FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) 
OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the transition period from                  to                 

COMMISSION FILE NUMBER

001-16531

GENERAL MARITIME CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (212) 763-5600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý   No o

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý   No o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No ý

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF NOVEMBER 4, 2005:

Common Stock, par value $0.01 per share 38,678,245 shares

GENERAL MARITIME CORPORATION AND SUBSIDIARIES
INDEX

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Item 1.    Financial Statements

GENERAL MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

See notes to consolidated financial statements.

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GENERAL MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE DATA)

(UNAUDITED)

See notes to consolidated financial statements.

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GENERAL MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005

(IN THOUSANDS)

See notes to consolidated financial statements.

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GENERAL MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

See notes to consolidated financial statements.

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GENERAL MARITIME CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

1.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS — General Maritime Corporation (the “Company”) through its subsidiaries is a provider of international transportation services of seaborne crude oil. The Company’s fleet is comprised of both Aframax and Suezmax vessels. Most of the Company’s vessels are currently operating in the Atlantic basin, which consists primarily of ports in the Caribbean, South and Central America, the United States, Western Africa, the Mediterranean, Europe and the North Sea. The Company operates its business in one business segment, which is the transportation of international seaborne crude oil.

The Company’s vessels are primarily available for charter on a spot voyage or time charter basis. Under a spot voyage charter, which generally lasts between two and ten weeks, the owner of a vessel agrees to provide the vessel for the transport of specific goods between specific ports in return for the payment of an agreed upon freight per ton of cargo or, alternatively, for a specified total amount. All operating costs are typically paid by the owner of the vessel and specified voyage costs such as fuel, canal and port costs are typically paid by the owner of the vessel.

A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily or monthly hire rate. In time charters, operating costs are typically paid by the owner of the vessel and specified voyage costs such as fuel, canal and port charges are paid by the charterer.

BASIS OF PRESENTATION — The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of financial position and operating results have been included in the statements. Interim results are not necessarily indicative of results for a full year. Reference is made to the December 31, 2004 consolidated financial statements of General Maritime Corporation contained in its Annual Report on Form 10-K for the year ended December 31, 2004.

BUSINESS GEOGRAPHICS — Non-U.S. operations accounted for 100% of revenues and net income. Vessels regularly move between countries in international waters, over hundreds of trade routes. It is therefore impractical to assign revenues or earnings from the transportation of international seaborne crude oil products by geographical area.

PRINCIPLES OF CONSOLIDATION — The accompanying consolidated financial statements include the accounts of General Maritime Corporation and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

REVENUE AND EXPENSE RECOGNITION.  Revenue and expense recognition policies for voyage and time charter agreements are as follows:

VOYAGE CHARTERS.  Voyage revenues and voyage expenses are recognized on a pro rata basis based on the relative transit time in each period. Estimated losses on voyages are provided for in full at the time such losses become evident. A voyage is deemed to commence upon the departure from the discharge port of the vessel’s previous cargo and is deemed to end upon the departure from the discharge port of the current cargo. Voyage expenses primarily include only those specific costs which are borne by the Company in connection with voyage charters which would otherwise have been borne by the charterer under time charter agreements. These expenses principally consist of fuel and port charges. Demurrage income represents payments by the charterer to the vessel owner when loading and discharging time exceed the stipulated time in the voyage charter. Demurrage income is measured in accordance with the provisions of the respective charter agreements and the circumstances under which demurrage claims arise and is recognized on a pro rata basis over the length of the voyage to which it pertains. At September 30, 2005 and December 31, 2004, the Company has a reserve of $1,633 and $2,320, respectively, against its due from charterers balance associated with demurrage revenues.

TIME CHARTERS.  Revenue from time charters is recognized on a straight line basis as the average revenue over the term of the respective time charter agreement. Direct vessel expenses are recognized when incurred.   As of September 30, 2005 and December 31, 2004, the Company has a reserve of $7,100 and $2,386, respectively, against its due from charterers balance associated with estimated performance claims against the Company’s time charters. 

VESSELS, NET - Effective January 1, 2004, the Company increased residual scrap value of its vessels from $0.125 per light weight ton to $0.175 per light weight ton, which the Company believes better approximates the historical average price of scrap steel. The impact of this change is to reduce depreciation expense by approximately $3,600, or $0.10 per share, per year subsequent to December 31, 2003.

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VESSEL CONSTRUCTION IN PROGRESS -   Vessel construction in progress represents the cost of acquiring contracts to build vessels, installments paid to shipyards, and interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use).  During the nine month period ended September 30, 2005, the Company capitalized $2,607 of interest expense.

OTHER ASSETS —Other assets represents cash placed in escrow, in lieu of being used to repay a portion of the Company’s outstanding term loan as required by an amendment to the 2004 Credit Facility, relating to the sale during August and October 2004 of four single-hull Suezmax vessels.  See Note 4 for further discussion.

EARNINGS PER SHARE —Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the applicable periods.  Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised.

DERIVATIVE FINANCIAL INSTRUMENTS - The Company uses other derivative financial instruments which, although regarded by the Company as economic hedges, have not been designated as hedges for accounting purposes.  The fair values of these derivative financial instruments and changes in their fair value are recognized in the financial statements as noncurrent assets or liabilities on the balance sheet and as Other expense on the statement of operations.

Amounts receivable or payable arising at the settlement of interest rate swaps are deferred and amortized as an adjustment to interest expense over the period of interest rate exposure provided the designated liability continues to exist.

INTEREST RATE RISK MANAGEMENT-  The Company is exposed to the impact of interest rate changes. The Company’s objective is to manage the impact of interest rate changes on earnings and cash flows of its borrowings. The Company used interest rate swaps to manage net exposure to interest rate changes related to its borrowings and to lower its overall borrowing costs through June 30, 2005.  Interest rate risk management instruments held by the Company during the nine months ended September 30, 2005 and 2004 were pay-fixed swaps. As of September 30, 2005, the Company is party to pay-fixed interest rate swap agreements that expire in June 2006 which, through June 30, 2005, effectively converted floating rate obligations to fixed rate instruments.  Effective during the third quarter of 2005, the Company has stopped designating its interest rate swaps as a hedge.  During the nine months ended September 30, 2005 and 2004, the Company recognized a derivative gain on cash flow hedge, a component of other comprehensive loss, to Accumulated other comprehensive loss of $545 and $1,510, respectively.  Because hedge accounting is no longer used as of September 30, 2005, Accumulated other comprehensive loss is $0.  The aggregate recorded liability in connection with the Company’s interest rate swaps as of September 30, 2005 and December 31, 2004 was $22 and $560, respectively, and is presented as a component of Derivative liability on the balance sheet..  The Company has recorded the aggregate net unrealized loss of $103, for the three and nine months ended September 30, 2005, which is classified as Other expense on the statement of operations.

DERIVATIVE FINANCIAL INSTRUMENTS.  In addition to interest rate swaps described above, the Company is party to other derivative financial instruments to guard against the risks of (a) a weakening U.S. Dollar that would make future Euro-based expenditure more costly, (b) rising fuel costs which would increase future voyage expenses, and (c) declines in future spot rates, which would reduce revenues on future voyages of vessels trading on the spot market.  The Company considers the derivative financial instruments the Company has entered to be economic hedges against these risks, although they do not qualify as hedges for accounting purposes.  As such, the Company records the fair value of the derivative financial instruments on its balance sheet as a net Derivative liability.  Changes in fair value in the derivative financial instruments, as well as payments made to, or received from counterparties, to periodically settle the derivative transactions, are recorded as Other expense or income on the statement of operations.

STOCK BASED COMPENSATION- The Company follows the provisions of Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees to account for its stock option plan. The Company provides pro forma disclosure of net income and earnings per share as if the accounting provision of SFAS No. 123, Accounting for Stock-Based Compensation had been adopted.  Options granted are exercisable at prices equal to the fair market value of such stock on the dates the options were granted.  The fair values of the options were determined on the date of grant using a Black-Scholes option pricing model. These options were valued based on the following assumptions: an estimated life of five years for all options granted, volatility of 53%, 47%, 63% and 54% for options granted during 2004, 2003, 2002 and 2001, respectively, risk free interest rate of 3.85%, 3.5%, 4.0% and 5.5% for options granted during 2004, 2003, 2002 and 2001, respectively, and no dividend yield for any options granted. The fair value of the 860,000 options to purchase common stock granted on June 12, 2001 is $8.50 per share. The fair value of the 143,500 options to purchase common stock granted on November 26, 2002 is $3.42 per share.  The fair value of the 50,000, 12,500 and 29,000 options to purchase common stock granted on May 5, 2003, June 5, 2003 and November 12, 2003 is $3.95 per share, $4.52 per share, and $6.61 per share, respectively.  The fair value of the 20,000 options to purchase common stock granted on May 20, 2004 is $11.22 per share.

Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the methods recommended by of Statement of Financial Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, the Company’s net income and net income per share for the three months and nine months ended September 30, 2005 and 2004, would have been stated at the pro forma amounts indicated below:

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RECENT ACCOUNTING PRONOUNCEMENTS.  In December 2004, the FASB issued SFAS No. 123R that will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued.  In addition, liability awards will be remeasured each reporting period.  Compensation cost will be recognized over the period that an employee provides service in exchange for the award.  SFAS 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB 25. This Statement will be effective as of the beginning of the first fiscal year that begins after June 15, 2005.

Entities that used the fair-value-based method for either recognition or disclosure under SFAS No. 123 will apply this revised Statement using a modified version of prospective application. Under this transition method, for the portion of outstanding awards for which the requisite service has not yet been rendered, compensation cost is recognized on or after required effective date based on the grant-date fair value of those awards calculated under SFAS No. 123 for either recognition or pro forma disclosures. For periods before the required effective date, those entities may elect to apply a modified version of the retrospective application under which financial statements for periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS No. 123.  The effects of the adoption of SFAS 123R on prior periods are presented in the Stock Based Compensation section of this footnote.  Besides the effect of stock options previously issued, the Company believes that the adoption of SFAS No. 123R will not have a material impact on the Company’s financial statements.

2.             EARNINGS PER COMMON SHARE

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the exercise of all dilutive stock options using the treasury stock method and the granting of unvested restricted stock awards for which the assumed proceeds upon grant are deemed to be the amount of compensation cost attributable to future services and not yet recognized using the treasury stock method, to the extent dilutive.  For the three and nine months ended September 30, 2005 and 2004, all stock options were considered to be dilutive.

The components of the denominator for the calculation of basic earnings per share and diluted earnings per share for the three months and nine months ended September 30, 2005 and 2004 are as follows:

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3.             ACQUISITIONS

In March 2004, the Company agreed to acquire three Aframax vessels, two Suezmax vessels, four newbuilding Suezmax contracts and a technical management company from an unaffiliated entity for cash.  The three Aframax vessels, two Suezmax vessels and the technical management company were acquired between April and June 2004. The four newbuilding Suezmax contracts were acquired in July 2004.  The purchase price of these assets was approximately $248,100, which were financed through cash on hand and borrowings under the Company’s then existing revolving credit facilities. This $248,100 purchase price was allocated as follows:  $180,599 for the five vessels, $67,242 for the four newbuilding Suezmax contracts and $266 for the technical management company the net assets of which are comprised of $107 of cash, other current assets of $738, noncurrent assets of $82 and current liabilities of $661.  Also during July 2004, $8,777 was paid to the shipyard as an installment on the construction price of the four newbuilding contracts.

4.             SALE OF VESSELS

In October 2005, the Company agreed to sell its four single-hull Suezmax vessels and its six double-sided Suezmax vessels in order to reduce the average age of the Company’s fleet as well as to increase the percentage of double-hull vessels in the Company’s fleet.  These ten vessels will be sold for approximately $289,100, which is net of costs of disposal such as broker fees.  As of September 30, 2005, these ten vessels have an aggregate book value, including vessel equipment and unamortized drydock, of approximately $186,381, which is anticipated to result in a gain on disposal of approximately $102,700.  These vessels have been reclassified as vessels held for sale as of September 30, 2005 and accordingly, no further depreciation and amortization will be recorded on them through the dates they are transferred to their new owner which is expected to occur between November 2005 and January 2006.

5.             LONG-TERM DEBT

Long-term debt consists of the following:

2004 Credit Facility

On July 1, 2004, the Company closed on an $825,000 senior secured bank financing facility (“2004 Credit Facility”) consisting of a term loan of $225,000 and a revolving loan of $600,000.  The term loan has a five year maturity at a rate of LIBOR plus 1.0% and amortizes on a quarterly basis with 19 payments of $10,000 and one payment of $35,000. The revolving loan component, which does not amortize, has a five year maturity at a rate of LIBOR plus 1.0% on the used portion and a 0.5% commitment fee on the unused portion.

Concurrent with the closing of the 2004 Credit Facility, pursuant to which the Company borrowed $225,000 under the term loan and $290,000 under the revolving credit facility, the Company retired its existing First, Second and Third Credit Facilities described below (the “Refinancing”).  In addition, each of our subsidiaries which have an ownership interest in any vessel that is secured by the 2004 Credit Facility has provided unconditional guaranties of all amounts owing under the 2004 Credit Facility.

Upon consummating the Refinancing, unamortized deferred financing costs associated with the First, Second and Third Credit Facilities aggregating $7,886 was written off as a non-cash charge in July 2004.  This non-cash charge is classified as other expense on the statement of operations.

As of September 30, 2005, the Company had $175,000 outstanding on the term loan and nothing outstanding on the revolving loan.  The 2004 Credit Facility is secured by all of the ships in the Company’s 43 vessel fleet (including ten Suezmax vessels held for sale) and cash held in escrow.  At September 30, 2005, the carrying value of the 33 vessels that are not held for sale was $901,547, the carrying value of the ten Suezmax vessels held for sale was $186,381 and $13,050 cash held in escrow.

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In August and October 2004, the Company sold four single-hull Suezmax vessels.  Pursuant to an amendment to the 2004 Credit Facility, the Company is permitted, until August 2005 to substitute as collateral future vessel acquisitions with a fair value equivalent to the vessels sold.  Had this amendment not been agreed to, the Company would, upon the sale of these four vessels, have had to repay $13,050 associated with the $225,000 term loan and the $600,000 revolving credit facility would have been permanently reduced by $35,194.  In accordance with amendments to the 2004 Credit Facility, the Company placed $13,050 in escrow which will be returned to the Company if collateral is substituted as described above. This amount of cash held in escrow is classified as Other assets on the Company’s balance sheet.  If such collateral is not fully provided, on August 31, 2006, the remaining amount held in the escrow account will be used to repay a portion of the term loan.  With respect to the revolving credit facility, $35,194 is currently not available to be drawn until such substitute collateral is provided.  To the extent substitute collateral is not provided by August 31, 2006, the revolving credit facility will be permanently reduced.

The terms and conditions of the 2004 Credit Facility require compliance with certain restrictive covenants, which the Company feels are consistent with loan facilities incurred by other shipping companies. Under this credit facility, the Company is required to maintain certain ratios such as: vessel market values to total outstanding loans and undrawn revolving credit facilities, EBITDA to net interest expense and to maintain minimum levels of working capital.  In addition, the 2004 Credit Facility, as amended, permits the Company to pay dividends with respect to any fiscal quarter up to an amount equal to EBITDA (as defined) for such fiscal quarter less fleet renewal reserves, which are established by the Company’s Board of Directors, net interest expense and cash taxes, in the event taxes are paid, for such fiscal quarter. Such amount will be reduced to the extent that the aggregate amount permitted to be paid for dividends for all fiscal quarters since January 1, 2005 is a negative amount.  However, the Company would not be permitted to pay dividends if certain significant defaults as defined under the 2004 Credit Facility were to occur.  During the nine months ended September 30, 2005, the Company paid dividends of $100,905.

First, Second and Third Credit Facilities- Refinanced by the 2004 Credit Facility

The First Credit Facility was comprised of a $200,000 term loan and a $100,000 revolving loan. The First Credit Facility was to mature on June 15, 2006. The term loan was repayable in quarterly installments. The principal of the revolving loan was to be payable at maturity. The First Credit Facility bore interest at LIBOR plus 1.5%. The Company was obligated to pay a fee of 0.625% per annum on the unused portion of the revolving loan on a quarterly basis. Due to the sale of three of the Aframax tankers securing the First Credit Facility, the revolving loan facility was reduced to $96,519.  As of June 30, 2004, the Company had $69,493 outstanding on the term loan and $50,000 outstanding on the revolving loan.  All of these outstanding balances were repaid during the Refinancing on July 1, 2004.  The Company’s obligations under the First Credit Facility were secured by 17 vessels.

The Second Credit Facility consisted of a $115,000 term loan and a $50,000 revolving loan. The Second Credit Facility was to mature on June 27, 2006. The term loan was repayable in quarterly installments. The principal of the revolving loan was to be payable at maturity.  The Second Credit Facility bore interest at LIBOR plus 1.5%. The Company was obligated to pay a fee of 0.625% per annum on the unused portion of the revolving loan on a quarterly basis. As of June 30, 2004, the Company had $45,000 outstanding on the term loan and $50,000 outstanding on the revolving loan.  All of these outstanding balances were repaid during the Refinancing on July 1, 2004.  The Company’s obligations under the Second Credit Facility agreements were secured by nine vessels.

On March 11, 2003 in connection with 19 vessels acquired by the Company, the Company entered into commitments for $450,000 in credit facilities.  These credit facilities were comprised of a first priority $350,000 amortizing term loan (the “Third Credit Facility”) and a second priority $100,000 non-amortizing term loan (the “Second Priority Term Loan”).  Pursuant to the issuance of the Senior Notes described below, the Third Credit Facility was reduced to $275,000 (such reduction from $350,000 is treated as a prepayment of the first six installments due under this facility) and the Second Priority Term Loan was eliminated.  The Third Credit Facility was to mature on March 10, 2008, was to be repayable in 19 quarterly installments and bore interest at LIBOR plus 1.625%.  As of June 30, 2004, the Company had outstanding $233,812 on the Third Credit Facility.  This outstanding balance was repaid during the Refinancing on July 1, 2004.  The Company’s obligations under the Third Credit Facility were secured by 16 vessels.

Interest Rate Swap Agreements

In August and October 2001, the Company entered into interest rate swap agreements with foreign banks to manage interest costs and the risk associated with changing interest rates.  At their inception, these swaps had notional principal amounts equal to 50% the Company’s outstanding term loans under its First and Second Credit Facilities.  The notional principal amounts amortize at the same rate as the term loans.  The interest rate swap agreement entered into during August 2001 hedged the First Credit Facility, described above, to a fixed rate of 6.25%.  This swap agreement terminates on June 15, 2006.  The interest rate swap agreement entered into during October 2001 hedged the Second Credit Facility, described above, to a fixed rate of 5.485%.  This swap agreement terminates on June 27, 2006.  The differential to be paid or received for these swap agreements was recognized as an adjustment to interest expense as incurred through June 30, 2005.  As of September 30, 2005, the outstanding notional principal amount on the swap agreements entered into during August 2001 and October 2001 are $13,500 and $12,500, respectively.  The Company has determined that, through June 30, 2005, these interest rate swap agreements, which effectively hedged the Company’s First and Second Credit Facilities continued to effectively hedge, but not perfectly, the Company’s 2004 Credit Facility.  As of July 1, 2005, the Company stopped designating its interest rate swaps as a hedge. 

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Interest expense pertaining to interest rate swaps for the nine months ended September 30, 2005 and 2004 was $338 and $1,550, respectively.

The Company would have paid approximately $22 and $560 to settle all outstanding swap agreements based upon their aggregate fair values as of September 30, 2005 and December 31, 2004, respectively. This fair value is based upon estimates received from financial institutions.

Senior Notes

On March 20, 2003, the Company issued $250,000 of 10% Senior Notes which are due March 15, 2013.  Interest is paid on the Senior Notes each March 15 and September 15.  The Senior Notes are general unsecured, senior obligations of the Company.  The proceeds of the Senior Notes, prior to payment of fees and expenses, were $246,158.  The Senior Notes contain incurrence covenants which, among other things, restrict the Company’s future ability to incur future indebtedness and liens, to apply the proceeds of asset sales freely, to merge or undergo other changes of control and to pay dividends, and required the Company to apply a portion of its cash flow during 2003 to the reduction of its debt under our First, Second and Third facilities.  As of September 30, 2005, the discount on the Senior Notes is $3,051.  This discount is being amortized as interest expense over the term of the Senior Notes using the effective interest method.  The Senior Notes are guaranteed by all of the Company’s present subsidiaries and future “restricted” subsidiaries (all of which are 100% owned by the Company).  These guarantees are full and unconditional and joint and several with the parent company General Maritime Corporation.  The parent company General Maritime Corporation has no independent assets or operations.  Additionally, certain defaults on other debt instruments, such as failure to pay interest or principal when due, are deemed to be a default under the Senior Notes agreement.

During September 2005, the Company’s management decided to repurchase $11,500 par value of the Senior Notes for $12,736.  At the time of their repurchase, the Senior Notes had a carrying value of $11,352, resulting in a loss of $1,384.  In addition, pursuant to the retirement of these Senior Notes, the Company wrote off $239 of unamortized Deferred financing costs relating to the March 2003 Senior Notes offering.  This aggregate loss of $1,623 is recorded as a component of Other expense on the Company’s statement of operations.

In accordance with the terms of our Senior Notes, the Company cannot make cumulative “restricted payments” in excess of the sum of (1) 50% of net income earned subsequent to December 31, 2002, (2) cash proceeds from common stock issued subsequent to December 31, 2002 and (3) $25,000.  “Restricted payments” principally include dividends, purchases of the Company’s common stock, and repayments of debt subordinate to the Senior Notes prior to their maturity.

As of September 30, 2005, the Company is in compliance with all of the covenants under its 2004 Credit Facility and its Senior Notes.

Based on borrowings as of September 30, 2005, aggregate maturities under the Senior Notes and the 2004 Credit Facility are as follows:

Interest rates during the nine months ended September 30, 2005 ranged from 3.44% to 4.69% on the 2004 Credit Facility.

6.             DERIVATIVE FINANCIAL INSTRUMENTS

As of September 30, 2005, the Company is party to the following derivative financial instruments:

Interest rates.  The Company is party to two pay-fixed interest rate swap agreements that expire in June 2006 which, through June 30, 2005, effectively converted floating rate obligations to fixed rate instruments.  Effective during the third quarter of 2005, the Company has stopped designating its interest rate swaps as a hedge.  During the nine months ended September 30, 2005 and 2004, the Company recognized a derivative gain on cash flow hedge, a component of other comprehensive loss, to Accumulated other comprehensive loss

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of $545 and $1,510, respectively.  Because hedge accounting is no longer used as of September 30, 2005, Accumulated other comprehensive loss is $0.  The aggregate recorded liability in connection with the Company’s interest rate swaps as of September 30, 2005 and December 31, 2004 was $22 and $560, respectively, and is presented as a component of Derivative liability on the balance sheet..  The Company has recorded the aggregate net unrealized loss of $103, for the three and nine months ended September 30, 2005, which is classified as Other expense on the statement of operations.

Foreign currency.  The Company is party to a forward contract to acquire 5 million Euros on January 17, 2006 for $6,033.  Changes in the fair value of this forward contract subsequent to July 19, 2005 (at which time the fair value was $0) will be recorded as Other expense on the Company’s statement of operations.  The Company entered into this contract to guard against weakening in the dollar against the Euro.  As of September 30, 2005, the Company has recorded an asset of $23 related to the fair market value of this derivative financial instrument. The Company has recorded the aggregate net unrealized gain of $23, for the three and nine months ended September 30, 2005, which is classified as Other expense on the statement of operations.

Fuel.  During the three months ended September 30, 2005, the Company entered into a “costless collar” to obtain a quantity of fuel between $220/metric ton (“MT”) and $300/MT.  The Company uses this derivative as an economic hedge to the Company, but has not designated this derivative as a hedge for accounting purposes.  As such, changes in the fair value of the derivative are recorded to the Company’s statement of income each reporting period.  Under this agreement, the Company has a right to receive (call option) the amount by which the bunker price on a specified index exceeds $300/MT and an obligation to pay (put option) the amount by which $220/MT exceeds the bunker price on a specified index.  The term is for a notional 1,000 MT of bunkers per month for each month in the period between October 1, 2005 and March 31, 2006. As of September 30, 2005, the Company has recorded an asset of $120 related to the fair market value of this economic hedge. The Company has recorded the aggregate net unrealized gain of $120, for the three and nine months ended September 30, 2005, which is classified as Other expense on the statement of operations.

Freight rates.  During September 2005, the Company entered into three forward freight agreements (“FFA”). The Company uses FFAs as economic hedges to the Company, but has not designated FFA as hedges for accounting purposes, and, as such, changes in the fair value of FFAs are recorded to the Company’s statement of income each reporting period.   These FFAs involve contracts to provide a fixed number of theoretical voyages at fixed rates. The FFA contracts settle based on the monthly Baltic Tanker Index (“BITR”). The BITR average rates received in the spot market by cargo type, crude oil and refined petroleum products, by trade route. The duration of a contract can be one month, quarterly or up to two years (currently our open positions extend to December 2005) with open positions settling on a monthly basis. The Company has taken short positions in FFA contracts, which reduce a portion of the Company’s exposure to the spot charter market by creating synthetic time charters. At September 30, 2005, the FFAs had an aggregate notional value of $3,189 that extend to December 2005. The notional amount is based on a computation of the quantity of cargo (or freight) the contract specifies, the contract rate (based on a certain trade route) and a flat rate determined by the market on an annual basis. Each contract is marked to market for the specified cargo and trade route. The fair value of forward freight agreements is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date. As of September 30, 2005, the Company has recorded a liability of $276 related to the fair market value of these economic hedges. The Company has recorded the aggregate net unrealized loss of $276, for the three and nine months ended September 30, 2005, which is classified as Other expense on the statement of operations.

A summary of the fair values of all of the Company’s derivative financial instruments as of September 30, 2005 are as follows:

7.             RELATED PARTY TRANSACTIONS

The following are related party transactions not disclosed elsewhere in these financial statements:

Through April 2005, the Company rented office space as its principal executive offices in a building currently leased by GenMar Realty LLC, a company wholly owned by Peter C. Georgiopoulos, the Chairman and Chief Executive Officer of the Company. There was no lease agreement between the Company and GenMar Realty LLC. The Company paid an occupancy fee on a month to month basis in the amount of $55. During the nine months ended September 30, 2005 and 2004, the Company expensed occupancy fees of $220 and $495, respectively.  

During the fourth quarter of 2000, the Company loaned $486 to Peter C. Georgiopoulos. This loan does not bear interest and is due and payable on demand. The full amount of this loan was outstanding as of September 30, 2005.

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During the nine months ended September 30, 2005 and 2004, the Company incurred fees for legal services aggregating $11 and $0, respectively, to the father of Mr. Peter Georgiopoulos, none of which is outstanding as of September 30, 2005.

In July 2004, the Company paid $200 of professional fees associated with its 2004 acquisitions described in Note 3 to American Marine Advisors, Inc., a company which has a senior vice president that is also a member of the Company’s board of directors.

During July 2005, Genco Shipping & Trading Limited (“Genco”), a company whose Chairman is Peter C. Georgiopoulos, chartered the Company’s corporate aircraft.  In October 2005, the Company billed Genco $113.

8.             STOCK OPTION PLAN

On June 10, 2001, the Company adopted the General Maritime Corporation 2001 Stock Incentive Plan. Under this plan the Company’s compensation committee, another designated committee of the board of directors or the board of directors, may grant a variety of stock based incentive awards to employees, directors and consultants whom the compensation committee (or other committee or the board of directors) believes are key to the Company’s success. The compensation committee may award incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock and performance shares.

The aggregate number of shares of common stock available for award under the 2001 Stock Incentive Plan was increased from 2,900,000 shares to 4,400,000 shares pursuant to an amendment and restatement of the plan as of May 26, 2005. On June 12, 2001, the Company granted incentive stock options and nonqualified stock options to purchase 860,000 shares of common stock at an exercise price of $18.00 per share (the initial public offering price) under the provisions of the 2001 Stock Incentive Plan. These options expire in 10 years. Options to purchase 110,000 shares of common stock vested immediately on June 12, 2001, the date of the grant. 25% of the remaining 750,000 options will vest on each of the first four anniversaries of the grant date. All options granted under this plan will vest upon a change of control, as defined. These options will be incentive stock options to the extent allowable under the Internal Revenue Code.

On November 26, 2002, the Company’s Chief Executive Officer and Chief Operating Officer surrendered to the Company outstanding options to purchase an aggregate of 590,000 shares of common stock. Also on November 26, 2002, options to purchase 143,500 were granted to other employees at an exercise price of $6.06 (the closing price on the date of grant). These options will generally vest in four equal installments on each of the first four anniversaries of the date of grant.

On May 5, 2003, the Company granted options to purchase 50,000 shares of common stock to the Company’s Chief Financial Officer at an exercise price of $8.73 (the closing price on the date of grant). These options were scheduled to vest in four equal installments on each of the first four anniversaries of the date of grant.  During 2003, all of these options were forfeited.

On June 5, 2003, the Company granted options to purchase an aggregate of 12,500 shares of common stock to five outside directors of the Company at an exercise price of $9.98 (the closing price on the date of grant). These options will vest in four equal installments on each of the first four anniversaries of the date of grant.

On November 12, 2003, the Company granted options to purchase an aggregate of 29,000 shares of common stock to certain employees of the Company at an exercise price of $14.58 (the closing price on the date of grant). These options will vest in four equal installments on each of the first four anniversaries of the date of grant.

On May 20, 2004, the Company granted options to purchase an aggregate of 20,000 shares of common stock to certain members of the Company’s board of directors at an exercise price of $22.57 (the closing price on the date of grant).  These options will vest in four equal installments on each of the first four anniversaries of the date of grant.

The Company follows the provisions of APB 25 to account for its stock option plan. The Company provides pro forma disclosure of net income and earnings per share as if the accounting provision of SFAS No. 123 had been adopted.  Options granted are exercisable at prices equal to the fair market value of such stock on the dates the options were granted.  The fair values of the options were determined on the date of grant using a Black-Scholes option pricing model. These options were valued based on the following assumptions: an estimated life of five years for all options granted, volatility of 53%, 47%, 63% and 54% for options granted during 2004, 2003, 2002 and 2001, respectively, risk free interest rate of 3.85%, 3.5%, 4.0% and 5.5% for options granted during 2004, 2003, 2002 and 2001, respectively, and no dividend yield for any options granted. The fair value of the 860,000 options to purchase common stock granted on June 12, 2001 is $8.50 per share. The fair value of the 143,500 options to purchase common stock granted on November 26, 2002 is $3.42 per share.  The fair value of the 50,000, 12,500 and 29,000 options to purchase common stock granted on May 5, 2003, June 5, 2003 and November 12, 2003 is $3.95 per share, $4.52 per share, and $6.61 per share, respectively.  The fair value of the 20,000 options to purchase common stock granted on May 20, 2004 is $11.22 per share.

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The following table summarizes stock option activity through September 30, 2005:

The following table summarizes certain information about stock options outstanding as of September 30, 2005:

9.             RESTRICTED STOCK AWARDS

On November 26, 2002, the Company made grants of restricted common stock in the amount of 500,000 shares to its Chief Executive Officer (CEO), and 125,000 shares to its President and Chief Operating Officer. The restrictions on these shares will lapse seven years from the date of grant. Upon grant of the restricted stock, an amount of unearned compensation equivalent to the market value at the date of grant was charged to Shareholders’ Equity.  This charge is being amortized to general and administrative expenses at a rate of $541 per annum (pro rata for the remainder of 2002).

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On November 12, 2003, the Company made grants of restricted common stock in the amount of 155,000 shares to certain officers and employees of the Company. Of this total, 75,000 restricted shares were granted to the CEO of the Company and 30,000 restricted shares were granted to the president of General Maritime Management LLC (“GMM”), a wholly-owned subsidiary of the Company.  The remaining 50,000 restricted shares were granted to other officers and employees of the Company and GMM.  The restrictions on these shares lapse 20% on each anniversary date from the date of grant and become fully vested after five years.  Upon grant of the restricted stock, an amount of unearned compensation equivalent to the market value at the date of grant was charged to Shareholders’ Equity.  Amortization of this charge, which is included in general and administrative expenses, was $1,126 and $147 in 2004 and 2003, respectively, and will be $568, $300 and $119 in 2005, 2006 and 2007, respectively.

On February 9, 2005, the Company made grants of restricted common stock in the amount of 304,500 shares to certain officers and employees of the Company.  Of this total, 150,000, 10,000 and 10,000 restricted shares were granted to the CEO, chief financial officer and chief administrative officer, respectively, of the Company and 50,000 restricted shares were granted to the president of GMM.  The remaining 84,500 restricted shares were granted to other officers and employees of the Company and GMM.  The restrictions on the 150,000 shares granted to the CEO of the Company will lapse on November 16, 2014.  The restrictions on the remaining 154,500 shares will lapse as to 20% of these shares on November 16, 2005 and as to 20% of these shares on November 16 of each of the four years thereafter, and will become fully vested on November 16, 2009.  Upon grant of the restricted stock, an amount of unearned compensation equivalent to the market value at the date of grant, or $14,631, will be charged to Shareholders’ Equity.  Amortization of this charge, which will be included in general and administrative expenses, will be $3,995, $2,716, $1,913, $1,398, and $1,010 in 2005, 2006, 2007, 2008 and 2009, respectively. Amortization subsequent to 2009 will be $3,599.

On April 6, 2005, the Company granted to the CEO 350,000 shares of restricted common stock, with restrictions on all such shares to lapse on December 31, 2014.  Restrictions on the restricted stock will also lapse in full if the CEO is dismissed without cause or resigns for good reason, or upon a change of control of the Company and will lapse on a straight-line basis upon his death or disability.   The value of these restricted shares aggregate $17,042 and will amortize $1,294 in 2005 and approximately $1,750 in each year thereafter through 2014.

On May 26, 2005, the Company granted a total of 4,800 shares of restricted common stock to four of the Company’s independent Directors. Restrictions on the restricted stock will lapse, if at all, on May 26, 2006 or the date of the Company’s 2006 Annual Meeting of Shareholders, whichever occurs first.  Restrictions on each director’s stock will also lapse in full upon such director’s death or disability or a change of control of the Company.  The value of these restricted shares aggregate $206 and will amortize $123 in 2005 and $83 in 2006.

10.          LEGAL PROCEEDINGS

From time to time the Company has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company or on its financial condition or results of operations.

The Company is cooperating in an investigation being conducted by the Office of the U.S. Attorney, District of Delaware with respect to alleged false or inaccurate entries in the vessel’s log books, which could possibly be a violation of U.S. law, during prior year voyage(s) of the Genmar Ajax.  The Company received four additional subpoenas for supplemental information in connection with the investigation on or about January 18, 2005, March 30, 2005, April 21, 2005 and August 10, 2005, to which the Company has responded and produced documents in a timely manner.  Management does not believe that this matter will have a material effect on the Company.

On February 4, 2005, the Genmar Kestrel was involved in a collision with the Singapore-flag tanker Trijata, which necessitated the trans-shipment of the Genmar Kestrel’s cargo and drydocking the vessel for repairs.  The incident resulted in the leakage of some oil to the sea.  Due to a combination of prompt clean up efforts, a light viscosity cargo onboard at the time of collision and favorable weather conditions, management believes that the incident resulted in minimal environmental damage and expect that substantially all of the liabilities associated with the incident will be covered by insurance.  Repairs were completed on the Genmar Kestrel on April 29, 2005, and the vessel resumed operations.

11.          SUBSEQUENT EVENTS

On October 24, 2005, the Company’s Board of Directors announced that the Company will be paying a quarterly dividend of $0.25 per share on or about December 13, 2005 to shareholders of record as of November 29, 2005.  The aggregate amount of the dividend is expected to be $9,700, which the Company anticipates will be funded from cash on hand at the time payment is to be made.

In October 2005, the Company’s Board of Directors approved a share repurchase program for up to a total of $200,000 of the Company’s common stock. The Board will review the program after eighteen months. Share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of

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purchases under the program will be determined by management based upon market conditions and other factors. Purchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act. The program does not require the Company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the Company’s discretion and without notice. Repurchases will be subject to the restricted payments covenant under the Company’s outstanding Senior Notes indenture and restrictions under our 2005 Credit Facility.

On October 26, 2005, we entered into a new $800 million revolving credit facility (the “2005 Credit Facility”) with a syndicate of commercial lenders. The 2005 Credit Facility has been used to refinance the existing term borrowings under the Company’s 2004 Credit Facility described below.  The 2005 Credit Facility provides a four year non amortizing revolving loan with semi annual reductions of $44,500 beginning October 26, 2009 and a bullet reduction of $533,000 at the end of year seven.  Up to $50,000 of the 2005 Credit Facility will be available for the issuance of stand-by and trade letters of credit to support obligations of the Company and its subsidiaries that are reasonably acceptable to the issuing lenders under the facility.

The 2005 Credit Facility permits the Company to pay out dividends under its current policy, repurchase shares of its common stock and repurchase the Company’s Senior Notes as the Company may so determine.  This facility allows the Company to pay dividends or repurchase our common stock in an amount not exceeding the net proceeds from the sale of certain non-collateralized vessels, including the ten Suezmax vessels the Company has classified as held for sale as of September 30, 2005. 

The 2005 Credit Facility carries an interest rate of LIBOR plus 75 basis points (or, depending on the Company’s long term foreign issuer credit rating and leverage ratio, 100 basis points) on the outstanding portion and a commitment fee of 26.25 basis points on the unused portion.  The facility will be collateralized by, among other things, the Company’s 17 double-hull vessels and its four new building Suezmax contracts, as well as the Company’s equity interests in its subsidiaries that own these assets, insurance proceeds of the collateralized vessels, and certain deposit accounts related to the vessels.  Each subsidiary of the Company with an ownership interest in these vessels or which has otherwise guaranteed the Company’s Senior Notes will also provide unconditional guaranties of amounts owing under the 2005 Credit Facility.  The rest of the Company’s 16 vessels the Company will have in its fleet after the ten Suezmax vessels held for sale are sold will be unencumbered.  The Company expects to write off approximately $5,789 in the fourth quarter of 2005 related to the unamortized fees associated with the 2004 Credit Facility.

The Company’s ability to borrow amounts under the 2005 Credit Facility is subject to satisfaction of certain customary conditions precedent, and compliance with terms and conditions included in the credit documents.  The various covenants in the 2005 Credit Facility are generally consistent with the types of covenants that were applicable under the 2004 Credit Facility.  These covenants include, among other things, customary restrictions on the Company’s ability to incur indebtedness or grant liens, pay dividends or make stock repurchases (except as otherwise permitted as described above), engage in businesses other than those engaged in on the effective date of the credit facility and similar or related businesses, enter into transactions with affiliates, amend its governing documents or documents related to its Senior Notes, and merge, consolidate, or dispose of assets.  The Company is also required to comply with various ongoing financial covenants, including with respect to the Company’s leverage ratio, minimum cash balance, net worth, and collateral maintenance.  If the Company does not comply with the various financial and other covenants and requirements of the 2005 Credit Facility, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the facility.

On November 3, 2005, the Company announced that it has agreed to sell six double-sided Aframax tankers to a single purchaser for $127,500 and one single-hull Aframax vessel to another purchaser for $18,500. The Company expects to realize an aggregate gain of $22,500 from the sales. The Company intends to utilize the proceeds to pay down debt and for corporate purposes which may include share repurchases; therefore the proceeds will be excluded in the calculation of the dividend for the applicable quarters. Deliveries of the six double-sided vessels are expected to take place from November 2005 through January 2006. Delivery of the single-hull Aframax vessel is expected to take place late November 2005.

On November 4, 2005, the Company repurchased $12,020 par value of the Senior Notes for $13,432.  The Company will record the aggregate loss of approximately $1,800 as a component of Other expense on the Company’s statement of operations during the fourth quarter of 2005.

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Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management’s current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward looking statements contained in this report are the following: changes in demand or a material decline in rates or prolonged weakness in the tanker market; changes in production of or demand for oil and petroleum products, generally or in particular regions; greater than anticipated levels of tanker newbuilding orders or lower than anticipated rates of tanker scrapping; changes in rules and regulations applicable to the tanker industry, including, without limitation, legislation adopted by international organizations such as the International Maritime Organization and the European Union or by individual countries; actions taken by regulatory authorities; changes in trading patterns significantly impacting overall tanker tonnage requirements; changes in the seasonal variations in tanker charter rates; changes in the cost of other modes of oil transportation; changes in oil transportation technology; increases in costs including but not limited to: crew wages, insurance, provisions, repairs, maintenance and overhead expenses; changes in general domestic and international political conditions; changes in the condition of the Company’s vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking or maintenance and repair costs); and other factors listed from time to time in our public filings with the Securities and Exchange Commission including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2004 and our subsequent reports on Form 10-Q and Form 8-K.  Our ability to pay dividends in any period will depend upon factors including the limitations under the indenture for our Senior Notes, applicable provisions of Marshall Islands law and the final determination by the Board of Directors each quarter after its review of our financial performance.  The timing and amount of dividends, if any, could also be affected by factors affecting cash flows, results of operations, required capital expenditures, or reserves.  As a result, the amount of dividends actually paid may vary.

The following is a discussion of our financial condition and results of operations for the three months and nine months ended September 30, 2005 and 2004.  You should consider the foregoing when reviewing the consolidated financial statements and this discussion. You should read this section together with the consolidated financial statements including the notes to those financial statements for the periods mentioned above.

We are a leading provider of international seaborne crude oil transportation services with one of the largest mid-sized tanker fleets in the world. As of September 30, 2005 our fleet consisted of 43 wholly owned vessels comprised of 26 Aframax vessels (including the seven Aframax vessels we have agreed to sell between November 2005 and January 2006) and 17 Suezmax tankers (including ten Suezmax vessels we have classified as held for sale as of September 30, 2005 between November 2005 and January 2006), with a total cargo carrying capacity of 5.2 million deadweight tons. In addition, we have four newbuilding Suezmax tankers of which two are anticipated to be delivered during 2006, and one are anticipated to be delivered during each of 2007 and 2008.

On November 3, 2005, the Company announced that it has agreed to sell six double-sided Aframax tankers to a single purchaser for $127.5 million and one single-hull Aframax vessel to another purchaser for $18.5 million. The Company expects to realize an aggregate gain of $22.5 million from the sales. The Company intends to utilize the proceeds to pay down debt and for corporate purposes which may include share repurchases; therefore the proceeds will be excluded in the calculation of the dividend for the applicable quarters. Deliveries of the six double-sided vessels are expected to take place from November 2005 through January 2006. Delivery of the single-hull Aframax vessel is expected to take place late November 2005.

A summary of our vessel acquisitions and dispositions (including the ten Suezmax vessels to be sold) during 2003, 2004 and 2005 is as follows:

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