lpg_Current_Folio_10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2015

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________   to __________ 

Commission File Number: 001-36437 

 

Picture 1

Dorian LPG Ltd.

(Exact name of registrant as specified in its charter) 

 

 

 

 

Marshall Islands

 

66-0818228

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

c/o Dorian LPG (USA) LLC

 

06902

27 Signal Road, Stamford, CT

 

 

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (203) 674-9900

Former name, former address and former fiscal year, if changed since last report: Not Applicable

 

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 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     No  

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes     No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer 

 

Non-accelerated filer

 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No     

As of January 27, 2016, there were 57,225,162 shares of the registrant’s Common Stock outstanding.

 

 


 

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FORWARD‑LOOKING STATEMENTS

 

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including analyses and other information based on forecasts of future results and estimates of amounts not yet determinable and statements relating to our future prospects, developments and business strategies. Forward-looking statements are generally identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. Forward-looking statements involve risks and uncertainties that may cause actual future activities and results of operations to be materially different from those suggested or described in this quarterly report.

 

These risks include the risks that are identified in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, and also include, among others, risks associated with the following:

 

·

future operating or financial results;

 

·

our limited operating history;

 

·

pending or recent acquisitions, business strategy and expected capital spending or operating expenses;

 

·

worldwide production of oil and natural gas, including production from U.S. shale fields;

 

·

completion of infrastructure projects to support marine transportation of liquefied petroleum gas, or LPG, including export terminals and pipelines;

 

·

competition in the marine transportation industry;

 

·

oversupply of or limited demand for LPG vessels comparable to ours;

 

·

supply and demand for LPG, which is affected by the production levels and price of oil, refined petroleum products and natural gas;

 

·

global and regional economic and political conditions;

 

·

shipping market trends, including charter rates, factors affecting supply and demand and world fleet composition;

 

·

ability to employ our vessels profitably;

 

·

our limited number of assets and small number of customers;

 

·

performance by the counterparties to our charter agreements;

 

·

termination of our customer contracts;

 

·

delays and cost overruns in vessel construction projects;

 

·

our ability to incur additional indebtedness under and compliance with restrictions and covenants in our debt agreements;

 

·

our need for cash to meet our debt service obligations and to pay installments in connection with our newbuilding vessels;

 


 

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·

our levels of operating and maintenance costs;

 

·

our dependence on key personnel;

 

·

availability of skilled workers and the related labor costs;

 

·

compliance with governmental, tax, environmental and safety regulation;

 

·

changes in tax laws, treaties or regulations;

 

·

any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), the U.K. Bribery Act 2010, or other applicable regulations relating to bribery;

 

·

general economic conditions and conditions in the oil and natural gas industry;

 

·

effects of new products and new technology in our industry;

 

·

operating hazards in the maritime transportation industry;

 

·

adequacy of insurance coverage in the event of a catastrophic event;

 

·

the volatility of the price of our common shares;

 

·

our incorporation under the laws of the Republic of the Marshall Islands and the limited rights to relief that may be available compared to other countries, including the United States;

 

·

our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities, the terms of such financing and our ability to comply with covenants set forth in such financing arrangements; and

 

·

expectations regarding vessel acquisitions.

 

Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is not realized. You should thoroughly read this quarterly report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this quarterly report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the forward-looking statements by these cautionary statements.

 

Any forward-looking statements contained herein are made only as of the date of this quarterly report, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

As used in this quarterly report and unless otherwise indicated, references to “Dorian,” the “Company,” “we,” “our,” “us,” or similar terms refer to Dorian LPG Ltd. and its subsidiaries.

 


 

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Dorian LPG Ltd.

 

TABLE OF CONTENTS

 

 

 

 

 

PART I. 

FINANCIAL INFORMATION

 

 

 

 

ITEM 1. 

FINANCIAL STATEMENTS

 

 

Unaudited Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2015

 

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2015 and December 31, 2014 

 

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the nine months ended December 31, 2015 and December 31, 2014

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2015 and December 31, 2014

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

ITEM 2. 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

15 

ITEM 3. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

25 

ITEM 4. 

CONTROLS AND PROCEDURES

25 

 

 

 

 

 

 

PART II. 

OTHER INFORMATION

 

 

 

 

ITEM 1. 

LEGAL PROCEEDINGS

26 

ITEM 1A. 

RISK FACTORS

26 

ITEM 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

26 

ITEM 6. 

EXHIBITS

26 

 

 

 

SIGNATURES 

 

27 

EXHIBIT INDEX 

 

28 

 

 

 

 


 

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PART I — FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

Dorian LPG Ltd.

Unaudited Condensed Consolidated Balance Sheets

(Expressed in United States Dollars,  except for share data)

 

 

 

 

 

 

 

 

 

 

    

As of

    

As of

 

 

 

December 31, 2015

 

March 31, 2015

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,034,919

 

$

204,821,183

 

Trade receivables, net and accrued revenues

 

 

12,542,013

 

 

22,847,224

 

Prepaid expenses and other receivables

 

 

4,033,795

 

 

1,780,548

 

Due from related parties

 

 

57,519,736

 

 

386,743

 

Inventories

 

 

2,123,758

 

 

3,375,759

 

Total current assets

 

 

98,254,221

 

 

233,211,457

 

Fixed assets

 

 

 

 

 

 

 

Vessels, net

 

 

1,604,987,643

 

 

419,976,053

 

Vessels under construction

 

 

26,523,881

 

 

398,175,504

 

Other fixed assets, net

 

 

641,880

 

 

464,889

 

Total fixed assets

 

 

1,632,153,404

 

 

818,616,446

 

Other non-current assets

 

 

 

 

 

 

 

Other non-current assets

 

 

97,454

 

 

97,446

 

Deferred charges, net

 

 

24,424,739

 

 

13,965,921

 

Derivative instruments

 

 

1,869,068

 

 

 

Due from related parties—non-current

 

 

16,500,000

 

 

 —

 

Restricted cash

 

 

49,712,789

 

 

33,210,000

 

Total assets

 

$

1,823,011,675

 

$

1,099,101,270

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade accounts payable

 

$

9,259,449

 

$

5,224,349

 

Accrued expenses

 

 

7,791,482

 

 

5,647,702

 

Due to related parties

 

 

557,297

 

 

525,170

 

Deferred income

 

 

4,704,350

 

 

1,122,239

 

Current portion of long-term debt

 

 

65,708,060

 

 

15,677,553

 

Total current liabilities

 

 

88,020,638

 

 

28,197,013

 

Long-term liabilities

 

 

 

 

 

 

 

Long-term debt—net of current portion

 

 

748,344,288

 

 

184,665,874

 

Derivative instruments

 

 

10,934,205

 

 

12,730,462

 

Other long-term liabilities

 

 

357,308

 

 

293,662

 

Total long-term liabilities

 

 

759,635,801

 

 

197,689,998

 

Total liabilities

 

 

847,656,439

 

 

225,887,011

 

Shareholders’ equity

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued nor outstanding

 

 

 

 

 

Common stock, $0.01 par value, 450,000,000 shares authorized, 58,057,493 and 58,057,493 shares issued, 57,225,162 and 58,057,493 shares outstanding (net of treasury stock), as of December 31, 2015 and March 31, 2015, respectively

 

 

580,575

 

 

580,575

 

Additional paid-in-capital

 

 

847,223,211

 

 

844,539,059

 

Treasury stock, at cost; 832,331 and zero shares as of December 31, 2015 and March 31, 2015, respectively

 

 

(10,070,645)

 

 

 —

 

Retained earnings

 

 

137,622,095

 

 

28,094,625

 

Total shareholders’ equity

 

 

975,355,236

 

 

873,214,259

 

Total liabilities and shareholders’ equity

 

$

1,823,011,675

 

$

1,099,101,270

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Operations  

(Expressed in United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

    

December 31, 2015

    

December 31, 2014

    

December 31, 2015

    

December 31, 2014

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net pool revenues—related party

 

$

66,044,777

 

$

 —

 

$

130,701,023

 

$

 —

 

Voyage charter revenues

 

 

15,567,844

 

 

25,516,971

 

 

46,013,858

 

 

47,444,311

 

Time charter revenues

 

 

11,237,746

 

 

6,965,705

 

 

26,169,581

 

 

20,713,290

 

Other revenues

 

 

433,341

 

 

101,314

 

 

988,138

 

 

638,440

 

Total revenues

 

 

93,283,708

 

 

32,583,990

 

 

203,872,600

 

 

68,796,041

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Voyage expenses

 

 

4,347,222

 

 

7,755,589

 

 

11,411,841

 

 

14,899,147

 

Vessel operating expenses

 

 

14,265,183

 

 

5,741,206

 

 

30,479,158

 

 

14,412,174

 

Management fees—related party

 

 

 —

 

 

 —

 

 

 —

 

 

1,125,000

 

Depreciation and amortization

 

 

13,536,900

 

 

3,966,640

 

 

26,697,882

 

 

9,467,720

 

General and administrative expenses

 

 

7,506,740

 

 

4,294,965

 

 

20,002,555

 

 

9,389,689

 

Loss on disposal of assets

 

 

 —

 

 

 —

 

 

105,549

 

 

 —

 

Total expenses

 

 

39,656,045

 

 

21,758,400

 

 

88,696,985

 

 

49,293,730

 

Other income—related parties

 

 

383,642

 

 

 —

 

 

1,150,927

 

 

 —

 

Operating income

 

 

54,011,305

 

 

10,825,590

 

 

116,326,542

 

 

19,502,311

 

Other income/(expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and finance costs

 

 

(4,633,454)

 

 

(34,491)

 

 

(5,700,583)

 

 

(250,483)

 

Interest income

 

 

22,382

 

 

104,169

 

 

137,226

 

 

345,797

 

Gain/(loss) on derivatives, net

 

 

5,382,442

 

 

(1,340,747)

 

 

(816,926)

 

 

(2,386,582)

 

Foreign currency loss, net

 

 

(121,352)

 

 

(557,916)

 

 

(418,789)

 

 

(778,512)

 

Total other income/(expenses), net

 

 

650,018

 

 

(1,828,985)

 

 

(6,799,072)

 

 

(3,069,780)

 

Net income

 

$

54,661,323

 

$

8,996,605

 

$

109,527,470

 

$

16,432,531

 

Earnings per common share—basic

 

$

0.97

 

$

0.16

 

$

1.92

 

$

0.29

 

Earnings per common share—diluted

 

$

0.97

 

$

0.16

 

$

1.92

 

$

0.29

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

(Expressed in United States Dollars, except for number of shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

                           

 

Additional

 

                           

 

 

 

 

 

 

common

 

Common

 

Treasury

 

paid-in

 

Retained

 

 

 

 

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2014

 

48,365,011

 

$

483,650

 

$

 —

 

$

688,881,939

 

$

2,833,843

 

$

692,199,432

 

Issuance—April 24, 2014

 

1,412,698

 

 

14,127

 

 

 —

 

 

25,849,437

 

 

 —

 

 

25,863,564

 

Issuance—May 13, 2014

 

7,105,263

 

 

71,053

 

 

 —

 

 

123,413,912

 

 

 —

 

 

123,484,965

 

Issuance—May 22, 2014

 

245,521

 

 

2,455

 

 

 —

 

 

4,335,901

 

 

 —

 

 

4,338,356

 

Restricted share award issuances

 

655,000

 

 

6,550

 

 

 —

 

 

(6,550)

 

 

 —

 

 

 —

 

Net income for the period

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

16,432,531

 

 

16,432,531

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

1,524,802

 

 

 —

 

 

1,524,802

 

Balance, December 31, 2014

 

57,783,493

 

$

577,835

 

$

 —

 

$

843,999,441

 

$

19,266,374

 

$

863,843,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

common

 

Common

 

Treasury

 

paid-in

 

Retained

 

 

 

 

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2015

 

58,057,493

 

$

580,575

 

$

 —

 

$

844,539,059

 

$

28,094,625

 

$

873,214,259

 

Net income for the period      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

109,527,470

 

 

109,527,470

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

2,684,152

 

 

 —

 

 

2,684,152

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(10,070,645)

 

 

 —

 

 

 —

 

 

(10,070,645)

 

Balance, December 31, 2015

 

58,057,493

 

$

580,575

 

$

(10,070,645)

 

$

847,223,211

 

$

137,622,095

 

$

975,355,236

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars)

 

 

 

 

 

 

 

 

 

 

    

Nine months ended

    

Nine months ended

 

 

 

December 31, 2015

 

December 31, 2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

109,527,470

 

$

16,432,531

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,697,882

 

 

9,467,720

 

Amortization of financing costs

 

 

1,553,730

 

 

693,733

 

Unrealized gain on derivatives

 

 

(3,665,324)

 

 

(1,637,646)

 

Stock-based compensation expense

 

 

3,050,819

 

 

1,524,802

 

Loss on disposal of assets

 

 

105,549

 

 

 —

 

Unrealized exchange differences

 

 

322,455

 

 

954,774

 

Other non-cash items

 

 

61,323

 

 

731,689

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Trade receivables, net and accrued revenue

 

 

10,305,211

 

 

(8,144,265)

 

Prepaid expenses and other receivables

 

 

(2,253,247)

 

 

(1,194,116)

 

Due from related parties

 

 

(73,632,993)

 

 

1,322,149

 

Inventories

 

 

1,252,001

 

 

(2,404,584)

 

Other non-current assets

 

 

(8)

 

 

(97,439)

 

Trade accounts payable

 

 

3,386,722

 

 

3,177,894

 

Accrued expenses and other liabilities

 

 

6,241,601

 

 

1,102,233

 

Due to related parties

 

 

32,127

 

 

403,903

 

Payments for drydocking costs

 

 

 —

 

 

(538,941)

 

Net cash provided by operating activities

 

 

82,985,318

 

 

21,794,437

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Payments for vessels and vessels under construction

 

 

(839,065,088)

 

 

(294,777,414)

 

Restricted cash deposits

 

 

(16,502,789)

 

 

(1,500,000)

 

Restricted cash released

 

 

 —

 

 

30,938,702

 

Proceeds from disposal of assets

 

 

136,660

 

 

 —

 

Payments to acquire other fixed assets

 

 

(443,417)

 

 

(185,336)

 

Net cash used in investing activities

 

 

(855,874,634)

 

 

(265,524,048)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

634,648,196

 

 

 —

 

Repayment of long-term debt borrowings

 

 

(20,939,276)

 

 

(6,084,500)

 

Proceeds from common share issuances

 

 

 —

 

 

155,830,178

 

Purchase of treasury stock

 

 

(10,070,645)

 

 

 —

 

Financing costs paid

 

 

(13,210,445)

 

 

 —

 

Payments relating to issuance costs

 

 

 —

 

 

(1,388,918)

 

Net cash provided by financing activities

 

 

590,427,830

 

 

148,356,760

 

Effects of exchange rates on cash and cash equivalents

 

 

(324,778)

 

 

(954,774)

 

Net decrease in cash and cash equivalents

 

 

(182,786,264)

 

 

(96,327,625)

 

Cash and cash equivalents at the beginning of the period

 

 

204,821,183

 

 

279,131,795

 

Cash and cash equivalents at the end of the period

 

$

22,034,919

 

$

182,804,170

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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 primarily focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm. Our fleet consists of twenty-two LPG carriers, including eighteen fuel-efficient 84,000 cbm ECO-design VLGCs, three 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have a  newbuilding contract for the construction of one new fuel-efficient 84,000 cbm ECO-design VLGC at Hyundai Heavy Industries Co., Ltd. ("Hyundai" or "HHI"), which is scheduled to be delivered to us in February 2016. We refer to this contract along with the VLGCs that were delivered between July 2014 and December 2015 from Hyundai and Daewoo  Shipping and Marine Engineering Ltd. ("Daewoo" or “DSME”), both of which are based in South Korea, as our VLGC Newbuilding Program.

 

On April 1, 2015, Dorian and Phoenix Tankers Pte. Ltd. (“Phoenix”), a wholly-owned subsidiary of Mitsui OSK Lines Ltd., began operation of Helios LPG Pool LLC, or the Helios Pool, a 50% joint venture, which is a pool of VLGC vessels. We believe that the operation of certain of our VLGCs in this pool will allow us to achieve better market coverage and utilization. Vessels entered into the Helios Pool are commercially managed jointly by Dorian LPG (UK) Ltd., our wholly-owned subsidiary, and Phoenix. The members of the Helios Pool share in the net pool revenues generated by the entire group of vessels in the pool, weighted according to certain technical vessel characteristics, and net pool revenues (see Note 2) are distributed as time charter hire to each participant. The vessels entered into the Helios Pool may operate either in the spot market, contracts of affreightment, or on time charters of two years' duration or less.

 

On May 13, 2014, we completed our initial public offering (the “IPO”) and our shares trade on the New York Stock Exchange under the ticker symbol "LPG".

 

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, 2015 included in our Annual Report on Form 10-K for the year ended March 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on June 4, 2015.

 

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, 2015, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.

 

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Vessel Owning Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

    

Type of

    

 

    

 

    

 

 

Subsidiary

 

vessel(2)

 

Vessel’s name

 

Built

 

CBM(1)

 

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML

 

2008

 

82,000

 

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP

 

2007

 

82,000

 

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL

 

2006

 

82,000

 

Grendon Tanker LLC

 

PGC

 

Grendon

 

1996

 

5,000

 

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

 

 

Newbuilding Vessel Owning Subsidiaries(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

Estimated

    

 

 

 

 

Type of

 

Hull

 

 

 

vessel

 

 

 

Subsidiary

 

vessel(2)

 

number

 

Vessel's Name

 

delivery date(4)

 

CBM(1)

 

Dorian Exporter LPG Transport LLC

 

VLGC

 

S758

 

Caravelle

 

Q1 2016

 

84,000

 

 


(1)

CBM: Cubic meters, a standard measure for LPG tanker capacity

(2)

Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)

(3)

Represents the owning subsidiary of a newbuilding vessel that was not yet delivered as of December 31, 2015

(4)

Represents calendar year quarters

 

Management Subsidiaries

 

 

 

 

 

 

 

Incorporation

 

Subsidiary

    

Date

 

Dorian LPG Management Corp

 

July 2, 2013

 

Dorian LPG (USA) LLC (incorporated in USA)

 

July 2, 2013

 

Dorian LPG (UK) Ltd. (incorporated in UK)

 

November 18, 2013

 

Dorian LPG Finance LLC

 

January 16, 2015

 

Occident River Trading Limited (incorporated in UK)

 

January 9, 2015

 

 

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Dormant Subsidiaries

 

 

 

 

 

 

 

Incorporation

 

Subsidiary

    

Date

 

SeaCor LPG I LLC

 

April 26, 2013

 

SeaCor LPG II LLC

 

April 26, 2013

 

Capricorn LPG Transport LLC

 

November 15, 2013

 

Constitution LPG Transport LLC

 

February 17, 2014

 

 

 

 

 

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, 2015 (see Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2015).

 

Additionally, as of April 1, 2015, we began operations of pooling arrangements. Net pool revenues—related party for each vessel in the pool is determined in accordance with the profit sharing terms specified within the pool agreement. In particular, the pool manager calculates the net pool revenues using gross revenues less voyage expenses of all the pool vessels and less the general and administrative expenses of the pool and distributes the net pool revenues as time charter hire to participants based on:

 

·

pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into consideration); and

 

·

number of days the vessel participated in the pool in the period. 

 

We recognize net pool revenues—related party 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. 

 

In February 2015, the Financial Accounting Standards Board (“FASB”) issued accounting guidance amending consolidation analysis which focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This new standard simplifies consolidation accounting by reducing the number of consolidation models and providing incremental benefits to stakeholders. In addition, the new standard places more emphasis on risk of loss when determining a controlling financial interest, reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (a “VIE”), and changes consolidation conclusion for public and private companies in several industries that typically make use of limited partnerships or VIEs. The pronouncement is effective prospectively for annual periods beginning after December 15, 2015, 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. 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. This pronouncement is effective retrospectively for fiscal years beginning after December 15, 2015 and interim periods within that reporting period, with early adoption permitted. We intend to adopt this pronouncement on April 1, 2016, and the amount of debt issuance costs that would be classified on our balance sheet as a reduction of debt was $23.9 million as of December 31, 2015 and $13.3 million as of March 31, 2015.

 

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

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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.

 

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.

 

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. (“Dorian Hellas,” “DHSA” or the “Manager”) 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 $0.2 million and $0.1 million for the three months ended December 31, 2015 and 2014, respectively, and $0.6 million and $0.3 million for the nine months ended December 31, 2015 and 2014, respectively. Such expenses are reimbursed based on their actual cost. Pursuant to an  agreement between Dorian LPG (UK) Ltd. and DHSA, chartering and operational services are provided by Dorian LPG (UK) Ltd. to DHSA. Fees for these services are included in “Other income-related parties” in the unaudited condensed consolidated statement of operations included herein and were less than $0.1 million and $0.1 million for the three and nine months ended December 31, 2015, respectively.

 

We outsourced the technical and commercial management of our vessels to DHSA, a related party, through June 30, 2014, pursuant to management agreements entered into by each vessel owning subsidiary on July 26, 2013, as amended. 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 and Highbury Shipping Services Limited ("HSSL"), to provide certain of these services on behalf of the vessel owning companies. Management fees incurred related to these agreements are presented as Management fees‑related party in the consolidated statement of operations in the relevant period. There were no management fees related to these agreements subsequent to June 30, 2014.

 

Additionally, a fixed monthly fee of $15,000 per hull was payable to DHSA for pre‑delivery services provided during the period from July 29, 2013 until June 30, 2014. Management fees related to the pre‑delivery services during the nine months ended December 31, 2014 amounted to $0.9 million, which have been capitalized and presented in “Vessels under construction or “Vessels, net for vessels that have been delivered. There were no Management fees related to the pre-delivery services during the three months ended December 31, 2014 or for the three and nine months ended December 31, 2015.  

 

Helios LPG Pool LLC

 

On April 1, 2015, Dorian and Phoenix began operations of the Helios Pool and entered into pool participation agreements for the purpose of establishing and operating, as charterer, under a time charter to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared as described in Note 2 above. 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. We have determined that the Helios Pool is a VIE 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. As of December 31, 2015, we had receivables from the Helios Pool of $73.5 million, including $16.5 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, 2015 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)

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Ltd. are included in “Other income-related parties” in the unaudited condensed consolidated statement of operations and were $0.4 million and $1.1 million for the three and nine months ended December 31, 2015.

 

Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three and nine months ended December 31, 2015. 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 incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the pool aggregates the revenue and expenses for all the vessels in the pool and distributes net pool revenues to the participants based on the results of the pool, operating days and pool points, as variable time charter hire for the relevant vessel. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 9.

 

Artwork

 

During the nine months ended December 31, 2015, we purchased $0.1 million of artwork for newbuilding vessels, which have been capitalized and presented in “Vessels under construction” or “Vessels, net” for vessels that have been delivered during the period,  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.

 

4. Deferred Charges, Net

 

The analysis and movement of deferred charges is presented in the table below:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Financing

    

Drydocking

    

Total deferred

 

 

 

costs

 

costs

 

charges, net

 

Balance, April 1, 2015

 

$

13,296,216

 

$

669,705

 

$

13,965,921

 

Additions

 

 

12,200,552

 

 

 —

 

 

12,200,552

 

Amortization

 

 

(1,553,730)

 

 

(188,004)

 

 

(1,741,734)

 

Balance, December 31, 2015

 

$

23,943,038

 

$

481,701

 

$

24,424,739

 

 

Financing costs incurred during the nine months ended December 31, 2015 relate to a $758 million debt facility that we entered into in March 2015 (the “2015 Debt Facility”). See Note 7 below.

 

There were no drydockings during the nine months ended December 31, 2015.

 

5. Vessels, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Accumulated

    

 

 

 

 

 

Cost

 

depreciation

 

Net book Value

 

Balance, April 1, 2015

 

$

439,180,669

 

$

(19,204,616)

 

$

419,976,053

 

Additions

 

 

1,211,595,756

 

 

 —

 

 

1,211,595,756

 

Disposals

 

 

(268,281)

 

 

26,060

 

 

(242,221)

 

Depreciation

 

 

 —

 

 

(26,341,945)

 

 

(26,341,945)

 

Balance, December 31, 2015

 

$

1,650,508,144

 

$

(45,520,501)

 

$

1,604,987,643

 

 

The additions to Vessels, net represent amounts transferred from Vessels under Construction relating to the cost of our fifteen newbuildings that were delivered to us during the nine months ended December 31, 2015.

 

Vessels, with a total carrying value of $1,601.3 million and $416.0 million as of December 31, 2015 and March 31, 2015, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 7 below). No impairment loss was recorded for the periods presented.

 

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6. Vessels Under Construction

 

 

 

 

 

 

Balance, April 1, 2015

    

$

398,175,504

 

Installment payments to shipyards

 

 

814,098,361

 

Other capitalized expenditures

 

 

21,184,618

 

Capitalized interest

 

 

4,661,154

 

Vessels delivered (transferred to Vessels)

 

 

(1,211,595,756)

 

Balance, December 31, 2015

 

$

26,523,881

 

 

Other capitalized expenditures for the nine months ended December 31, 2015 represent LPG coolant of $4.8 million and fees paid to third party vendors of $16.4 million for supervision and other newbuilding pre‑delivery costs including engineering and technical support, liaising with the shipyard, and ensuring key suppliers are integrated into the production planning process.

 

7. Long-term Debt

 

RBS Loan Facility -  refer to Note 11 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.

 

2015 Debt Facility – refer to Note 11 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015 for additional information related to the 2015 Debt Facility. During the nine months ended December 31, 2015, we made drawdowns of $634.6 million, including $9.0 million to pay lender fees, under the 2015 Debt Facility, which was secured by fifteen newbuilding vessels delivered during that period and was comprised of four separate tranches. As of December 31, 2015,  $42.2 million was available to be drawn under the facility on delivery of our final newbuilding.

 

Debt Obligations

 

The table below presents our debt obligations:

 

 

 

 

 

 

 

 

 

RBS secured bank debt

    

December 31, 2015

    

March 31, 2015

 

Tranche A

 

$

39,100,000

 

$

40,800,000

 

Tranche B

 

 

28,127,000

 

 

30,684,000

 

Tranche C

 

 

45,795,000

 

 

47,622,500

 

Total

 

$

113,022,000

 

$

119,106,500

 

 

 

 

 

 

 

 

 

2015 Debt Facility

 

 

 

 

 

 

 

Commercial Financing

 

$

231,599,393

 

$

26,695,381

 

KEXIM Direct Financing

 

 

188,405,793

 

 

21,890,212

 

KEXIM Guaranteed

 

 

186,383,877

 

 

21,655,293

 

K-sure Insured

 

 

94,641,285

 

 

10,996,041

 

Total

 

 

701,030,348

 

 

81,236,927

 

Total debt obligations

 

$

814,052,348

 

$

200,343,427

 

 

 

 

 

 

 

 

 

Presented as follows:

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

65,708,060

 

$

15,677,553

 

Long-term debt—net of current portion

 

 

748,344,288

 

 

184,665,874

 

Total

 

$

814,052,348

 

$

200,343,427

 

 

 

8. Stock-Based Compensation Plans

 

Our stock-based compensation expense was $1.3 million and $3.1 million for the three and nine months ended December 31, 2015, respectively, and was $0.8 million and $1.5 million for the three and nine months ended December 31, 2014. Stock-based compensation expense is included within general and administrative expenses in the

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unaudited condensed consolidated statements of operations. Unrecognized compensation cost was $13.3 million as of December 31, 2015 and will be recognized over the remaining weighted average life of 3.70 years. For more information on our equity incentive plan, see Note 13 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.

 

A summary of the activity of restricted shares awarded under our equity incentive plan as of December 31, 2015 and changes during the nine months then ended, is as follows:

 

 

 

 

 

 

 

 

 

    

 

    

Weighted-Average

 

 

 

 

 

Grant-Date

 

Restricted Share Awards

 

Numbers of Shares

 

Fair Value

 

Unvested as of March 31, 2015

 

929,000

 

$

19.70

 

Granted

 

 —

 

 

 —

 

Unvested as of December 31, 2015

 

929,000

 

$

19.70

 

 

 

9. Revenues

 

Revenues comprise the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

    

Nine months ended

 

 

 

December 31, 2015

    

December 31, 2014

 

December 31, 2015

    

December 31, 2014

 

Net pool revenues—related party

 

$

66,044,777

 

$

 —

 

$

130,701,023

 

$

 —

 

Voyage charter revenues

 

 

15,567,844

 

 

25,516,971

 

 

46,013,858

 

 

47,444,311

 

Time charter revenues

 

 

11,237,746

 

 

6,965,705

 

 

26,169,581

 

 

20,713,290

 

Other revenues

 

 

433,341

 

 

101,314

 

 

988,138

 

 

638,440

 

Total

 

$

93,283,708

 

$

32,583,990

 

$

203,872,600

 

$

68,796,041

 

 

Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. See Note 3 to our unaudited interim condensed consolidated financial statements.

 

Time charter revenue included a profit-sharing element of the time charter agreements of $2.4 million and $7.8 million for the three and nine months ended December 31, 2014, respectively. There was no profit-sharing element of the time charter agreements for the three and nine months ended December 31, 2015. Other revenues represents income from charterers relating to reimbursement of voyage expenses such as costs for security guards and war risk insurance.

 

10. Financial Instruments and Fair Value Disclosures

 

Our principal financial assets consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. Our principal financial liabilities consist of long‑term bank loan, interest rate swaps, 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 receivable 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 effectively convert substantially all of our RBS Loan Facility from a floating to a fixed rate. To hedge our exposure to changes in interest rates we are a party to five floatingtofixed interest rate swaps with RBS. 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

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rate to a fixed rate and each has a termination date of March 23, 2022. The fixed interest rate is 1.93% and 2.00% on the Citibank and ING swaps, respectively. 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, with a termination date of March 23, 2022. Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on marketbased 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.

 

(c) Fair value measurements: 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, 2015

 

 

March 31, 2015

 

 

 

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

 

$

1,869,068

 

$

10,934,205

 

$

 

$

12,730,462

 

 

The effect of derivative instruments within the unaudited condensed consolidated statement 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, 2015

    

December 31, 2014

 

Interest Rate Swap—Change in fair value

 

Gain/(loss) on derivatives, net

 

$

7,389,868

 

$

(19,406)

 

Interest Rate Swap—Realized loss

 

Gain/(loss) on derivatives, net

 

 

(2,007,426)

 

 

(1,321,341)

 

Gain/(loss) on derivatives, net

 

 

 

$

5,382,442

 

$

(1,340,747)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Nine months ended

 

Derivatives not designated as hedging instruments

    

Location of gain/(loss) recognized

    

December 31, 2015

    

December 31, 2014

 

Interest Rate Swap—Change in fair value

 

Gain/(loss) on derivatives, net

 

$

3,665,324

 

$

1,637,646

 

Interest Rate Swap—Realized loss

 

Gain/(loss) on derivatives, net

 

 

(4,482,250)

 

 

(4,024,228)

 

Gain/(loss) on derivatives, net

 

 

 

$

(816,926)

 

$

(2,386,582)

 

 

As of December 31, 2015 and March 31, 2015, 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, 2015 and 2014.

 

(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 shortterm 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 i