##### 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 September 30, 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(Jurisdiction of incorporation or organization)
    
    98-0460376(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 oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o  o þ
 THE
NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUERS CLASSES OF
COMMON STOCK, AS OF NOVEMBER 7, 2008:




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##### 



ARLINGTON TANKERS LTD. AND SUBSIDIARIES
INDEX
 PART I:
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements
    
    3Condensed Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007
    
    3Condensed Consolidated Statements of Operations (unaudited) for the three and nine months endedSeptember 30, 2008 and 2007
    
    4Condensed Consolidated Statement of Shareholders Equity (unaudited) for the nine months endedSeptember 30, 2008
    
    5Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September30, 2008 and 2007
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    21ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    32ITEM 4.
    
    Controls and Procedures
    
    33PART II:
    
    OTHER INFORMATION
    
    34ITEM 1.
    
    Legal Proceedings
    
    34ITEM 1A.
    
    Risk Factors
    
    34ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    45ITEM 3.
    
    Defaults Upon Senior Securities
    
    45ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    45ITEM 5.
    
    Other Information
    
    45ITEM 6.
    
    Exhibits
    
    45SIGNATURES
    
    46EXHIBIT INDEXEx-10.1 Letter Agreement, dated as of August 5, 2008Ex-10.2 Executive Retention Agreement, dated as of October 17, 2008Ex-12.1 Statement re: Computation of Ratio of Earnings to fixed chargesEx-31.1 Section 302 Certification of the CEO & CFOEx-32.1 Section 906 Certification of the CEO & CFO
  2




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##### Table of Contents



Item 1. Financial Statements
  
 ARLINGTON TANKERS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 Sept. 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    15,268
    
    
    $
    6,274Short-term investments
    
    
    
    
    
    
    12,500Prepaid expenses and accrued income
    
    
    92
    
    
    
    184Other receivables
    
    
    1,167
    
    
    
    304Total current assets
    
    
    16,527
    
    
    
    19,262NONCURRENT ASSETS:Vessels, net
    
    
    317,829
    
    
    
    329,330Deferred debt issuance costs, net
    
    
    539
    
    
    
    717TOTAL ASSETS
    
    $
    334,895
    
    
    $
    349,309LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accrued expenses
    
    $
    2,804
    
    
    $
    451Unearned charter revenue
    
    
    3,409
    
    
    
    5,693Total current liabilities
    
    
    6,213
    
    
    
    6,144NONCURRENT LIABILITIES:Interest rate swap at fair value
    
    
    7,552
    
    
    
    7,453Long-term debt
    
    
    229,500
    
    
    
    229,500TOTAL LIABILITIES
    
    
    243,265
    
    
    
    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
    
    
    91,475
    
    
    
    106,734Accumulated deficit
    
    
    
    
    
    
    (677
    )TOTAL SHAREHOLDERS EQUITY
    
    
    91,630
    
    
    
    106,212TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    334,895
    
    
    $
    349,309
  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 MONTHS
    
    
    FOR THE NINE MONTHSENDED SEPTEMBER 30,
    
    
    ENDED SEPTEMBER 30,2008
    
    
    2007
    
    
    2008
    
    
    2007OPERATING REVENUES:Charter revenues
    
    $
    17,851
    
    
    $
    17,512
    
    
    $
    52,847
    
    
    $
    52,630OPERATING EXPENSES:Vessel operating expenses, other
    
    
    5,138
    
    
    
    4,937
    
    
    
    15,568
    
    
    
    14,901Depreciation
    
    
    3,891
    
    
    
    3,861
    
    
    
    11,501
    
    
    
    11,456Administrative expenses
    
    
    2,748
    
    
    
    564
    
    
    
    4,205
    
    
    
    1,707TOTAL OPERATING EXPENSES
    
    
    11,777
    
    
    
    9,362
    
    
    
    31,274
    
    
    
    28,064OPERATING INCOME
    
    
    6,074
    
    
    
    8,150
    
    
    
    21,573
    
    
    
    24,566OTHER INCOME (EXPENSE):Interest income
    
    
    68
    
    
    
    216
    
    
    
    266
    
    
    
    645Interest (expense), other
    
    
    (3,452
    )
    
    
    (3,452
    )
    
    
    (10,282
    )
    
    
    (10,244
    )Unrealized (loss) on interest rate swap
    
    
    (269
    )
    
    
    (4,955
    )
    
    
    (99
    )
    
    
    (2,624
    )OTHER INCOME (EXPENSE), NET
    
    
    (3,653
    )
    
    
    (8,191
    )
    
    
    (10,115
    )
    
    
    (12,223
    )NET INCOME (LOSS)
    
    $
    2,421
    
    
    $
    (41
    )
    
    $
    11,458
    
    
    $
    12,343Earnings (loss) per common share, basic and diluted
    
    $
    0.16
    
    
    $
    (0.00
    )
    
    $
    0.74
    
    
    $
    0.80Weighted average shares outstanding, basic and diluted
    
    
    15,500,000
    
    
    
    15,500,000
    
    
    
    15,500,000
    
    
    
    15,500,000
  4




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(DOLLARS IN THOUSANDS)
(UNAUDITED)
 Common
    
    Paid-in
    
    AccumulatedStock
    
    Capital
    
    Deficit
    
    TotalBalance as of January 1, 2008
    
    $
    155
    
    
    $
    106,734
    
    
    $
    (677
    )
    
    $
    106,212Net income
    
    
    
    
    
    
    
    
    
    
    11,458
    
    
    
    11,458Cash dividends paid
    
    
    
    
    
    
    (15,259
    )
    
    
    (10,781
    )
    
    
    (26,040
    )Balance at September 30, 2008 (unaudited)
    
    $
    155
    
    
    $
    91,475
    
    
    $
    
    
    
    $
    91,630
  5




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ARLINGTON TANKERS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
 FOR THE NINE MONTHSENDED SEPTEMBER 30,2008
    
    
    2007OPERATING ACTIVITIES:Net income
    
    $
    11,458
    
    
    $
    12,343Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    11,501
    
    
    
    11,456Unrealized loss on interest rate swap
    
    
    99
    
    
    
    2,624Amortization of debt issuance costs
    
    
    178
    
    
    
    178CHANGE IN OPERATING ASSETS AND LIABILITIES:Other receivables
    
    
    (863
    )
    
    
    (216
    )Prepaid expenses and accrued income
    
    
    92
    
    
    
    546Accrued expenses and other current liabilities
    
    
    2,353
    
    
    
    90Unearned charter revenue
    
    
    (2,284
    )
    
    
    Net cash provided by operating activities
    
    
    22,534
    
    
    
    27,021INVESTING ACTIVITIES:Sale of short-term investments
    
    
    12,500
    
    
    
    31,400Purchase of short-term investments
    
    
    
    
    
    
    (30,900
    )Net cash provided by investing activities
    
    
    12,500
    
    
    
    500FINANCING ACTIVITIES:Dividend payments from retained earnings
    
    
    (10,781
    )
    
    
    (17,258
    )Dividend payments from paid in capital
    
    
    (15,259
    )
    
    
    (9,712
    )Net cash used by financing activities
    
    
    (26,040
    )
    
    
    (26,970
    )Net increase in cash
    
    
    8,994
    
    
    
    551Cash and cash equivalents, beginning of period
    
    
    6,274
    
    
    
    3,210Cash and cash equivalents, end of period
    
    $
    15,268
    
    
    $
    3,761Supplemental Cash Flow Information  Cash paid for interest
    
    $
    10,282
    
    
    $
    10,244
  6




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##### Table of Contents



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




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Companion Stena Concord Stena Companion
     8




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##### Table of Contents



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.    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
    
    
    37,772
    
    
    
    9,572
    
    
    
    28,200(Option Year 1)(1)Nov. 11, 2010  Nov. 10, 2011
    
    
    38,251
    
    
    
    10,051
    
    
    
    28,200(Option Year 2)Nov. 11, 2011  Nov. 10, 2012
    
    
    38,753
    
    
    
    10,553
    
    
    
    28,200(Option Year 3)
 
 (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. 9




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Stena Companion Stena Concord
 Stena Companion
    
    Stena ConcordBase
    
    
    
    
    
    
    
    
    
    BaseOperating
    
    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
    
    
    
    10,200(Option Year 1)(1)Nov. 11, 2009 
Nov. 10, 2010
    
    
    18,989
    
    
    
    7,339
    
    
    
    11,650
    
    
    
    16,964
    
    
    
    6,764
    
    
    
    10,200(Option Year 2)Nov. 11, 2010 
Nov. 10, 2011
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200(Option Year 3)
 
 (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 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 ConsulBase
    
    
    
    
    
    
    
    
    
    BaseOperating
    
    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
    
    
    19,356
    
    
    
    7,706
    
    
    
    11,650
    
    
    
    17,303
    
    
    
    7,103
    
    
    
    10,200(Option Year 1)(1)Nov. 11, 2011 
Nov. 10, 2012
    
    
    19,741
    
    
    
    8,091
    
    
    
    11,650
    
    
    
    17,658
    
    
    
    7,458
    
    
    
    10,200(Option Year 2)Nov. 11, 2012 
Nov. 10, 2013
    
    
    20,145
    
    
    
    8,495
    
    
    
    11,650
    
    
    
    18,031
    
    
    
    7,831
    
    
    
    10,200(Option Year 3)
 
 (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. 10




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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 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.   
    
    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
 11




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Stena
Victory Stena Vision Stena Victory Stena Vision
 Stena Victory Stena Vision
      12




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




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Earnings (loss) per share
  Distributions to shareholders
  3. RECENTLY ISSUED ACCOUNTING STANDARDS
 Fair Value Measurements Determining the Fair Value of a Financial Asset When the Market for
That Asset is Not Active
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Business Combinations
 Disclosures about Derivative Instruments and
Hedging ActivitiesAn Amendment of FASB Statement No. 133 Accounting for
Derivative Instruments and Hedging Activities
 14




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The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 4. CHARTER REVENUES
 Stena Victory Stena Vision Stena Victory Stena Vision
 Minimum FutureYear
    
    Charter Revenue(In thousands of $)2008
    
    
    17,7562009
    
    
    68,8182010
    
    
    68,0622011
    
    
    67,4012012
    
    
    53,764Thereafter
    
    
    19,954
 5. OTHER RECEIVABLES
 September 30,
    
    December 31,2008
    
    2007(In thousands of $)Additional hire revenue due from Stena and Concordia
    
    $
    1,167
    
    
    $
    304$
    1,167
    
    
    $
    304
  15




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##### Table of Contents



6. VESSELS, NET
 September 30,
    
    December 31,2008
    
    2007(In thousands of $)VesselsCost
    
    $
    402,426
    
    
    $
    402,426Accumulated depreciation
    
    
    (84,597
    )
    
    
    (73,096
    )Net book value at end of period
    
    
    317,829
    
    
    
    329,330Spare parts
    
    
    
    
    
    
    Vessels, net
    
    $
    317,829
    
    
    $
    329,330
  7. DEFERRED DEBT ISSUANCE COST
  September 30,
    
    December 31,2008
    
    2007(In thousands of $)Debt arrangement fees
    
    $
    1,200
    
    
    $
    1,200Accumulated amortization
    
    
    (661
    )
    
    
    (483
    )Deferred debt issuance cost
    
    $
    539
    
    
    $
    717
 8. DEBT
 September 30,
    
    December 31,2008
    
    2007(In thousands of $)Secured credit facility
    
    $
    229,500
    
    
    $
    229,500Total debt
    
    $
    229,500
    
    
    $
    229,500
    16




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##### Table of Contents



9. FINANCIAL INSTRUMENTS
 Derivative instruments and hedging activities
 Accounting for Derivative Instruments and Hedging Activities
    Nine months ended
    
    Nine months endedSeptember 30, 2008
    
    September 30, 2007(In thousands of $)Interest related to floating rate debt facility
    
    $
    7,319
    
    
    $
    10,630Interest cost (benefit) related to swap agreement
    
    
    2,694
    
    
    
    (653
    )Total interest incurred under debt facility and interest rate swap
    
    $
    10,013
    
    
    $
    9,977
  17




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10. FAIR VALUE MEASUREMENT
     11. SHARE CAPITAL
    18




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##### Table of Contents



12. COMMITMENTS AND CONTINGENCIES
 September 30, 2008
    
    December 31, 2007(In thousands of $)Ship mortgages
    
    $
    229,500
    
    
    $
    229,500
  th
 Year
    
    Minimum Future Vessel Operating Expenses(In thousands of $)2008
    
    
    5,1892009
    
    
    21,2752010
    
    
    22,3392011
    
    
    22,7922012
    
    
    17,972Thereafter
    
    
    8,024
    19




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##### Table of Contents



13. RELATED PARTY TRANSACTIONS
   14. SUBSEQUENT EVENTS
  20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    our ability to consummate our pending combination with General Maritime Corporation;
    
    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
   21




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##### 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. PENDING MERGER WITH GENERAL MARITIME
  22




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##### Table of Contents



OUR CHARTERS
   Stena Consul Stena Compatriot Stena Concord Stena Companion Stena Concord Stena Companion
 Basic Hire under Our Charters
  23




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##### Table of Contents



Stena Vision Stena Victory
 BaseBasic
    
    Operating
    
    OperatingPeriod
    
    Hire
    
    Costs
    
    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
    
    
    
    
    
    
    
    
    
    BaseBasic
    
    Operating
    
    Operating
    
    Basic
    
    Operating
    
    OperatingPeriod
    
    Hire
    
    Costs
    
    Margin
    
    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 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. 24




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##### Table of Contents



Stena Compatriot Stena Consul, .
 Stena
Compatriot
    

Stena
ConsulBase
    
    
    
    
    
    
    
    
    
    BaseBasic
    
    Operating
    
    Operating
    
    Basic
    
    Operating
    
    OperatingPeriod
    
    Hire
    
    Costs
    
    Margin
    
    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.
 BaseBasic
    
    Operating
    
    OperatingPeriod
    
    Hire
    
    Costs
    
    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 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. 25




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##### Table of Contents



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 Victory Stena Vision
 Stena
Victory Stena Vision Stena Victory Stena Vision
 Stena Victory Stena Vision
 26




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OUR SHIP MANAGEMENT AGREEMENTS
        DIVIDEND POLICY
   27




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28




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RESULTS OF OPERATIONS
 Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007
 Total operating revenues
    Total vessel operating expenses
  Depreciation
  Administrative expenses
  Net Other Expense
  29




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##### Table of Contents



Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007
 Total operating revenues
   Total vessel operating expenses
  Depreciation
  Administrative expenses
  Net Other Expense
   30




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LIQUIDITY AND CAPITAL RESOURCES
         31




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
  Vessels, Depreciation and Impairment
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   32




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Item 4. Controls and Procedures
   33




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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
     34




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##### 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
   35




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##### 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.
  36




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We are leveraged and subject to restrictions in our financing agreements that impose constraints
on our operating and financing flexibility
   Our combination with General Maritime may not be completed
  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
   37




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##### 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.
 38




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##### Table of Contents




    
    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.
    Indemnification of Directors.
   39




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##### Table of Contents



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
  
    
    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.
  Our shareholder rights plan could prevent a change in control of us in instances in which some
shareholders may believe a change in control is in their best interests
  40




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##### Table of Contents



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;
    
    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.
 
 41




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##### Table of Contents



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
  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
  42




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##### Table of Contents



The shipping industry has inherent operational risks, which may not be adequately covered by
insurance
   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
  43




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##### Table of Contents



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
   44




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##### 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)10.1
    
    Letter agreement, dated as of
August 5, 2008 and countersigned by the Company on
September 25, 2008, as amended by the letters dated
September 2, 2008 and September 23, 2008, by and among the
Company, The Royal Bank of Scotland plc and certain subsidiaries of
the Company10.2
    
    Executive Retention Agreement,
dated as of October 17, 2008, by and between the Company and Edward Terino12.1
    
    Statement re: Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934.32.1
    
    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




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##### Table of Contents



SIGNATURES
  ARLINGTON TANKERS LTD.By:
    /s/ EDWARD TERINOName:
    Edward TerinoTitle:
    Chief Executive Officer, Chief Financial Officer and
President  46




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit(1)10.1
    
    Letter agreement, dated as of
August 5, 2008 and countersigned by the Company on
September 25, 2008, as amended by the letters dated
September 2, 2008 and September 23, 2008, by and among the
Company, The Royal Bank of Scotland plc and certain subsidiaries of
the Company10.2
    
    Executive Retention Agreement,
dated as of October 17, 2008, by and between the Company and Edward Terino12.1
    
    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 1934.32.1
    
    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. 47