     |   |
| Increase in due from  charterers                                                          |   | (10,850  | )      | (5,645   | )      | (6,706   | )      |
| Increase in prepaid  expenses and other assets                                            |   | (4,819   | )      | (3,433   | )      | (3,383   | )      |
| Increase in accounts  payable and accrued expenses                                        |   | 7,261    |   | 4,660    |   | 1,910    |   |
| Increase (decrease) in  accrued interest                                                  |   | 7,441    |   | (61      | )      | (1,809   | )      |
| Increase (decrease) in  deferred voyage revenue                                           |   | 5,586    |   | (2,179   | )      | 1,526    |   |
| Deferred drydock costs  incurred                                                          |   | (14,137  | )      | (13,546  | )      | (3,321   | )      |
| Net cash provided by  operating activities                                                |   | 178,112  |   | 43,637   |   | 83,442   |   |
|                                                                                      |   |     |   |     |   |     |   |
| CASH FLOWS (USED) PROVIDED  BY INVESTING ACTIVITIES:                                      |   |     |   |     |   |     |   |
| Purchase of vessels                                                                       |   | (528,519 | )      | —   |   | (256,135 | )      |
| Purchase of other fixed  assets                                                           |   | (1,677   | )      | (217     | )      | (276     | )      |
| Proceeds from sale of  vessels                                                            |   | 27,277   |   | 2,251    |   | —   |   |
| Acquisition of business net  of cash received                                             |   | —   |   | —   |   | (5,392   | )      |
| Net cash (used) provided by  investing activites                                          |   | (502,919 | )      | 2,034    |   | (261,803 | )      |
|                                                                                      |   |     |   |     |   |     |   |
| CASH FLOWS PROVIDED (USED)  BY FINANCING ACTIVITIES:                                      |   |     |   |     |   |     |   |
| Decrease in restricted cash                                                               |   | —   |   | —   |   | 149      |   |
| Proceeds from senior notes  offering                                                      |   | 246,158  |   | —   |   | —   |   |
| Long-term debt borrowings                                                                 |   | 275,000  |   | —   |   | 325,000  |   |
| Principal payments on long  - term debt                                                   |   | (91,584  | )      | (74,589  | )      | (334,149 | )      |
| Net (payments) borrowings  on revolving credit facilitities                               |   | (54,100  | )      | 15,000   |   | 61,100   |   |
| Deferred financing costs  paid                                                            |   | (14,590  | )      | (120     | )      | (6,357   | )      |
| Proceeds from issuance of  common stock                                                   |   | 147      |   | —   |   | 126,281  |   |
| Common stock issuance costs                                                               |   | —   |   | (467     | )      | —   |   |
| Net cash provided (used) by  financing activities                                         |   | 361,031  |   | (60,176  | )      | 172,024  |   |
|                                                                                      |   |     |   |     |   |     |   |
| Net increase (decrease) in  cash                                                          |   | 36,224   |   | (14,505  | )      | (6,337   | )      |
| Cash, beginning of the year                                                               |   | 2,681    |   | 17,186   |   | 23,523   |   |
| Cash, end of year                                                                         |   | $        | 38,905 |     | $      | 2,681    |   | $ | 17,186 |   |
|                                                                                      |   |     |   |     |   |     |   |
| Supplemental disclosure of  cash flow information:                                        |   |     |   |     |   |     |   |
| Cash paid during the period  for interest                                                 |   | $        | 28,064 |     | $      | 14,808   |   | $ | 19,437 |   |
|                                                                                      |   |     |   |     |   |     |   |
| Supplemental schedule of  noncash financing activities:                                   |   |     |   |     |   |     |   |
| Common stock issued for  vessels                                                          |   | $        | — |     | $      | —   |   | $ | 132,385 |   |

 

See notes to consolidated financialstatements.

 

F-6

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**GENERAL MARITIME CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001**

**(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)**

 

**1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

NATURE OF BUSINESS.  GeneralMaritime Corporation (the “Company”) through its subsidiaries providesinternational transportation services of seaborne crude oil. The Company’sfleet is comprised of both Aframax and Suezmax tankers. The Company operatesits business in one business segment, which is the transportation ofinternational seaborne crude oil.

 

The Company’s vessels are primarily available for charter on a spotvoyage or time charter basis. Under a spot voyage charter, which generallylasts between two to ten weeks, the owner of a vessel agrees to provide thevessel for the transport of specific goods between specific ports in return forthe payment of an agreed upon freight per ton of cargo or, alternatively, for aspecified total amount. All operating and specified voyage costs are paid bythe owner of the vessel.

 

A time charter involves placing a vessel at the charterer’s disposalfor a set period of time during which the charterer may use the vessel inreturn for the payment by the charterer of a specified daily or monthly hirerate. In time charters, operating costs such as for crews, maintenance andinsurance are typically paid by the owner of the vessel and specified voyagecosts such as fuel and port charges are paid by the charterer.

 

RECAPITALIZATION PLAN.  TheCompany’s recapitalization was completed as to 14 vessels on June 12, 2001 andis described below. These 14 vessels were owned directly or indirectly byvarious limited partnerships. The managing general partners of the limitedpartnerships were various companies wholly owned by Peter C. Georgiopoulos,Chairman and Chief Executive Officer of the Company. The commercial operationsfor all of these vessels were conducted by the old General MaritimeCorporation, a Subchapter S Corporation also wholly owned by Mr. Georgiopoulos.

 

As part of the Company’s recapitalization, Mr. Georgiopoulostransferred the equity interests in the old General Maritime Corporation to theCompany along with the general partnership interests in the vessel owninglimited partnerships in exchange for equity interests in the Company.

 

In addition, each vessel owner entered into an agreement with theCompany with respect to the recapitalization. Pursuant to these agreements, thevessel owners delivered the entire equity interest in each vessel to theCompany. In exchange, the Company issued to each vessel owner shares of commonstock of the Company.

 

Accordingly, the financial statements have been prepared as if therecapitalization had occurred at February 1, 1997, representing thecommencement of operations of the old General Maritime Corporation. It isaccounted for in a manner similar to a pooling of interests as all of theequity interests delivered in the recapitalization are under common control.The financial information included herein does not necessarily reflect theconsolidated results of operations, financial position, changes inshareholders’ equity and cash flows of the Company as if the Company operatedas a legal consolidated entity for the years presented.

 

For the purposes of determining the number of shares outstanding withrespect to the accompanying financial statements, the Company used the initialpublic offering price of $18.00 per share. Under the terms of theRecapitalization Plan there were certain provisions, which required apost-closing reallocation of issued shares between the respective limitedpartners. This post-closing reallocation did not result in a material change tothe outstanding shares in any of the years presented.

 

F-7

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BASIS OF PRESENTATION.  Thefinancial statements of the Company have been prepared on the accrual basis ofaccounting. A summary of the significant accounting policies followed in thepreparation of the accompanying financial statements, which conform toaccounting principles generally accepted in the United States of America, is presentedbelow.

 

Certain reclassifications have been made to prior year financialstatements to conform to 2003 presentation.

 

BUSINESS GEOGRAPHICS.  Non-U.S.operations accounted for 100% of revenues and net income. Vessels regularlymove between countries in international waters over hundreds of trade routes.It is therefore impractical to assign revenues or earnings from thetransportation of international seaborne crude oil products by geographicalarea.

 

SEGMENT REPORTING.  The Companyhas determined that it operates in one reportable segment, the transportationof crude oil with its fleet of midsize tankers.

 

PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial statements include the accountsof General Maritime Corporation and its wholly owned subsidiaries. Allintercompany accounts and transactions have been eliminated on consolidation.

 

REVENUE AND EXPENSE RECOGNITION. Revenue and expense recognition policies for voyage and time charteragreements are as follows:

 

VOYAGE CHARTERS.  Voyage revenues and voyage expenses are recognized on a pro ratabasis based on the relative transit time in each period. Estimated losses onvoyages are provided for in full at the time such losses become evident. Avoyage is deemed to commence upon the completion of discharge of the vessel’sprevious cargo and is deemed to end upon the completion of discharge of thecurrent cargo. Voyage expenses primarily include only those specific costswhich are borne by the Company in connection with voyage charters which wouldotherwise have been borne by the charterer under time charter agreements. Theseexpenses principally consist of fuel and port charges. Demurrage incomerepresents payments by the charterer to the vessel owner when loading anddischarging time exceed the stipulated time in the voyage charter. Demurrageincome is measured in accordance with the provisions of the respective charteragreements and the circumstances under which demurrage claims arise and isrecognized on a pro rata basis over the length of the voyage to which itpertains. At December 31, 2003 and 2002, the Company has a reserve ofapproximately $1,143 and $513, respectively, against its due from charterersbalance associated with demurrage revenues.

 

TIME CHARTERS.  Revenue from time charters are recognized on a straight linebasis as the average revenue over the term of the respective time charteragreement. Direct vessel expenses are recognized when incurred.

 

 

VESSELS, NET.  Vessels, net isstated at cost less accumulated depreciation. Included in vessel costs areacquisition costs directly attributable to the vessel and expenditures made toprepare the vessel for its initial voyage. Vessels are depreciated on astraight-line basis over their estimated useful lives, determined to be 25years from date of initial delivery from the shipyard for non-single-hullvessels. During the fourth quarter of 2003, management determined that single-hull vessels can only trade until2010, when regulatory restrictions require their phase out unless certainconditions are met, resulting in a reduction of the estimated useful lives ofsingle-hull vessels to 19 to 21 years from the date of initial delivery fromthe shipyard.  This change in estimateresulted in an increase in depreciation expense on the Company’s ninesingle-hull vessels during the fourth quarter of 2003 of approximately $2,100,or $0.06 per share, and will result in additional annual depreciation expenseof approximately $8,500 through 2009.

 

Depreciation is based on cost less the estimated residual scrap value.The costs of significant replacements, renewals and betterments are capitalizedand depreciated over the shorter of the vessel’s remaining useful life or thelife of the renewal or betterment. Undepreciated cost of any asset componentbeing replaced is written off as a component of direct vessel operatingexpense. Expenditures for routine maintenance and repairs are expensed asincurred.

 

F-8

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OTHER FIXED ASSETS, NET.  Otherfixed assets, net is stated at cost less accumulated depreciation. Depreciationis computed using the straight-line method over the following estimated usefullives:

 
| **DESCRIPTION**                          |   | **USEFUL LIVES** |   |
|------------------------------------------|--------|------------------|--------|
| Furniture,  fixtures and other equipment |   | 10 years         |   |
| Vessel  equipment                        |   | 5 years          |   |
| Computer  equipment                      |   | 4 years          |   |

 

IMPAIRMENT OF LONG-LIVED ASSETS. The Company follows Statement of Financial Accounting Standards (“SFAS”)No. 144, *Accountingfor the Impairment or Disposal of Long-Lived Assets*, which requiresimpairment losses to be recorded on long-lived assets used in operations whenindicators of impairment are present and the undiscounted cash flows estimatedto be generated by those assets are less than the asset’s carrying amount.  In the evaluation of the fair value andfuture benefits of long-lived assets, the Company performs an analysis of theanticipated undiscounted future net cash flows of the related long-livedassets.  If the carrying value of therelated asset exceeds the undiscounted cash flows, the carrying value isreduced to its fair value. Various factors including future charter rates andvessel operating costs are included in this analysis.

 

During the year ended December 31, 2003, an impairment charge of$18,803 was recorded on five of the Company’s single-hull vessels (see Note4).  During the year ended December 31,2002, an impairment charge of $13,366 was recorded on three of the Company’ssingle-hull vessels which were disposed of during the years ended December 31,2003 and 2002 (see Note 4).

 

 

DEFERRED DRYDOCK COSTS, NET. Approximately every 30 to 60 months the Company’s vessels are requiredto be drydocked for major repairs and maintenance, which cannot be performedwhile the vessels are operating. The Company capitalizes costs associated withthe drydocks as they occur and amortizes these costs on a straight line basisover the period between drydocks. Amortization of drydock costs is included indepreciation and amortization in the statement of operations. For the yearsended December 31, 2003, 2002 and 2001, amortization was $7,072, $4,340 and$2,389, respectively. Accumulated amortization as of December 31, 2003 and 2002was $13,348 and $6,276, respectively.

 

DEFERRED FINANCING COSTS, NET. Deferred financing costs include fees, commissions and legal expensesassociated with securing loan facilities. These costs are amortized over thelife of the related debt, which is included in depreciation and amortization.Amortization was $3,468, $1,492 and $890 for the years ended December 31, 2003,2002 and 2001, respectively. Accumulated amortization as of December 31, 2003and 2002 was $4,934 and $2,099, respectively.

 

GOODWILL.  As of January 1,2002, the Company adopted the provisions for SFAS No. 142 “Goodwill and OtherIntangible Assets.”  This statementrequires that goodwill and intangible assets with indefinite lives no longer beamortized, but instead be tested for impairment at least annually and writtendown with a charge to operations when the carrying amount exceeds the estimatedfair value.  Prior to the adoption ofSFAS No. 142, the Company amortized goodwill. The amount of such unamortized goodwill was $5,713 as of January 1,2002.  In accordance with SFAS No. 142the Company discontinued the amortization of goodwill effective January 1, 2002.  The Company’s only reporting unit withgoodwill is its technical management business, which is not a reportablesegment.  The Company determined thatthere was no impairment of goodwill as of the transition date and during theyears ended December 31, 2003 and 2002.

 

INCOME TAXES.  The Company isincorporated in the Republic of the Marshall Islands. Pursuant to the incometax laws of the Marshall Islands, the Company is not subject to MarshallIslands income tax. Additionally, pursuant to the U.S. Internal Revenue Code,the Company is exempt from U.S. income tax on its income attributable to theoperation of vessels in international commerce. Pursuant to various taxtreaties, the Company’s shipping operations are not subject to foreign incometaxes.  Therefore, no provision forincome taxes is required.

 

F-9

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DEFERRED VOYAGE REVENUE. Deferred voyage revenue primarily relates to cash received fromcharterers prior to it being earned. These amounts are recognized as income inthe appropriate future periods.

 

COMPREHENSIVE INCOME.  TheCompany follows Statement of Financial Accounting Standards No. 130 “ReportingComprehensive Income”, which establishes standards for reporting and displayingcomprehensive income and its components in financial statements. Comprehensiveincome is comprised of net income less charges related to the adoption andimplementation of SFAS No. 133.

 

ACCOUNTING ESTIMATES.  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

 

EARNINGS PER SHARE.  Basicearnings/(loss) per share are computed by dividing net income/(loss) by theweighted average number of common shares outstanding during the year. Dilutedincome/(loss) per share reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock were exercised.

 

STOCK BASED COMPENSATION.  TheCompany accounts for stock based employee compensation arrangements inaccordance with Accounting Principles Board Opinion (“APB”) No. 25, Accountingfor Stock Issued to Employees, and complies with the disclosure provisions ofSFAS No. 123, Accounting for Stock-Based Compensation. Under APB 25,compensation expense is based on the difference, if any, between the fair valueof the Company’s stock and the exercise price of the option. Options aregenerally granted at the fair market value at the date of grant.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair values of the Company’s financial instruments otherthan its Senior Notes approximate their individual carrying amounts as ofDecember 31, 2003 and 2002 due to their short-term maturity or the variable-ratenature of the respective borrowings. The estimated fair value of the Company’s Senior Notes are based onquoted market prices.

 

DERIVATIVE FINANCIAL INSTRUMENTS. To manage its exposure to fluctuating interest rates, the Company usesinterest rate swap agreements. Interest rate differentials to be paid orreceived under these agreements are accrued and recognized as an adjustment ofinterest expense related to the designated debt. The fair values of interestrate swap agreements and changes in fair value are recognized in the financialstatements as noncurrent assets or liabilities.

 

Amounts receivable or payable arising at the settlement of interestrate swaps are deferred and amortized as an adjustment to interest expense overthe period of interest rate exposure provided the designated liabilitycontinues to exist.

 

INTEREST RATE RISK MANAGEMENT. The Company is exposed to the impact of interest rate changes. TheCompany’s objective is to manage the impact of interest rate changes onearnings and cash flows of its borrowings. The Company uses interest rate swapsto manage net exposure to interest rate changes related to its borrowings andto lower its overall borrowing costs. Significant interest rate risk managementinstruments held by the Company during the years ended December 31, 2003, 2002and 2001 included pay-fixed swaps. As of December 31, 2003, the Company isparty to pay-fixed interest rate swap agreements that expire in 2006 whicheffectively convert floating rate obligations to fixed rate instruments.  During the years ended December 31, 2003,2002 and 2001, the Company recognized a credit/(charge) to OCI of $1,890,$(3,263) and $(1,107), respectively. The aggregate liability in connection with a portion of the Company’scash flow hedges as of December 31, 2003 and 2002 was $2,480 and $4,370,respectively, and is presented as Derivative liability for cash flow hedge onthe balance sheet.

 

CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject the Company toconcentrations of credit risk are trade receivables. With respect to accountsreceivable, the Company limits its credit risk by performing ongoing creditevaluations and, when deemed necessary, requiring letters of credit, guaranteesor

 

F-10

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collateral. Management does not believe significant risk exists inconnection with the Company’s concentrations of credit at December 31, 2003.

 

RECENT ACCOUNTING PRONOUNCEMENTS. Effective January 1, 2001, the Company adopted Statement of FinancialStandards (“SFAS”) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGINGACTIVITIES (“SFAS 133”), and its corresponding amendments under SFAS No. 138.SFAS 133 requires the Company to measure all derivatives, including certain derivativesembedded in other contracts, at fair value and to recognize them in theConsolidated Balance Sheet as an asset or liability, depending on the Company’srights or obligations under the applicable derivative contract. For derivativesdesignated as fair value hedges in the fair value of both the derivativeinstrument and the hedged item are recorded in earnings. For derivativesdesignated as cash flow hedges, the effective portions of changes in fair valueof the derivative are reported in the other comprehensive income (“OCI”) andare subsequently reclassified into earnings when the hedged item affectsearnings. Changes in fair value of derivative instruments not designated ashedging instruments and ineffective portions of hedges are recognized in earningsin the current period. The adoption of SFAS 133 as of January 1, 2001 did nothave a material impact on the Company’s results of operations or financialposition. The Company recognized a charge to OCI of $662 as a result ofcumulative effect in accounting change in relation to the adoption of SFAS No.133. During June 2001, the Company terminated its interest rate swapagreements, which resulted in the reversal of the entire OCI balance. Pursuantto the termination of these interest rate swap agreements, the Company made anaggregate cash payment of approximately $1,822 to counterparties. This amountis included in the statement of operations as a component of other expense. InAugust and October 2001, the Company entered into interest rate swap agreement(see Note 8).

 

In January 2003, the FASB issued FIN 46, “Consolidation of VariableInterest Entities,” which clarified the application of Accounting ResearchBulletin No. 51, “Consolidated Financial Statements,” to address perceivedweaknesses in accounting for entities commonly known as special-purpose oroff-balance sheet entities.    Itprovides guidance for identifying the party with a controlling financialinterest resulting from arrangements or financial interests rather than votinginterests.  It requires consolidation ofVariable Interest Entities (“VIEs”) only if those VIEs do not effectivelydisperse the risks and benefits amount the various parties involved.  In October 2003, the effective date of FIN No.46 was deferred for variable interests held by public companies in all entitiesthat were acquired prior to February 1, 2003. This deferral is to allow timefor certain implementation issues to be addressed through the issuance of apotential modification to the interpretation. The deferral revised theeffective date for consolidation of these entities for the Company to thequarter ended January 3, 2004.   Basedon the current rules, the Company does not believe it will be required toconsolidate any variable interest entities as a result of FIN 46.

 

 

In April 2003, the FASB issued SFAS No. 149, “Amendment to Statement133 on Derivative Instruments and Hedging Activities.”  SFAS No. 149 amends and clarifies accountingfor derivative instruments, including certain derivative instruments embeddedin other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149is applied prospectively and is effective for contracts entered into ormodified after June 30, 2003, except for SFAS No. 133 implementation issuesthat have been effective for fiscal quarters that began prior to June 15, 2003and certain provisions relating to forward purchases and sales on securitiesthat do not yet exist. The adoption of this standard did not have a materialeffect on the Company’s financial position and results of operations.

 

In May 2003, the FASB issued SFAS No. 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity.”SFAS No. 150 changes the accounting guidance for certain financial instrumentsthat, under previous guidance, could have been classified as either a liabilityor equity. SFAS No. 150 now requires those instruments to be classified asliabilities (or as assets under some circumstances) in the statement offinancial position. SFAS No. 150 also requires the terms of those instrumentsand any settlement alternatives to be disclosed. SFAS No. 150 is effective forall financial instruments entered into or modified after May 31, 2003.Otherwise, it is effective at the beginning of the first interim periodbeginning after June 15, 2003. The adoption of SFAS No. 150 did not have amaterial impact on the Company’s financial position and results of operations.

 

F-11

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**2.  ACQUISITIONS**

 

As part of the Company’s recapitalization, the Company acquired UnitedOverseas Tankers, Ltd. (“UOT”), a Greek company providing technical managementservices exclusively to the Company, for $5,979. The Company recorded goodwillof $5,954 that reflected the excess of purchase price over fair value of netassets acquired. The composition of the fair value of net assets acquired areas follows:

 
| Cash                               |   | $        | 37     |   |
|------------------------------------|--------|----------|--------|--------|
| Other  current assets              |   | 3        |   |
| Fixed assets                       |   | 50       |   |
| Fair value  of assets acquired     |   | 90       |   |
| Less:  Liabilities assumed         |   | (65      | )      |
| Fair value  of net assets acquired |   | ­25 |   |
| Cash paid                          |   | 5,429    |   |
| Due to  sellers                    |   | 550      |   |
| Total paid                         |   | 5,979    |   |
| Goodwill                           |   | $        | 5,954  |   |

 

Goodwill was being amortized over a 15 year period. For the year endedDecember 31, 2001, amortization was $201. Effective January 1, 2002,amortization of goodwill is no longer permitted. The acquisition was accountedfor as a purchase and results of operations have been included in theconsolidated financial statements from the date of acquisition. Pro forma netassets and results of operations of this acquisition had the acquisitionoccurred at the beginning of 2001 were not material and accordingly, have notbeen provided. Results of UOT’s operations for the period from January 1, 2001through June 12, 2001 were not significant to the Company’s operations for theyear ended December 31, 2001.

 

Prior to the acquisition, the Company paid management fees to UOT of$547for the year ended December 31, 2001.

 

On June 15, 2001, in accordance with the Company’s recapitalization,the Company purchased five vessels for an aggregate purchase price ofapproximately $145,050 and also purchased certain other assets. Considerationin this transaction consisted of approximately 5,675,000 shares of common stockat an initial public offering price of $18.00 per share, subject to postclosing adjustment, and the assumption of indebtedness. On June 14, 2002, anadjustment was made to the purchase price of some of the vessels which weacquired for shares at the time of the Company’s initial public offering wherebythe Company received 35,230 shares of common stock valued at $18.00 per shareas settlement of $634 owed to the Company by the sellers as of June 15, 2001.These shares have been retired and are shown on the Company’s statement ofshareholders’ equity as a reduction of paid-in capital.

 

From June 27, 2001 through August 24, 2001, the Company acquired tenvessels for an aggregate purchase price of approximately $283,636. Included inthis purchase price are 1,680,000 shares of common stock at an initial publicoffering price of $18.00 per share, subject to post closing adjustment, valuedat $30,243.

 

During the period from March 2003 to May 2003, the Company acquired 19tankers from an unaffiliated entity consisting of 14 Suezmax tankers and fiveAframax tankers.  The aggregate purchaseprice of these vessels was $525,000, which was financed through the use of cashand borrowings under the Company’s existing revolving credit facilitiestogether with the incurrance of additional debt described in Note 8.

 

**3.  EARNINGS (LOSS) PER COMMON SHARE**

 

The computation of basic earnings (loss) per share is based on theweighted average number of common shares outstanding during the year. Thecomputation of diluted earnings (loss) per share assumes the exercise of all dilutivestock options (see Note 14) using the treasury stock method and the granting ofunvested restricted stock awards (see Note 15), for which the assumed proceedsupon grant are deemed to be the amount of compensation cost attributable tofuture services and not yet recognized using the treasury stock method, to theextent dilutive.

 

F-12

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The components of the denominator for the calculation of basic earningsper share and diluted earnings per share is as follows:

 
|                                        |   | **Year ended  December 31,** |   |
|---------------------------------------------|--------|------------------------------|--------|
|                                        |   | **2003**                     |   | **2002** |   | **2001** |   |
|                                        |   |                         |   |   |   |   |   |
| Basic  earnings (loss) per share:           |   |                         |   |   |   |   |   |
| Weighted  average common shares outstanding |   | 36,967,174                   |   | 36,980,600 |   | 30,144,709 |   |
|                                        |   |                         |   |   |   |   |   |
| Diluted  earnings (loss) per share:         |   |                         |   |   |   |   |   |
| Weighted  average common shares outstanding |   | 36,967,174                   |   | 36,980,600 |   | 30,144,709 |   |
| Stock  options                              |   | 52,176                       |   | — |   | — |   |
| Restricted  stock awards                    |   | 336,414                      |   | — |   | — |   |
|                                        |   | 37,355,764                   |   | 36,980,600 |   | 30,144,709 |   |

 

 

**4.  IMPAIRMENT CHARGE/ GAIN ON SALE OF VESSELS**

 

During September 2002, the Company decided to retire a 1979-builtsingle-hull Aframax tanker through its sale for scrap. This decision was basedon management’s assessment of estimated charter rates for the vessel and theestimated daily operating costs as well as the cost of this vessel’s nextdrydocking which was scheduled for April 2003. An impairment charge of $4,520 was recognized during the year endedDecember 31, 2002, which was the amount by which the vessel’s carrying valueexceeded the estimated net proceeds to be received upon disposal.  When the vessel was sold in November 2002, a$266 gain was recognized for the amount by which net proceeds received uponsale of the vessel exceeded the vessel’s then carrying value.

 

During December 2002, the Company decided to sell a 1980-builtsingle-hull Aframax tanker and a 1981-built single-hull Aframax tanker. Thisdecision was based on management’s assessment of the projected cost associatedwith the vessels’ next drydockings which were scheduled to occur during 2003and the estimated operating revenues for the vessels over their remainingoperating lives. An impairment charge of $8,846 was recorded during the yearended December 31, 2002 that represents the difference between the vessels’book values and the estimated proceeds from their anticipated sale. Thesevessels were written down to their estimated net selling price of $2,000 pervessel, and were reclassified on the December 31, 2002 balance sheet fromvessels to vessels held for sale.

 

During 2003, the vessels held for sale as of December 31, 2002 weresold, resulting in an aggregate gain on sale of vessels of $2,664.  Also during 2003, three double-bottomAframax vessels acquired in 2003 were sold for an aggregate loss on sale ofvessels of $1,174.  Of these threevessels, two were delivered to their new owners in 2003 and one was deliveredto its new owner in February 2004.

 

In December 2003, the International Maritime Organization adopted aproposed amendment to the International Convention for the Prevention ofPollution from Ships to accelerate the phase-out of certain single-hull tankersfrom 2015 to 2010, unless the flag state extends the date to 2015.  Management determined that the useful livesof its nine single-hull tankers would end in 2010, which is four to six yearsearlier than the 25-year useful lives the vessels had previously beenascribed.  Because of the reduction inthe useful lives of these single-hull tankers, an impairment evaluation was performedin accordance with the guidelines of SFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets”. The completion of our evaluation indicated that the carrying value offive of our nine single-hull tankers exceeded the expected undiscounted futurecash flows attributable to these assets, resulting in an impairment.  Our total impairment charge recognizedduring the fourth quarter was $18,803. In accordance with our policy, the impairment loss was determined to beequal to the amount by which the carrying value of these five tankers exceededtheir estimated fair value.

 

F-13

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In addition to the impairment charge taken on five single-hull tankers,effective October 1, 2003, the estimated useful lives of the nine single-hull tankerswere reduced to useful lives ranging from 19 to 21 years.  The effect of this change in accountingestimate will increase depreciation expense by approximately $8,500 per year onthese nine single-hull tankers through the end of their estimated useful livesin 2010.

 

 

**5.  PREPAID EXPENSES AND OTHER CURRENT ASSETS**

 

Prepaid expenses and other current assets consist of the following:

 
|                              |   | **December  31,  2003** |   | **December  31,  2002** |   |
|-----------------------------------|--------|-------------------------|--------|-------------------------|--------|
| Bunkers and  lubricants inventory |   | $                       | 14,198 |                    | $      | 9,246 |   |
| Other                             |   | 2,773                   |   | 2,906                   |   |
| Total                             |   | $                       | 16,971 |                    | $      | 12,152 |   |

 

**6.  OTHER FIXED ASSETS**

 

Other fixed assets consist of the following:

 
|                               |   | **December  31,  2003** |   | **December  31,  2002** |   |
|------------------------------------|--------|-------------------------|--------|-------------------------|--------|
| Other fixed  assets:               |   |                    |   |                    |   |
| Furniture,  fixtures and equipment |   | $                       | 948    |                    | $      | 421 |   |
| Vessel  equipment                  |   | 1,786                   |   | 1,229                   |   |
| Computer  equipment                |   | 705                     |   | 196                     |   |
| Total cost                         |   | 3,439                   |   | 1,846                   |   |
| Less:  accumulated depreciation    |   | 1,370                   |   | 976                     |   |
| Total                              |   | $                       | 2,069  |                    | $      | 870 |   |

 

**7.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES**

 

Accounts payable and accrued expenses consist of the following:

 
|              |   | **December  31,  2003** |   | **December  31,  2002** |   |
|-------------------|--------|-------------------------|--------|-------------------------|--------|
| Accounts  payable |   | $                       | 13,357 |                    | $      | 10,199 |   |
| Accrued  expenses |   | 9,061                   |   | 4,958                   |   |
| Total             |   | $                       | 22,418 |                    | $      | 15,157 |   |

 

**8.  LONG-TERM DEBT**

 

Long-term debt consists of the following:

 

F-14

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|                                     |   | **December  31,  2003** |    | **December  31,  2002** |   |
|------------------------------------------|--------|-------------------------|---------|-------------------------|--------|
| First Credit  Facility                   |   |                    |    |                    |   |
| Term Loan                                |   | $                       | 86,866  |                    | $      | 129,411 |   |
| Revolving  Credit Facility               |   | 13,000                  |    | 54,100                  |   |
| Second  Credit Facility                  |   |                    |    |                    |   |
| Term Loan                                |   | 53,000                  |    | 74,500                  |   |
| Revolving  Credit Facility               |   | 9,000                   |    | 22,000                  |   |
| Third Credit  Facility                   |   | 247,461                 |    | —                  |   |
| Senior  Notes, net of $3,657 discount    |   | 246,343                 |    | —                  |   |
| Total                                    |   | 655,670                 |    | 280,011                 |   |
| Less:  Current portion of long-term debt |   | 59,553                  |    | 62,003                  |   |
| Long-term  debt                          |   | $                       | 596,117 |                    | $      | 218,008 |   |

 

Pursuant to the Company’s recapitalization on June 12, 2001, 12 loanfacilities, consisting of senior and junior facilities, with an aggregateprincipal balance of approximately $217,850, were fully repaid, $70,100 fromthe proceeds of the Company’s Initial Public Offering and the remainder withborrowings made under a new credit facility (the “First Credit Facility”). TheCompany wrote off the unamortized deferred loan costs aggregating $1,184associated with these 12 loan facilities. Additionally, in June 2001, theCompany terminated all of its interest rate swap agreements pertaining to these12 loan facilities by paying the counterparties an aggregate amount of $1,822.These termination charges and the write off of the unamortized deferred loancosts which combined aggregated to $3,006 were recorded in the statement ofoperations as a component of other expenses.

 

In June 2001 the Company entered into two new credit facilities. TheFirst Credit Facility is comprised of a $200,000 term loan and a $100,000revolving loan. The First Credit Facility matures on June 15, 2006. The termloan is repayable in quarterly installments. The principal of the revolvingloan is payable at maturity. The First Credit Facility bears interest at LIBORplus 1.5%. The Company must pay a fee of 0.625% per annum on the unused portionof the revolving loan on a quarterly basis. Due to the sale of three of theAframax tankers securing the First Credit Facility (see Note 4), the revolvingloan facility was reduced to $96,519. As of December 31, 2003, the Company had$86,866 outstanding on the term loan and $13,000 outstanding on the revolvingloan. The Company’s obligations under the First Credit Facility are secured by17 vessels, with an aggregate carrying value of $407,878 at December 31, 2003.

 

On June 27, 2001, the Company entered into an additional creditfacility (the “Second Credit Facility”) consisting of a $115,000 term loan anda $50,000 revolving loan. The Second Credit Facility maturity date is June 27,2006. The term loan is repayable in quarterly installments. The principal ofthe revolving loan is payable at maturity. The Second Credit Facility bearsinterest at LIBOR plus 1.5%. The Company must pay a fee of 0.625% per annum onthe unused portion of the revolving loan on a quarterly basis. As of December31, 2003, the Company had $53,000 outstanding on the term loan and $9,000outstanding on the revolving loan. The Company’s obligations under the SecondCredit Facility are secured by nine vessels with an aggregate carrying value of$234,070 at December 31, 2003.

 

On March 11, 2003 in connection with the 19 vessels acquired by theCompany as discussed in Note 2, the Company entered into commitments for$450,000 in credit facilities.  Thesecredit facilities are comprised of a first priority $350,000 amortizing termloan (the “Third Credit Facility”) and a second priority $100,000non-amortizing term loan (the “Second Priority Term Loan”).  Pursuant to the issuance of the Senior Notesdescribed below, the Third Credit Facility was reduced to $275,000 (such reductionfrom $350,000 will be treated as a prepayment of the first six installments dueunder this facility) and the Second Priority Term Loan was eliminated.  The Third Credit Facility

 

F-15

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matures on March 10, 2008, is repayable in 19 quarterly installmentsand bears interest at LIBOR plus 1.625%. During 2003, the Company made principal repayments of $27,539 on theThird Credit Facility consisting of: (i) $11,189 repaid upon the sale of two ofthe vessels securing this credit facility and (ii) $16,350 repaid pursuant toterms of the Senior Notes described below, which require the Company to repayduring 2003 from a portion of its cash flows (as defined) indebtedness underits First, Second and Third Credit Facilities.   As of December 31 2003, the Company had outstanding $247,461 onthe Third Credit Facility. The Company’s obligations under the Third CreditFacility agreements are secured by 17 vessels, including one vessel which isheld for sale, with an aggregate carrying value of approximately $483,418 atDecember 31, 2003.

 

The terms and conditions of the First, Second and Third CreditFacilities require compliance with certain restrictive covenants. Under thesecredit facilities, the Company is required to maintain certain ratios such as:vessel market values to total outstanding loans and undrawn revolving creditfacilities, EBITDA to net interest expense and to maintain minimum levels ofworking capital.

 

Interest rates during the year ended December 31, 2003 ranged from2.56% to 3.00% on the First, Second and Third Credit Facilities.

 

In August 2001 and October 2001, the Company entered into interest rateswap agreements with foreign banks to manage interest costs and the riskassociated with changing interest rates. At their inception, these swaps had notional principal amounts equal to50% the Company’s outstanding term loans, described above.  The notional principal amounts amortize atthe same rate as the term loans.  Theinterest rate swap agreement entered into during August 2001 hedges the FirstCredit Facility, described above, to a fixed rate of 6.25%.  This swap agreement terminates on June 15,2006.   The interest rate swap agreemententered into during October 2001 hedges the Second Credit Facility, describedabove, to a fixed rate of 5.485%.  Thisswap agreement terminates on June 27, 2006.  The differential to be paid or received for these swap agreements isrecognized as an adjustment to interest expense as incurred.  As of December 31, 2003, the outstandingnotional principal amount on the swap agreements entered into during August2001 and October 2001 are $45,000 and $26,500, respectively. The changes in thenotional principal amounts of the swaps during the years ended December 31, 2003and 2002 are as follows:

 
|                                          |   | **December  31,  2003** |    | **December  31,  2002** |   |
|-----------------------------------------------|--------|-------------------------|---------|-------------------------|--------|
| Notional  principal amount, beginning of year |   | $                       | 102,750 |                    | $      | 139,250 |   |
| Amortization  of swaps                        |   | (31,250                 | )       | (36,500                 | )      |
| Notional  principal amount, end of the year   |   | $                       | 71,500  |                    | $      | 102,750 |   |

 

The Company would have paid approximately $2,480 and $4,370 to settleall outstanding swap agreements based upon their aggregate fair values as ofDecember 31, 2003 and 2002, respectively. This fair value is based uponestimates received from financial institutions.

 

Interest expense pertaining to interest rate swaps for the years endedDecember 31, 2003, 2002 and 2001 was $2,919, $3,223, $943, respectively.

 

On March 20, 2003, in connection with the 19 vessels acquired by theCompany as discussed in Note 2, the Company issued $250,000 of 10% Senior Noteswhich are due March 15, 2013.   Interestis paid on the Senior Notes each March 15 and September 15.  The Senior Notes are general unsecured,senior obligations of the Company.  Theproceeds of the Senior Notes, prior to payment of fees and expenses, were$246,158, which is net of the original issue discount of $3,842.  This discount is being amortized as interestexpense over the term of the Senior Notes using the effective interestmethod.   As of December 31, 2003, thediscount on the Senior Notes was $3,657. The Senior Notes are guaranteed by all of the Company’s presentsubsidiaries and future “restricted” subsidiaries.  The Senior Notes contain incurrence covenants which, among otherthings, restrict the Company’s ability to incur future indebtedness and liens,to apply the proceeds of asset sales freely, to merge or undergo other changesof control and to pay dividends, and require the Company during 2003 to makeadditional principal repayments to reduce its debt under the First, Second andThird Credit Facilities based on certain cash flow calculations.  Additionally, certain defaults on other debtinstruments, such as failure to pay interest or principal when due are deemedto be a default under the Senior Notes agreement.

 

F-16

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Pursuant to certain of the aforementioned provisions of the SeniorNotes, the Company is required to make additional principal repayments during2003 for the reduction of its debt under the First, Second and Third CreditFacilities.  During the year endedDecember 31, 2003, the total amount of the additional principal repayments forthe four quarters of 2003 aggregated $49,856, of which $19,031 was paid during 2003 to reduce a portion ofthe revolving loans under the First and Second Credit Facilities and $16,350was paid during 2003 to reduce the Third Credit Facility.  Of the unpaid amount of $14,475 as ofDecember 31, 2003, $5,669 will be used to repay a portion of the revolvingloans outstanding on the First and Second Credit Facilities and $8,806 will beapplied to the Third Credit Facility by February 29, 2004.

 

Of the net proceeds of $24,347 received on the sale during 2003 of the1981-built Aframax vessel and the two double-bottom Aframax vessels describedin Note 4, $12,246 was used to repay indebtedness under the Company’s First andThird Credit Facilities.  The terms ofthe Company’s Senior Notes require that, if the $12,101 amount by which the netproceeds from the sale of the three vessels exceed the indebtedness repaid isnot used to acquire or invest in additional assets, as defined, within 360 daysafter the sale of the vessels, such excess must be used to repay a portion ofthe Senior Notes.

 

As of December 31, 2003, the Company is in compliance with all of thefinancial covenants under its First, Second and Third Credit Facilities and itsSenior Notes.

 

Interest expense under all of the Company’s credit facilities, SeniorNotes and interest rate swaps aggregated $35,505, $14,747 and $17,728 for the years ended December 31, 2003, 2002and 2001, respectively.

 

Based on borrowings as of December 31, 2003, aggregate maturities underthe First, Second and Third Credit Facilities including permanent repayments ofthe Third Credit Facility of $8,806 described above as well as the Senior Notesare as follows:

 
| **PERIOD ENDING DECEMBER 31,** |   | **First  Credit  Facility** |       | **Second  Credit  Facility** |   | **Third  Credit  Facility** |       | **Senior  Notes** |        | **TOTAL**   |       |
|--------------------------------|--------|-----------------------------|------------|------------------------------|--------|-----------------------------|------------|-------------------|-------------|-------------|------------|
| 2004                           |   | $                           | 34,747     |                         | $      | 16,000                      |       | $                 | 8,806       |        | $          | — | ** ** | **$** | **59,553** | ** ** |
| 2005                           |   | 34,747                      |       | 16,000                       |   | 43,370                      |       | —            | ** **  | **94,117**  | ** ** |
| 2006                           |   | 30,372                      |       | 30,000                       |   | 43,370                      |       | —            | ** **  | **103,742** | ** ** |
| 2007                           |   | —                      |       | —                       |   | 54,243                      |       | —            | ** **  | **54,243**  | ** ** |
| 2008                           |   | —                      |       | —                       |   | 97,672                      |       | —            | ** **  | **97,672**  | ** ** |
| Thereafter                     |   | —                      |       | —                       |   | —                      |       | 250,000           | ** **  | **250,000** | ** ** |
|                           |   |                        |       |                         |   |                        |       |              |        |        |       |
|                           |   | **$**                       | **99,866** |                         | **$**  | **62,000**                  | ** ** | **$**             | **247,461** | ** **  | **$**      | **250,000** | ** ** | **$** | **659,327** | ** ** |

 

**9.FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

The estimated fair values of the Company’s financial instruments are asfollows:

 
|                                       |   | **December  31, 2003** |   | **December  31, 2002** |   |
|--------------------------------------------|--------|------------------------|--------|------------------------|--------|
|                                       |   | **Carrying  Value**    |   | **Fair  Value**        |   | **Carrying  Value** |   | **Fair  Value** |   |
| Cash                                       |   | $                      | 38,905 |                   | $      | 38,905 |   | $ | 2,681 |   | $ | 2,681 |   |
| Floating rate debt                         |   | 409,327                |   | 409,327                |   | 280,011 |   | 280,011 |   |
| Senior Notes                               |   | 246,343                |   | 282,500                |   | — |   | — |   |
| Cash flow hedges - net  liability position |   | 2,480                  |   | 2,480                  |   | 4,370 |   | 4,370 |   |
|                                            |        |                        |        |                        |        |  |  |  |  |  |  |  |  |

 

The fair value of term loans and revolving credit facilities isestimated based on current rates offered to the Company for similar debt of thesame remaining maturities. The carrying value approximates the fair marketvalue for the variable rate loans. The fair value of interest rate swaps (usedfor purposes other than trading) is the estimated amount the Company would payto terminate swap agreements at the reporting date, taking into account current

 

F-17

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interest rates and the current credit-worthiness of the swapcounter-parties.  The fair value of theSenior Notes has been determined based quoted market prices as of December 31,2003.

 

**10.REVENUE FROM TIME CHARTERS**

 

Total revenue earned on time charters for the years ended December 31,2003, 2002 and 2001 was $58,743, $28,293 and $47,520, respectively. Futureminimum time charter revenue, based on vessels committed to non-cancelable timecharter contracts excluding time charters that are subject to a market rate adjustmentwith no minimum daily rate as of December 31, 2003 will be $70,219 during 2004and $2,319 during 2005.

 

**11.  SIGNIFICANT CUSTOMERS**

 

For the years ended December 31, 2003 and 2002, the Company did notearn 10% or more of its voyage revenues from any single customer. For the yearended December 31, 2001, the Company earned $27,389 from one customer whichrepresented 12.6% of voyage revenues.

 

**12.  RELATED PARTY TRANSACTIONS**

 

The following are related party transactions not disclosed elsewhere inthese financial statements:

 

The Company rents office space as its principal executive offices in abuilding currently leased by GenMar Realty LLC, a company wholly owned by PeterC. Georgiopoulos, the Chairman and Chief Executive Officer of the Company.There is no lease agreement between the Company and GenMar Realty LLC. TheCompany currently pays an occupancy fee on a month to month basis in the amountof $55.  For the years ended December31, 2003, 2002 and 2001, the Company’s occupancy fees were $660 in each year.

 

During 2000, the Company loaned $486 to Mr. Peter C.Georgiopoulos.  This loan is included inprepaid expenses and other current assets. This loan does not bear interest and is due and payable on demand.  The full amount of this loan was outstandingas of December 31, 2003.

 

During 2003, 2002 and 2001, the Company paid approximately $5, $181 and$10. respectively, to Poles, Tublin, Patestides & Stratakis LLP, a law firmwith which the father of Mr. Georgiopoulos is affiliated.

 

During the year ended December 31, 2003, the Company incurred legalservices (primarily in connection with the acquisition of 19 tankers during2003) aggregating $249 to the father of Mr. Peter Georgiopoulos.  This amount is unpaid as of December 31,2003 and is included in accounts payable and accrued expenses.

 

 

**13.  SAVINGS PLAN**

 

In November 2001, the Company established a 401(k) Plan (the “Plan”)which is available to full-time employees who meet the Plan’s eligibilityrequirements. This Plan is a defined contribution plan, which permits employeesto make contributions up to 15 percent of their annual salaries with theCompany matching up to the first three percent until April 2003 and six percentthereafter. The matching contribution vests over a four year period, retroactiveto date of hire. During 2003, 2002 and 2001, the Company’s matchingcontribution to the Plan was $178, $90 and $26, respectively.

 

**14.  STOCK OPTION PLAN**

 

On June 10, 2001, the Company adopted the General Maritime Corporation2001 Stock Incentive Plan. Under this plan the Company’s compensationcommittee, designated the board of directors or the board of directors, maygrant a variety of stock based incentive awards to employees, directors andconsultants whom the compensation committee (or other committee or the board ofdirectors) believes are key to the Company’s success. The compensationcommittee may award incentive stock options, nonqualified stock options, stockappreciation rights, dividend equivalent rights, restricted stock, unrestrictedstock and performance shares.

 

F-18

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The aggregate number of shares of common stock available for awardunder the 2001 Stock Incentive Plan is 2,900,000 shares. On June 12, 2001, theCompany granted incentive stock options and nonqualified stock options topurchase 860,000 shares of common stock at an exercise price of $18.00 pershare (the initial public offering price) under the provisions of the 2001Stock Incentive Plan. These options expire in 10 years. Options to purchase110,000 shares of common stock vested immediately on June 12, 2001, the date ofthe grant. 25% of the remaining 750,000 options will vest on each of the firstfour anniversaries of the grant date. All options granted under this plan willvest upon a change of control, as defined. These options will be incentivestock options to the extent allowable under the Internal Revenue Code.  During 2003, 48,000 of these options wereforfeited.

 

On November 26, 2002, the Company’s chief executive officer and chiefoperating officer surrendered to the Company outstanding options to purchase anaggregate of 590,000 shares of common stock. Also on November 26, 2002, optionsto purchase 143,500 were granted to other employees at an exercise price of$6.06 (the closing price on the date of grant). These options will generallyvest in four equal installments on each of the first four anniversaries of thedate of grant.  During 2003, 24,375 ofthese options were exercised and 6,500 of these options were forfeited.

 

On May 5, 2003, the Company granted options to purchase 50,000 sharesof common stock to the Company’s chief financial officer at an exercise priceof $8.73 (the closing price on the date of grant). These options will vest infour equal installments on each of the first four anniversaries of the date ofgrant.  During 2003, all of theseoptions were forfeited.

 

On June 5, 2003, the Company granted options to purchase an aggregateof 12,500 shares of common stock to five outside directors of the Company at anexercise price of $9.98 (the closing price on the date of grant). These optionswill vest in four equal installments on each of the first four anniversaries ofthe date of grant.

 

On November 4, 2003, the Company granted options to purchase an aggregateof 29,000 shares of common stock to certain employees of the Company at anexercise price of $13.29 (the closing price on the date of grant). Theseoptions will vest in four equal installments on each of the first fouranniversaries of the date of grant.

 

The Company follows the provisions of APB 25 to account for its stockoption plan. The fair value of the options were determined on the date of grantusing a Black-Scholes option pricing model. These options were valued based onthe following assumptions: an estimated life of five years for all optionsgranted, volatility of 47%, 63% and 54% for options granted during 2003, 2002and 2001, respectively, risk free interest rate of 3.5%, 4.0% and 5.5% foroptions granted during 2003, 2002 and 2001, respectively, and no dividend yieldfor any options granted. The fair value of the 860,000 options to purchasecommon stock granted on June 12, 2001 is $8.50 per share. The fair value of theoptions to purchase common stock granted on November 26, 2002 is $3.42 pershare.  The fair value of the options topurchase common stock granted on May 5, 2003, June 5, 2003 and November 4, 2003is $3.95 per share, $4.52 per share, and $6.02 per share, respectively.

 

 

The following table summarizes stock option activity since theinception of option grants by the Company:

 

F-19

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|                            |   | **Number of  Options** |   | **Weighted  Average Exercise  Price** |   | **Weighted  Average Fair  Value** |   |
|---------------------------------|--------|------------------------|--------|---------------------------------------|--------|-----------------------------------|--------|
|                            |   |                   |   |                                  |   |                              |   |
| Outstanding,  January 1, 2001   |   | —                 |   | $                                     | — |                              | $      | — |   |
|                            |   |                   |   |                                  |   |                              |   |
| Granted                         |   | 860,000                |   | $                                     | 18.00  |                              | $      | 8.50 |   |
| Exercised                       |   | —                 |   | —                                |   | —                            |   |
| Forfeited                       |   | —                 |   | —                                |   | —                            |   |
|                            |   |                   |   |                                  |   |                              |   |
| Outstanding,  December 31, 2001 |   | 860,000                |   | $                                     | 18.00  |                              | $      | 8.50 |   |
|                            |   |                   |   |                                  |   |                              |   |
| Granted                         |   | 143,500                |   | $                                     | 6.06   |                              | $      | 3.42 |   |
| Exercised                       |   |                   |   |                                  |   |                              |   |
| Forfeited                       |   | (590,000               | )      | $                                     | 18.00  |                              | $      | 8.50 |   |
|                            |   |                   |   |                                  |   |                              |   |
| Outstanding,  December 31, 2002 |   | 413,500                |   | $                                     | 13.86  |                              | $      | 6.74 |   |
|                            |   |                   |   |                                  |   |                              |   |
| Granted                         |   | 91,500                 |   | $                                     | 10.35  |                              | $      | 4.68 |   |
| Exercised                       |   | (24,375                | )      | $                                     | 6.06   |                              | $      | 3.42 |   |
| Forfeited                       |   | (104,500               | )      | $                                     | 12.82  |                              | $      | 6.01 |   |
|                            |   |                   |   |                                  |   |                              |   |
| Outstanding,  December 31, 2003 |   | 376,125                |   | $                                     | 13.84  |                              | $      | 6.98 |   |

 

The following table summarizes certain information about stock optionsoutstanding as of December 31, 2003:

 
|                         |   | **Options  Outstanding as of December 31, 2003** |   | **Options  Exercisable as of  December 31, 2003** |   |
|------------------------------|--------|--------------------------------------------------|--------|---------------------------------------------------|--------|
| **Range of  Exercise Price** |   | **Number of  Options**                           |   | **Weighted  Average  Exercise Price**             |   | **Weighted  Average  Remaining  Contractual Life** |   | **Number of  Options** |   | **Weighed  Average Exercise  Price** |   |
|                         |   |                                             |   |                                              |   |   |   |   |   |   |   |
| $ 6.06                       |   | 112,625                                          |   | $                                                 | 6.06   |   | 8.90 |   | 9,875 |   | $ | 6.06 |   |
| $ 9.98 - $13.29              |   | 41,500                                           |   | $                                                 | 12.29  |   | 9.68 |   | — |   | $ | 12.29 |   |
| $ 18.00                      |   | 222,000                                          |   | $                                                 | 18.00  |   | 7.45 |   | 150,000 |   | $ | 18.00 |   |
|                         |   |                                             |   |                                              |   |   |   |   |   |   |   |
|                         |   | 376,125                                          |   | $                                                 | 13.80  |   | 8.13 |   | 159,875 |   | $ | 17.26 |   |

 

Had compensation cost for the Company’s stock option plans beendetermined based on the fair value at the grant dates for awards under thoseplans consistent with the methods recommended by SFAS No. 123, the Company’snet income and net income per share for the years ended December 31, 2003, 2002and 2001, would have been stated at the pro forma amounts indicated below:

 

F-20

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|                                                                    |   | **2003** |   | **2002** |   | **2001** |   |
|-------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Net Income  (Loss):                                                     |   |     |   |     |   |     |   |
|                                                                    |   |     |   |     |   |     |   |
| As reported                                                             |   | $        | 84,518 |     | $      | (9,742   | )      | $ | 51,221 |   |
| Stock based  compensation expense (benefit) using the fair value method |   | (201     | )      | 1,005    |   | (2,764   | )      |
| Pro forma                                                               |   | $        | 84,317 |     | $      | (8,737   | )      | $ | 48,457 |   |
|                                                                    |   |     |   |     |   |     |   |
| Earnings  (loss) per common share (as reported):                        |   |     |   |     |   |     |   |
|                                                                    |   |     |   |     |   |     |   |
| Basic                                                                   |   | $        | 2.29   |     | $      | (0.26    | )      | $ | 1.70 |   |
|                                                                    |   |     |   |     |   |     |   |
| Diluted                                                                 |   | $        | 2.26   |     | $      | (0.26    | )      | $ | 1.70 |   |
|                                                                    |   |     |   |     |   |     |   |
| Earnings  (loss) per common share (pro forma):                          |   |     |   |     |   |     |   |
|                                                                    |   |     |   |     |   |     |   |
| Basic                                                                   |   | $        | 2.28   |     | $      | (0.24    | )      | $ | 1.61 |   |
|                                                                    |   |     |   |     |   |     |   |
| Diluted                                                                 |   | $        | 2.26   |     | $      | (0.24    | )      | $ | 1.61 |   |

 

**15.  RESTRICTED STOCK AWARDS**

 

On November 26, 2002, the Company made grants of restricted commonstock in the amount of 500,000 shares to its Chief Executive Officer, and125,000 shares to its President and Chief Operating Officer. The restrictionson these shares will lapse seven years from the date of grant (or earlier uponthe death, disability, dismissal without cause or resignation for good reasonof the recipient or upon a change of control of the Company). Upon grant of therestricted stock, an amount of unearned compensation equivalent to the marketvalue at the date of grant was charged to Shareholders’ Equity.  This charge is being amortized to generaland administrative expenses at a rate of $541 per annum (pro rata for theremainder of 2002).

 

On November 4, 2003, the Company made grants of restricted common stockin the amount of 155,000 shares to certain officers and employees of theCompany.  Of this total, 75,000restricted shares were granted to the Chief Executive Officer of the Companyand 30,000 restricted shares were granted to the President of General MaritimeManagement LLC (“GMM”), a wholly-owned subsidiary of the Company.  The remaining 50,000 restricted shares weregranted to other officers and employees of the Company and GMM.  The restrictions on these shares lapse 20%on each anniversary date from the date of grant and become fully vested afterfive years.  Upon grant of therestricted stock, an amount of unearned compensation equivalent to the marketvalue at the date of grant was charged to Shareholders’ Equity.  Amortization of this charge, which isincluded in general and administrative expenses, was $147 in 2003 and will be$876, $497, $301, $169 and $70 in 2004, 2005, 2006, 2007 and 2008.

 

**16.  LEGAL PROCEEDINGS**

 

From time to time the Company has been, and expects to continue to be,subject to legal proceedings and claims in the ordinary course of its business,principally personal injury and property casualty claims. Such claims, even iflacking merit, could result in the expenditure of significant financial andmanagerial resources. The Company is not aware of any legal proceedings or claimsthat it believes will have, individually or in the aggregate, a materialadverse effect on the Company or on its financial condition or results ofoperations.

 

**17.  SUBSEQUENT EVENTS**

 

In February 2004, the Company sold a vessel held for sale for itscarrying value of $10,388, which represents the proceeds from sale of thevessel of $10,600 net of a $212 commission paid to a broker.

 

F-21

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In February 2004, the Company entered into a lease for an aircraft.  The lease has a term of five years andrequires monthly payments of the Company of $125.

 

F-22

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**ITEM8. *SUPPLEMENTARYDATA***

 

**QuarterlyResults of Operations (Unaudited)**

**(Inthousands, except per share amounts)**

 
|                               |   | **2003 Quarter Ended** |   | **2002 Quarter Ended** |   |
|------------------------------------|--------|------------------------|--------|------------------------|--------|
|                               |   | **March 31**           |   | **June 30**            |   | **Sept. 30** |   | **Dec. 31** |   | **March 31** |   | **June 30** |   | **Sept. 30** |   | **Dec. 31** |   |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Voyage revenues                    |   | $                      | 91,493 |                   | $      | 126,248 |   | $ | 109,848 |   | $ | 126,867 |   | $ | 52,966 |   | $ | 54,552 |   | $ | 54,960 |   | $ | 63,879 |   |
| Operating income                   |   | 38,283                 |   | 46,136                 |   | 17,583 |   | 17,559 |   | 4,428 |   | 3,173 |   | (4,430 | ) | 1,600 |   |
| Net Income (Loss)                  |   | 34,379                 |   | 35,735                 |   | 7,049 |   | 7,355 |   | 575 |   | (634 | ) | (7,944 | ) | (1,737 | ) |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (Loss) Per Common  Share: |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                              |   | $                      | 0.93   |                   | $      | 0.97 |   | $ | 0.19 |   | $ | 0.20 |   | $ | 0.02 |   | $ | (0.02 | ) | $ | (0.21 | ) | $ | (0.05 | ) |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                            |   | $                      | 0.92   |                   | $      | 0.96 |   | $ | 0.19 |   | $ | 0.20 |   | $ | 0.02 |   | $ | (0.02 | ) | $ | (0.21 | ) | $ | (0.05 | ) |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Shares            |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding:                       |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                              |   | 36,965                 |   | 36,965                 |   | 36,965 |   | 36,974 |   | 37,000 |   | 36,993 |   | 36,965 |   | 36,965 |   |
|                               |   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                            |   | 37,216                 |   | 37,265                 |   | 37,381 |   | 37,467 |   | 37,000 |   | 36,993 |   | 36,965 |   | 36,965 |   |
|                                    |        |                        |        |                        |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

**ITEM 9.****                 CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

No changes were made to, nor was there anydisagreement with the Company’s independent auditors regarding, the Company’saccounting or financial disclosure.

 

 

**ITEM9A.  CONTROLS AND PROCEDURES**

 

**EVALUATIONOF DISCLOSURE CONTROLS AND PROCEDURES**

 

Within the 90 days prior to the date of thisreport, the Company carried out an evaluation, under the supervision and with theparticipation of the Company’s management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedurespursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective in alerting them timely tomaterial information relating to the Company required to be included in theCompany’s periodic SEC filings.

 

**CHANGESIN INTERNAL CONTROLS**

 

There have been no significant changes in our internal controls or inother factors that could have significantly affected those controls subsequentto the date of our most recent evaluation of internal controls, including anycorrective actions with regard to significant deficiencies and materialweaknesses.

 

**PARTIII**

 

**ITEM10.  DIRECTORS AND EXECUTIVE OFFICERS OFTHE REGISTRANT**

 

Information regarding General Maritime’sdirectors and executive officers is incorporated by reference herein to GeneralMaritime’s Proxy Statement for its Annual Meeting of Shareholders to be held onMay 20, 2004 (the “2004 ProxyStatement”). Information relating to our Code of Conduct and Ethics and to compliancewith

 

50

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Section 16(a) of the 1934 Act is set forth inour 2004 Proxy Statement relating and is incorporated herein by reference.

 

**ITEM11.  EXECUTIVE COMPENSATION**

 

Information regarding compensation of GeneralMaritime’s executive officers and information with respect to CompensationCommittee Interlocks and Insider Participation in compensation decisions isincorporated by reference herein to the 2004 Proxy Statement.

 

**ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

Information regarding the beneficialownership of shares of General Maritime’s common stock by certain persons isincorporated by reference herein to the 2004 Proxy Statement.

 

**ITEM13.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

 

Information regarding certain transactions ofGeneral Maritime is incorporated by reference herein to the 2004 ProxyStatement.

 

**ITEM 14. PRINCIPAL ACCOUNTANT FEES ANDSERVICES**

 

Informationregarding our accountant fees and services is incorporated by reference hereinto the 2004 Proxy Statement.

 

 

**PARTIV**

 

**ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES ANDREPORTS ON FORM 8-K**

 

(a)           The followingdocuments are filed as a part of this report:

 
| 1.     |   | The financial statements listed in the “Index to Consolidated  Financial Statements.”                                                                                                                                                                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.     |   | The financial statement schedules listed in the “Index to Financial  Statement Schedules.”                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 3.     |   | Exhibits:                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.1    |   | Plan of Recapitalization.(1)                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.2    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd. (subsequently renamed General Maritime Corporation), Ajax  Limited Partnership, the limited partners of Ajax Limited Partnership, Genmar  Ajax Ltd., Peter C. Georgiopoulos, Genmar Ajax Corporation and GMC Administration  Ltd.(3) |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.3    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings, Ltd., Ajax II, L.P., the limited partners of Ajax II, L.P.,  Ajax II LLC, Peter C. Georgiopoulos, Genmar Ajax II Corporation and GMC  Administration Ltd.(3)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.4    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., Ajax II, L.P., the limited partners of Boss, L.P., Genmar  Boss Ltd., Peter C. Georgiopoulos, Genmar Boss Corporation and GMC  Administration Ltd.(3)                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                        |
| 2.5    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., General Maritime I, L.P., the limited partners of General  Maritime I, L.P., General                                                                                                                                                |

 

51

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|   |   | Maritime I Corporation, Peter C. Georgiopoulos, Genmar Maritime I  Corporation and GMC Administration Ltd., and amendment thereto.(1)                                                                                                                                                                                                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.6    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., General Maritime II, L.P., the limited partners of  General Maritime II, L.P., General Maritime II Corporation, Peter C.  Georgiopoulos, Genmar Maritime II Corporation and GMC Administration Ltd.(3)                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.7    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., Harriet, L.P., the limited partners of Harriet, L.P.,  General Maritime III Corporation, Peter C. Georgiopoulos, Genmar Harriet  Corporation and GMC Administration Ltd.(3)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.8    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., and Pacific Tankship, L.P., the limited partners of  Pacific Tankship, L.P., Genmar Pacific Ltd., Peter C. Georgiopoulos, Genmar  Pacific Corporation and GMC Administration Ltd.(3)                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.9    |   | Contribution Agreement, dated May 25, 2001, among General Maritime  Ship Holdings Ltd., Genmar Alexandra, LLC Genmar II, LLC, Equili Company,  L.P., Equili Company, LLC, Equili Company II, L.P. and Equili Company II,  LLC.(3)                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.10   |   | Vessel Contribution Agreement, dated April 26, 2001, between General  Maritime Ship Holdings Ltd. and Blystad Shipholding Inc., Liberia.(3)                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.11   |   | Memorandum of Agreement, dated April 26, 2001, between Blystad  Shipholding Inc., Liberia and General Maritime Ship Holdings Ltd.(3)                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.12   |   | Memorandum of Agreement, dated April 26, 2001, between Blystad  Shipholding Inc., Liberia and General Maritime Ship Holdings Ltd.(3)                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.13   |   | Vessel Contribution Agreement, dated May 25, 2001, between General  Maritime Ship Holdings Ltd. and KS Stavanger Prince.(3)                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.14   |   | Memorandum of Agreement, dated May 4, 2001, between KS Stavanger  Prince and General Maritime Ship Holdings Ltd. (3)                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.15   |   | Letter Agreement, dated May 25, 2001, between General Maritime Ship  Holdings, Ltd. and Peter C. Georgiopoulos relating to the acquisition of the  old Maritime Corporation.(3)                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 2.16   |   | Reorganization Agreement, dated as of September 9, 2002, between  General Maritime Corporation and certain of its then existing subsidiaries  relating to the reorganization of General Maritime Corporation and its  various subsidiaries.3.1 Amended and Restated Articles of Incorporation of  General Maritime Ship Holdings Ltd.(1) |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 3.2    |   | Articles of Amendment to Amended and Restated Articles of  Incorporation, changing name from General Maritime Ship Holdings Ltd. to  General Maritime Corporation.(1)                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 3.3    |   | Amended and Restated By-Laws of General Maritime Ship Holdings  Ltd.(1)                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 4.1    |   | Form of Common Stock Certificate of General Maritime Corporation.(2)                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 4.2    |   | Form of Registration Rights Agreement.(3)                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                     |
| 4.3    |   | Form of 10% Senior Global Notes Due 2013, issued pursuant to Rule  144A and Regulation S.(5)                                                                                                                                                                                                                                             |

 

52

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| 4.4    |   | Form of Indenture relating to 10% Senior Notes, due 2013.(5)                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                    |
| 10.1   |   | $300,000,000 Credit Agreement dated June 12, 2001 among General  Maritime Corporation, Christiania Bank og KreditKasse ASA, New York Branch  and various Lenders.(2)    |
|   |   |                                                                                                                                                                    |
| 10.2   |   | Form of First Preferred Ship Mortgage on Marshall Islands Flag  Vessel, related to $300,000,000 Credit Agreement.(1)                                                    |
|   |   |                                                                                                                                                                    |
| 10.3   |   | Form of First Preferred Ship Mortgage on Liberian Flag Vessel,  related to $300,000,000 Credit Agreement.(1)                                                            |
|   |   |                                                                                                                                                                    |
| 10.4   |   | Form of Deed of Covenants to accompany a First Preferred Statutory  Mortgage on Malta Flag Vessel, related to $300,000,000 Credit Agreement.(1)                         |
|   |   |                                                                                                                                                                    |
| 10.5   |   | Form of Deed of Covenants to accompany a First Preferred Statutory  Mortgage on Norwegian Flag Vessel, related to $300,000,000 Credit  Agreement.(1)                    |
|   |   |                                                                                                                                                                    |
| 10.6   |   | Form of Insurance Assignment, related to $300,000,000 Credit  Agreement.(1)                                                                                             |
|   |   |                                                                                                                                                                    |
| 10.7   |   | Form of Earnings Assignment, related to $300,000,000 Credit  Agreement.(1)                                                                                              |
|   |   |                                                                                                                                                                    |
| 10.8   |   | Form of Master Vessel and Collateral Trust Agreement, related to  $300,000,000 Credit Agreement.(1)                                                                     |
|   |   |                                                                                                                                                                    |
| 10.9   |   | Form of Subsidiaries Guaranty, related to $300,000,000 Credit  Agreement.(1)                                                                                            |
|   |   |                                                                                                                                                                    |
| 10.10  |   | Form of Pledge and Security Agreement, related to $300,000,000 Credit  Agreement.(1)                                                                                    |
|   |   |                                                                                                                                                                    |
| 10.11  |   | [reserved]                                                                                                                                                              |
|   |   |                                                                                                                                                                    |
| 10.12  |   | Form of Insurance Assignment, related to $165,000,000 Credit  Agreement.(4)                                                                                             |
|   |   |                                                                                                                                                                    |
| 10.13  |   | Form of Earnings Assignment, related to $165,000,000 Credit  Agreement.(4)                                                                                              |
|   |   |                                                                                                                                                                    |
| 10.14  |   | Form of Subsidiaries Guaranty, related to $165,000,000 Credit  Agreement.(4)                                                                                            |
|   |   |                                                                                                                                                                    |
| 10.15  |   | Form of Pledge and Security Agreement, related to $165,000,000 Credit  Agreement.(4)                                                                                    |
|   |   |                                                                                                                                                                    |
| 10.16  |   | Form of Master Vessel and Collateral Trust Agreement, related to  $165,000,000 Credit Agreement.(4)                                                                     |
|   |   |                                                                                                                                                                    |
| 10.17  |   | Form of First Preferred Ship Mortgage on Marshall Islands Flag  Vessel, related to $165,000,000 Credit Agreement.(4)                                                    |
|   |   |                                                                                                                                                                    |
| 10.18  |   | Form of First Preferred Ship Mortgage on Liberian Flag Vessel,  related to $165,000,000 Credit Agreement.(4)                                                            |
|   |   |                                                                                                                                                                    |
| 10.19  |   | Form of Deed of Covenants to accompany a First Preferred Statutory  Mortgage on Malta Flag Vessel, related to $165,000,000 Credit Agreement.(4)                         |
|   |   |                                                                                                                                                                    |
| 10.20  |   | Escrow Agreement dated June 11, 2001 between General Maritime Ship  Holdings Ltd., the Recipients and Partnerships listed therein and Mellon  Investor Services LLC.(1) |

 

53

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| 10.21  |   | Management Rights Agreement dated June 11, 2001 between General  Maritime Corporation and OCM Principal Opportunities Fund, L.P.(2)                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                         |
| 10.22  |   | Employment Agreement dated June 12, 2001 between General Maritime  Ship Holdings Ltd. and Peter C. Georgiopoulous.(2)                                        |
|   |   |                                                                                                                                                         |
| 10.23  |   | Employment Agreement dated June 12, 2001 between General Maritime  Ship Holdings Ltd. and John P. Tavlarios.(2)                                              |
|   |   |                                                                                                                                                         |
| 10.24  |   | Employment Agreement dated June 12, 2001 between General Maritime  Ship Holdings Ltd. and James C. Christodoulou.(2)                                         |
|   |   |                                                                                                                                                         |
| 10.25  |   | Employment Agreement dated June 12, 2001 between General Maritime  Ship Holdings Ltd. and John C. Georgiopoulos.(2)                                          |
|   |   |                                                                                                                                                         |
| 10.26  |   | Form of General Maritime 2001 Stock Incentive Plan, as amended and  restated, effective December 12, 2002.                                                   |
|   |   |                                                                                                                                                         |
| 10.27  |   | Form of Outside Director Stock Option Grant Certificate.(1)                                                                                                  |
|   |   |                                                                                                                                                         |
| 10.28  |   | Incentive Stock Option Agreement dated June 12, 2001 between General  Maritime Corporation and Peter C. Georgiopoulos.(1)                                    |
|   |   |                                                                                                                                                         |
| 10.29  |   | Incentive Stock Option Agreement dated June 12, 2001 between General  Maritime Corporation and John P. Tavlarios. (1)                                        |
|   |   |                                                                                                                                                         |
| 10.30  |   | Incentive Stock Option Agreement dated June 12, 2001 between General  Maritime Corporation and James C. Christodoulou.(1)                                    |
|   |   |                                                                                                                                                         |
| 10.31  |   | Incentive Stock Option Agreement dated June 12, 2001 between General  Maritime Corporation and John C. Georgiopoulos.(1)                                     |
|   |   |                                                                                                                                                         |
| 10.32  |   | Form of Incentive Stock Option Grant Certificate.(2)                                                                                                         |
|   |   |                                                                                                                                                         |
| 12.1   |   | Computation of Ratio of Earnings to Fixed Changes.(*)                                                                                                        |
|   |   |                                                                                                                                                         |
| 21.1   |   | Subsidiaries of General Maritime Corporation.(*)                                                                                                             |
|   |   |                                                                                                                                                         |
| 23.1   |   | Consent of Independent Auditors.(*)                                                                                                                          |
|   |   |                                                                                                                                                         |
| 31.1   |   | Certification of Chief Executive Officer pursuant to Rule 13(a) —  14(a) and 15(d) — 14(a) of the Securities Exchange Act of 1934, as  amended.(*) |
|   |   |                                                                                                                                                         |
| 31.2   |   | Certification of Chief Financial Officer pursuant to Rule 13(a) —  14(a) and 15(d) — 14(a) of the Securities Exchange Act of 1934, as  amended.(*) |
|   |   |                                                                                                                                                         |
| 32.1   |   | Certification of Chief Executive Officer pursuant to 18 U.S.C.  Section 1350.(*)                                                                             |
|   |   |                                                                                                                                                         |
| 32.2   |   | Certification of Chief Financial Officer pursuant to 18 U.S.C.  Section 1350.(*)                                                                             |
|   |   |                                                                                                                                                         |

 

----

(*)                                 Filed herewith.

(1)                                  Incorporated byreference to Amendment No. 5 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on June 12, 2001.

(2)                                  Incorporated byreference to Amendment No. 4 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on June 6, 2001.

(3)                                  Incorporated byreference to Amendment No. 3 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on May 25, 2001.

(4)                                  Incorporated byreference to General Maritime’s Quarterly Report on Form 10-Q, filed with theSecurities and Exchange Commission on August 14, 2001.

 

54

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(5)                                  Incorporated byreference to General Maritime’s Form S-4 filed with the Securities and ExchangeCommission on June 20, 2003.

 

(b)           Current Reports onForm 8-K.

 

During thethree months ended December 31, 2003, the Registrant filed one report on Form8-K. The report was filed on November 13, 2003, and reported the appointment ofMr. John C. Georgiopoulos as interimchief financial officer of the Company.

 

55

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SIGNATURES

 

Pursuant tothe requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,the Registrant has duly caused this first amended report to be signed on itsbehalf by the undersigned, thereunto duly authorized, in the City of New York,State of New York, on March 15, 2004.

 
|   | GENERAL MARITIME CORPORATION |
|--------|------------------------------|
|   |                         |
|   | By:                          | /s/ Peter C. Georgiopoulos |
|   |                         | Name:  Peter C. Georgiopoulos |
|   |                         | Title: Chairman and Chief Executive Officer |

 

Pursuant to the requirements of the Securities Exchange Act of  1934, this first amended report has beensigned on March 15, 2004, by the following persons in the capacities indicated:

 
|   | **SIGNATURE** |                   | **TITLE** |
|--------|---------------|------------------------|-----------|
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | Peter C. Georgiopoulos |      | CHAIRMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND |
|   |          | Peter C. Georgiopoulos |      | DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | John C. Georgiopoulos  |      | VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY |
|   |          | John C. Georgiopoulos  |      | (PRINCIPAL FINANCIAL AND ACCOUNTING  OFFICER) |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | John P. Tavlarios      |      | DIRECTOR |
|   |          | John P. Tavlarios      |      |   |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | Andrew Cazalet         |      | DIRECTOR |
|   |          | Andrew Cazalet         |      |   |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | William J. Crabtree    |      | DIRECTOR |
|   |          | William J. Crabtree    |      |   |
|   |          |                   |      |   |
|   |          |                   |      |
|   | /s/           | Rex W. Harrington      |      | DIRECTOR |
|   |          | Rex W. Harrington      |      |   |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | Stephen A. Kaplan      |      | DIRECTOR |
|   |          | Stephen A. Kaplan      |      |   |
|   |          |                   |      |
|   |          |                   |      |
|   | /s/           | Peter S. Shaerf        |      | DIRECTOR |
|   |          | Peter S. Shaerf        |      |   |

 

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