| Revenues
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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 through the ownership and operation of LPG tankers. Dorian and its subsidiaries (together "we", “us”, "our", "DLPG" or the "Company") is focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm. 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. See Note 3 below for further description of the Helios Pool relationship.
The accompanying unaudited 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, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 31, 2016, as subsequently amended.
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 December 31, 2016, 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(2) |
|
(1) |
CBM: Cubic meters, a standard measure for LPG tanker capacity |
(2) |
Owner of the Pressurized Gas Carrier (“PGC”) Grendon until it was sold in February 2016 |
|
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, 2016 (see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016).
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. We are currently assessing the impact the amended guidance will have on our financial statements.
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 March 2016, the FASB issued accounting guidance to simplify the requirements of accounting for share-based payment transactions. The guidance simplifies the accounting for taxes related to stock-based compensation, including adjustments to how excess tax benefits and an entity’s payments for tax withholdings should be classified. Additionally, an entity may make an entity-wide policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within that reporting period with early adoption permitted in any interim or annual period. We have early adopted this pronouncement and have made the entity-wide policy election to account for forfeitures when they occur. The amended guidance had no significant impact on our financial statements for the three and nine months ended December 31, 2016.
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. We are currently assessing the impact the amended guidance will have on our financial statements.
In April 2015, an accounting pronouncement was issued by the FASB to update the guidance related to the presentation of debt issuance costs, which we adopted in April 2016. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. The reclassification does not impact net income/(loss) as previously reported or any prior amounts reported on the consolidated statements of comprehensive income, or the consolidated statements of cash flows. The effect of the retrospective application of this change in accounting principle on our consolidated balance sheets as of December 31, 2016 and March 31, 2016 resulted in a reduction of “Deferred charges, net” and “Total assets” in the amount of $21.0 million and $23.7 million, respectively, with a corresponding reduction of “Long-term debt—net of current portion” and “Total long-term liabilities.”
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.
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3. Transactions with Related Parties
Dorian (Hellas), S.A.
As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from Dorian (Hellas), S.A. (“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, Inc. (“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 and $0.2 million for the three months ended December 31, 2016 and 2015, respectively, and $0.3 million and $0.6 million for the nine months ended December 31, 2016 and 2015, respectively. 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 and less than $0.1 million for the three months ended December 31, 2016 and 2015, respectively, and $0.3 million and $0.1 million for the nine months ended December 31, 2016 and 2015, respectively.
As of December 31, 2016, $1.2 million was due from DHSA and included in “Due from related parties” in the unaudited condensed consolidated balance sheets and $0.5 million was due to DHSA and included in “Due to related parties” in the unaudited condensed consolidated balance sheets. As of March 31, 2016, $0.9 million was due from DHSA and included in “Due from related parties” in the unaudited condensed consolidated balance sheets and $0.5 million was due to DHSA and included in “Due to related parties” in the unaudited condensed 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 December 31, 2016, the Helios Pool operated twenty-four VLGCs, including seventeen of our vessels, three Oriental Energy vessels and four Phoenix vessels.
As of December 31, 2016, we had receivables from the Helios Pool of $43.2 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2016, we had receivables from the Helios Pool of $71.0 million, including $17.6 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of December 31, 2016 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 condensed consolidated statement of operations and were $0.6 million and $0.4 million for the three months ended December 31, 2016 and 2015, respectively, and were $1.5 million and $1.1 million for the nine months ended December 31, 2016 and 2015, respectively. 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 $0.2 million and $0.3 million for the three months ended December 31, 2016 and 2015, respectively, and $0.7 million and $0.6 million for the nine months ended December 31, 2016 and 2015, respectively, and are included in “Other revenues” in the unaudited condensed consolidated statement of operations.
Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three and nine months ended December 31, 2016. 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.
Artwork
During the three and nine months ended December 31, 2015, we purchased less than $0.1 and $0.1 million, respectively, of artwork for newbuilding vessels, which have been capitalized and presented in “Vessels, net” in the unaudited condensed consolidated balance sheets, for our Athens, Greece office and for a shipyard, which are included in “General and administrative expenses” in the unaudited condensed consolidated statement of operations. The artist is a relative of one of our executive officers. No artwork was purchased during the three and nine months ended December 31, 2016.
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4. Deferred Charges, Net
The analysis and movement of deferred charges is presented in the table below:
|
|
Drydocking |
|
|
|
|
costs |
|
|
Balance, April 1, 2016 |
|
$ |
294,935 |
|
Additions |
|
|
1,699,708 |
|
Amortization |
|
|
(107,957) |
|
Balance, December 31, 2016 |
|
$ |
1,886,686 |
|
The drydocking costs incurred during the nine months ended December 31, 2016 relate to the drydocking of two of our VLGCs.
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5. Vessels, Net
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2016 |
|
$ |
1,727,979,929 |
|
$ |
(60,755,453) |
|
$ |
1,667,224,476 |
|
Additions |
|
|
984,639 |
|
|
— |
|
|
984,639 |
|
Transfers out |
|
|
(195,273) |
|
|
— |
|
|
(195,273) |
|
Depreciation |
|
|
— |
|
|
(48,621,720) |
|
|
(48,621,720) |
|
Balance, December 31, 2016 |
|
$ |
1,728,769,295 |
|
$ |
(109,377,173) |
|
$ |
1,619,392,122 |
|
Additions to vessels, net were largely due to capital improvements made to two of our VLGCs during the nine months ended December 31, 2016. Vessels, with a total carrying value of $1,619.4 million and $1,667.2 million as of December 31, 2016 and March 31, 2016, 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.
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6. Long-term Debt
RBS Loan Facility - refer to Note 11 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016 for information on the RBS Loan Facility.
2015 Debt Facility – refer to Note 11 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016 for information on the 2015 Debt Facility.
Debt Obligations
The table below presents our debt obligations:
RBS secured bank debt |
|
December 31, 2016 |
|
March 31, 2016 |
|
||
Tranche A |
|
$ |
35,700,000 |
|
$ |
37,400,000 |
|
Tranche B |
|
|
25,570,000 |
|
|
28,127,000 |
|
Tranche C |
|
|
42,140,000 |
|
|
43,967,500 |
|
Total RBS secured bank debt |
|
$ |
103,410,000 |
|
$ |
109,494,500 |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
230,977,160 |
|
$ |
241,442,384 |
|
KEXIM Direct Financing |
|
|
181,945,598 |
|
|
194,827,596 |
|
KEXIM Guaranteed |
|
|
179,993,011 |
|
|
192,736,763 |
|
K-sure Insured |
|
|
91,396,155 |
|
|
97,867,129 |
|
Total 2015 Debt Facility |
|
$ |
684,311,924 |
|
$ |
726,873,872 |
|
|
|
|
|
|
|
|
|
Total debt obligations |
|
$ |
787,721,924 |
|
$ |
836,368,372 |
|
Less: deferred financing fees |
|
|
21,027,494 |
|
|
23,748,116 |
|
Debt obligations—net of deferred financing fees |
|
$ |
766,694,430 |
|
$ |
812,620,256 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
65,978,786 |
|
$ |
66,265,643 |
|
Long-term debt—net of current portion and deferred financing fees |
|
|
700,715,644 |
|
|
746,354,613 |
|
Total |
|
$ |
766,694,430 |
|
$ |
812,620,256 |
|
Deferred Financing Fees
The analysis and movement of deferred financing fees is presented in the table below:
|
|
Financing |
|
|
|
|
costs |
|
|
Balance, April 1, 2016 |
|
$ |
23,748,116 |
|
Additions |
|
|
99,785 |
|
Amortization |
|
|
(2,820,407) |
|
Balance, December 31, 2016 |
|
$ |
21,027,494 |
|
|
7. Stock-Based Compensation Plans
Our stock-based compensation expense is included within general and administrative expenses in the unaudited condensed consolidated statements of operations and was $1.2 million and $1.3 million for the three months ended December 31, 2016 and 2015, respectively, and $3.2 million and $3.1 million for the nine months ended December 31, 2016 and 2015, respectively. Unrecognized compensation cost was $10.6 million as of December 31, 2016 and will be recognized over the remaining weighted average life of 1.65 years. For more information on our equity incentive plan, see Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016.
In June 2016, we granted 250,000 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 expensed on a straight-line basis over the vesting periods.
In June 2016, September 2016 and December 2016, we granted 6,950, 10,130 and 8,695 shares of stock, respectively, to our non-executive directors, which were valued and expensed at their grant date fair market value.
In December 2016, we granted 1,739 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 December 31, 2016 and changes during the nine months ended December 31, 2016, is as follows:
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Incentive Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of April 1, 2016 |
|
929,000 |
|
$ |
19.70 |
|
Granted |
|
277,514 |
|
|
7.75 |
|
Vested |
|
(90,014) |
|
|
7.60 |
|
Forfeited |
|
(1,875) |
|
|
7.82 |
|
Unvested as of December 31, 2016 |
|
1,114,625 |
|
$ |
17.72 |
|
|
8. Revenues
Revenues comprise the following:
|
|
Three months ended |
|
Nine months ended |
|
||||||||
|
|
December 31, 2016 |
|
December 31, 2015 |
|
December 31, 2016 |
|
December 31, 2015 |
|
||||
Net pool revenues—related party |
|
$ |
22,301,512 |
|
$ |
66,044,777 |
|
$ |
80,798,208 |
|
$ |
130,701,023 |
|
Time charter revenues |
|
|
11,921,875 |
|
|
11,237,746 |
|
|
36,919,910 |
|
|
26,169,581 |
|
Voyage charter revenues |
|
|
1,296,952 |
|
|
15,567,844 |
|
|
1,296,952 |
|
|
46,013,858 |
|
Other revenues |
|
|
214,649 |
|
|
433,341 |
|
|
846,927 |
|
|
988,138 |
|
Total revenues |
|
$ |
35,734,988 |
|
$ |
93,283,708 |
|
$ |
119,861,997 |
|
$ |
203,872,600 |
|
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 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016.
Other revenues 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 the RBS Loan Facility and our 2015 Debt Facility. The interest rate swaps related to the RBS Loan Facility were terminated during the three months ended December 31, 2016 for $8.1 million. 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: |
|
|
|
December 31, 2016 |
|
|
March 31, 2016 |
|
||||||
|
|
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 |
|
$ |
4,961,435 |
|
$ |
69,750 |
|
$ |
— |
|
$ |
21,647,965 |
|
The effect of derivative instruments within the unaudited 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 |
|
December 31, 2016 |
|
December 31, 2015 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized gain on derivatives |
|
$ |
24,381,306 |
|
$ |
7,389,868 |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(8,390,014) |
|
|
(2,007,426) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
15,991,292 |
|
$ |
5,382,442 |
|
|
|
|
|
Nine months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2016 |
|
December 31, 2015 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized gain on derivatives |
|
$ |
26,539,650 |
|
$ |
3,665,324 |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(12,980,717) |
|
|
(4,482,250) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
13,558,933 |
|
$ |
(816,926) |
|
As of December 31, 2016 and March 31, 2016, 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 and nine months ended December 31, 2016 and 2015.
(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
Commitments under Operating Leases
As of December 31, 2016, we had the following commitments as a lessee under operating leases relating to our United States, Greece and United Kingdom offices:
|
|
December 31, 2016 |
|
|
Less than one year |
|
$ |
293,179 |
|
One to three years |
|
|
176,513 |
|
Total |
|
$ |
469,692 |
|
Fixed Time Charter Contracts
As of December 31, 2016, we had the following future minimum fixed time charter hire receipts based on non-cancelable long-term fixed time charter contracts:
|
|
December 31, 2016 |
|
|
Less than one year |
|
$ |
49,723,113 |
|
One to three years |
|
|
65,686,227 |
|
Three to five years |
|
|
8,213,252 |
|
Total |
|
$ |
123,622,592 |
|
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 December 31, 2016, 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(2) |
|
(1) |
CBM: Cubic meters, a standard measure for LPG tanker capacity |
(2) |
Owner of the Pressurized Gas Carrier (“PGC”) Grendon until it was sold in February 2016 |
|
|
|
Drydocking |
|
|
|
|
costs |
|
|
Balance, April 1, 2016 |
|
$ |
294,935 |
|
Additions |
|
|
1,699,708 |
|
Amortization |
|
|
(107,957) |
|
Balance, December 31, 2016 |
|
$ |
1,886,686 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2016 |
|
$ |
1,727,979,929 |
|
$ |
(60,755,453) |
|
$ |
1,667,224,476 |
|
Additions |
|
|
984,639 |
|
|
— |
|
|
984,639 |
|
Transfers out |
|
|
(195,273) |
|
|
— |
|
|
(195,273) |
|
Depreciation |
|
|
— |
|
|
(48,621,720) |
|
|
(48,621,720) |
|
Balance, December 31, 2016 |
|
$ |
1,728,769,295 |
|
$ |
(109,377,173) |
|
$ |
1,619,392,122 |
|
|
RBS secured bank debt |
|
December 31, 2016 |
|
March 31, 2016 |
|
||
Tranche A |
|
$ |
35,700,000 |
|
$ |
37,400,000 |
|
Tranche B |
|
|
25,570,000 |
|
|
28,127,000 |
|
Tranche C |
|
|
42,140,000 |
|
|
43,967,500 |
|
Total RBS secured bank debt |
|
$ |
103,410,000 |
|
$ |
109,494,500 |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
230,977,160 |
|
$ |
241,442,384 |
|
KEXIM Direct Financing |
|
|
181,945,598 |
|
|
194,827,596 |
|
KEXIM Guaranteed |
|
|
179,993,011 |
|
|
192,736,763 |
|
K-sure Insured |
|
|
91,396,155 |
|
|
97,867,129 |
|
Total 2015 Debt Facility |
|
$ |
684,311,924 |
|
$ |
726,873,872 |
|
|
|
|
|
|
|
|
|
Total debt obligations |
|
$ |
787,721,924 |
|
$ |
836,368,372 |
|
Less: deferred financing fees |
|
|
21,027,494 |
|
|
23,748,116 |
|
Debt obligations—net of deferred financing fees |
|
$ |
766,694,430 |
|
$ |
812,620,256 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
65,978,786 |
|
$ |
66,265,643 |
|
Long-term debt—net of current portion and deferred financing fees |
|
|
700,715,644 |
|
|
746,354,613 |
|
Total |
|
$ |
766,694,430 |
|
$ |
812,620,256 |
|
|
|
Financing |
|
|
|
|
costs |
|
|
Balance, April 1, 2016 |
|
$ |
23,748,116 |
|
Additions |
|
|
99,785 |
|
Amortization |
|
|
(2,820,407) |
|
Balance, December 31, 2016 |
|
$ |
21,027,494 |
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Incentive Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of April 1, 2016 |
|
929,000 |
|
$ |
19.70 |
|
Granted |
|
277,514 |
|
|
7.75 |
|
Vested |
|
(90,014) |
|
|
7.60 |
|
Forfeited |
|
(1,875) |
|
|
7.82 |
|
Unvested as of December 31, 2016 |
|
1,114,625 |
|
$ |
17.72 |
|
|
|
|
Three months ended |
|
Nine months ended |
|
||||||||
|
|
December 31, 2016 |
|
December 31, 2015 |
|
December 31, 2016 |
|
December 31, 2015 |
|
||||
Net pool revenues—related party |
|
$ |
22,301,512 |
|
$ |
66,044,777 |
|
$ |
80,798,208 |
|
$ |
130,701,023 |
|
Time charter revenues |
|
|
11,921,875 |
|
|
11,237,746 |
|
|
36,919,910 |
|
|
26,169,581 |
|
Voyage charter revenues |
|
|
1,296,952 |
|
|
15,567,844 |
|
|
1,296,952 |
|
|
46,013,858 |
|
Other revenues |
|
|
214,649 |
|
|
433,341 |
|
|
846,927 |
|
|
988,138 |
|
Total revenues |
|
$ |
35,734,988 |
|
$ |
93,283,708 |
|
$ |
119,861,997 |
|
$ |
203,872,600 |
|
|
|
|
|
December 31, 2016 |
|
|
March 31, 2016 |
|
||||||
|
|
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 |
|
$ |
4,961,435 |
|
$ |
69,750 |
|
$ |
— |
|
$ |
21,647,965 |
|
|
|
|
|
Three months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2016 |
|
December 31, 2015 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized gain on derivatives |
|
$ |
24,381,306 |
|
$ |
7,389,868 |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(8,390,014) |
|
|
(2,007,426) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
15,991,292 |
|
$ |
5,382,442 |
|
|
|
|
|
Nine months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2016 |
|
December 31, 2015 |
|
||
Interest Rate Swap—Change in fair value |
|
Unrealized gain on derivatives |
|
$ |
26,539,650 |
|
$ |
3,665,324 |
|
Interest Rate Swap—Realized loss |
|
Realized loss on derivatives |
|
|
(12,980,717) |
|
|
(4,482,250) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
13,558,933 |
|
$ |
(816,926) |
|
|
|
|
December 31, 2016 |
|
|
Less than one year |
|
$ |
293,179 |
|
One to three years |
|
|
176,513 |
|
Total |
|
$ |
469,692 |
|
|
|
December 31, 2016 |
|
|
Less than one year |
|
$ |
49,723,113 |
|
One to three years |
|
|
65,686,227 |
|
Three to five years |
|
|
8,213,252 |
|
Total |
|
$ |
123,622,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|