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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, 2007
 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
  o þ o
  o þ
 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUERS CLASSES OF COMMON STOCK, AS OF MAY 7,
2007_:




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
INDEX
 PART I:
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2007 (unaudited) and December 31, 2006Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2007 and 2006Condensed Consolidated Statement of Shareholders Equity (unaudited) for the three months ended March 31, 2007Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2007 and 2006Notes to Condensed Consolidated Financial Statements (unaudited)ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3.
    
    Quantitative and Qualitative Disclosures About Market RiskITEM 4.
    
    Controls and ProceduresPART II:
    
    OTHER INFORMATIONITEM 1.
    
    Legal ProceedingsITEM 1A.
    
    Risk FactorsITEM 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsITEM 3.
    
    Defaults Upon Senior SecuritiesITEM 4.
    
    Submission of Matters to a Vote of Security HoldersITEM 5.
    
    Other InformationITEM 6.
    
    ExhibitsSIGNATURESEXHIBIT INDEXEX-12.1 STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEO AND CFO
 2




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Item 1. Financial Statements
  ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 March 31,
    
    
    December 31,2007
    
    
    2006(UNAUDITED)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,028
    
    
    $
    3,210Short-term investments
    
    
    6,000
    
    
    
    13,000Other receivables
    
    
    514
    
    
    
    979Prepaid expenses and accrued income
    
    
    281
    
    
    
    208Total current assets
    
    
    16,823
    
    
    
    17,397NONCURRENT ASSETS:Vessels, net
    
    
    341,196
    
    
    
    344,973Deferred debt issuance costs
    
    
    896
    
    
    
    955Interest rate swap at fair value
    
    
    
    
    
    
    84Total noncurrent assets
    
    
    342,092
    
    
    
    346,012TOTAL ASSETS
    
    $
    358,915
    
    
    $
    363,409LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accrued expenses
    
    $
    601
    
    
    $
    1,028Unearned charter revenues
    
    
    2,188
    
    
    
    2,261Total current liabilities
    
    
    2,789
    
    
    
    3,289NONCURRENT LIABILITIES:Interest rate swap agreement at fair value
    
    
    992
    
    
    
    Long-term debt
    
    
    229,500
    
    
    
    229,500TOTAL LIABILITIES
    
    
    233,281
    
    
    
    232,789SHAREHOLDERS EQUITY:Preference shares, $0.01 par value per
share, 4,000,000 authorized, none issued
or outstanding at March 31, 2007 and
December 31, 2006
    
    
    
    
    
    
    Common stock, $0.01 par value per share;
60,000,000 authorized; 15,500,000 shares
issued and outstanding at March 31, 2007
and December 31, 2006
    
    
    155
    
    
    
    155Additional paid-in capital
    
    
    121,630
    
    
    
    125,590Retained earnings
    
    
    3,849
    
    
    
    4,875TOTAL SHAREHOLDERS EQUITY
    
    
    125,634
    
    
    
    130,620TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    358,915
    
    
    $
    363,409
  3




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 (UNAUDITED)
 FOR THE THREE MONTHSENDED MARCH 31,2007
    
    
    2006REVENUES
    
    $
    17,343
    
    
    $
    17,244OPERATING EXPENSES:Vessel operating expenses
    
    
    4,951
    
    
    
    4,722Depreciation
    
    
    3,777
    
    
    
    3,977General and administrative expenses
    
    
    528
    
    
    
    741TOTAL OPERATING EXPENSES
    
    
    9,256
    
    
    
    9,440OPERATING INCOME
    
    
    8,087
    
    
    
    7,804OTHER (EXPENSE) INCOME:Interest expense
    
    
    (3,377
    )
    
    
    (3,300
    )Interest income
    
    
    216
    
    
    
    144Unrealized gain/(loss) on interest rate swap
    
    
    (1,077
    )
    
    
    4,182NET OTHER (EXPENSE) INCOME
    
    
    (4,238
    )
    
    
    1,026NET INCOME
    
    $
    3,849
    
    
    $
    8,830Earnings per common share, basic and diluted
    
    $
    0.25
    
    
    $
    0.57Weighted average shares outstanding, basic and diluted
    
    
    15,500,000
    
    
    
    15,500,000
  4




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2007
 (DOLLARS IN THOUSANDS)
 Common
    
    
    Paid-in
    
    
    RetainedStock
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance as of January 1, 2007
    
    $
    155
    
    
    $
    125,590
    
    
    $
    4,875
    
    
    $
    130,620Net income
    
    
    
    
    
    
    
    
    
    
    3,849
    
    
    
    3,849Cash dividend paid
    
    
    
    
    
    
    (3,960
    )
    
    
    (4,875
    )
    
    
    (8,835
    )Balance at March 31, 2007 (unaudited)
    
    $
    155
    
    
    $
    121,630
    
    
    $
    3,849
    
    
    $
    125,634
  5




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (DOLLARS IN THOUSANDS)
 (UNAUDITED)
 FOR THE THREE MONTHSENDED MARCH 31,2007
    
    
    2006OPERATING ACTIVITIES:Net income
    
    $
    3,849
    
    
    $
    8,830Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    3,777
    
    
    
    3,977Unrealized loss/(gain) on interest rate swap
    
    
    1,077
    
    
    
    (4,182
    )Amortization of debt issuance costs
    
    
    58
    
    
    
    58CHANGE IN OPERATING ASSETS AND LIABILITIES:Other receivables
    
    
    465
    
    
    
    202Prepaid expenses and accrued income
    
    
    (73
    )
    
    
    4Accrued expenses and other current liabilities
    
    
    (427
    )
    
    
    (1,728
    )Unearned revenues
    
    
    (73
    )
    
    
    (72
    )Net cash provided by operating activities
    
    
    8,653
    
    
    
    7,089INVESTING ACTIVITIES:Capital expenditures on vessels
    
    
    
    
    
    
    (92,000
    )Sale of short-term investments
    
    
    13,000
    
    
    
    2,500Purchase of short-term investments
    
    
    (6,000
    )
    
    
    (4,800
    )Net cash provided (used) by investing activities
    
    
    7,000
    
    
    
    (94,300
    )FINANCING ACTIVITIES:Proceeds from long-term debt
    
    
    
    
    
    
    94,500Dividend payments from retained earnings
    
    
    (4,875
    )
    
    
    (6,458
    )Dividend payments from paid in capital
    
    
    (3,960
    )
    
    
    (1,757
    )Net cash (used) provided by financing activities
    
    
    (8,835
    )
    
    
    86,285Net increase (decrease) in cash
    
    
    6,818
    
    
    
    (926
    )Cash and cash equivalents, beginning of period
    
    
    3,210
    
    
    
    11,839Cash and cash equivalents, end of period
    
    $
    10,028
    
    
    $
    10,913
  6




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




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Stena Consul Stena Compatriot Stena
Concord Stena Companion
     Vessel Type
    
    Year Built
    
    Dwt
    
    Flag
    
    Date AcquiredV-MAXStena Victory
    
    
    2001
    
    
    314,000
    
    Bermuda
    
    November 10, 2004Stena Vision
    
    
    2001
    
    
    314,000
    
    Bermuda
    
    November 10, 2004PanamaxStena Companion
    
    
    2004
    
    
    72,000
    
    Bermuda
    
    November 10, 2004Stena Compatriot
    
    
    2004
    
    
    72,000
    
    Bermuda
    
    November 10, 2004ProductStena Concord
    
    
    2004
    
    
    47,400
    
    Bermuda
    
    November 10, 2004Stena Consul
    
    
    2004
    
    
    47,400
    
    Bermuda
    
    November 10, 2004Stena Concept
    
    
    2005
    
    
    47,400
    
    Bermuda
    
    January 5, 2006Stena Contest
    
    
    2005
    
    
    47,400
    
    Bermuda
    
    January 5, 2006
   8




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Stena Vision,
    
    Stena
    
    StenaStena Victory
    
    Compatriot
    
    Companion
    
    Stena Consul
    
    Stena ConcordPeriod
    
    (V-MAX)
    
    (Panamax)
    
    (Panamax)
    
    (Product)
    
    (Product)Nov. 11, 2006  Nov. 10, 2007
    
    
    36,469
    
    
    
    17,989
    
    
    
    17,989
    
    
    
    16,043
    
    
    
    16,043Nov. 11, 2007  Nov. 10, 2008
    
    
    36,882
    
    
    
    18,306
    
    
    
    18,306
    
    
    
    16,335
    
    
    
    16,335Nov. 11, 2008  Nov. 10, 2009 (1)
    
    
    37,316
    
    
    
    18,639
    
    
    
    18,639
    
    
    
    16,642
    
    
    
    16,642Nov. 11, 2009  Nov. 10, 2010 (2)
    
    
    37,772
    
    
    
    18,989
    
    
    
    18,989
    
    
    
    16,964
    
    
    
    16,964Nov. 11, 2010  Nov. 10, 2011 (3)
    
    
    38,251
    
    
    
    19,356
    
    
    
    19,356
    
    
    
    17,303
    
    
    
    17,303Nov. 11, 2011  Nov. 10, 2012
    
    
    38,753
    
    
    
    19,741
    
    
    
    
    
    
    
    17,658
    
    
    
    Nov. 11, 2012  Nov. 10, 2013
    
    
    
    
    
    
    20,145
    
    
    
    
    
    
    
    18,031
    
    
    
    
 
 (1)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Companionand Stena Concord. There can be no assurance that the Charterer will
exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters for the V-MAX Tankers, Stena Visionand Stena Victory. There can be no assurance that the
Charterer will exercise any option.(3)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Compatriotand Stena Consul. There can be no assurance that the Charterer will
exercise any option.  Stena ConceptStena ContestPeriod
    
    (Product)January 5, 2006  January 4, 2007
    
    $
    19,765January 5, 2007  January 4, 2008
    
    
    20,043January 5, 2008  January 4, 2009
    
    
    20,335January 5, 2009  January 4, 2010 (1)
    
    
    17,942January 5, 2010  January 4, 2011
    
    
    18,264
 9




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Stena ConceptStena ContestPeriod
    
    (Product)January 5, 2011  July 4, 2011
    
    
    18,603July 5, 2011  July 4, 2012 (2)
    
    
    21,158July 5, 2012  July 4, 2013
    
    
    21,531
 
 (1)
    
    At the end of the initial fixed charter period expiring on January 4, 2009,
either the Company or the Charterers may extend the charters on a vessel-by-vessel basis for an
additional 30-month period expiring on July 4, 2011. If the Charterer extends the Charter for this
30-monthly period, the Company would be eligible to earn Additional Hire in addition to Basic Hire.
There can be no assurance that the Charterer will exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters if either one of the Charterers exercises the option described in Footnote 1 above. The
Company would not be eligible to earn Additional Hire over the term of such extensions. There can
be no assurance that the Charterer will exercise any option.   
    
    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.
    10




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Stena Vision,
    
    Stena
    
    StenaStena Victory
    
    Compatriot
    
    Companion
    
    Stena Consul
    
    Stena ConcordPeriod
    
    (V-MAX)
    
    (Panamax)
    
    (Panamax)
    
    (Product)
    
    (Product)Nov. 11, 2006  Nov. 10, 2007
    
    
    8,269
    
    
    
    6,339
    
    
    
    6,339
    
    
    
    5,843
    
    
    
    5,843Nov. 11, 2007  Nov. 10, 2008
    
    
    8,682
    
    
    
    6,656
    
    
    
    6,656
    
    
    
    6,135
    
    
    
    6,135Nov. 11, 2008  Nov. 10, 2009 (1)
    
    
    9,116
    
    
    
    6,989
    
    
    
    6,989
    
    
    
    6,442
    
    
    
    6,442Nov. 11, 2009  Nov. 10, 2010 (2)
    
    
    9,572
    
    
    
    7,339
    
    
    
    7,339
    
    
    
    6,764
    
    
    
    6,764Nov. 11, 2010  Nov. 10, 2011 (3)
    
    
    10,051
    
    
    
    7,706
    
    
    
    7,706
    
    
    
    7,103
    
    
    
    7,103
 11




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Stena Vision,
    
    Stena
    
    StenaStena Victory
    
    Compatriot
    
    Companion
    
    Stena Consul
    
    Stena ConcordPeriod
    
    (V-MAX)
    
    (Panamax)
    
    (Panamax)
    
    (Product)
    
    (Product)Nov. 11, 2011  Nov. 10, 2012
    
    
    10,553
    
    
    
    8,091
    
    
    
    
    
    
    
    7,458
    
    
    
    Nov. 11, 2012  Nov. 10, 2013
    
    
    
    
    
    
    8,495
    
    
    
    
    
    
    
    7,831
    
    
    
    
 
 (1)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Companion and Stena Concord. There can be no assurance that the Charterer
will exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters for the V-MAX Tankers. There can be no assurance that the Charterer will exercise
any option.(3)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Compatriotand Stena Consul. There can be no assurance that the Charterer
will exercise any option.  Stena ConceptStena ContestPeriod
    
    (Product)January 5, 2006  January 4, 2007
    
    $
    5,565January 5, 2007  January 4, 2008
    
    
    5,843January 5, 2008  January 4, 2009
    
    
    6,135January 5, 2009  January 4, 2010 (1)
    
    
    6,442January 5, 2010  January 4, 2011
    
    
    6,764January 5, 2011  July 4, 2011
    
    
    7,103July 5, 2011  July 4, 2012 (2)
    
    
    7,458July 5, 2012  July 4, 2013
    
    
    7,831
 
 (1)
    
    At the end of the initial fixed charter period expiring on January 4, 2009,
either the Company or the Charterers may extend the charters on a vessel-by-vessel basis
for an additional 30-month period expiring on July 4, 2011. If the Charterer extends
the charter for this 30-monthly period, the Company would be eligible to earn Additional
Hire in addition to Basic Hire. There can be no assurance that the Charterer will
exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters if either one of the Charterers exercises the option described in Footnote 1
above. The Company will not be eligible to receive Additional Hire over these periods.
There can be no assurance that the Charterer will exercise any option.   12




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2. ACCOUNTING POLICIES
 Basis of accounting and presentation
  Cash and cash equivalents and short-term investments
  Drydocking
  Estimates and concentrations
   Fair value of financial instruments
 13




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.
 Earnings per share
  Distributions to shareholders
  3. RECENTLY ISSUED ACCOUNTING STANDARDS
    4. CHARTER REVENUES
  14




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Minimum FutureYear
    
    Charter Revenue(In thousands of $)2007
    
    
    50,6222008
    
    
    65,5482009
    
    
    36,5092010
    
    
    11,289
 5. OTHER RECEIVABLES
 March 31,
    
    
    December 31,2007
    
    
    2006(In thousands of $)Additional hire revenue due from Stena/Concordia
    
    $
    514
    
    
    $
    979$
    514
    
    
    $
    979
  6. VESSELS, NET
 March 31,
    
    December 31,2007
    
    2006(In thousands of $)VesselsCost
    
    $
    402,426
    
    
    $
    402,426Accumulated depreciation
    
    
    (61,230
    )
    
    
    (57,453
    )Net book value at end of period
    
    
    341,196
    
    
    
    344,973Spare parts
    
    
    
    
    
    
    Vessels, net
    
    $
    341,196
    
    
    $
    344,973
  DEFERRED DEBT ISSUANCE COST
  March 31,
    
    
    December 31,2007
    
    
    2006(In thousands of $)Debt arrangement fees
    
    $
    1,200
    
    
    $
    1,200Accumulated amortization
    
    
    (304
    )
    
    
    (245
    )Deferred debt issuance cost
    
    $
    896
    
    
    $
    955
 15




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8. DEBT
 March 31,
    
    
    December 31,2007
    
    
    2006(In thousands of $)Secured credit facility
    
    $
    229,500
    
    
    $
    229,500Total debt
    
    $
    229,500
    
    
    $
    229,500
   9. FINANCIAL INSTRUMENTS
 Derivative instruments and hedging activities
      16




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Three months ended
    
    Three months ended($ in thousands)
    
    March 31, 2007
    
    March 30, 2006Interest related to floating rate debt facility
    
    $
    3,547
    
    
    $
    2,960Interest (benefit) cost related to fixed rate swap agreement
    
    
    (221
    )
    
    
    254Total interest incurred under debt facility and interest rate swap
    
    $
    3,326
    
    
    $
    3,214
    17




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10. SHARE CAPITAL
   11. COMMITMENTS AND CONTINGENCIES
 March 31,
    
    December 31,2007
    
    2006(In thousands of $)Ship mortgages
    
    $
    229,500
    
    
    $
    229,500
  th
 Minimum Future VesselYear
    
    Operating Expenses(In thousand of $)2007
    
    
    14,5662008
    
    
    19,6312009
    
    
    10,7102010
    
    
    4,428
    18




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12. RELATED PARTY TRANSACTIONS
   13. SUBSEQUENT EVENTS
  
 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 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.
  19




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OVERVIEW
    Stena Concept Stena
Contest
   Vessel Type
    
    Year Built
    
    Dwt
    
    Flag
    
    Date AcquiredV-MAXStena Victory
    
    
    2001
    
    
    
    314,000
    
    
    Bermuda
    
    November 10, 2004Stena Vision
    
    
    2001
    
    
    
    314,000
    
    
    Bermuda
    
    November 10, 2004PanamaxStena Companion
    
    
    2004
    
    
    
    72,000
    
    
    Bermuda
    
    November 10, 2004Stena Compatriot
    
    
    2004
    
    
    
    72,000
    
    
    Bermuda
    
    November 10, 2004
 20




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Vessel Type
    
    Year Built
    
    Dwt
    
    Flag
    
    Date AcquiredProductStena Concord
    
    
    2004
    
    
    
    47,400
    
    
    Bermuda
    
    November 10, 2004Stena Consul
    
    
    2004
    
    
    
    47,400
    
    
    Bermuda
    
    November 10, 2004Stena Concept
    
    
    2005
    
    
    
    47,400
    
    
    Bermuda
    
    January 5, 2006Stena Contest
    
    
    2005
    
    
    
    47,400
    
    
    Bermuda
    
    January 5, 2006
 OUR CHARTERS
   Stena Consul Stena Compatriot Stena Concord Stena Companion
 Basic Hire Under Our Charters
  21




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##### Table of Contents



Stena Vision,
    
    Stena
    
    StenaStena Victory
    
    Compatriot
    
    Companion
    
    Stena Consul
    
    Stena ConcordPeriod
    
    (V-MAX)
    
    (Panamax)
    
    (Panamax)
    
    (Product)
    
    (Product)Nov. 11, 2006  Nov. 10, 2007
    
    
    36,469
    
    
    
    17,989
    
    
    
    17,989
    
    
    
    16,043
    
    
    
    16,043Nov. 11, 2007  Nov. 10, 2008
    
    
    36,882
    
    
    
    18,306
    
    
    
    18,306
    
    
    
    16,335
    
    
    
    16,335Nov. 11, 2008  Nov. 10, 2009 (1)
    
    
    37,316
    
    
    
    18,639
    
    
    
    18,639
    
    
    
    16,642
    
    
    
    16,642Nov. 11, 2009  Nov. 10, 2010 (2)
    
    
    37,772
    
    
    
    18,989
    
    
    
    18,989
    
    
    
    16,964
    
    
    
    16,964Nov. 11, 2010  Nov. 10, 2011 (3)
    
    
    38,251
    
    
    
    19,356
    
    
    
    19,356
    
    
    
    17,303
    
    
    
    17,303Nov. 11, 2011  Nov. 10, 2012
    
    
    38,753
    
    
    
    19,741
    
    
    
    
    
    
    
    17,658
    
    
    
    Nov. 11, 2012  Nov. 10, 2013
    
    
    
    
    
    
    20,145
    
    
    
    
    
    
    
    18,031
    
    
    
    
 
 (1)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Companionand Stena Concord. There can be no assurance that the Charterer will
exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters for the V-MAX Tankers, Stena Visionand Stena Victory. There can be no assurance that the
Charterer will exercise any option.(3)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Compatriotand Stena Consul. There can be no assurance that the Charterer will
exercise any option.  Stena ConceptStena ContestPeriod
    
    (Product)January 5, 2006  January 4, 2007
    
    $
    19,765January 5, 2007  January 4, 2008
    
    
    20,043January 5, 2008  January 4, 2009
    
    
    20,335January 5, 2009  January 4, 2010 (1)
    
    
    17,942January 5, 2010  January 4, 2011
    
    
    18,264January 5, 2011  July 4, 2011
    
    
    18,603July 5, 2011  July 4, 2012 (2)
    
    
    21,158July 5, 2012  July 4, 2013
    
    
    21,531
 
 (1)
    
    At the end of the initial fixed charter period expiring on January 4, 2009,
either we or the Charterers may extend the charters on a vessel-by-vessel basis for an additional
30-month period expiring on July 4, 2011. If the Charterer extends the Charter 22




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for this 30-monthly period, we would be eligible to earn Additional Hire in addition to Basic
Hire. There can be no assurance that the Charterer will exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters if either one of the Charterers exercises the option described in Footnote 1 above. We
would not be eligible to earn Additional Hire over the term of such extensions. There can be no
assurance that the Charterer will exercise any 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.
   Stena Vision Stena Victory Stena Vision
   23




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OUR SHIP MANAGEMENT AGREEMENTS
      24




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Stena Vision,
    
    Stena
    
    StenaStena Victory
    
    Compatriot
    
    Companion
    
    Stena Consul
    
    Stena ConcordPeriod
    
    (V-MAX)
    
    (Panamax)
    
    (Panamax)
    
    (Product)
    
    (Product)Nov. 11, 2006  Nov. 10, 2007
    
    
    8,269
    
    
    
    6,339
    
    
    
    6,339
    
    
    
    5,843
    
    
    
    5,843Nov. 11, 2007  Nov. 10, 2008
    
    
    8,682
    
    
    
    6,656
    
    
    
    6,656
    
    
    
    6,135
    
    
    
    6,135Nov. 11, 2008  Nov. 10, 2009 (1)
    
    
    9,116
    
    
    
    6,989
    
    
    
    6,989
    
    
    
    6,442
    
    
    
    6,442Nov. 11, 2009  Nov. 10, 2010 (2)
    
    
    9,572
    
    
    
    7,339
    
    
    
    7,339
    
    
    
    6,764
    
    
    
    6,764Nov. 11, 2010  Nov. 10, 2011 (3)
    
    
    10,051
    
    
    
    7,706
    
    
    
    7,706
    
    
    
    7,103
    
    
    
    7,103Nov. 11, 2011  Nov. 10, 2012
    
    
    10,553
    
    
    
    8,091
    
    
    
    
    
    
    
    7,458
    
    
    
    Nov. 11, 2012  Nov. 10, 2013
    
    
    
    
    
    
    8,495
    
    
    
    
    
    
    
    7,831
    
    
    
    
 
 (1)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Companion and Stena Concord. There can be no assurance that the Charterer
will exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters for the V-MAX Tankers. There can be no assurance that the Charterer will exercise
any option.(3)
    
    This period is the first for which the Charterer has the option to extend the
charters for Stena Compatriotand Stena Consul. There can be no assurance that the Charterer
will exercise any option.  Stena ConceptStena ContestPeriod
    
    (Product)January 5, 2006  January 4, 2007
    
    $
    5,565January 5, 2007  January 4, 2008
    
    
    5,843January 5, 2008  January 4, 2009
    
    
    6,135January 5, 2009  January 4, 2010 (1)
    
    
    6,442January 5, 2010  January 4, 2011
    
    
    6,764January 5, 2011  July 4, 2011
    
    
    7,103July 5, 2011  July 4, 2012 (2)
    
    
    7,458July 5, 2012  July 4, 2013
    
    
    7,831
 
 (1)
    
    At the end of the initial fixed charter period expiring on January 4, 2009,
either we or the Charterer may extend the charters on a vessel-by-vessel basis for an
additional 30-month period expiring on July 4, 2011. If the Charterer 25




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extends the charter for this 30-monthly period, we would be eligible to earn
Additional Hire in addition to Basic Hire. There can be no assurance that the
Charterer will exercise any option.(2)
    
    This period is the first for which the Charterer has the option to extend the
charters if the option described in Footnote 1 above is exercised. We will not be
eligible to receive Additional Hire over these periods. There can be no assurance that
the Charterer will exercise any option.   DIVIDEND POLICY
       
    
    the Basic Hire is paid on all of our Vessels and all of our Vessels are on hire for 360
days per fiscal year;
    
    no Additional Hire is paid other than the guaranteed Additional Hire based on the two
current sub-charters with Sun International which will expire within 30 days of June 30,
2007 and within 30 days of September 30, 2007, unless Sun
 26




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International elects to extend one of the sub-charter arrangements and Additional Hire of
$514,000 earned on four of our Panamax and Product tankers in the first three months of 2007;
    
    the V-MAX vessels are returned on the notional termination date 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 term loan
facility;
    
    we pay no U.S. federal income taxes and minimal U.S. state and 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 term loan 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 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 Item 3.  Quantitative and Qualitative Disclosures
about Market Risk  We cannot assure you that we will pay any dividends 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.
  
    
    the amount of cash that was available for dividends in the fiscal year ended December 31, 2006; 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
2007, 2008 and 2009 fiscal years.
 2006
    
    2007
    
    2008
    
    2009(In millions of dollars, exceptper share amounts)Basic Hire(1)
    
    $
    64.3
    
    
    $
    65.3
    
    
    $
    66.2
    
    
    $
    65.3Guaranteed V-MAX Additional Hire(2)
    
    
    2.4
    
    
    
    1.4
    
    
    
    
    
    
    
    Other Additional Hire(3)
    
    
    2.7
    
    
    
    .5
    
    
    
    
    
    
    
    Vessel operating expenses
    
    
    (18.6
    )
    
    
    (19.3
    )
    
    
    (20.3
    )
    
    
    (21.2
    )Cash administrative expenses(4)
    
    
    (2.7
    )
    
    
    (2.3
    )
    
    
    (2.4
    )
    
    
    (2.5
    )Cash interest costs(5)
    
    
    (12.0
    )
    
    
    (12.3
    )
    
    
    (12.3
    )
    
    
    (12.3
    )Cash available for dividends
    
    
    36.1
    
    
    
    33.3
    
    
    
    31.2
    
    
    
    29.3Estimated dividends per share(6)
    
    $
    2.33
    
    
    $
    2.15
    
    
    $
    2.01
    
    
    $
    1.89
 
 (1)
    
    Basic Hire revenues for 2008 and 2009 assume that options available under charter
contracts are exercised by the Charterer. 27




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(2)
    
    The Additional Hire revenue associated with the Sun International sub-charters is
guaranteed, meaning that we will be paid the Additional Hire revenue by Concordia whether
the two V-MAX tankers are in service or not in service, during the terms of the Sun
International sub-charters. The sub-charter with Sun International for the Stena Visionis
due to expire within 30 days of June 30, 2007 and the sub-charter with Sun International
for the Stena Victoryis due to expire within 30 days of September 30, 2007. For a portion
of the current Sun International sub-charter of the Stena Vision, the vessel has not been
in service to Sun International due to the required repair of a reduction gear on the
vessel. As a result, Sun International may elect to extend the term of the sub-charter
arrangement beyond the expiration of the original term of the sub-charter. If Sun
International elects to extend the sub-charter for the Stena Vision, we expect that vessel
to be under sub-charter to Sun International until approximately June 2008. Our estimate of
guaranteed V-MAX Additional Hire revenue assumes that the Sun International sub-charters
will expire as scheduled. Immediately following the expiration of each sub-charter with
Sun International, the applicable V-MAX tanker will commence operating under a new
sub-charter agreement. 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 to be received by 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. Because the Additional Hire
under these sub-charters is not guaranteed, and we cannot determine the exact commencement
date for the new sub-charter agreements, we have not included any Additional Hire related
to these sub-charter agreements in our estimated cash available for dividends. Once the
new sub-charters commence, the profit sharing provisions in the Concordia charters are
expected to result in Additional Hire revenue of approximately $700,000 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.(3)
    
    Other Additional Hire reflects Additional Hire revenues actually earned by our four
Panamax and Product tankers eligible to earn Additional Hire. For the three months ended
March 31, 2007, we have received $514,000 of Additional Hire relating to these four
Vessels. No estimates have been made for the remainder of 2007, 2008 and 2009 as these
Additional Hire revenues are not contractually guaranteed via long-term sub-charters.(4)
    
    General and administrative expenses for 2007 through 2009 do not include any cost for
executive bonuses, which are primarily performance based.(5)
    
    Cash interest costs reflect the benefit of approximately $1.0 million per year from the
2005 termination of the interest rate swap with Fortis Bank. The interest expense for each
year will be approximately $13.3 million ($229.5 million at 5.7325%).(6)
    
    Based on 15,500,000 issued and outstanding common shares.   28




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RESULTS OF OPERATIONS
  Three Months Ended March 31, 2007 Compared to the Three Months Ended March 31, 2006
 Total operating revenues
    Total vessel operating expenses
  Depreciation
  General and administrative expenses
  Net Other Income (Expense)
  29




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Liquidity and Capital Resources
        30




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
  Vessels, Depreciation and Impairment
   31




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 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
 32




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We cannot assure you that we will pay any dividends
    We are highly dependent on the Charterers and their guarantors, Stena and Concordia
  If we cannot refinance our loans, or in the event of a default under our secured term loan
facility, we may have to sell our Vessels, which may leave no additional funds for distributions
to shareholders
  33




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##### Table of Contents



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
       Concordia and Stena are able to influence the Company, including the outcome of shareholder votes
  We are leveraged and subject to restrictions in our financing agreements that impose constraints
on our operating and financing flexibility
  34




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##### 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
     Our operating income could fail to qualify for an exemption from U.S. federal income taxation,
which would reduce our cash flow
  35




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##### Table of Contents



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.
 36




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##### 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
  We have anti-takeover provisions in our bye-laws that may discourage a change of control
 37




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##### Table of Contents




    
    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% 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
    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;
    
    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;
 38




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##### Table of Contents




    
    changes in the production of crude oil, particularly by OPEC 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 term loan facility
  39




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##### 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
   40




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##### 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
   
 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.
  41




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##### Table of Contents



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 pursuant to Rule 13a-14(a) under the Securities Exchange Act of 193431.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adapted32.1
    
    pursuant to Section 906 of the Sarbanes Oxley Act of 2002
 
 (1)
    
    Unless otherwise noted, each exhibit is filed herewith. 42




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##### Table of Contents



SIGNATURES
  ARLINGTON TANKERS LTD.By:
    /s/  Edward TerinoName:
    Edward TerinoTitle:
    Co-Chief Executive Officer and Chief Financial Officer  43




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##### 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 pursuant to Rule 13a-14(a) under the Securities Exchange Act of 193431.2
    
    Certification of 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 adapted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002
 
 (1)
    
    Unless otherwise noted, each exhibit is filed herewith. 44