Arlington Tankers 2Q Results

Wednesday, July 23, 2008

Arlington Tankers announced financial results for the second quarter ended June 30, 2008. For the quarter ended June 30, 2008, the company’s total revenues were $17.4m, consisting of $16.5m in basic vessel charter hire and $900,000 in additional charter hire that the company received under its profit sharing arrangements.
On the basis of the second quarter results, Arlington’s Board of Directors has declared a cash dividend of $0.56 per share. The dividend is payable on August 5, 2008 to shareholders of record at the close of business on August 1, 2008.
The additional charter hire earned during the second 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 $900,000 in additional charter hire, $600,000 was attributed to profit sharing for the two V-MAX vessels. The remaining $300,000 was attributed to additional charter hire from the Company’s two Panamax tankers and the Company’s two Product tankers that are currently eligible to earn additional hire. For these four 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 second quarter of 2008, including depreciation costs of $3.8 million and administrative expenses of approximately $834,000 were $9.9m. The company’s interest expense, net of interest income for the second quarter of 2008, was $3.3 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 second quarter of 2008 was increased by an unrealized gain of approximately $7.3 million, 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 second quarter of 2008 was $11.5 million, or $0.74 per share. Excluding the effect of the unrealized gain on the interest rate swap, the Company’s net income for the second quarter of 2008 was $4.2 million, or $0.27 per share.
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.