##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934.
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934.
 For the period from       to
 Commission file number: 001-32343
 Arlington Tankers Ltd.
 (Exact name of Registrant as specified in its charter)
 Bermuda
    
    98-0460376(Jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 First Floor, The Hayward Building
22 Bermudiana Road
Hamilton HM 11, Bermuda  (Address of principal executive offices)
 (441) 292-4456
 Not applicable.
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUERS CLASSES OF COMMON STOCK, AS OF MAY 6,
2008:




---



##### 



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
INDEX
 PART I:
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Shareholders Equity (unaudited) for the three months ended March 31, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2008 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32ITEM 4.
    
    Controls and Procedures
    
    
    32PART II:
    
    OTHER INFORMATION
    
    
    33ITEM 1.
    
    Legal Proceedings
    
    
    33ITEM 1A.
    
    Risk Factors
    
    
    33ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    43ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43ITEM 5.
    
    Other Information
    
    
    43ITEM 6.
    
    Exhibits
    
    
    43SIGNATURES
    
    
    44EXHIBIT INDEXEX-12.1 Computation of Ratio of Earnings to Fixed ChargesEX-31.1 Section 302 Certification of CEO & CFOEX-32.1 Section 906 Certification of CEO & CFO
  2




---



##### Table of Contents



Item 1. Financial Statements
  ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 March 31,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    15,872
    
    
    $
    6,274Short-term investments
    
    
    
    
    
    
    12,500Prepaid expenses and accrued income
    
    
    200
    
    
    
    184Other receivables
    
    
    847
    
    
    
    304Total current assets
    
    
    16,919
    
    
    
    19,262NONCURRENT ASSETS:Vessels, net
    
    
    325,568
    
    
    
    329,330Deferred debt issuance costs, net
    
    
    658
    
    
    
    717TOTAL ASSETS
    
    $
    343,145
    
    
    $
    349,309LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accrued expenses
    
    $
    728
    
    
    $
    451Unearned charter revenue
    
    
    3,294
    
    
    
    5,693Total current liabilities
    
    
    4,002
    
    
    
    6,144NONCURRENT LIABILITIES:Interest rate swap at fair value
    
    
    14,568
    
    
    
    7,453Long-term debt
    
    
    229,500
    
    
    
    229,500TOTAL LIABILITIES
    
    
    248,090
    
    
    
    243,097SHAREHOLDERS EQUITY:Founder shares, $1.00 par value per share, 12,000 authorized, none issued or outstanding
    
    
    
    
    
    
    Preference shares, $0.01 par value per share, 4,000,000 authorized, none issued or
outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value per share; 60,000,000 authorized; 15,500,000 shares
issued and outstanding
    
    
    155
    
    
    
    155Additional paid-in capital
    
    
    98,054
    
    
    
    106,734Accumulated deficit
    
    
    (3,154
    )
    
    
    (677
    )TOTAL SHAREHOLDERS EQUITY
    
    
    95,055
    
    
    
    106,212TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    343,145
    
    
    $
    349,309
  3




---



##### Table of Contents



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
 FOR THE THREE MONTHSENDED MARCH 31,2008
    
    
    2007OPERATING REVENUES:Charter revenues
    
    $
    17,558
    
    
    $
    17,343OPERATING EXPENSES:Vessel operating expenses, other
    
    
    5,251
    
    
    
    4,951Depreciation
    
    
    3,762
    
    
    
    3,777Administrative expenses
    
    
    623
    
    
    
    528TOTAL OPERATING EXPENSES
    
    
    9,636
    
    
    
    9,256OPERATING INCOME
    
    
    7,922
    
    
    
    8,087OTHER INCOME (EXPENSES):Interest income
    
    
    131
    
    
    
    216Interest (expense), other
    
    
    (3,415
    )
    
    
    (3,377
    )Unrealized loss on interest rate swap
    
    
    (7,115
    )
    
    
    (1,077
    )OTHER EXPENSES, NET
    
    
    (10,399
    )
    
    
    (4,238
    )NET (LOSS) INCOME
    
    $
    (2,477
    )
    
    $
    3,849(Loss) Income per common share, basic and diluted
    
    $
    (0.16
    )
    
    $
    0.25Weighted average shares outstanding, basic and diluted
    
    
    15,500,000
    
    
    
    15,500,000
  4




---



##### Table of Contents



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 FOR THE THREE MONTHS ENDED MARCH 31, 2008
(DOLLARS IN THOUSANDS)
(UNAUDITED)
 Common
    
    
    Paid-in
    
    
    AccumulatedStock
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance as of January 1, 2008
    
    $
    155
    
    
    $
    106,734
    
    
    $
    (677
    )
    
    $
    106,212Net loss
    
    
    
    
    
    
    
    
    
    
    (2,477
    )
    
    
    (2,477
    )Cash dividends paid
    
    
    
    
    
    
    (8,680
    )
    
    
    
    
    
    
    (8,680
    )Balance at March 31, 2008 (unaudited)
    
    $
    155
    
    
    $
    98,054
    
    
    $
    (3,154
    )
    
    $
    95,055
  5




---



##### Table of Contents



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (DOLLARS IN THOUSANDS)
(UNAUDITED)
 FOR THE THREE MONTHSENDED MARCH 31,2008
    
    
    2007OPERATING ACTIVITIES:Net (loss) income
    
    $
    (2,477
    )
    
    $
    3,849Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    3,762
    
    
    
    3,777Unrealized loss on interest rate swap
    
    
    7,115
    
    
    
    1,077Amortization of debt issuance costs
    
    
    59
    
    
    
    58CHANGE IN OPERATING ASSETS AND LIABILITIES:Other receivables
    
    
    (543
    )
    
    
    465Prepaid expenses and accrued income
    
    
    (16
    )
    
    
    (73
    )Accrued expenses and other current liabilities
    
    
    277
    
    
    
    (427
    )Unearned charter revenue
    
    
    (2,399
    )
    
    
    (73
    )Net cash provided by operating activities
    
    
    5,778
    
    
    
    8,653INVESTING ACTIVITIES:Sale of short-term investments
    
    
    12,500
    
    
    
    13,000Purchase of short-term investments
    
    
    
    
    
    
    (6,000
    )Net cash provided by investing activities
    
    
    12,500
    
    
    
    7,000FINANCING ACTIVITIES:Dividend payments from retained earnings
    
    
    
    
    
    
    (4,875
    )Dividend payments from paid in capital
    
    
    (8,680
    )
    
    
    (3,960
    )Net cash used by financing activities
    
    
    (8,680
    )
    
    
    (8,835
    )Net increase in cash
    
    
    9,598
    
    
    
    6,818Cash and cash equivalents, beginning of period
    
    
    6,274
    
    
    
    3,210Cash and cash equivalents, end of period
    
    $
    15,872
    
    
    $
    10,028Supplemental Cash Flow Information  Cash paid for interest
    
    $
    3,326
    
    
    $
    3,326
  6




---



##### Table of Contents



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 Notes to the Condensed Consolidated Financial Statements
 (Unaudited)
 1. GENERAL
   Stena Concept Stena
Contest
  7




---



##### Table of Contents



Stena Consul Stena Compatriot Stena
Concord Stena Companion
     Initial Charter
    
    Latest CharterVessel Type
    
    Year Built
    
    Dwt
    
    Date Acquired
    
    Expiration Date(1)
    
    Expiration Date (1)V-MAXStena Victory
    
    
    2001
    
    
    
    314,000
    
    
    November 10, 2004
    
    November 9, 2009
    
    November 9, 2012Stena Vision
    
    
    2001
    
    
    
    314,000
    
    
    November 10, 2004
    
    November 9, 2009
    
    November 9, 2012PanamaxStena Companion
    
    
    2004
    
    
    
    72,000
    
    
    November 10, 2004
    
    November 9, 2008
    
    November 9, 2011Stena Compatriot
    
    
    2004
    
    
    
    72,000
    
    
    November 10, 2004
    
    November 9, 2010
    
    November 9, 2013ProductStena Concord
    
    
    2004
    
    
    
    47,400
    
    
    November 10, 2004
    
    November 9, 2008
    
    November 9, 2011Stena Consul
    
    
    2004
    
    
    
    47,400
    
    
    November 10, 2004
    
    November 9, 2010
    
    November 9, 2013Stena Concept
    
    
    2005
    
    
    
    47,400
    
    
    January 5, 2006
    
    January 4, 2009
    
    July 4, 2011Stena Contest
    
    
    2005
    
    
    
    47,400
    
    
    January 5, 2006
    
    January 4, 2009
    
    July 4, 2011
 
 (1)
    
    Each of the charters contains renewal options described in greater detail below.  8




---



##### Table of Contents



Stena Vision Stena Victory
 Period
    
    Basic Hire
    
    Base Operating Costs
    
    Operating MarginNov. 11, 2007  Nov. 10, 2008
    
    $
    36,882
    
    
    $
    8,682
    
    
    $
    28,200Nov. 11, 2008  Nov. 10, 2009
    
    
    37,316
    
    
    
    9,116
    
    
    
    28,200Nov. 11, 2009  Nov. 10, 2010
(Option Year 1)(1)
    
    
    37,772
    
    
    
    9,572
    
    
    
    28,200Nov. 11, 2010  Nov. 10, 2011
(Option Year 2)
    
    
    38,251
    
    
    
    10,051
    
    
    
    28,200Nov. 11, 2011  Nov. 10, 2012
(Option Year 3)
    
    
    38,753
    
    
    
    10,553
    
    
    
    28,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel
basis for 3 additional 1 year terms. There can be no assurance that the Charterer will exercise any
such option. Stena Companion Stena Concord
 Stena Companion
    
    Stena ConcordBase Operating
    
    Operating
    
    
    
    
    
    Base Operating
    
    OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Margin
    
    Basic Hire
    
    Costs
    
    MarginNov. 11, 2007 
Nov. 10, 2008
    
    $
    18,306
    
    
    $
    6,656
    
    
    $
    11,650
    
    
    $
    16,335
    
    
    $
    6,135
    
    
    $
    10,200Nov. 11, 2008 
Nov. 10, 2009
(Option Year 1)(1)
    
    
    18,639
    
    
    
    6,989
    
    
    
    11,650
    
    
    
    16,642
    
    
    
    6,442
    
    
    
    10,200Nov. 11, 2009 
Nov. 10, 2010
(Option Year 2)
    
    
    18,989
    
    
    
    7,339
    
    
    
    11,650
    
    
    
    16,964
    
    
    
    6,764
    
    
    
    10,200Nov. 11, 2010 
Nov. 10, 2011
(Option Year 3)
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel
basis for 3 additional 1 year terms. In May 2008, the Company announced that the Charterer
exercised the first of these one-year options for both vessels. There can be no assurance that the
Charterer will exercise any additional options. 9




---



##### Table of Contents



Stena Compatriot Stena Consul
 Stena Compatriot
    
    Stena ConsulBaseBase Operating
    
    Operating
    
    
    
    
    
    Operating
    
    OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Margin
    
    Basic Hire
    
    Costs
    
    MarginNov. 11, 2007 
Nov. 10, 2008
    
    $
    18,306
    
    
    $
    6,656
    
    
    $
    11,650
    
    
    $
    16,335
    
    
    $
    6,135
    
    
    $
    10,200Nov. 11, 2008 
Nov. 10, 2009
    
    
    18,639
    
    
    
    6,989
    
    
    
    11,650
    
    
    
    16,642
    
    
    
    6,442
    
    
    
    10,200Nov. 11, 2009 
Nov. 10, 2010
    
    
    18,989
    
    
    
    7,339
    
    
    
    11,650
    
    
    
    16,964
    
    
    
    6,764
    
    
    
    10,200Nov. 11, 2010 
Nov. 10, 2011
(Option Year 1)(1)
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200Nov. 11, 2011 
Nov. 10, 2012
(Option Year 2)
    
    
    19,741
    
    
    
    8,091
    
    
    
    11,650
    
    
    
    17,658
    
    
    
    7,458
    
    
    
    10,200Nov. 11, 2012 
Nov. 10, 2013
(Option Year 3)
    
    
    20,145
    
    
    
    8,495
    
    
    
    11,650
    
    
    
    18,031
    
    
    
    7,831
    
    
    
    10,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel basis for 3
additional 1 year terms. There can be no assurance that the Charterer will exercise any such
option. Stena Concept Stena Contest
 Base OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Operating MarginJan. 5, 2007  Jan 4, 2008
    
    $
    20,043
    
    
    $
    5,843
    
    
    $
    14,200Jan. 5, 2008  Jan. 4, 2009
    
    
    20,335
    
    
    
    6,135
    
    
    
    14,200Jan. 5, 2009  Jan. 4, 2010
(Option Period 1)(1)
    
    
    17,942
    
    
    
    6,442
    
    
    
    11,500Jan. 5, 2010  Jan. 4, 2011
(Option Period 1)
    
    
    18,264
    
    
    
    6,764
    
    
    
    11,500Jan. 5, 2011  July 4, 2011
(Option Period 1)
    
    
    18,603
    
    
    
    7,103
    
    
    
    11,500July 5, 2011  July 4, 2012
(Option Period 2) (2)
    
    
    21,158
    
    
    
    7,458
    
    
    
    13,700July 5, 2012  July 4, 2013
(Option Period 3)
    
    
    21,531
    
    
    
    7,831
    
    
    
    13,700
 
 (1)
    
    In May 2008, the Company announced that the Charterer exercised its option to extend
these Charters for an additional 30-month period expiring on July 4, 2011. As a result, the Company
will be eligible to earn Additional Hire in addition to Basic Hire during this 30-month period.(2)
    
    This period is the first for which the Charterer has the option to extend these Charters
as a result of exercising the option described in Footnote 1 above. The Company would not be
eligible to earn Additional Hire over the term of any extension. There can be no assurance that
the Charterer will exercise any such option. 10




---



##### Table of Contents




    
    a weighted average of the time charter hire per day received by the Charterer for any
periods during the calculation period, determined as described below, that the Initial
Vessel is sub-chartered by the Charterer under a time charter, less ship broker commissions
paid by the Charterer in an amount not to exceed 2.5% of such time charter hire and
commercial management fees paid by the Charterer in an amount not to exceed 1.25% of such
time charter hire; and
    
    the time charter equivalent hire for any periods during the calculation period that the
Vessel is not sub-chartered by the Charterer under a time charter.
  Stena
Victory Stena
Vision
  Stena
Victory Stena Vision Stena Victory Stena Vision Stena Vision
 Stena Victory Stena Vision
 11




---



##### Table of Contents



2. ACCOUNTING POLICIES
 Basis of accounting and presentation
  12




---



##### Table of Contents



Cash and cash equivalents and short-term investments
  Drydocking provisions
 Stena Vision
 Estimates and concentrations
   Earnings
(loss) per share
  Distributions to shareholders
  13




---



##### Table of Contents



3. RECENTLY ISSUED ACCOUNTING STANDARDS
 Fair Value
Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No.51
 Business Combinations
 4. CHARTER REVENUES
 Stena Victory Stena Vision Stena Victory
 14




---



##### Table of Contents



Stena Vision
 Minimum FutureYear
    
    Charter Revenue(In thousands of $)2008
    
    
    52,7122009
    
    
    68,8182010
    
    
    68,0622011
    
    
    59,7472012
    
    
    38,142Thereafter
    
    
    11,987
 5. OTHER RECEIVABLES
 March 31,
    
    
    December 31,2008
    
    
    2007(In thousands of $)Additional hire revenue due from Stena and Concordia
    
    $
    847
    
    
    $
    304$
    847
    
    
    $
    304
  6. VESSELS, NET
 March 31,
    
    
    December 31,2008
    
    
    2007(In thousands of $)VesselsCost
    
    $
    402,426
    
    
    $
    402,426Accumulated depreciation
    
    
    (76,858
    )
    
    
    (73,096
    )Net book value at end of period
    
    
    325,568
    
    
    
    329,330Spare parts
    
    
    
    
    
    
    Vessels, net
    
    $
    325,568
    
    
    $
    329,330
  DEFERRED DEBT ISSUANCE COST
  March 31,
    
    
    December 31,2008
    
    
    2007(In thousands of $)Debt arrangement fees
    
    $
    1,200
    
    
    $
    1,200Accumulated amortization
    
    
    542
    
    
    
    483Deferred debt issuance cost
    
    $
    658
    
    
    $
    717
 15




---



##### Table of Contents



8. DEBT
 March 31,
    
    
    December 31,2008
    
    
    2007(In thousands of $)Secured credit facility
    
    $
    229,500
    
    
    $
    229,500Total debt
    
    $
    229,500
    
    
    $
    229,500
   9. FINANCIAL INSTRUMENTS
 Derivative instruments and hedging activities
 Accounting for Derivative Instruments and
Hedging Activities
   16




---



##### Table of Contents



Three months ended
    
    
    Three months endedMarch 31, 2008
    
    
    March 31, 2007(In thousands of $)Interest related to floating rate debt facility
    
    $
    3,237
    
    
    $
    3,547Interest cost (benefit) related to swap agreement
    
    
    89
    
    
    
    (221
    )Total interest incurred under debt facility and interest rate swap
    
    $
    3,326
    
    
    $
    3,326
   10. FAIR VALUE MEASUREMENT
     17




---



##### Table of Contents



11. SHARE CAPITAL
   12. COMMITMENTS AND CONTINGENCIES
 March 31, 2008
    
    December 31, 2007(In thousands of $)Ship mortgages
    
    $
    229,500
    
    
    $
    229,500
  th
 Minimum Future Vessel OperatingYear
    
    Expenses(In thousands of $)2008
    
    
    15,2942009
    
    
    21,2752010
    
    
    22,3392011
    
    
    20,0932012
    
    
    12,379Thereafter
    
    
    5,126
    13. RELATED PARTY TRANSACTIONS
  18




---



##### Table of Contents



14. SUBSEQUENT EVENTS
  Stena Companion Stena
Concord Stena Contest Stena Concept
 19




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    future operating or financial results;
    
    future payments of quarterly dividends and the availability of cash for payment of
quarterly dividends;
    
    statements about future, pending or recent acquisitions, business strategy, areas of
possible expansion, and expected capital spending or operating expenses;
    
    statements about tanker market trends, including charter rates and factors affecting
vessel supply and demand;
    
    expectations about future revenues from sub-charters;
    
    expectations about the availability of vessels to purchase, the time which it may take to
construct new vessels, or vessels useful lives; and
    
    our ability to repay our secured credit facility at maturity, to obtain additional
financing and to obtain replacement charters for our Vessels.
   OVERVIEW
   20




---



##### Table of Contents



Stena Concept Stena
Contest
   Initial Charter
    
    Latest CharterVessel Type
    
    Year Built
    
    Dwt
    
    Date Acquired
    
    Expiration Date(1)
    
    Expiration Date (1)V-MAXStena Victory
    
    
    2001
    
    
    
    314,000
    
    
    November 10, 2004
    
    November 9, 2009
    
    November 9, 2012Stena Vision
    
    
    2001
    
    
    
    314,000
    
    
    November 10, 2004
    
    November 9, 2009
    
    November 9, 2012PanamaxStena Companion
    
    
    2004
    
    
    
    72,000
    
    
    November 10, 2004
    
    November 9, 2008
    
    November 9, 2011Stena Compatriot
    
    
    2004
    
    
    
    72,000
    
    
    November 10, 2004
    
    November 9, 2010
    
    November 9, 2013ProductStena Concord
    
    
    2004
    
    
    
    47,400
    
    
    November 10, 2004
    
    November 9, 2008
    
    November 9, 2011Stena Consul
    
    
    2004
    
    
    
    47,400
    
    
    November 10, 2004
    
    November 9, 2010
    
    November 9, 2013Stena Concept
    
    
    2005
    
    
    
    47,400
    
    
    January 5, 2006
    
    January 4, 2009
    
    July 4, 2011Stena Contest
    
    
    2005
    
    
    
    47,400
    
    
    January 5, 2006
    
    January 4, 2009
    
    July 4, 2011
 
 (1)
    
    Each of the charters contains renewal options described in greater detail below. 21




---



##### Table of Contents



OUR CHARTERS
   Stena Consul Stena Compatriot Stena Concord Stena Companion
 Basic Hire under Our Charters
  Stena Vision Stena Victory
 Period
    
    Basic Hire
    
    Base Operating Costs
    
    Operating MarginNov. 11, 2007  Nov. 10, 2008
    
    $
    36,882
    
    
    $
    8,682
    
    
    $
    28,200Nov. 11, 2008  Nov. 10, 2009
    
    
    37,316
    
    
    
    9,116
    
    
    
    28,200Nov. 11, 2009  Nov. 10, 2010
(Option Year 1)(1)
    
    
    37,772
    
    
    
    9,572
    
    
    
    28,200Nov. 11, 2010  Nov. 10, 2011
(Option Year 2)
    
    
    38,251
    
    
    
    10,051
    
    
    
    28,200Nov. 11, 2011  Nov. 10, 2012
(Option Year 3)
    
    
    38,753
    
    
    
    10,553
    
    
    
    28,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel basis for 3
additional 1 year terms. There can be no assurance that the Charterer will exercise any such
option. 22




---



##### Table of Contents



Stena Companion Stena Concord .
 Stena Companion
    
    Stena ConcordBase Operating
    
    Operating
    
    
    
    
    
    Base Operating
    
    OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Margin
    
    Basic Hire
    
    Costs
    
    MarginNov. 11, 2007 
Nov. 10, 2008
    
    $
    18,306
    
    
    $
    6,656
    
    
    $
    11,650
    
    
    $
    16,335
    
    
    $
    6,135
    
    
    $
    10,200Nov. 11, 2008 
Nov. 10, 2009
(Option Year 1)(1)
    
    
    18,639
    
    
    
    6,989
    
    
    
    11,650
    
    
    
    16,642
    
    
    
    6,442
    
    
    
    10,200Nov. 11, 2009 
Nov. 10, 2010
(Option Year 2)
    
    
    18,989
    
    
    
    7,339
    
    
    
    11,650
    
    
    
    16,964
    
    
    
    6,764
    
    
    
    10,200Nov. 11, 2010 
Nov. 10, 2011
(Option Year 3)
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel basis for 3
additional 1 year terms. In May 2008, we announced that the Charterer exercised the first of these
one-year options for both vessels. There can be no assurance that the Charterer will exercise any
additional options. Stena Compatriot Stena Consul, .
 Stena Compatriot
    
    Stena ConsulBaseBase Operating
    
    Operating
    
    
    
    
    
    Operating
    
    OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Margin
    
    Basic Hire
    
    Costs
    
    MarginNov. 11, 2007 
Nov. 10, 2008
    
    $
    18,306
    
    
    $
    6,656
    
    
    $
    11,650
    
    
    $
    16,335
    
    
    $
    6,135
    
    
    $
    10,200Nov. 11, 2008 
Nov. 10, 2009
    
    
    18,639
    
    
    
    6,989
    
    
    
    11,650
    
    
    
    16,642
    
    
    
    6,442
    
    
    
    10,200Nov. 11, 2009 
Nov. 10, 2010
    
    
    18,989
    
    
    
    7,339
    
    
    
    11,650
    
    
    
    16,964
    
    
    
    6,764
    
    
    
    10,200Nov. 11, 2010 
Nov. 10, 2011
(Option Year 1)(1)
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200Nov. 11, 2011 
Nov. 10, 2012
(Option Year 2)
    
    
    19,741
    
    
    
    8,091
    
    
    
    11,650
    
    
    
    17,658
    
    
    
    7,458
    
    
    
    10,200Nov. 11, 2012 
Nov. 10, 2013
(Option Year 3)
    
    
    20,145
    
    
    
    8,495
    
    
    
    11,650
    
    
    
    18,031
    
    
    
    7,831
    
    
    
    10,200
 
 (1)
    
    The Charterer has the option to extend these Charters on a vessel-by-vessel basis for 3
additional 1 year terms. There can be no assurance that the Charterer will exercise any such
option. 23




---



##### Table of Contents



Stena Concept Stena Contest.
 Base OperatingPeriod
    
    Basic Hire
    
    Costs
    
    Operating MarginJan. 5, 2007  Jan 4, 2008
    
    $
    20,043
    
    
    $
    5,843
    
    
    $
    14,200Jan. 5, 2008  Jan. 4, 2009
    
    
    20,335
    
    
    
    6,135
    
    
    
    14,200Jan. 5, 2009  Jan. 4, 2010
(Option Period 1)(1)
    
    
    17,942
    
    
    
    6,442
    
    
    
    11,500Jan. 5, 2010  Jan. 4, 2011
(Option Period 1)
    
    
    18,264
    
    
    
    6,764
    
    
    
    11,500Jan. 5, 2011  July 4, 2011
(Option Period 1)
    
    
    18,603
    
    
    
    7,103
    
    
    
    11,500July 5, 2011  July 4, 2012
(Option Period 2) (2)
    
    
    21,158
    
    
    
    7,458
    
    
    
    13,700July 5, 2012  July 4, 2013
(Option Period 3)
    
    
    21,531
    
    
    
    7,831
    
    
    
    13,700
 
 (1)
    
    In May 2008, we announced that the Charterer exercised its option to extend these
Charters for an additional 30-month period expiring on July 4, 2011. As a result, we will be
eligible to earn Additional Hire in addition to Basic Hire during this 30-month period.(2)
    
    This period is the first for which the Charterer has the option to extend these Charters
as a result of exercising the option described in Footnote 1 above. We would not be eligible to
earn Additional Hire over the term of any extension. There can be no assurance that the Charterer
will exercise any such option. Additional Hire under Our Charters
   
    
    a weighted average of the time charter hire per day received by the Charterer for any
periods during the calculation period, determined as described below, that the Initial
Vessel is sub-chartered by the Charterer under a time charter, less ship broker commissions
paid by the Charterer in an amount not to exceed 2.5% of such time charter hire and
commercial management fees paid by the Charterer in an amount not to exceed 1.25% of such
time charter hire; and
 
    
    the time charter equivalent hire for any periods during the calculation period that the
Vessel is not sub-chartered by the Charterer under a time charter.
    24




---



##### Table of Contents



Stena Victory Stena Vision
 Stena
Victory Stena Vision Stena Victory Stena Vision Stena
Vision
 Stena Victory Stena Vision
 OUR SHIP MANAGEMENT AGREEMENTS
     25




---



##### Table of Contents



DIVIDEND POLICY
       26




---



##### Table of Contents




    
    the Basic Hire is paid on all of our Vessels, all of our Vessels are on hire for 360
days per fiscal year and the options to extend the charters are exercised by the
Charterers;
    
    no Additional Hire is paid on our two Panamax Tankers or our two Product Tankers that
are eligible to earn Additional Hire other than the $231,000 earned in the first three
months of 2008;
    
    the Additional Hire continues to be paid in connection with the sub-charter of the Stena
Visionto Sun International, which is expected to expire within 30 days of July 31, 2008;
    
    Additional Hire of approximately $350,000 per Vessel per quarter is paid on the V-MAX
Vessels in connection with the Eiger Shipping sub-charters, assuming that the V-MAX Vessels
operate for 90 days per quarter (the Eiger Shipping sub-charger for the Stena Victory
commenced on October 20, 2007 and the Eiger Shipping sub-charter for the Stena Visionis
expected to commence within 30 days of July 31, 2008);
    
    the V-MAX Vessels are returned on the notional termination dates of the sub-charter
within the 60-day delivery window;
    
    we have no cash expenses or liabilities other than the ship management agreements, our
current directors fees, the current salaries and benefits of our employees, currently
anticipated administrative and other expenses and interest under our secured credit
facility;
    
    we pay no U.S. federal income taxes and minimal U.S. and state payroll taxes;
    
    we have no requirement to fund any required capital expenditures with respect to our
Vessels;
    
    we do not suffer the loss or constructive loss of any of our Vessels;
    
    no material cash reserves or requirements are established by the actions of our Board of
Directors or management;
    
    we remain in compliance with our secured credit facility which requires, among other
things, that the fair market value of our Vessels exceeds 140% of our borrowings under the
facility (or 125% if the loan amount at the time of such dividend all of our Vessels are on
time charter for a remaining period of at least 12 months) in order to pay dividends; and
    
    we do not issue any additional common shares or other securities or borrow any
additional funds.
  We cannot assure you that our dividends will in fact be equal to the amounts set forth below. The
amount of future dividends set forth in the table below represents only an estimate of future
dividends based on the list of assumptions set forth above. The amount of future dividends, if
any, could be affected by various factors, including the loss of a Vessel, required capital
expenditures, cash reserves established by our Board of Directors, increased or unanticipated
expenses, a change in our dividend policy, increased borrowings, more restrictive debt covenants,
higher interest rates, principal amortization requirements or future issuances of securities, many
of which will be beyond our control. As a result, the amount of dividends actually paid may vary
from the amounts currently estimated and such variations may be material. There can be no
assurance that any dividends will be paid. See Part II. Item 1A.  Risk Factors  Company
Specific Risk Factors  We cannot assure you that we will pay any dividends,  If we cannot
refinance our secured credit facility, or in the event of a default under the facility, we may have
to sell our Vessels, which may leave no additional funds for distributions to shareholders and
We may not be able to re-charter our Vessels profitably after they expire, unless they are
extended at the option of the Charterers.
 27




---



##### Table of Contents




    
    the amount of cash that was available for dividends in the fiscal year ended
December 31, 2007; and
    
    based on the assumptions and the other matters in the preceding paragraphs, our
estimate of the amount of cash likely to be available for dividends for each of the
2008, 2009, and 2010 fiscal years.
 2007
    
    2008
    
    2009
    
    2010(In millions of dollars, except per share amounts)Basic Hire(1)
    
    $
    65.9
    
    
    $
    66.3
    
    
    $
    65.3
    
    
    $
    66.4V-MAX Additional Hire  Sun International sub-charters(2)
    
    
    2.0
    
    
    
    .5
    
    
    
    
    
    
    
    V-MAX Additional Hire  Eiger Shipping sub-charters(3)
    
    
    .3
    
    
    
    2.2
    
    
    
    2.6
    
    
    
    .8Additional Hire  Panamax and Product tankers(4)
    
    
    2.0
    
    
    
    .2
    
    
    
    
    
    
    
    Vessel operating expenses
    
    
    (20.0
    )
    
    
    (20.3
    )
    
    
    (21.2
    )
    
    
    (22.3
    )Cash administrative expenses(5)
    
    
    (2.2
    )
    
    
    (2.4
    )
    
    
    (2.5
    )
    
    
    (2.5
    )Cash interest costs(6)
    
    
    (12.0
    )
    
    
    (12.3
    )
    
    
    (12.3
    )
    
    
    (12.3
    )Cash available for dividends
    
    
    36.1
    
    
    
    34.2
    
    
    
    31.8
    
    
    
    30.1Estimated dividends per share(7)
    
    $
    2.32
    
    
    $
    2.21
    
    
    $
    2.05
    
    
    $
    1.94
 
 (1)
    
    Basic Hire revenues for 2008, 2009 and 2010 assume that all options available under the
charter contracts are exercised by the Charterer. Basic Hire reflected in the above table
includes $700,000 of revenue in 2008, $28.8 million of revenue in 2009, and $56.0 million
of revenues in 2010 arising from such option exercises.(2)
    
    The sub-charter with Sun International for the StenaVictory expired on October 20,
2007. The Additional Hire revenue associated with the ongoing sub-charter of the Stena
Vision to Sun International is guaranteed, meaning that we will be paid the Additional Hire
revenue by Concordia whether the V-MAX tanker is in service or not in service, during the
term of the sub-charter. The sub-charter with Sun International for the Stena Visionis
due to expire within 30 days of July 31, 2008. Our estimate above reflects guaranteed V-MAX
Additional Hire revenue from Sun International sub-charter through July 31, 2008.(3)
    
    Immediately following the expiration of the sub-charter of the Stena Victorywith Sun
International, that Vessel commenced operating under a new sub-charter agreement with Eiger
Shipping. In addition, immediately following the expiration of the sub-charter of the
Stena Visionwith Sun International, we expect that Vessel to commence operating under a
new sub-charter agreement with Eiger Shipping. During the term of these new sub-charters,
we will continue to earn guaranteed Basic Hire from Concordia and we will also earn
Additional Hire under the profit sharing provisions of the Charters. Additional Hire for
the V-MAX tankers under the new sub-charters will be based on a fixed time charter hire
payable by Eiger Shipping to Concordia under the sub-charters and the Additional Hire is
not exposed to fluctuations in spot market rates. Additional Hire revenues under these
sub-charters are not guaranteed, meaning that we will earn Additional Hire only if the
Vessel is in service. The sub-charter for Eiger Shipping related to the Stena Victory
commenced on October 20, 2007. Our estimated cash available for dividends includes our
estimated Additional Hire for the Stena Victory, based on the October 20, 2007 commencement
date. Our estimated cash available for dividends includes our estimated Additional Hire for
the Stena Vision, assuming that the Eiger Shipping sub-charter for that Vessel begins on
August 1, 2008. While the V-MAX Vessels are sub-chartered to Eiger Shipping, the profit
sharing provisions in the Concordia charters are expected to result in Additional Hire
revenue of approximately $350,000 per Vessel per quarter, based on the time charter rates
under the sub-charters and assuming the Vessels operate 90 days per quarter, in addition to
the guaranteed Basic Hire.(4)
    
    Reflects Additional Hire revenues actually earned in 2007 and in the three months ended
March 31, 2008 by our two Panamax tankers and our two Product tankers that are eligible to
earn Additional Hire. No estimates have been made for the remainder of 2008, or for 2009
and 2010, as these Additional Hire revenues are not determinable due to volatility and
unpredictability of various factors, including spot market rates which are used to compute
Additional Hire revenues.(5)
    
    General and administrative expenses for 2008 through 2010 do not include any cost for
executive bonuses, which are primarily performance based.(6)
    
    Cash interest costs are adjusted to reflect a benefit of approximately $1.0 million per
year from the 2005 termination of an interest rate swap. The gain recorded on the
termination of this swap is being distributed from cash to reduce the effect on dividends
from refinancing of the debt at a higher interest cost. The gross interest expense for each
year will be approximately $13.3 million ($229.5 million at 5.7325%).(7)
    
    Based on 15,500,000 issued and outstanding common shares. 28




---



##### Table of Contents



RESULTS OF OPERATIONS
 Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007
 Total operating revenues, net
    Total vessel operating expenses
  29




---



##### Table of Contents



Depreciation
  Administrative expenses
  Net Other Expense
    Liquidity and Capital Resources
   30




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
  31




---



##### Table of Contents



Vessels, Depreciation and Impairment
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   32




---



##### Table of Contents



PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Risk Factors
 The following important factors, among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this report or presented elsewhere by
management from time to time.
 Company Specific Risk Factors
 We cannot assure you that we will pay any dividends
     33




---



##### Table of Contents



We are highly dependent on the Charterers and their guarantors, Stena and Concordia
  If we cannot refinance our secured credit facility, or in the event of a default under the
facility, we may have to sell our Vessels, which may leave no additional funds for distributions
to shareholders
   We may not be able to re-charter our Vessels profitably after their Charters expire, unless they
are extended at the option of the Charterers
   34




---



##### Table of Contents



Stena and Concordias ownership interest in our company can have significant influence over the
Company, including the outcome of shareholder votes and our ability to conduct future business or
modify existing agreements with Stena or Concordia
  
    
    prior to the date of the transaction that resulted in the shareholder becoming an
interested shareholder, our board of directors approved either the business combination
or the transaction that resulted in the shareholder becoming an interested shareholder;
or
    
    upon consummation of the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of our issued and
outstanding voting shares at the time the transaction commenced.
  We are leveraged and subject to restrictions in our financing agreements that impose constraints
on our operating and financing flexibility
  35




---



##### Table of Contents



We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to
us in order to satisfy our financial and other obligations
  U.S. tax authorities could treat us as a passive foreign investment company, which could have
adverse U.S. federal income tax consequences to U.S. shareholders
     36




---



##### Table of Contents



Our operating income could fail to qualify for an exemption from U.S. federal income taxation,
which would reduce our cash flow
    U.S. investors who own our common shares may have more difficulty in protecting their interests
than U.S. investors who own shares of a Delaware corporation
  Interested Directors.
 
    
    the material facts as to such interested directors relationship or interests were
disclosed or were known to the Board of Directors and the board had in good faith authorized
the transaction by the affirmative vote of a majority of the disinterested directors;
    
    such material facts were disclosed or were known to the stockholders entitled to vote on
such transaction and the transaction was specifically approved in good faith by vote of the
majority of shares entitled to vote thereon; or
    
    the transaction was fair as to the corporation as of the time it was authorized, approved
or ratified.
  Shareholders Suits.
 37




---



##### Table of Contents



Indemnification of Directors.
   Bermuda law and our bye-laws permit our Board of Directors to establish preference shares having
terms which could reduce or eliminate dividends payable to our common shareholders
  Our bye-laws restrict shareholders from bringing certain legal action against our officers and
directors
  38




---



##### Table of Contents



We have anti-takeover provisions in our bye-laws that may discourage a change of control
  
    
    a classified Board of Directors with staggered three-year terms, elected without
cumulative voting;
    
    directors can only be removed for cause and only with the affirmative vote of holders of
at least 80% of the common shares issued and outstanding;
    
    advance notice for nominations of directors by shareholders and for shareholders to
include matters to be considered at annual meetings;
    
    our Board of Directors to determine the powers, preferences
and rights of our preference shares and to issue the preference shares without shareholder approval; and
    
    a requirement that amalgamations, sales of assets and certain other transactions with
persons owning 15% or more of our voting securities, which we refer to as interested
shareholders, be approved by holders of at least 66 2/3% of our issued and outstanding
voting shares not owned by the interested shareholder, subject to certain exceptions.
  Industry Specific Risk Factors
 The highly cyclical nature of the tanker industry may lead to volatile changes in charter rates
and vessel values which may adversely affect our earnings
   Stena Vision
 Factors beyond our control may adversely affect the value of our Vessels
  
    
    demand for oil and oil products, which affect the need for tanker capacity;
 39




---



##### Table of Contents




    
    global and regional economic and political conditions which among other things, could
impact the supply of oil as well as trading patterns and the demand for various types of
vessels;
    
    changes in the production of crude oil, particularly by OPEC members and other key
producers, which impact the need for tanker capacity;
    
    developments in international trade;
    
    changes in seaborne and other transportation patterns, including changes in the distances
that cargoes are transported;
    
    environmental concerns and regulations;
    
    weather; and
    
    competition from alternative sources of energy.
  
    
    the number of newbuilding deliveries;
    
    restrictions on vessels from entering into certain trades based upon their age, safety or
other factors;
    
    the scrapping rate of older vessels; and
    
    the number of vessels that are out of service.
 An over supply of new vessels may adversely affect charter rates and vessel values
  Terrorist attacks and international hostilities can affect the tanker industry, which could
adversely affect our business
  The value of our Vessels may fluctuate and adversely affect our liquidity and may result in
breaches under our secured credit facility
  40




---



##### Table of Contents



We operate in the highly competitive international tanker market which could affect our position
if the Charterers do not renew our Charters
  Compliance with environmental laws or regulations may adversely affect our business
  The shipping industry has inherent operational risks, which may not be adequately covered by
insurance
   41




---



##### Table of Contents



Maritime claimants could arrest our tankers, which could interrupt the Charterers or our cash
flow
  Governments could requisition our Vessels during a period of war or emergency without adequate
compensation
  Rising or high oil prices may affect demand for oil, and subsequently demand for oil tankers may
fall.
  Risks Related To Our Common Shares
 If a significant number of our common shares are sold in the market, the market price of our
common shares could significantly decline, even if our business is doing well
   42




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
  ExhibitNumber
    
    Description of Exhibit(1)12.1
    
    Statement re: Computation of Ratio of Earnings to Fixed Charges31.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(a) under the Securities Exchange
Act of 193432.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes Oxley Act of 2002
 
 (1)   Unless otherwise noted, each exhibit is filed herewith. 43




---



##### Table of Contents



SIGNATURES
  ARLINGTON TANKERS LTD.By:

/s/
EDWARD TERINOName:
    Edward TerinoTitle:
    Chief Executive Officer, Chief Financial Officer and
President  44




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit(1)12.1
    
    Statement re: Computation of Ratio of Earnings to Fixed Charges31.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(a) under the Securities Exchange
Act of 193432.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes Oxley Act of 2002
 
 (1)   Unless otherwise noted, each exhibit is filed herewith. 45