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 June 30, 2017

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 

 

W:\Word Team jobs\Bridge\2015\11 November\26\Dorian LPG, LTD\8K Earnings Release\Wip\image00001.jpg

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer

Accelerated filer  

Non-accelerated filer

 

Smaller reporting company

Emerging growth company  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

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

As of July 24, 2017, there were 55,105,318 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 this quarterly report and of our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, and also include, among others, risks associated with the following:

 

·

our future operating or financial results;

 

·

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

 

·

shipping trends, including changes in charter rates, scrapping rates and vessel and other asset values;

 

·

factors affecting supply of and demand for liquefied petroleum gas, or LPG, shipping;

 

·

changes in trading patterns that impact tonnage requirements;

 

·

general economic conditions and specific economic conditions in the oil and natural gas industry and the countries and regions where LPG is produced and consumed;

 

·

the supply of and demand for LPG, which is affected by the production levels and price of oil, refined petroleum products and natural gas, including production from U.S. shale fields;

 

·

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

 

·

changes to the supply and demand for LPG vessels as a result of the expansion of the Panama Canal;

 

·

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

 

·

competition in the LPG shipping industry;

 

·

our ability to profitably employ our vessels, including vessels participating in the Helios Pool (defined below);

 

·

the failure of our or the Helios Pool’s significant customers to perform their obligations to us or to the Helios Pool;

 

·

the performance of the Helios Pool;

 

·

the loss or reduction in business from our or the Helios Pool’s significant customers;

 

·

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

 


 

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·

our costs, including crew wages, insurance, provisions, repairs and maintenance, and general and administrative expenses;

 

·

our dependence on key personnel;

 

·

the availability of skilled workers and the related labor costs;

 

·

the effects of new products and new technology in our industry;

 

·

operating hazards in the maritime transportation industry, including piracy;

 

·

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

 

·

compliance with and changes to governmental, tax, environmental and safety laws and regulations;

 

·

compliance with the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or other applicable regulations relating to bribery; and

 

·

the volatility of the price of our common shares.

 

 

Actual results could differ materially from expectations expressed in the forward-looking statements in this quarterly report 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.

 

We caution readers of this quarterly report not to place undue reliance on forward-looking statements. Any forward-looking statements contained herein are made only as of the date of this 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, except as required by law.

 

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 June 30, 2017 and March 31, 2017

1

 

Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2017 and June 30, 2016 

2

 

Unaudited Condensed Consolidated Statements of Shareholders' Equity for the three months ended June 30, 2017 and June 30, 2016

3

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2017 and June 30, 2016

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

 

 

 

ITEM 2. 

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

17

ITEM 3. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

26

ITEM 4. 

CONTROLS AND PROCEDURES

26

 

 

 

 

 

 

PART II. 

OTHER INFORMATION

 

 

 

 

ITEM 1. 

LEGAL PROCEEDINGS

28

ITEM 1A. 

RISK FACTORS

28

ITEM 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

28

ITEM 6. 

EXHIBITS

28

 

 

 

SIGNATURES 

 

29

EXHIBIT INDEX 

 

30

 

 

 

 


 

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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

 

 

 

June 30, 2017

 

March 31, 2017

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,363,045

 

$

17,018,552

 

Trade receivables, net and accrued revenues

 

 

2,730

 

 

11,030

 

Prepaid expenses and other receivables

 

 

2,688,092

 

 

1,903,804

 

Due from related parties

 

 

37,441,188

 

 

42,457,000

 

Inventories

 

 

2,458,407

 

 

2,580,742

 

Total current assets

 

 

77,953,462

 

 

63,971,128

 

Fixed assets

 

 

 

 

 

 

 

Vessels, net

 

 

1,587,588,137

 

 

1,603,469,247

 

Other fixed assets, net

 

 

246,628

 

 

317,348

 

Total fixed assets

 

 

1,587,834,765

 

 

1,603,786,595

 

Other non-current assets

 

 

 

 

 

 

 

Deferred charges, net

 

 

1,900,452

 

 

1,884,174

 

Derivative instruments

 

 

3,883,944

 

 

5,843,368

 

Due from related parties—non-current

 

 

19,800,000

 

 

19,800,000

 

Restricted cash

 

 

18,075,146

 

 

50,874,146

 

Other non-current assets

 

 

78,879

 

 

75,469

 

Total assets

 

$

1,709,526,648

 

$

1,746,234,880

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade accounts payable

 

$

4,451,775

 

$

7,075,622

 

Accrued expenses

 

 

6,412,584

 

 

5,386,397

 

Due to related parties

 

 

33,212

 

 

11,162

 

Deferred income

 

 

7,610,612

 

 

7,313,048

 

Current portion of long-term debt

 

 

45,658,482

 

 

65,978,785

 

Total current liabilities

 

 

64,166,665

 

 

85,765,014

 

Long-term liabilities

 

 

 

 

 

 

 

Long-term debt—net of current portion and deferred financing fees

 

 

674,665,830

 

 

683,985,463

 

Derivative instruments

 

 

410,767

 

 

 —

 

Other long-term liabilities

 

 

532,323

 

 

482,685

 

Total long-term liabilities

 

 

675,608,920

 

 

684,468,148

 

Total liabilities

 

 

739,775,585

 

 

770,233,162

 

Commitments and contingencies

 

 

 

 

 

 

 

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, 58,610,665 and 58,342,201 shares issued, 55,105,318 and 54,974,526 shares outstanding (net of treasury stock), as of June 30, 2017 and March 31, 2017, respectively

 

 

586,107

 

 

583,422

 

Additional paid-in-capital

 

 

854,495,905

 

 

852,974,373

 

Treasury stock, at cost; 3,505,347 and 3,367,675 shares as of June 30, 2017 and March 31, 2017, respectively

 

 

(34,982,171)

 

 

(33,897,269)

 

Retained earnings

 

 

149,651,222

 

 

156,341,192

 

Total shareholders’ equity

 

 

969,751,063

 

 

976,001,718

 

Total liabilities and shareholders’ equity

 

$

1,709,526,648

 

$

1,746,234,880

 

 

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 

 

 

    

June 30, 2017

    

June 30, 2016

 

Revenues

 

 

 

 

 

 

 

Net pool revenues—related party

 

$

28,475,359

 

$

37,659,385

 

Time charter revenues

 

 

12,564,655

 

 

12,532,351

 

Other revenues, net

 

 

(14,542)

 

 

324,040

 

Total revenues

 

 

41,025,472

 

 

50,515,776

 

Expenses

 

 

 

 

 

 

 

Voyage expenses

 

 

239,445

 

 

755,804

 

Vessel operating expenses

 

 

16,885,289

 

 

16,095,552

 

Depreciation and amortization

 

 

16,293,158

 

 

16,192,745

 

General and administrative expenses

 

 

8,534,909

 

 

5,611,310

 

Total expenses

 

 

41,952,801

 

 

38,655,411

 

Other income—related parties

 

 

633,883

 

 

552,901

 

Operating income/(loss)

 

 

(293,446)

 

 

12,413,266

 

Other income/(expenses)

 

 

 

 

 

 

 

Interest and finance costs

 

 

(7,477,734)

 

 

(7,038,209)

 

Interest income

 

 

15,816

 

 

23,178

 

Unrealized loss on derivatives

 

 

(2,370,191)

 

 

(4,369,859)

 

Realized loss on derivatives

 

 

(612,863)

 

 

(2,256,788)

 

Gain on early extinguishment of debt

 

 

4,117,364

 

 

 —

 

Foreign currency loss, net

 

 

(68,916)

 

 

(62,709)

 

Total other income/(expenses), net

 

 

(6,396,524)

 

 

(13,704,387)

 

Net loss

 

$

(6,689,970)

 

$

(1,291,121)

 

Loss per common share—basic

 

$

(0.12)

 

$

(0.02)

 

Loss per common share—diluted

 

$

(0.12)

 

$

(0.02)

 

 

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

2


 

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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, 2016

 

58,057,493

 

$

580,575

 

$

(20,943,816)

 

$

848,179,471

 

$

157,783,007

 

$

985,599,237

 

Net loss for the period      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,291,121)

 

 

(1,291,121)

 

Restricted share award issuances

 

256,950

 

 

2,570

 

 

 —

 

 

(2,570)

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

1,421,636

 

 

 —

 

 

1,421,636

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(11,853,983)

 

 

 —

 

 

 —

 

 

(11,853,983)

 

Balance, June 30, 2016

 

58,314,443

 

$

583,145

 

$

(32,797,799)

 

$

849,598,537

 

$

156,491,886

 

$

973,875,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

common

 

Common

 

Treasury

 

paid-in

 

Retained

 

 

 

 

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2017

 

58,342,201

 

$

583,422

 

$

(33,897,269)

 

$

852,974,373

 

$

156,341,192

 

$

976,001,718

 

Net loss for the period      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(6,689,970)

 

 

(6,689,970)

 

Restricted share award issuances

 

268,464

 

 

2,685

 

 

 —

 

 

(2,685)

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

1,524,217

 

 

 —

 

 

1,524,217

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(1,084,902)

 

 

 —

 

 

 —

 

 

(1,084,902)

 

Balance, June 30, 2017

 

58,610,665

 

$

586,107

 

$

(34,982,171)

 

$

854,495,905

 

$

149,651,222

 

$

969,751,063

 

 

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

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

June 30, 2017

 

June 30, 2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(6,689,970)

 

$

(1,291,121)

 

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

16,293,158

 

 

16,192,745

 

Amortization of financing costs

 

 

1,098,827

 

 

948,407

 

Unrealized (gain)/loss on derivatives

 

 

2,370,191

 

 

4,369,859

 

Stock-based compensation expense

 

 

1,524,217

 

 

1,009,798

 

Gain on early extinguishment of debt

 

 

(4,117,364)

 

 

 —

 

Unrealized foreign currency (gain)/loss, net

 

 

(75,142)

 

 

88,067

 

Other non-cash items

 

 

15,689

 

 

20,953

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Trade receivables, net and accrued revenue

 

 

8,300

 

 

18,482

 

Prepaid expenses and other receivables

 

 

(784,288)

 

 

(35,827)

 

Due from related parties

 

 

5,015,812

 

 

8,830,603

 

Inventories

 

 

122,335

 

 

156,030

 

Other non-current assets

 

 

(3,410)

 

 

608

 

Trade accounts payable

 

 

(2,511,722)

 

 

(212,475)

 

Accrued expenses and other liabilities

 

 

516,824

 

 

(198,144)

 

Due to related parties

 

 

22,050

 

 

(115,926)

 

Payments for drydocking costs

 

 

(395,189)

 

 

 —

 

Net cash provided by operating activities

 

 

12,410,318

 

 

29,782,059

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

(276,396)

 

 

(1,241,220)

 

Restricted cash deposits

 

 

(1,000)

 

 

 —

 

Restricted cash released

 

 

32,800,000

 

 

 —

 

Payments to acquire other fixed assets

 

 

 —

 

 

(606)

 

Net cash provided by/(used in) investing activities

 

 

32,522,604

 

 

(1,241,826)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

97,000,000

 

 

 —

 

Repayment of long-term debt borrowings

 

 

(120,738,340)

 

 

(15,657,054)

 

Purchase of treasury stock

 

 

(350,279)

 

 

(11,853,983)

 

Financing costs paid

 

 

(2,541,005)

 

 

(42,047)

 

Net cash used in financing activities

 

 

(26,629,624)

 

 

(27,553,084)

 

Effects of exchange rates on cash and cash equivalents

 

 

41,195

 

 

(77,911)

 

Net increase in cash and cash equivalents

 

 

18,344,493

 

 

909,238

 

Cash and cash equivalents at the beginning of the period

 

 

17,018,552

 

 

46,411,962

 

Cash and cash equivalents at the end of the period

 

$

35,363,045

 

$

47,321,200

 

 

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

4


 

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Dorian LPG Ltd.

Notes to Unaudited Condensed Consolidated Financial Statements

(Expressed in United States Dollars)

1. Basis of Presentation and General Information

 

Dorian LPG Ltd. (“Dorian”) was incorporated on July 1, 2013 under the laws of the Republic of the Marshall Islands, is headquartered in the United States and is engaged in the transportation of liquefied petroleum gas ("LPG") worldwide. Specifically, Dorian and its subsidiaries (together "we", "us", "our", or the "Company") are focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm, in the LPG shipping industry. Our fleet currently consists of twenty-two VLGCs, including nineteen fuel-efficient 84,000 cbm ECO-design VLGCs (“ECO VLGCs”) and three 82,000 cbm VLGCs.

 

On April 1, 2015, Dorian and Phoenix Tankers Pte. Ltd. (“Phoenix”) began operations of Helios LPG Pool LLC (the “Helios Pool”), which entered into pool participation agreements for the purpose of establishing and operating, as charterer, under variable rate time charters to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. Refer to Note 3 below for further description of the Helios Pool.

 

The accompanying unaudited interim condensed consolidated financial statements and related notes (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the Financial Statements. The Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2017 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2017.

 

Our interim results are subject to seasonal and other fluctuations, and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.

 

Our subsidiaries as of June 30, 2017, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.

 

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Vessel Owning Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

    

Type of

    

 

    

 

    

 

 

Subsidiary

 

vessel

 

Vessel’s name

 

Built

 

CBM(1)

 

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL

 

2006

 

82,000

 

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP

 

2007

 

82,000

 

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML

 

2008

 

82,000

 

Comet LPG Transport LLC

 

VLGC

 

Comet

 

2014

 

84,000

 

Corsair LPG Transport LLC

 

VLGC

 

Corsair

 

2014

 

84,000

 

Corvette LPG Transport LLC

 

VLGC

 

Corvette

 

2015

 

84,000

 

Dorian Shanghai LPG Transport LLC

 

VLGC

 

Cougar

 

2015

 

84,000

 

Concorde LPG Transport LLC

 

VLGC

 

Concorde

 

2015

 

84,000

 

Dorian Houston LPG Transport LLC

 

VLGC

 

Cobra

 

2015

 

84,000

 

Dorian Sao Paulo LPG Transport LLC

 

VLGC

 

Continental

 

2015

 

84,000

 

Dorian Ulsan LPG Transport LLC

 

VLGC

 

Constitution

 

2015

 

84,000

 

Dorian Amsterdam LPG Transport LLC

 

VLGC

 

Commodore

 

2015

 

84,000

 

Dorian Dubai LPG Transport LLC

 

VLGC

 

Cresques

 

2015

 

84,000

 

Constellation LPG Transport LLC

 

VLGC

 

Constellation

 

2015

 

84,000

 

Dorian Monaco LPG Transport LLC

 

VLGC

 

Cheyenne

 

2015

 

84,000

 

Dorian Barcelona LPG Transport LLC

 

VLGC

 

Clermont

 

2015

 

84,000

 

Dorian Geneva LPG Transport LLC

 

VLGC

 

Cratis

 

2015

 

84,000

 

Dorian Cape Town LPG Transport LLC

 

VLGC

 

Chaparral

 

2015

 

84,000

 

Dorian Tokyo LPG Transport LLC

 

VLGC

 

Copernicus

 

2015

 

84,000

 

Commander LPG Transport LLC

 

VLGC

 

Commander

 

2015

 

84,000

 

Dorian Explorer LPG Transport LLC

 

VLGC

 

Challenger

 

2015

 

84,000

 

Dorian Exporter LPG Transport LLC

 

VLGC

 

Caravelle

 

2016

 

84,000

 

 

 Management Subsidiaries

 

 

 

 

Subsidiary

 

Dorian LPG Management Corp.

 

Dorian LPG (USA) LLC (incorporated in USA)

 

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

 

Dorian LPG Finance LLC

 

Occident River Trading Limited (incorporated in UK)

 

 

Dormant Subsidiaries

 

 

 

 

Subsidiary

 

SeaCor LPG I LLC

 

SeaCor LPG II LLC

 

Capricorn LPG Transport LLC

 

Constitution LPG Transport LLC

 

Grendon Tanker LLC

 


(1)

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

 

 

 

 

 

2. Significant Accounting Policies

 

The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as were applied in the preparation of our audited financial statements for the year ended March 31, 2017 (refer to Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017).

 

In November 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance to require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The pronouncement is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The implementation of this guidance is anticipated to result in restricted cash transfers not reported as cash flow activities in the consolidated

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statements of cash flows, and, upon adoption, is not anticipated to have an impact on our consolidated balance sheets and statements of operations.

 

In August 2016, the FASB issued accounting guidance addressing specific cash flow issues with the objective of reducing the existing diversity in practice. The pronouncement is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not believe that the impact of the adoption of this amended guidance will have a material effect on our financial statements.

 

In February 2016, the FASB issued accounting guidance to update the requirements of financial accounting and reporting for lessees and lessors. The updated guidance, for lease terms of more than 12 months, will require a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. Lessor accounting remains largely unchanged. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The pronouncement is effective prospectively for public business entities for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted for all entities. We are currently assessing the impact the amended guidance will have on our financial statements.

 

In July 2015, the FASB issued accounting guidance requiring entities to measure most inventory at the lower of cost and net realizable value. The pronouncement is effective prospectively for annual periods beginning after December 15, 2016, and interim periods within that reporting period. The impact of the adoption of this amended guidance did not have a material effect on our financial statements.

 

In May 2014, the FASB amended its accounting guidance for revenue recognition. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and consideration that a company expects to receive for the services provided. It also requires additional disclosures necessary for the financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB voted to defer the effective date by one year for fiscal years beginning on or after December 15, 2017 and interim periods within that reporting period and permit early adoption of the standard, but not before the beginning of 2017. We are currently assessing the impact the amended guidance will have on our financial statements.

 

3. Transactions with Related Parties

 

Dorian (Hellas), S.A.

 

Pursuant to management agreements entered into by each of our then vessel owning subsidiaries on July 26, 2013, as amended, with Dorian (Hellas) S.A. (“DHSA”), the technical, crew and commercial management as well as insurance and accounting services of our vessels was outsourced to DHSA. In addition, under these management agreements, strategic and financial services had also been outsourced to DHSA. DHSA had entered into agreements with each of Eagle Ocean Transport Inc. (“Eagle Ocean Transport”) and Highbury Shipping Services Limited (“HSSL”) to provide certain of these services on behalf of our then vessel owning companies. Mr. John Hadjipateras, our Chairman, President and Chief Executive Officer, owns 100% of Eagle Ocean Transport, and our Vice President of Chartering, Insurance and Legal, Nigel GreyTurner, owns 100% of HSSL.  As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from DHSA and are now provided through our wholly-owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp. Subsequent to the transition agreements, Eagle Ocean Transport continues to incur related travel costs for certain transitioned employees as well as office-related costs, for which we reimbursed Eagle Ocean Transport $0.1 million for both the three months ended June 30, 2017 and 2016. Such expenses are reimbursed based on their actual cost.

 

Dorian LPG (USA) LLC and its subsidiaries entered into an agreement with DHSA, retroactive to July 2014 and superseding an agreement between Dorian LPG (UK) Ltd. and DHSA, for the provision by Dorian LPG (USA) LLC and

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its subsidiaries of certain chartering and marine operation services to DHSA, for which income was earned and included in “Other income-related parties” totaling $0.1 million for both the three months ended June 30, 2017 and 2016.

 

As of June 30, 2017, $0.9 million was due from DHSA and included in “Due from related parties” in the unaudited interim condensed consolidated balance sheets. As of March 31, 2017, $0.8 million was due from DHSA and included in “Due from related parties” in the audited consolidated balance sheets.

 

Helios LPG Pool LLC

 

On April 1, 2015, Dorian and Phoenix began operations of the Helios Pool, which entered into pool participation agreements for the purpose of establishing and operating, as charterer, under variable rate time charters to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. We hold a 50% interest in the Helios Pool as a joint venture with Phoenix and all significant rights and obligations are equally shared by both parties. All profits of the Helios Pool are distributed to the pool participants based on pool points assigned to each vessel as variable charter hire and, as a result, there are no profits available to the equity investors as a share of equity. We have determined that the Helios Pool is a variable interest entity as it does not have sufficient equity at risk. We do not consolidate the Helios Pool because we are not the primary beneficiary and do not have a controlling financial interest. In consideration of Accounting Standards Codification (“ASC”) 810-10-50-4e, the significant factors considered and judgments made in determining that the power to direct the activities of the Helios Pool that most significantly impact the entity’s economic performance are shared, in that all significant performance activities which relate to approval of pool policies and strategies related to pool customers and the marketing of the pool for the procurement of customers for the pool vessels, addition of new pool vessels and the pool cost management, require unanimous board consent from a board consisting of two members from each joint venture investor. Further, in accordance with the guidance in ASC 810-10-25-38D, the Company and Phoenix are not related parties as defined in ASC 850 nor are they de facto agents pursuant to ASC 810-10, the power over the significant activities of the Helios Pool is shared, and no party is the primary beneficiary in the Helios Pool, or has a controlling financial interest. In March 2016, the Helios Pool reached an agreement with Oriental Energy Company Ltd. ("Oriental Energy") whereby Oriental Energy would contribute certain vessels to the Helios Pool, have certain of its vessels time chartered by the Helios Pool and simultaneously enter into a multi-year contract of affreightment covering Oriental Energy’s shipments from the United States Gulf. The agreement with Oriental Energy had no impact on the ownership structure or the power to direct significant activities of the Helios Pool. As of June 30, 2017, the Helios Pool operated twenty-nine VLGCs, including eighteen of our vessels, six Oriental Energy vessels and five Phoenix vessels.

 

As of June 30, 2017, we had receivables from the Helios Pool of $56.3 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2017, we had receivables from the Helios Pool of $61.4 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of June 30, 2017 is limited to the receivables from the pool. The Helios Pool does not have any third-party debt obligations. The Helios Pool has entered into commercial management agreements with each of Dorian LPG (UK) Ltd. and Phoenix as commercial managers and has appointed both commercial managers as the exclusive commercial managers of pool vessels. Fees for commercial management services provided by Dorian LPG (UK) Ltd. are included in “Other income-related parties” in the unaudited interim condensed consolidated statement of operations and were $0.5 million for both the three months ended June 30, 2017 and 2016. Additionally, we receive a fixed reimbursement of expenses such as costs for security guards and war risk insurance for vessels operating in high risk areas from the Helios Pool, for which we earned less than $0.1 million for the three months ended June 30, 2017 and $0.3 million for the three months ended June 30, 2016, and are included in “Other revenues” in the unaudited interim condensed consolidated statement of operations.

 

Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three months ended June 30, 2017. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and, where applicable, incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the Helios Pool calculates net pool revenues using gross revenues, less voyage expenses of all the pool vessels, less fixed time charter hire for any chartered-in vessels, less the general and administrative expenses of the pool. Net pool revenues, less any amounts required for working capital of the Helios Pool, are distributed

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as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 8.

 

4. Deferred Charges, Net

 

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

 

 

 

 

 

 

 

    

Drydocking

 

 

 

costs

 

Balance, April 1, 2017

 

$

1,884,174

 

Additions

 

 

138,921

 

Amortization

 

 

(122,643)

 

Balance, June 30, 2017

 

$

1,900,452

 

 

 

5. Vessels, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Accumulated

    

 

 

 

 

 

Cost

 

depreciation

 

Net book Value

 

Balance, April 1, 2017

 

$

1,728,769,295

 

$

(125,300,048)

 

$

1,603,469,247

 

Other additions

 

 

218,685

 

 

 —

 

 

218,685

 

Depreciation

 

 

 —

 

 

(16,099,795)

 

 

(16,099,795)

 

Balance, June 30, 2017

 

$

1,728,987,980

 

$

(141,399,843)

 

$

1,587,588,137

 

 

Additions to vessels, net were largely due to capital improvements made to one of our VLGCs during the three months ended June 30, 2017. Vessels, with a total carrying value of $1,587.6 million and $1,603.5 million as of June 30, 2017 and March 31, 2017, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 6 below). No impairment loss was recorded for the periods presented.

 

6. Long-term Debt

 

RBS Loan Facility

 

Refer to Note 10 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017 for information on our term loans with the Royal Bank of Scotland (the “RBS Loan Facility”). We repaid in full the RBS Loan Facility at 96% of the then outstanding principal amount using proceeds from a bridge loan agreement entered into on June 8, 2017. Refer to “2017 Bridge Loan” below for further details.

 

2017 Bridge Loan

 

On June 8, 2017, we entered into a $97.0 million bridge loan agreement (the “2017 Bridge Loan”) with DNB Capital LLC. The principal amount of the 2017 Bridge Loan is due on or before August 8, 2018 (the “Maturity Date”) and accrues interest on the outstanding principal amount at a rate of LIBOR plus 2.50% for the period ending December 7, 2017; LIBOR plus 4.50% for the period from December 8 until March 7, 2018; LIBOR plus 6.50% for the period March 8, 2018 until June 7, 2018, and 8.50% from June 8, 2018 until the Maturity Date.

 

The proceeds of the 2017 Bridge Loan were used to repay in full the RBS Loan Facility at 96% of the then outstanding principal amount. The remaining proceeds were used to pay accrued interest, legal, arrangement and advisory fees related to the 2017 Bridge Loan. As part of this transaction, $6.0 million of cash previously restricted under the RBS Loan Facility was released as unrestricted cash for use in operations.

 

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The 2017 Bridge Loan provides that it be secured by, among other things, (i) first priority mortgages on the four VLGCs that were financed under the RBS Loan Facility, (ii) first assignments of all freights, earnings and insurances relating to these four VLGCs, and (iii) pledges of membership interests of the borrowers.

 

The 2017 Bridge Loan also contains customary covenants that require us to maintain adequate insurance coverage, properly maintain the vessels and to obtain the lender’s prior consent before changes are made to the flag, class or management of the vessels. The 2017 Bridge Loan includes customary events of default, including those relating to a failure to pay principal or interest, breaches of covenants, representations and warranties, a cross-default to other indebtedness and non-compliance with security documents, and customary restrictions on the borrowers from paying dividends if an event of default has occurred and is continuing, or if an event of default would result therefrom.

 

The following financial covenants are the most restrictive from the 2017 Bridge Loan with which the Company is required to comply, calculated on a consolidated basis, determined and defined according to the provisions of the loan agreement:

 

·

Consolidated liquidity shall be at least $50.0 million, of which an amount at least equal to $10.0 million shall be held by the Parent Guarantor (as defined in the 2017 Bridge Loan agreement) on a freely available and unencumbered basis, and shall mean, on a consolidated basis, the sum of (a) cash and (b) cash equivalents, in each case held by the Parent Guarantor on a freely available and unencumbered basis, provided, that (1) cash and cash equivalents shall at all times be deemed to include cash held in the Earnings Accounts (as defined in the 2015 Debt Facility agreement), (2) cash and cash equivalents shall at all times be deemed to include all cash amounts on the balance sheet of the Parent Guarantor, and (3) at all times prior to and through May 31, 2018 only,  all cash held in accounts by Helios LPG Pool LLC attributable to the vessels owned directly or indirectly by the Parent Guarantor or its subsidiaries;

 

·

The ratio of consolidated net debt to consolidated total capitalization shall not exceed 0.60 to 1.00;

 

·

Minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense must be maintained greater than or equal to (i) 1.25 until and including the quarter ended March 31, 2018, and (ii) 1.50 thereafter;

 

·

Minimum shareholders' equity must be equal to the aggregate of (i) $400.0 million, (ii) 50% of new equity raised after June 8, 2017, and (iii) 25% of the positive net income for the immediately preceding fiscal year;

 

·

The ratio of current assets and long-term restricted cash divided by current liabilities less the current portion of long-term debt shall always be greater than 1.00; and

 

·

The ratio of the aggregate market value of the vessels securing the loan to the principal amount outstanding under such loan at all times shall be in excess of 150%.

 

2015 Debt Facility 

 

Refer to Notes 10 and 24 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017 for information on our $758 million debt financing facility that we entered into in March 2015 with a group of banks and financial institutions (the “2015 Debt Facility”). We entered into an agreement to amend the 2015 Debt Facility on May 31, 2017. Refer to “Amendment to the 2015 Debt Facility” below for more information.

 

Amendment to the 2015 Debt Facility

 

On May 31, 2017, we entered into an agreement to amend the 2015 Debt Facility (the “Amendment”). The Amendment includes the relaxation of certain covenants under the 2015 Debt Facility; the release of $26.8 million of

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restricted cash as of the date of the Amendment to be applied towards the next two debt principal payments, interest and certain fees; and certain other modifications, including an expanded definition of the components of consolidated liquidity to include all cash held in accounts by Helios LPG Pool LLC attributable to the vessels owned directly or indirectly by us.

 

The Amendment also includes a provision for the reduction of the minimum balance held as restricted cash. The minimum balance of the restricted cash deposited under the Amendment is:

 

·

the lesser of $18.0 million and $1.0 million per mortgaged vessel under the 2015 Debt Facility at all times from the date of the Amendment (“Amendment Date”) through six months from the Amendment Date;

 

·

the lesser of $29.0 million and $1.6 million per mortgaged vessel under the 2015 Debt Facility at all times from six months from the Amendment Date through the first anniversary of the Amendment Date;

 

·

the lesser of $40.0 million and $2.2 million per mortgaged vessel under the 2015 Debt Facility at all times thereafter; and   

 

·

if we complete a common stock offering of at least $50 million, including fees (an “Approved Equity Offering”), the restricted cash shall be calculated as an amount at least equal to 5% of the total principal of the 2015 Debt Facility outstanding, but at no time less than the lesser of $20.0 million and $1.1 million per mortgaged vessel under the 2015 Debt Facility.

 

The following covenants were relaxed under the Amendment:

 

·

Minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense must be maintained greater than or equal to (i) 1.25 at all times prior to and through March 31, 2018, (ii) 1.50 at all times from April 1, 2018 through March 31, 2019, and (iii) 2.50 at all times thereafter; and

 

·

Fair market value of the mortgaged ships plus any additional security over the outstanding loan balance shall be at least (i) 125% at all times prior to and through March 31, 2018, (ii) 130% at all times from April 1, 2018 through March 31, 2019, (iii) 135% at all times thereafter.

 

The following negative covenants were added under the Amendment:

 

·

Restrictions on dividends and stock repurchases until the earlier of (i) an Approved Equity Offering and (ii) the second anniversary of the Amendment Date; and

 

·

Restrictions on voluntary payments of the RBS Loan Facility, excluding refinancing, until the earlier of (i) an Approved Equity Offering and (ii) the second anniversary of the Amendment Date.

 

Fees related to the Amendment totaled approximately $1.1 million.

 

 

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Debt Obligations

 

The table below presents our debt obligations:

 

 

 

 

 

 

 

 

 

RBS Loan Facility

    

June 30, 2017

    

March 31, 2017

 

Tranche A

 

$

 —

 

$

34,000,000

 

Tranche B

 

 

 —

 

 

25,570,000

 

Tranche C

 

 

 —

 

 

40,312,500

 

Total RBS Loan Facility

 

$

 —

 

$

99,882,500

 

 

 

 

 

 

 

 

 

2017 Bridge Loan

 

$

97,000,000

 

$

 —

 

 

 

 

 

 

 

 

 

2015 Debt Facility

 

 

 

 

 

 

 

Commercial Financing

 

$

219,362,501

 

$

227,512,277

 

KEXIM Direct Financing

 

 

167,710,376

 

 

177,680,534

 

KEXIM Guaranteed

 

 

172,450,332

 

 

175,773,718

 

K-sure Insured

 

 

85,897,019

 

 

89,253,699

 

Total 2015 Debt Facility

 

$

645,420,228

 

$

670,220,228

 

 

 

 

 

 

 

 

 

Total debt obligations

 

$

742,420,228

 

$

770,102,728

 

Less: deferred financing fees

 

 

22,095,916

 

 

20,138,480

 

Debt obligations—net of deferred financing fees

 

$

720,324,312

 

$

749,964,248

 

 

 

 

 

 

 

 

 

Presented as follows:

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

45,658,482

 

$

65,978,785

 

Long-term debt—net of current portion and deferred financing fees

 

 

674,665,830

 

 

683,985,463

 

Total

 

$

720,324,312

 

$

749,964,248

 

 

Deferred Financing Fees

 

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

 

 

 

 

 

 

 

    

Financing

 

 

 

costs

 

Balance, April 1, 2017

 

$

20,138,480

 

Additions

 

 

2,883,059

 

Amortization

 

 

(1,098,827)

 

Gain on early extinguishment of debt

 

 

173,204

 

Balance, June 30, 2017

 

$

22,095,916

 

 

 

 

7. Stock-Based Compensation Plans

 

Our stock-based compensation expense is included within general and administrative expenses in the unaudited interim condensed consolidated statements of operations and was $1.5 million and $1.0 million for the three months ended June 30, 2017 and 2016, respectively. Unrecognized compensation cost was $9.7 million as of June 30, 2017 and will be recognized over the remaining weighted average life of 1.63 years. For more information on our equity incentive plan, refer to Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017.

 

In June 2017, we granted 259,800 shares of restricted stock to certain of our officers and employees. One-fourth of these restricted shares vested immediately on the grant date, one-fourth will vest one year after grant date, one-fourth will vest two years after grant date, and one-fourth will vest three years after grant date. The restricted shares were valued at their grant date fair market value and are expensed on a straight-line basis over the vesting periods. 

 

In June 2017, we granted 7,220 shares of stock to our non-executive directors, which were valued and expensed at their grant date fair market value.

 

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In June 2017, we granted 1,444 shares of stock to a non-employee consultant, which were valued and expensed at their grant date fair market value.

 

A summary of the activity of restricted shares awarded under our equity incentive plan as of June 30, 2017 and changes during the three months ended June 30, 2017, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted-Average

 

 

 

 

 

Grant-Date

 

Incentive Share Awards

 

Numbers of Shares

 

Fair Value

 

Unvested as of April 1, 2017

 

1,114,625

 

$

17.72

 

Granted

 

268,464

 

 

7.35

 

Vested

 

(353,823)

 

 

17.10

 

Unvested as of June 30, 2017

 

1,029,266

 

$

15.23

 

 

 

8. Revenues

 

Revenues comprise the following:

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

June 30, 2017

    

June 30, 2016

 

Net pool revenues—related party

 

$

28,475,359

 

$

37,659,385

 

Time charter revenues

 

 

12,564,655

 

 

12,532,351

 

Other revenues, net

 

 

(14,542)

 

 

324,040

 

Total revenues

 

$

41,025,472

 

$

50,515,776

 

 

Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. Refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017.

 

Other revenues, net represent income from charterers relating to reimbursement of voyage expenses such as costs for security guards and war risk insurance.

 

9. Financial Instruments and Fair Value Disclosures

 

Our principal financial assets consist of cash and cash equivalents, amounts due from related parties, trade accounts receivable and derivative instruments. Our principal financial liabilities consist of long‑term debt, derivative instruments, accounts payable, amounts due to related parties and accrued liabilities.

 

(a) Concentration of credit risk:  Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivables from Helios Pool, and cash and cash equivalents. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents by placing it with highly-rated financial institutions.

 

(b) Interest rate risk:  Our long‑term bank loans are based on LIBOR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to our 2015 Debt Facility. In September 2015, we entered into interest rate swaps with Citibank N.A. (“Citibank”) and ING Bank N.V. (“ING”) to effectively convert a notional amount of $200 million and $50 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.93% and 2.00%, respectively, each with a termination date of March 23, 2022. In October 2015, we entered into interest rate swaps with the Commonwealth Bank of Australia (“CBA”) and Citibank to effectively convert amortizing notional amounts of $85.7 million and $128.6 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% and 1.38%, respectively, each with a termination date of March 23, 2022. In June 2016, we entered into two interest rate swaps with Citibank to effectively convert amortizing notional amounts of $73.0 million and $30.0 million,

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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 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. The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives all of which are considered Level 2 items in accordance with the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2017

 

 

March 31, 2017

 

 

 

Other non-current assets

 

Long-term liabilities

 

Other non-current assets

 

Long-term liabilities

 

Derivatives not designated as hedging instruments

    

Derivative instruments

    

Derivative instruments

    

Derivative instruments

    

Derivative instruments

 

Interest rate swap agreements

 

$

3,883,944

 

$

410,767

 

$

5,843,368

 

$

 —

 

 

The effect of derivative instruments within the unaudited interim condensed consolidated statements of operations for the periods presented is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Derivatives not designated as hedging instruments

    

Location of gain/(loss) recognized

    

June 30, 2017

    

June 30, 2016

 

Interest Rate Swap—Change in fair value

 

Unrealized loss on derivatives

 

$

(2,370,191)

 

$

(4,369,859)

 

Interest Rate Swap—Realized loss

 

Realized loss on derivatives

 

 

(612,863)

 

 

(2,256,788)

 

Gain/(loss) on derivatives, net

 

 

 

$

(2,983,054)

 

$

(6,626,647)

 

 

As of June 30, 2017 and March 31, 2017, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three months ended June 30, 2017 and 2016.

 

(d) Book values and fair values of financial instruments:   In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above), we have other financial instruments that are carried at historical cost. These financial instruments include trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the short‑term nature of these financial instruments. We also have long-term bank debt for which we believe the historical carrying value approximates their fair value as the loans bear interest at variable interest rates, being LIBOR, which is observable at commonly quoted intervals for the full terms of the loans, and hence are considered as Level 2 items in accordance with the fair value hierarchy. Cash and cash equivalents and restricted cash are considered Level 1 items.

 

10. Earnings/(Loss) Per Share (“EPS”)

 

Basic EPS represents net income/(loss) attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period. Our restricted stock shares include rights to receive dividends that are subject to the risk of forfeiture if service requirements are not satisfied, and as a result, these shares are not considered participating securities and are excluded from the basic weighted-average shares outstanding calculation. Diluted EPS represent net income/(loss) attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period.

 

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Table of Contents

The calculations of basic and diluted EPS for the periods presented are as follows:

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

(In U.S. dollars except share data)

 

June 30, 2017

 

June 30, 2016

 

Numerator:

 

 

 

 

 

 

 

Net loss

 

$

(6,689,970)

 

$

(1,291,121)

 

Denominator:

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

53,875,292