Arlington Tankers Ltd. yesterday announced financial results for the third quarter ended September 30, 2008. For the quarter ended September 30, 2008, the Company's total revenues were $17.9 million, consisting of $16.7 million in basic vessel charter hire and $1.2 million in additional charter hire that the Company received under its profit sharing arrangements. Arlington's Board of Directors has declared a cash dividend of $0.57 per share. The dividend is payable on November 4, 2008 to shareholders of record at the close of business on October 31, 2008.
The additional charter hire earned during the third quarter of 2008 was derived from profit sharing arrangements under the time charters of the Company's V-MAX, Panamax and Product tankers. Of the $1.2 million in additional charter hire, $700,000 was attributed to profit sharing for the two V-MAX vessels. The remaining $500,000 was attributed to additional charter hire from the Company's two Panamax tankers. For these two vessels, the average time charter equivalent rates under the Company's profit sharing agreements over the preceding twelve months were in excess of contractual minimum levels.
The Company's operating expenses during the third quarter of 2008, including depreciation costs of $3.9 million and administrative expenses of $2.7 million were $11.8 million. Included in the $2.7 million of administrative expenses are $2.3 million of expenses incurred in connection with the Company's pending merger with General Maritime Corporation. These merger costs were funded with a portion of the Company's interest rate swap benefit realized in 2005 that had not been previously distributed to shareholders. The Company's interest expense, net of interest income for the third quarter of 2008, was $3.4 million. This expense represents interest under the Company's $229.5 million, secured credit facility with The Royal Bank of Scotland plc.
The Company's net income for the third quarter of 2008 was decreased by an unrealized loss of approximately $270,000, representing the change in the fair value of the Company's interest rate swap arrangement related to its secured credit facility with The Royal Bank of Scotland plc. As a result, the Company's net income for the third quarter of 2008 was $2.4 million, or $0.16 per share. Excluding the expenses incurred in connection with the pending General Maritime merger and the effect of the unrealized loss on the interest rate swap, the Company's net income for the third quarter of 2008 was $4.9 million, or $0.32 per share.
On August 5, 2008, the Company entered into a definitive agreement with General Maritime whereby the two companies will combine in a stock-for-stock combination. Under the terms of the definitive agreement, shareholders of General Maritime will receive 1.340 shares of the combined company for each share of General Maritime held, and shareholders of Arlington Tankers will receive one share of the combined company for each share of Arlington Tankers held. The completion of the proposed merger remains subject to approval by the shareholders of Arlington and General Maritime, and certain other conditions. The transaction is expected to be completed by the end of the fourth quarter of 2008.
"We continue to be very excited about our pending combination with General Maritime," said Edward Terino, Chief Executive Officer, President and Chief Financial Officer of Arlington. "We believe that the merger will provide Arlington's shareholders the opportunity to participate in the potential increased future value of a larger company with an attractive business profile. The combined company will have a young, diverse fleet of vessels, a management team with experience in consolidations and a strong platform for long-term dividend and fleet growth. Following the merger, the combined company is expected to follow a partial dividend payout with an initial cash dividend target of $2.00 per share annually. Benefits of the combined company also include a charter revenue stream of approximately $450 million under contract through 2013, and estimated cash cost savings of $7.5 million expected to be realized in the first year of post-closing operations."
All of Arlington's eight vessels are currently trading on time charter contracts to subsidiaries of Stena AB and Concordia Maritime AB. The charters have terms that expire at various dates, with the charters for four vessels expiring in 2009, the charters for two vessels expiring in 2010 and the charters for two vessels expiring in 2011. All of the charter contracts also include options to extend the terms of the charters. During the second quarter of 2008, the Company announced that Stena had exercised the first of its three one-year options for the Stena Companion and Stena Concord, and its 30-month options for the Stena Contest and Stena Concept.
Each charter contract provides for fixed-rate basic charter hire during the operating period. In addition to the fixed-rate basic charter hire, the Company's two V-MAX vessels, two Panamax tankers and two of the Company's four Product tankers currently have the possibility of receiving additional charter hire from the time charterers through profit sharing arrangements related to the performance of the tanker markets on specified geographic routes, or from actual time charter rates. As a result of Stena's exercise of the option to extend the charters for the Stena Contest and Stena Concept, these vessels will have the possibility of receiving additional charter hire during the 30-month period from January 5, 2009 through July 4, 2011. Tanker freight rates are volatile and additional charter hire for the Panamax and Product tankers is not guaranteed. The Company's two V-MAX vessels are receiving additional hire from the time charterers through profit sharing arrangements based on sub-charters with Sun International and Eiger Shipping, SA, an affiliate of the shipping branch of LukOil International Trading and Supply Company. During the third quarter of 2008, the two-year sub-charter with Eiger Shipping, SA, for the Stena Vision commenced.
Mr. Terino added, "We are very pleased with overall results for the third quarter of 2008. Despite the recent turmoil in the financial markets and declines in share prices across the shipping sector, Arlington delivered on its dividend guidance. In addition, our profit sharing arrangements generated positive cash flows for dividend distribution for the sixteenth consecutive quarter since we commenced operations in 2004."
Dividend Policy
Arlington has paid quarterly cash dividends in amounts substantially equal to the charter hire revenues received, less cash expenses and any adjustments for cash reserves established or drawn down by the Company's Board of Directors.
The Company is not providing dividend guidance for the remainder of 2008 because future dividends will be the responsibility of the combined company in the pending combination with General Maritime, assuming the transaction closes before the end of 2008.
The additional charter hire earned during the third quarter of 2008 was derived from profit sharing arrangements under the time charters of the Company's V-MAX, Panamax and Product tankers. Of the $1.2 million in additional charter hire, $700,000 was attributed to profit sharing for the two V-MAX vessels. The remaining $500,000 was attributed to additional charter hire from the Company's two Panamax tankers. For these two vessels, the average time charter equivalent rates under the Company's profit sharing agreements over the preceding twelve months were in excess of contractual minimum levels.
The Company's operating expenses during the third quarter of 2008, including depreciation costs of $3.9 million and administrative expenses of $2.7 million were $11.8 million. Included in the $2.7 million of administrative expenses are $2.3 million of expenses incurred in connection with the Company's pending merger with General Maritime Corporation. These merger costs were funded with a portion of the Company's interest rate swap benefit realized in 2005 that had not been previously distributed to shareholders. The Company's interest expense, net of interest income for the third quarter of 2008, was $3.4 million. This expense represents interest under the Company's $229.5 million, secured credit facility with The Royal Bank of Scotland plc.
The Company's net income for the third quarter of 2008 was decreased by an unrealized loss of approximately $270,000, representing the change in the fair value of the Company's interest rate swap arrangement related to its secured credit facility with The Royal Bank of Scotland plc. As a result, the Company's net income for the third quarter of 2008 was $2.4 million, or $0.16 per share. Excluding the expenses incurred in connection with the pending General Maritime merger and the effect of the unrealized loss on the interest rate swap, the Company's net income for the third quarter of 2008 was $4.9 million, or $0.32 per share.
On August 5, 2008, the Company entered into a definitive agreement with General Maritime whereby the two companies will combine in a stock-for-stock combination. Under the terms of the definitive agreement, shareholders of General Maritime will receive 1.340 shares of the combined company for each share of General Maritime held, and shareholders of Arlington Tankers will receive one share of the combined company for each share of Arlington Tankers held. The completion of the proposed merger remains subject to approval by the shareholders of Arlington and General Maritime, and certain other conditions. The transaction is expected to be completed by the end of the fourth quarter of 2008.
"We continue to be very excited about our pending combination with General Maritime," said Edward Terino, Chief Executive Officer, President and Chief Financial Officer of Arlington. "We believe that the merger will provide Arlington's shareholders the opportunity to participate in the potential increased future value of a larger company with an attractive business profile. The combined company will have a young, diverse fleet of vessels, a management team with experience in consolidations and a strong platform for long-term dividend and fleet growth. Following the merger, the combined company is expected to follow a partial dividend payout with an initial cash dividend target of $2.00 per share annually. Benefits of the combined company also include a charter revenue stream of approximately $450 million under contract through 2013, and estimated cash cost savings of $7.5 million expected to be realized in the first year of post-closing operations."
All of Arlington's eight vessels are currently trading on time charter contracts to subsidiaries of Stena AB and Concordia Maritime AB. The charters have terms that expire at various dates, with the charters for four vessels expiring in 2009, the charters for two vessels expiring in 2010 and the charters for two vessels expiring in 2011. All of the charter contracts also include options to extend the terms of the charters. During the second quarter of 2008, the Company announced that Stena had exercised the first of its three one-year options for the Stena Companion and Stena Concord, and its 30-month options for the Stena Contest and Stena Concept.
Each charter contract provides for fixed-rate basic charter hire during the operating period. In addition to the fixed-rate basic charter hire, the Company's two V-MAX vessels, two Panamax tankers and two of the Company's four Product tankers currently have the possibility of receiving additional charter hire from the time charterers through profit sharing arrangements related to the performance of the tanker markets on specified geographic routes, or from actual time charter rates. As a result of Stena's exercise of the option to extend the charters for the Stena Contest and Stena Concept, these vessels will have the possibility of receiving additional charter hire during the 30-month period from January 5, 2009 through July 4, 2011. Tanker freight rates are volatile and additional charter hire for the Panamax and Product tankers is not guaranteed. The Company's two V-MAX vessels are receiving additional hire from the time charterers through profit sharing arrangements based on sub-charters with Sun International and Eiger Shipping, SA, an affiliate of the shipping branch of LukOil International Trading and Supply Company. During the third quarter of 2008, the two-year sub-charter with Eiger Shipping, SA, for the Stena Vision commenced.
Mr. Terino added, "We are very pleased with overall results for the third quarter of 2008. Despite the recent turmoil in the financial markets and declines in share prices across the shipping sector, Arlington delivered on its dividend guidance. In addition, our profit sharing arrangements generated positive cash flows for dividend distribution for the sixteenth consecutive quarter since we commenced operations in 2004."
Dividend Policy
Arlington has paid quarterly cash dividends in amounts substantially equal to the charter hire revenues received, less cash expenses and any adjustments for cash reserves established or drawn down by the Company's Board of Directors.
The Company is not providing dividend guidance for the remainder of 2008 because future dividends will be the responsibility of the combined company in the pending combination with General Maritime, assuming the transaction closes before the end of 2008.