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Dorian LPG Ltd.
Notes to Unaudited Condensed Consolidated Financial Statements
(Expressed in United States Dollars)
1. Basis of Presentation and General Information
Dorian LPG Ltd. (“Dorian”) was incorporated on July 1, 2013 under the laws of the Republic of the Marshall Islands, is headquartered in the United States and is engaged in the transportation of liquefied petroleum gas ("LPG") worldwide. Specifically, Dorian and its subsidiaries (together "we", "us", "our", or the "Company") are focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm, in the LPG shipping industry. Our fleet currently consists of twenty-two VLGCs, including nineteen fuel-efficient 84,000 cbm ECO-design VLGCs (“ECO VLGCs”) and three 82,000 cbm VLGCs.
On April 1, 2015, Dorian and Phoenix Tankers Pte. Ltd. (“Phoenix”) began operations of Helios LPG Pool LLC (the “Helios Pool”), which entered into pool participation agreements for the purpose of establishing and operating, as charterer, under variable rate time charters to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. Refer to Note 3 below for further description of the Helios Pool.
The accompanying unaudited interim condensed consolidated financial statements and related notes (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the Financial Statements. The Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2017 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2017.
Our interim results are subject to seasonal and other fluctuations, and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.
Our subsidiaries as of June 30, 2017, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.
Vessel Owning Subsidiaries
|
|
Type of |
|
|
|
|
|
|
|
Subsidiary |
|
vessel |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CMNL LPG Transport LLC |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CNML LPG Transport LLC |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
Comet LPG Transport LLC |
|
VLGC |
|
Comet |
|
2014 |
|
84,000 |
|
Corsair LPG Transport LLC |
|
VLGC |
|
Corsair |
|
2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
VLGC |
|
Corvette |
|
2015 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC |
|
VLGC |
|
Cougar |
|
2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
VLGC |
|
Concorde |
|
2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC |
|
VLGC |
|
Cobra |
|
2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC |
|
VLGC |
|
Continental |
|
2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC |
|
VLGC |
|
Constitution |
|
2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC |
|
VLGC |
|
Commodore |
|
2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC |
|
VLGC |
|
Cresques |
|
2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
VLGC |
|
Constellation |
|
2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC |
|
VLGC |
|
Cheyenne |
|
2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC |
|
VLGC |
|
Clermont |
|
2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC |
|
VLGC |
|
Cratis |
|
2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC |
|
VLGC |
|
Chaparral |
|
2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC |
|
VLGC |
|
Copernicus |
|
2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
VLGC |
|
Commander |
|
2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC |
|
VLGC |
|
Challenger |
|
2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC |
|
VLGC |
|
Caravelle |
|
2016 |
|
84,000 |
|
Management Subsidiaries
|
|
Subsidiary |
|
Dorian LPG Management Corp. |
|
Dorian LPG (USA) LLC (incorporated in USA) |
|
Dorian LPG (UK) Ltd. (incorporated in UK) |
|
Dorian LPG Finance LLC |
|
Occident River Trading Limited (incorporated in UK) |
|
Dormant Subsidiaries
|
|
Subsidiary |
|
SeaCor LPG I LLC |
|
SeaCor LPG II LLC |
|
Capricorn LPG Transport LLC |
|
Constitution LPG Transport LLC |
|
Grendon Tanker LLC |
|
(1) |
CBM: Cubic meters, a standard measure for LPG tanker capacity |
|
2. Significant Accounting Policies
The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as were applied in the preparation of our audited financial statements for the year ended March 31, 2017 (refer to Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017).
In November 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance to require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The pronouncement is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The implementation of this guidance is anticipated to result in restricted cash transfers not reported as cash flow activities in the consolidated statements of cash flows, and, upon adoption, is not anticipated to have an impact on our consolidated balance sheets and statements of operations.
In August 2016, the FASB issued accounting guidance addressing specific cash flow issues with the objective of reducing the existing diversity in practice. The pronouncement is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not believe that the impact of the adoption of this amended guidance will have a material effect on our financial statements.
In February 2016, the FASB issued accounting guidance to update the requirements of financial accounting and reporting for lessees and lessors. The updated guidance, for lease terms of more than 12 months, will require a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. Lessor accounting remains largely unchanged. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The pronouncement is effective prospectively for public business entities for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted for all entities. We are currently assessing the impact the amended guidance will have on our financial statements.
In July 2015, the FASB issued accounting guidance requiring entities to measure most inventory at the lower of cost and net realizable value. The pronouncement is effective prospectively for annual periods beginning after December 15, 2016, and interim periods within that reporting period. The impact of the adoption of this amended guidance did not have a material effect on our financial statements.
In May 2014, the FASB amended its accounting guidance for revenue recognition. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and consideration that a company expects to receive for the services provided. It also requires additional disclosures necessary for the financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB voted to defer the effective date by one year for fiscal years beginning on or after December 15, 2017 and interim periods within that reporting period and permit early adoption of the standard, but not before the beginning of 2017. We are currently assessing the impact the amended guidance will have on our financial statements.
|
3. Transactions with Related Parties
Dorian (Hellas), S.A.
Pursuant to management agreements entered into by each of our then vessel owning subsidiaries on July 26, 2013, as amended, with Dorian (Hellas) S.A. (“DHSA”), the technical, crew and commercial management as well as insurance and accounting services of our vessels was outsourced to DHSA. In addition, under these management agreements, strategic and financial services had also been outsourced to DHSA. DHSA had entered into agreements with each of Eagle Ocean Transport Inc. (“Eagle Ocean Transport”) and Highbury Shipping Services Limited (“HSSL”) to provide certain of these services on behalf of our then vessel owning companies. Mr. John Hadjipateras, our Chairman, President and Chief Executive Officer, owns 100% of Eagle Ocean Transport, and our Vice President of Chartering, Insurance and Legal, Nigel Grey‑Turner, owns 100% of HSSL. As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from DHSA and are now provided through our wholly-owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp. Subsequent to the transition agreements, Eagle Ocean Transport continues to incur related travel costs for certain transitioned employees as well as office-related costs, for which we reimbursed Eagle Ocean Transport $0.1 million for both the three months ended June 30, 2017 and 2016. Such expenses are reimbursed based on their actual cost.
Dorian LPG (USA) LLC and its subsidiaries entered into an agreement with DHSA, retroactive to July 2014 and superseding an agreement between Dorian LPG (UK) Ltd. and DHSA, for the provision by Dorian LPG (USA) LLC and its subsidiaries of certain chartering and marine operation services to DHSA, for which income was earned and included in “Other income-related parties” totaling $0.1 million for both the three months ended June 30, 2017 and 2016.
As of June 30, 2017, $0.9 million was due from DHSA and included in “Due from related parties” in the unaudited interim condensed consolidated balance sheets. As of March 31, 2017, $0.8 million was due from DHSA and included in “Due from related parties” in the audited consolidated balance sheets.
Helios LPG Pool LLC
On April 1, 2015, Dorian and Phoenix began operations of the Helios Pool, which entered into pool participation agreements for the purpose of establishing and operating, as charterer, under variable rate time charters to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. We hold a 50% interest in the Helios Pool as a joint venture with Phoenix and all significant rights and obligations are equally shared by both parties. All profits of the Helios Pool are distributed to the pool participants based on pool points assigned to each vessel as variable charter hire and, as a result, there are no profits available to the equity investors as a share of equity. We have determined that the Helios Pool is a variable interest entity as it does not have sufficient equity at risk. We do not consolidate the Helios Pool because we are not the primary beneficiary and do not have a controlling financial interest. In consideration of Accounting Standards Codification (“ASC”) 810-10-50-4e, the significant factors considered and judgments made in determining that the power to direct the activities of the Helios Pool that most significantly impact the entity’s economic performance are shared, in that all significant performance activities which relate to approval of pool policies and strategies related to pool customers and the marketing of the pool for the procurement of customers for the pool vessels, addition of new pool vessels and the pool cost management, require unanimous board consent from a board consisting of two members from each joint venture investor. Further, in accordance with the guidance in ASC 810-10-25-38D, the Company and Phoenix are not related parties as defined in ASC 850 nor are they de facto agents pursuant to ASC 810-10, the power over the significant activities of the Helios Pool is shared, and no party is the primary beneficiary in the Helios Pool, or has a controlling financial interest. In March 2016, the Helios Pool reached an agreement with Oriental Energy Company Ltd. ("Oriental Energy") whereby Oriental Energy would contribute certain vessels to the Helios Pool, have certain of its vessels time chartered by the Helios Pool and simultaneously enter into a multi-year contract of affreightment covering Oriental Energy’s shipments from the United States Gulf. The agreement with Oriental Energy had no impact on the ownership structure or the power to direct significant activities of the Helios Pool. As of June 30, 2017, the Helios Pool operated twenty-nine VLGCs, including eighteen of our vessels, six Oriental Energy vessels and five Phoenix vessels.
As of June 30, 2017, we had receivables from the Helios Pool of $56.3 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2017, we had receivables from the Helios Pool of $61.4 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of June 30, 2017 is limited to the receivables from the pool. The Helios Pool does not have any third-party debt obligations. The Helios Pool has entered into commercial management agreements with each of Dorian LPG (UK) Ltd. and Phoenix as commercial managers and has appointed both commercial managers as the exclusive commercial managers of pool vessels. Fees for commercial management services provided by Dorian LPG (UK) Ltd. are included in “Other income-related parties” in the unaudited interim condensed consolidated statement of operations and were $0.5 million for both the three months ended June 30, 2017 and 2016. Additionally, we receive a fixed reimbursement of expenses such as costs for security guards and war risk insurance for vessels operating in high risk areas from the Helios Pool, for which we earned less than $0.1 million for the three months ended June 30, 2017 and $0.3 million for the three months ended June 30, 2016, and are included in “Other revenues” in the unaudited interim condensed consolidated statement of operations.
Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three months ended June 30, 2017. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and, where applicable, incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the Helios Pool calculates net pool revenues using gross revenues, less voyage expenses of all the pool vessels, less fixed time charter hire for any chartered-in vessels, less the general and administrative expenses of the pool. Net pool revenues, less any amounts required for working capital of the Helios Pool, are distributed as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 8.
|
4. Deferred Charges, Net
The analysis and movement of deferred charges is presented in the table below:
|
|
Drydocking |
|
|
|
|
costs |
|
|
Balance, April 1, 2017 |
|
$ |
1,884,174 |
|
Additions |
|
|
138,921 |
|
Amortization |
|
|
(122,643) |
|
Balance, June 30, 2017 |
|
$ |
1,900,452 |
|
|
5. Vessels, Net
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2017 |
|
$ |
1,728,769,295 |
|
$ |
(125,300,048) |
|
$ |
1,603,469,247 |
|
Other additions |
|
|
218,685 |
|
|
— |
|
|
218,685 |
|
Depreciation |
|
|
— |
|
|
(16,099,795) |
|
|
(16,099,795) |
|
Balance, June 30, 2017 |
|
$ |
1,728,987,980 |
|
$ |
(141,399,843) |
|
$ |
1,587,588,137 |
|
Additions to vessels, net were largely due to capital improvements made to one of our VLGCs during the three months ended June 30, 2017. Vessels, with a total carrying value of $1,587.6 million and $1,603.5 million as of June 30, 2017 and March 31, 2017, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 6 below). No impairment loss was recorded for the periods presented.
|
6. Long-term Debt
RBS Loan Facility
Refer to Note 10 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017 for information on our term loans with the Royal Bank of Scotland (the “RBS Loan Facility”). We repaid in full the RBS Loan Facility at 96% of the then outstanding principal amount using proceeds from a bridge loan agreement entered into on June 8, 2017. Refer to “2017 Bridge Loan” below for further details.
2017 Bridge Loan
On June 8, 2017, we entered into a $97.0 million bridge loan agreement (the “2017 Bridge Loan”) with DNB Capital LLC. The principal amount of the 2017 Bridge Loan is due on or before August 8, 2018 (the “Maturity Date”) and accrues interest on the outstanding principal amount at a rate of LIBOR plus 2.50% for the period ending December 7, 2017; LIBOR plus 4.50% for the period from December 8 until March 7, 2018; LIBOR plus 6.50% for the period March 8, 2018 until June 7, 2018, and 8.50% from June 8, 2018 until the Maturity Date.
The proceeds of the 2017 Bridge Loan were used to repay in full the RBS Loan Facility at 96% of the then outstanding principal amount. The remaining proceeds were used to pay accrued interest, legal, arrangement and advisory fees related to the 2017 Bridge Loan. As part of this transaction, $6.0 million of cash previously restricted under the RBS Loan Facility was released as unrestricted cash for use in operations.
The 2017 Bridge Loan provides that it be secured by, among other things, (i) first priority mortgages on the four VLGCs that were financed under the RBS Loan Facility, (ii) first assignments of all freights, earnings and insurances relating to these four VLGCs, and (iii) pledges of membership interests of the borrowers.
The 2017 Bridge Loan also contains customary covenants that require us to maintain adequate insurance coverage, properly maintain the vessels and to obtain the lender’s prior consent before changes are made to the flag, class or management of the vessels. The 2017 Bridge Loan includes customary events of default, including those relating to a failure to pay principal or interest, breaches of covenants, representations and warranties, a cross-default to other indebtedness and non-compliance with security documents, and customary restrictions on the borrowers from paying dividends if an event of default has occurred and is continuing, or if an event of default would result therefrom.
The following financial covenants are the most restrictive from the 2017 Bridge Loan with which the Company is required to comply, calculated on a consolidated basis, determined and defined according to the provisions of the loan agreement:
· |
Consolidated liquidity shall be at least $50.0 million, of which an amount at least equal to $10.0 million shall be held by the Parent Guarantor (as defined in the 2017 Bridge Loan agreement) on a freely available and unencumbered basis, and shall mean, on a consolidated basis, the sum of (a) cash and (b) cash equivalents, in each case held by the Parent Guarantor on a freely available and unencumbered basis, provided, that (1) cash and cash equivalents shall at all times be deemed to include cash held in the Earnings Accounts (as defined in the 2015 Debt Facility agreement), (2) cash and cash equivalents shall at all times be deemed to include all cash amounts on the balance sheet of the Parent Guarantor, and (3) at all times prior to and through May 31, 2018 only, all cash held in accounts by Helios LPG Pool LLC attributable to the vessels owned directly or indirectly by the Parent Guarantor or its subsidiaries; |
· |
The ratio of consolidated net debt to consolidated total capitalization shall not exceed 0.60 to 1.00; |
· |
Minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense must be maintained greater than or equal to (i) 1.25 until and including the quarter ended March 31, 2018, and (ii) 1.50 thereafter; |
· |
Minimum shareholders' equity must be equal to the aggregate of (i) $400.0 million, (ii) 50% of new equity raised after June 8, 2017, and (iii) 25% of the positive net income for the immediately preceding fiscal year; |
· |
The ratio of current assets and long-term restricted cash divided by current liabilities less the current portion of long-term debt shall always be greater than 1.00; and |
· |
The ratio of the aggregate market value of the vessels securing the loan to the principal amount outstanding under such loan at all times shall be in excess of 150%. |
2015 Debt Facility
Refer to Notes 10 and 24 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017 for information on our $758 million debt financing facility that we entered into in March 2015 with a group of banks and financial institutions (the “2015 Debt Facility”). We entered into an agreement to amend the 2015 Debt Facility on May 31, 2017. Refer to “Amendment to the 2015 Debt Facility” below for more information.
Amendment to the 2015 Debt Facility
On May 31, 2017, we entered into an agreement to amend the 2015 Debt Facility (the “Amendment”). The Amendment includes the relaxation of certain covenants under the 2015 Debt Facility; the release of $26.8 million of restricted cash as of the date of the Amendment to be applied towards the next two debt principal payments, interest and certain fees; and certain other modifications, including an expanded definition of the components of consolidated liquidity to include all cash held in accounts by Helios LPG Pool LLC attributable to the vessels owned directly or indirectly by us.
The Amendment also includes a provision for the reduction of the minimum balance held as restricted cash. The minimum balance of the restricted cash deposited under the Amendment is:
· |
the lesser of $18.0 million and $1.0 million per mortgaged vessel under the 2015 Debt Facility at all times from the date of the Amendment (“Amendment Date”) through six months from the Amendment Date; |
· |
the lesser of $29.0 million and $1.6 million per mortgaged vessel under the 2015 Debt Facility at all times from six months from the Amendment Date through the first anniversary of the Amendment Date; |
· |
the lesser of $40.0 million and $2.2 million per mortgaged vessel under the 2015 Debt Facility at all times thereafter; and |
· |
if we complete a common stock offering of at least $50 million, including fees (an “Approved Equity Offering”), the restricted cash shall be calculated as an amount at least equal to 5% of the total principal of the 2015 Debt Facility outstanding, but at no time less than the lesser of $20.0 million and $1.1 million per mortgaged vessel under the 2015 Debt Facility. |
The following covenants were relaxed under the Amendment:
· |
Minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense must be maintained greater than or equal to (i) 1.25 at all times prior to and through March 31, 2018, (ii) 1.50 at all times from April 1, 2018 through March 31, 2019, and (iii) 2.50 at all times thereafter; and |
· |
Fair market value of the mortgaged ships plus any additional security over the outstanding loan balance shall be at least (i) 125% at all times prior to and through March 31, 2018, (ii) 130% at all times from April 1, 2018 through March 31, 2019, (iii) 135% at all times thereafter. |
The following negative covenants were added under the Amendment:
· |
Restrictions on dividends and stock repurchases until the earlier of (i) an Approved Equity Offering and (ii) the second anniversary of the Amendment Date; and |
· |
Restrictions on voluntary payments of the RBS Loan Facility, excluding refinancing, until the earlier of (i) an Approved Equity Offering and (ii) the second anniversary of the Amendment Date. |
Fees related to the Amendment totaled approximately $1.1 million.
Debt Obligations
The table below presents our debt obligations:
RBS Loan Facility |
|
June 30, 2017 |
|
March 31, 2017 |
|
||
Tranche A |
|
$ |
— |
|
$ |
34,000,000 |
|
Tranche B |
|
|
— |
|
|
25,570,000 |
|
Tranche C |
|
|
— |
|
|
40,312,500 |
|
Total RBS Loan Facility |
|
$ |
— |
|
$ |
99,882,500 |
|
|
|
|
|
|
|
|
|
2017 Bridge Loan |
|
$ |
97,000,000 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
219,362,501 |
|
$ |
227,512,277 |
|
KEXIM Direct Financing |
|
|
167,710,376 |
|
|
177,680,534 |
|
KEXIM Guaranteed |
|
|
172,450,332 |
|
|
175,773,718 |
|
K-sure Insured |
|
|
85,897,019 |
|
|
89,253,699 |
|
Total 2015 Debt Facility |
|
$ |
645,420,228 |
|
$ |
670,220,228 |
|
|
|
|
|
|
|
|
|
Total debt obligations |
|
$ |
742,420,228 |
|
$ |
770,102,728 |
|
Less: deferred financing fees |
|
|
22,095,916 |
|
|
20,138,480 |
|
Debt obligations—net of deferred financing fees |
|
$ |
720,324,312 |
|
$ |
749,964,248 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
45,658,482 |
|
$ |
65,978,785 |
|
Long-term debt—net of current portion and deferred financing fees |
|
|
674,665,830 |
|
|
683,985,463 |
|
Total |
|
$ |
720,324,312 |
|
$ |
749,964,248 |
|
Deferred Financing Fees
The analysis and movement of deferred financing fees is presented in the table below:
|
|
Financing |
|
|
|
|
costs |
|
|
Balance, April 1, 2017 |
|
$ |
20,138,480 |
|
Additions |
|
|
2,883,059 |
|
Amortization |
|
|
(1,098,827) |
|
Gain on early extinguishment of debt |
|
|
173,204 |
|
Balance, June 30, 2017 |
|
$ |
22,095,916 |
|
|
7. Stock-Based Compensation Plans
Our stock-based compensation expense is included within general and administrative expenses in the unaudited interim condensed consolidated statements of operations and was $1.5 million and $1.0 million for the three months ended June 30, 2017 and 2016, respectively. Unrecognized compensation cost was $9.7 million as of June 30, 2017 and will be recognized over the remaining weighted average life of 1.63 years. For more information on our equity incentive plan, refer to Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017.
In June 2017, we granted 259,800 shares of restricted stock to certain of our officers and employees. One-fourth of these restricted shares vested immediately on the grant date, one-fourth will vest one year after grant date, one-fourth will vest two years after grant date, and one-fourth will vest three years after grant date. The restricted shares were valued at their grant date fair market value and are expensed on a straight-line basis over the vesting periods.
In June 2017, we granted 7,220 shares of stock to our non-executive directors, which were valued and expensed at their grant date fair market value.
In June 2017, we granted 1,444 shares of stock to a non-employee consultant, which were valued and expensed at their grant date fair market value.
A summary of the activity of restricted shares awarded under our equity incentive plan as of June 30, 2017 and changes during the three months ended June 30, 2017, is as follows:
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Incentive Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of April 1, 2017 |
|
1,114,625 |
|
$ |
17.72 |
|
Granted |
|
268,464 |
|
|
7.35 |
|
Vested |
|
(353,823) |
|
|
17.10 |
|
Unvested as of June 30, 2017 |
|
1,029,266 |
|
$ |
15.23 |
|
|
8. Revenues
Revenues comprise the following:
|
|
Three months ended |
|
||||
|
|
June 30, 2017 |
|
June 30, 2016 |
|
||
Net pool revenues—related party |
|
$ |
28,475,359 |
|
$ |
37,659,385 |
|
Time charter revenues |
|
|
12,564,655 |
|
|
12,532,351 |
|
Other revenues, net |
|
|
(14,542) |
|
|
324,040 |
|
Total revenues |
|
$ |
41,025,472 |
|
$ |
50,515,776 |
|
Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. Refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017.
Other revenues, net represent income from charterers relating to reimbursement of voyage expenses such as costs for security guards and war risk insurance.
|
9. Financial Instruments and Fair Value Disclosures
Our principal financial assets consist of cash and cash equivalents, amounts due from related parties, trade accounts receivable and derivative instruments. Our principal financial liabilities consist of long‑term debt, derivative instruments, accounts payable, amounts due to related parties and accrued liabilities.
(a) Concentration of credit risk: Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivables from Helios Pool, and cash and cash equivalents. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents by placing it with highly-rated financial institutions. |
(b) Interest rate risk: Our long‑term bank loans are based on LIBOR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to our 2015 Debt Facility. In September 2015, we entered into interest rate swaps with Citibank N.A. (“Citibank”) and ING Bank N.V. (“ING”) to effectively convert a notional amount of $200 million and $50 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.93% and 2.00%, respectively, each with a termination date of March 23, 2022. In October 2015, we entered into interest rate swaps with the Commonwealth Bank of Australia (“CBA”) and Citibank to effectively convert amortizing notional amounts of $85.7 million and $128.6 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% and 1.38%, respectively, each with a termination date of March 23, 2022. In June 2016, we entered into two interest rate swaps with Citibank to effectively convert amortizing notional amounts of $73.0 million and $30.0 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.21% and 1.16%, respectively, each with a termination date of March 23, 2022. |
(c) Fair value measurements: Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on market‑based LIBOR swap yield rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and, therefore, are considered Level 2 items in accordance with the fair value hierarchy. The fair value of the interest rate swap agreements approximates the amount that we would have to pay for the early termination of the agreements. The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives all of which are considered Level 2 items in accordance with the fair value hierarchy: |
|
|
|
June 30, 2017 |
|
|
March 31, 2017 |
|
||||||
|
|
Other non-current assets |
|
Long-term liabilities |
|
Other non-current assets |
|
Long-term liabilities |
|
||||
Derivatives not designated as hedging instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
||||
Interest rate swap agreements |
|
$ |
3,883,944 |
|
$ |
410,767 |
|
$ |
5,843,368 |
|
$ |
— |
|
The effect of derivative instruments within the unaudited interim condensed consolidated statements of operations for the periods presented is as follows:
|
|
|
|
Three months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
June 30, 2017 |
|
June 30, 2016 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized loss on derivatives |
|
$ |
(2,370,191) |
|
$ |
(4,369,859) |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(612,863) |
|
|
(2,256,788) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
(2,983,054) |
|
$ |
(6,626,647) |
|
As of June 30, 2017 and March 31, 2017, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three months ended June 30, 2017 and 2016.
(d) Book values and fair values of financial instruments: In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above), we have other financial instruments that are carried at historical cost. These financial instruments include trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the short‑term nature of these financial instruments. We also have long-term bank debt for which we believe the historical carrying value approximates their fair value as the loans bear interest at variable interest rates, being LIBOR, which is observable at commonly quoted intervals for the full terms of the loans, and hence are considered as Level 2 items in accordance with the fair value hierarchy. Cash and cash equivalents and restricted cash are considered Level 1 items. |
|
11. Commitments and Contingencies
Operating Leases
Operating lease rent expense was as follows:
|
|
Three months ended |
||||
|
|
June 30, 2017 |
|
June 30, 2016 |
||
Operating lease rent expense |
|
$ |
106,192 |
|
$ |
115,030 |
We had the following commitments as a lessee under operating leases relating to our United States, Greece and United Kingdom offices:
|
|
June 30, 2017 |
|
|
Less than one year |
|
$ |
306,153 |
|
One to three years |
|
|
119,614 |
|
Total |
|
$ |
425,767 |
|
Fixed Time Charter Contracts
We had the following future minimum fixed time charter hire receipts based on non-cancelable long-term fixed time charter contracts:
|
|
June 30, 2017 |
|
|
Less than one year |
|
$ |
47,473,113 |
|
One to three years |
|
|
46,936,227 |
|
Three to five years |
|
|
3,443,252 |
|
Total |
|
$ |
97,852,592 |
|
Other
From time to time we expect to be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Such claims, even if lacking in merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any claim that is reasonably possible and should be disclosed or probable and for which a provision should be established in the accompanying unaudited interim condensed consolidated financial statements.
|
Our subsidiaries as of June 30, 2017, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.
Vessel Owning Subsidiaries
|
|
Type of |
|
|
|
|
|
|
|
Subsidiary |
|
vessel |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CMNL LPG Transport LLC |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CNML LPG Transport LLC |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
Comet LPG Transport LLC |
|
VLGC |
|
Comet |
|
2014 |
|
84,000 |
|
Corsair LPG Transport LLC |
|
VLGC |
|
Corsair |
|
2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
VLGC |
|
Corvette |
|
2015 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC |
|
VLGC |
|
Cougar |
|
2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
VLGC |
|
Concorde |
|
2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC |
|
VLGC |
|
Cobra |
|
2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC |
|
VLGC |
|
Continental |
|
2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC |
|
VLGC |
|
Constitution |
|
2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC |
|
VLGC |
|
Commodore |
|
2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC |
|
VLGC |
|
Cresques |
|
2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
VLGC |
|
Constellation |
|
2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC |
|
VLGC |
|
Cheyenne |
|
2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC |
|
VLGC |
|
Clermont |
|
2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC |
|
VLGC |
|
Cratis |
|
2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC |
|
VLGC |
|
Chaparral |
|
2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC |
|
VLGC |
|
Copernicus |
|
2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
VLGC |
|
Commander |
|
2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC |
|
VLGC |
|
Challenger |
|
2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC |
|
VLGC |
|
Caravelle |
|
2016 |
|
84,000 |
|
Management Subsidiaries
|
|
Subsidiary |
|
Dorian LPG Management Corp. |
|
Dorian LPG (USA) LLC (incorporated in USA) |
|
Dorian LPG (UK) Ltd. (incorporated in UK) |
|
Dorian LPG Finance LLC |
|
Occident River Trading Limited (incorporated in UK) |
|
Dormant Subsidiaries
|
|
Subsidiary |
|
SeaCor LPG I LLC |
|
SeaCor LPG II LLC |
|
Capricorn LPG Transport LLC |
|
Constitution LPG Transport LLC |
|
Grendon Tanker LLC |
|
(1) |
CBM: Cubic meters, a standard measure for LPG tanker capacity |
|
|
|
Drydocking |
|
|
|
|
costs |
|
|
Balance, April 1, 2017 |
|
$ |
1,884,174 |
|
Additions |
|
|
138,921 |
|
Amortization |
|
|
(122,643) |
|
Balance, June 30, 2017 |
|
$ |
1,900,452 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2017 |
|
$ |
1,728,769,295 |
|
$ |
(125,300,048) |
|
$ |
1,603,469,247 |
|
Other additions |
|
|
218,685 |
|
|
— |
|
|
218,685 |
|
Depreciation |
|
|
— |
|
|
(16,099,795) |
|
|
(16,099,795) |
|
Balance, June 30, 2017 |
|
$ |
1,728,987,980 |
|
$ |
(141,399,843) |
|
$ |
1,587,588,137 |
|
|
RBS Loan Facility |
|
June 30, 2017 |
|
March 31, 2017 |
|
||
Tranche A |
|
$ |
— |
|
$ |
34,000,000 |
|
Tranche B |
|
|
— |
|
|
25,570,000 |
|
Tranche C |
|
|
— |
|
|
40,312,500 |
|
Total RBS Loan Facility |
|
$ |
— |
|
$ |
99,882,500 |
|
|
|
|
|
|
|
|
|
2017 Bridge Loan |
|
$ |
97,000,000 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
219,362,501 |
|
$ |
227,512,277 |
|
KEXIM Direct Financing |
|
|
167,710,376 |
|
|
177,680,534 |
|
KEXIM Guaranteed |
|
|
172,450,332 |
|
|
175,773,718 |
|
K-sure Insured |
|
|
85,897,019 |
|
|
89,253,699 |
|
Total 2015 Debt Facility |
|
$ |
645,420,228 |
|
$ |
670,220,228 |
|
|
|
|
|
|
|
|
|
Total debt obligations |
|
$ |
742,420,228 |
|
$ |
770,102,728 |
|
Less: deferred financing fees |
|
|
22,095,916 |
|
|
20,138,480 |
|
Debt obligations—net of deferred financing fees |
|
$ |
720,324,312 |
|
$ |
749,964,248 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
45,658,482 |
|
$ |
65,978,785 |
|
Long-term debt—net of current portion and deferred financing fees |
|
|
674,665,830 |
|
|
683,985,463 |
|
Total |
|
$ |
720,324,312 |
|
$ |
749,964,248 |
|
|
|
Financing |
|
|
|
|
costs |
|
|
Balance, April 1, 2017 |
|
$ |
20,138,480 |
|
Additions |
|
|
2,883,059 |
|
Amortization |
|
|
(1,098,827) |
|
Gain on early extinguishment of debt |
|
|
173,204 |
|
Balance, June 30, 2017 |
|
$ |
22,095,916 |
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Incentive Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of April 1, 2017 |
|
1,114,625 |
|
$ |
17.72 |
|
Granted |
|
268,464 |
|
|
7.35 |
|
Vested |
|
(353,823) |
|
|
17.10 |
|
Unvested as of June 30, 2017 |
|
1,029,266 |
|
$ |
15.23 |
|
|
|
|
Three months ended |
|
||||
|
|
June 30, 2017 |
|
June 30, 2016 |
|
||
Net pool revenues—related party |
|
$ |
28,475,359 |
|
$ |
37,659,385 |
|
Time charter revenues |
|
|
12,564,655 |
|
|
12,532,351 |
|
Other revenues, net |
|
|
(14,542) |
|
|
324,040 |
|
Total revenues |
|
$ |
41,025,472 |
|
$ |
50,515,776 |
|
|
|
|
|
June 30, 2017 |
|
|
March 31, 2017 |
|
||||||
|
|
Other non-current assets |
|
Long-term liabilities |
|
Other non-current assets |
|
Long-term liabilities |
|
||||
Derivatives not designated as hedging instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
||||
Interest rate swap agreements |
|
$ |
3,883,944 |
|
$ |
410,767 |
|
$ |
5,843,368 |
|
$ |
— |
|
|
|
|
|
Three months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
June 30, 2017 |
|
June 30, 2016 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized loss on derivatives |
|
$ |
(2,370,191) |
|
$ |
(4,369,859) |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(612,863) |
|
|
(2,256,788) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
(2,983,054) |
|
$ |
(6,626,647) |
|
|
|
|
Three months ended |
||||
|
|
June 30, 2017 |
|
June 30, 2016 |
||
Operating lease rent expense |
|
$ |
106,192 |
|
$ |
115,030 |
|
|
June 30, 2017 |
|
|
Less than one year |
|
$ |
306,153 |
|
One to three years |
|
|
119,614 |
|
Total |
|
$ |
425,767 |
|
|
|
June 30, 2017 |
|
|
Less than one year |
|
$ |
47,473,113 |
|
One to three years |
|
|
46,936,227 |
|
Three to five years |
|
|
3,443,252 |
|
Total |
|
$ |
97,852,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|