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, 2018

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 August 7, 2018, there were 55,157,193 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, 2018, 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; 

 

·

potential costs and uncertainty relating to the unsolicited proposal of BW LPG Limited to acquire the Company and contested proxy filed by BW LPG Limited and its affiliates;

 

·

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 (defined below) 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;

 

 


 

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·

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;

 

·

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;

 

·

changes in domestic and international political and geopolitical conditions, including the imposition of tariffs or otherwise on LPG or LPG products;

 

·

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, 2018 and March 31, 2018

1

 

Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2018 and June 30, 2017 

2

 

Unaudited Condensed Consolidated Statements of Shareholders' Equity for the three months ended June 30, 2018 and June 30, 2017

3

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and June 30, 2017

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

27

ITEM 4. 

CONTROLS AND PROCEDURES

27

 

 

 

 

 

 

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

 

 

 

EXHIBIT INDEX 

 

29

SIGNATURES 

 

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, 2018

 

March 31, 2018

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

65,291,784

 

$

103,505,676

 

Trade receivables, net and accrued revenues

 

 

10,537

 

 

336,162

 

Prepaid expenses and other receivables

 

 

2,779,262

 

 

2,471,415

 

Due from related parties

 

 

32,807,418

 

 

26,880,720

 

Inventories

 

 

2,832,194

 

 

2,012,907

 

Total current assets

 

 

103,721,195

 

 

135,206,880

 

Fixed assets

 

 

 

 

 

 

 

Vessels, net

 

 

1,523,143,231

 

 

1,539,111,833

 

Other fixed assets, net

 

 

167,933

 

 

203,678

 

Total fixed assets

 

 

1,523,311,164

 

 

1,539,315,511

 

Other non-current assets

 

 

 

 

 

 

 

Deferred charges, net

 

 

1,526,980

 

 

1,574,522

 

Derivative instruments

 

 

15,972,515

 

 

14,264,899

 

Due from related parties—non-current

 

 

20,900,000

 

 

19,800,000

 

Restricted cash—non-current

 

 

35,636,500

 

 

25,862,704

 

Other non-current assets

 

 

80,349

 

 

85,640

 

Total assets

 

$

1,701,148,703

 

$

1,736,110,156

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade accounts payable

 

$

8,137,340

 

$

6,329,193

 

Accrued expenses

 

 

5,832,861

 

 

4,702,808

 

Due to related parties

 

 

29,712

 

 

345,515

 

Deferred income

 

 

5,007,120

 

 

5,564,557

 

Current portion of long-term debt

 

 

63,968,414

 

 

65,067,569

 

Total current liabilities

 

 

82,975,447

 

 

82,009,642

 

Long-term liabilities

 

 

 

 

 

 

 

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

 

 

677,684,689

 

 

694,035,583

 

Other long-term liabilities

 

 

1,172,243

 

 

651,569

 

Total long-term liabilities

 

 

678,856,932

 

 

694,687,152

 

Total liabilities

 

 

761,832,379

 

 

776,696,794

 

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, 58,849,713 and 58,640,161 shares issued, 55,157,193 and 55,090,165 shares outstanding (net of treasury stock), as of June 30, 2018 and March 31, 2018, respectively

 

 

588,497

 

 

586,402

 

Additional paid-in-capital

 

 

859,740,325

 

 

858,109,882

 

Treasury stock, at cost; 3,692,520 and 3,549,996 shares as of June 30, 2018 and March 31, 2018, respectively

 

 

(36,356,446)

 

 

(35,223,428)

 

Retained earnings

 

 

115,343,948

 

 

135,940,506

 

Total shareholders’ equity

 

 

939,316,324

 

 

959,413,362

 

Total liabilities and shareholders’ equity

 

$

1,701,148,703

 

$

1,736,110,156

 

 

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, 2018

    

June 30, 2017

 

Revenues

 

 

 

 

 

 

 

Net pool revenues—related party

 

$

16,106,401

 

$

28,475,359

 

Time charter revenues

 

 

11,467,881

 

 

12,564,655

 

Other revenues, net

 

 

70,000

 

 

(14,542)

 

Total revenues

 

 

27,644,282

 

 

41,025,472

 

Expenses

 

 

 

 

 

 

 

Voyage expenses

 

 

100,173

 

 

239,445

 

Vessel operating expenses

 

 

16,685,457

 

 

16,885,289

 

Depreciation and amortization

 

 

16,265,056

 

 

16,293,158

 

General and administrative expenses

 

 

8,403,286

 

 

8,534,909

 

Total expenses

 

 

41,453,972

 

 

41,952,801

 

Other income—related parties

 

 

644,517

 

 

633,883

 

Operating loss

 

 

(13,165,173)

 

 

(293,446)

 

Other income/(expenses)

 

 

 

 

 

 

 

Interest and finance costs

 

 

(10,374,281)

 

 

(7,477,734)

 

Interest income

 

 

460,973

 

 

15,816

 

Unrealized gain/(loss) on derivatives

 

 

1,707,616

 

 

(2,370,191)

 

Realized gain/(loss) on derivatives

 

 

782,565

 

 

(612,863)

 

Gain on early extinguishment of debt

 

 

 —

 

 

4,117,364

 

Foreign currency loss, net

 

 

(8,258)

 

 

(68,916)

 

Total other income/(expenses), net

 

 

(7,431,385)

 

 

(6,396,524)

 

Net loss

 

$

(20,596,558)

 

$

(6,689,970)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

 

54,237,237

 

 

53,875,292

 

 

 

 

 

 

 

 

 

Loss per common share—basic and diluted

 

$

(0.38)

 

$

(0.12)

 

 

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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

common

 

Common

 

Treasury

 

paid-in

 

Retained

 

 

 

 

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2018

 

58,640,161

 

$

586,402

 

$

(35,223,428)

 

$

858,109,882

 

$

135,940,506

 

$

959,413,362

 

Net loss for the period      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(20,596,558)

 

 

(20,596,558)

 

Restricted share award issuances

 

209,552

 

 

2,095

 

 

 —

 

 

(2,095)

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

1,632,538

 

 

 —

 

 

1,632,538

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(1,133,018)

 

 

 —

 

 

 —

 

 

(1,133,018)

 

Balance, June 30, 2018

 

58,849,713

 

$

588,497

 

$

(36,356,446)

 

$

859,740,325

 

$

115,343,948

 

$

939,316,324

 

 

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, 2018

 

June 30, 2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

 

$

(20,596,558)

 

$

(6,689,970)

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

16,265,056

 

 

16,293,158

 

Amortization of financing costs

 

 

 

793,212

 

 

1,098,827

 

Unrealized (gain)/loss on derivatives

 

 

 

(1,707,616)

 

 

2,370,191

 

Stock-based compensation expense

 

 

 

1,632,538

 

 

1,524,217

 

Gain on early extinguishment of debt

 

 

 

 —

 

 

(4,117,364)

 

Unrealized foreign currency (gain)/loss, net

 

 

 

133,579

 

 

(75,142)

 

Other non-cash items

 

 

 

23,370

 

 

15,689

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Trade receivables, net and accrued revenue

 

 

 

325,625

 

 

8,300

 

Prepaid expenses and other receivables

 

 

 

(291,354)

 

 

(784,288)

 

Due from related parties

 

 

 

(7,026,698)

 

 

5,015,812

 

Inventories

 

 

 

(819,287)

 

 

122,335

 

Other non-current assets

 

 

 

5,291

 

 

(3,410)

 

Trade accounts payable

 

 

 

1,432,822

 

 

(2,511,722)

 

Accrued expenses and other liabilities

 

 

 

(412,057)

 

 

516,824

 

Due to related parties

 

 

 

(315,803)

 

 

22,050

 

Payments for drydocking costs

 

 

 

(1,405)

 

 

(395,189)

 

Net cash provided by/(used in) operating activities

 

 

 

(10,559,285)

 

 

12,410,318

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(60,320)

 

 

(276,396)

 

Net cash used in investing activities

 

 

 

(60,320)

 

 

(276,396)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

 

65,137,500

 

 

97,000,000

 

Repayment of long-term debt borrowings

 

 

 

(82,228,759)

 

 

(120,738,340)

 

Purchase of treasury stock

 

 

 

(461,489)

 

 

(350,279)

 

Financing costs paid

 

 

 

(160,611)

 

 

(2,541,005)

 

Net cash used in financing activities

 

 

 

(17,713,359)

 

 

(26,629,624)

 

Effects of exchange rates on cash and cash equivalents

 

 

 

(107,132)

 

 

41,195

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

 

(28,440,096)

 

 

(14,454,507)

 

Cash, cash equivalents, and restricted cash at the beginning of the period

 

 

 

129,368,380

 

 

67,892,698

 

Cash, cash equivalents, and restricted cash at the end of the period

 

 

$

100,928,284

 

$

53,438,191

 

 

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 have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and related Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. 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 accompanying unaudited interim condensed consolidated financial statements and related notes. The accompanying unaudited interim condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2018 included in our Annual Report on Form 10-K filed with the SEC on June 27, 2018.

 

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, 2018, 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 Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

    

Type of

    

 

    

 

    

 

 

Subsidiary

 

vessel

 

Vessel’s name

 

Built

 

CBM(1)

 

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL(2)

 

2006

 

82,000

 

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP(2)

 

2007

 

82,000

 

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML(2)

 

2008

 

82,000

 

Comet LPG Transport LLC

 

VLGC

 

Comet

 

2014

 

84,000

 

Corsair LPG Transport LLC

 

VLGC

 

Corsair(2)

 

2014

 

84,000

 

Corvette LPG Transport LLC

 

VLGC

 

Corvette(2)

 

2015

 

84,000

 

Dorian Shanghai LPG Transport LLC

 

VLGC

 

Cougar

 

2015

 

84,000

 

Concorde LPG Transport LLC

 

VLGC

 

Concorde(2)

 

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)

Operated pursuant to a bareboat charter agreement. Refer to Note 6 below for further information.

 

 

 

 

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, 2018 (refer to Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018), except as discussed herein.

 

Accounting Pronouncements Adopted During the Three Months Ended June 30, 2018

 

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 and are applied using a

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retrospective transition method to each period presented. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

March 31, 2018

 

June 30, 2017

 

March 31, 2017

 

Cash and cash equivalents

 

$

65,291,784

 

$

103,505,676

 

$

35,363,045

 

$

17,018,552

 

Restricted cash—non-current

 

 

35,636,500

 

 

25,862,704

 

 

18,075,146

 

 

50,874,146

 

Total cash, cash equivalents, and restricted cash

 

$

100,928,284

 

$

129,368,380

 

$

53,438,191

 

$

67,892,698

 

 

In August 2016, the FASB issued accounting guidance addressing specific cash flow statement 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. The implementation of this guidance did not have a material effect on our condensed consolidated 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. The amended guidance introduces a five-step process to achieve the fundamental principles and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. It also provides further guidance on applying collectability criterion to assess whether a contract is valid and represents a substantive transaction on the basis of whether a customer has the ability and intention to pay the promised consideration. The amended guidance 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. The amended guidance shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. Under the amended guidance, voyage charter revenues are recognized based on load-to-discharge basis as compared to the previously used discharge-to-discharge basis, provided an agreed non-cancellable charter between the Company and the charterer is in existence, the charter rate is fixed and determinable, and collectability is reasonably assured. Additionally, voyage expenses related to voyage charters, including bunkers and port expenses, are deferred until load port and expensed on a load-to-discharge basis under the amended guidance. There is no modifications under the amended guidance for our method of recognizing net pool revenues—related party and time charter revenues. We adopted the amended guidance beginning April 1, 2018. The adoption of the amended guidance did not have any material impact on our condensed consolidated financial statements for the three months ended June 30, 2018 or for prior periods, but may impact the timing with which voyage charter revenues will be recognized in future periods.

 

Accounting Pronouncements Not Yet Adopted

 

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 from current U.S. GAAP. We expect that our time charter arrangements will be subject to the requirements of the new lease guidance as we will be regarded as the lessor under these arrangements. 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. In July 2018, the FASB issued amended guidance to provide entities with relief from the cost of implementing certain aspects of the new leasing guidance. Entities may elect not to recast comparative periods presented when transitioning to the new leasing guidance and, furthermore, lessors may elect not to separate lease and nonlease components when certain conditions are met. 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 intend to adopt the new guidance on its required effective date of April 1, 2019 and are currently assessing the impact the amended guidance will have on our condensed consolidated financial statements.

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3.  Transactions with Related Parties

 

Dorian (Hellas), S.A.

 

Dorian (Hellas) S.A. (“DHSA”) formerly provided technical, crew, commercial management, insurance and accounting services to our vessels and had agreements to outsource certain of these services to Eagle Ocean Transport Inc. (“Eagle Ocean Transport”), which is 100% owned by Mr. John C. Hadjipateras, our Chairman, President and Chief Executive Officer.

 

Dorian LPG (USA) LLC and its subsidiaries entered into an agreement with DHSA, retroactive to July 2014 and superseding an agreement between Dorian LPG (UK) Ltd. and DHSA, for the provision by Dorian LPG (USA) LLC and its subsidiaries of certain chartering and marine operation services to DHSA, for which income was earned and included in “Other income-related parties” totaling $0.1 million for both the three months ended June 30, 2018 and 2017, respectively.

 

As of June 30, 2018, $1.0 million was due from DHSA and included in “Due from related parties” in the unaudited interim condensed consolidated balance sheets included herein. As of March 31, 2018, $0.9 million was due from DHSA and included in “Due from related parties” in the audited consolidated balance sheets.

 

Eagle Ocean Transport incurs office-related costs on behalf of us, for which we reimbursed Eagle Ocean Transport less than $0.1 million and $0.1 million for the three months ended June 30, 2018 and 2017, respectively. Such expenses are reimbursed based on their actual cost.

 

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. As of June 30, 2018, the Helios Pool operated twenty-seven VLGCs, including nineteen of our vessels, five Phoenix vessels, and three other vessels.

 

As of June 30, 2018, we had receivables from the Helios Pool of $52.6 million, including $20.9 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2018, we had receivables from the Helios Pool of $45.4 million (net of an amount due to Helios Pool of $0.3 million which is reflected under “Due to related Parties”), 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, 2018 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

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operations included herein and were $0.6 million and $0.5 million for the three months ended June 30, 2018 and 2017, respectively. Additionally, we receive a fixed reimbursement of expenses such as costs for security guards and war risk insurance for vessels operating in high risk areas from the Helios Pool, for which we earned $0.1 million and less than $0.1 million for the three months ended June 30, 2018, and 2017, respectively, and are included in “Other revenues, net” in the unaudited interim condensed consolidated statement of operations included herein.

 

Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three months ended June 30, 2018 and 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 pool vessels, less fixed time charter hire for any chartered-in vessels, less the general and administrative expenses of the pool. Net pool revenues, less any amounts required for working capital of the Helios Pool, are distributed as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. We recognize net pool revenues on a monthly basis, when each relevant 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 from the Helios Pool 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, 2018

 

$

1,574,522

 

Additions

 

 

98,891

 

Amortization

 

 

(146,433)

 

Balance, June 30, 2018

 

$

1,526,980

 

 

 

 

5.  Vessels, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Accumulated

    

 

 

 

 

 

Cost

 

depreciation

 

Net book Value

 

Balance, April 1, 2018

 

$

1,728,987,980

 

$

(189,876,147)

 

$

1,539,111,833

 

Other additions

 

 

131,193

 

 

 —

 

 

131,193

 

Depreciation

 

 

 —

 

 

(16,099,795)

 

 

(16,099,795)

 

Balance, June 30, 2018

 

$

1,729,119,173

 

$

(205,975,942)

 

$

1,523,143,231

 

 

Additions to vessels, net were largely due to capital improvements made to one of our VLGCs during the three months ended June 30, 2018. Our vessels, with a total carrying value of $1,523.1 million and $1,539.1 million as of June 30, 2018 and March 31, 2018, respectively, are first‑priority mortgaged as collateral for our long-term debt (refer to Note 6 below). No impairment loss was recorded for the periods presented.

 

 

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6.  Long-term Debt

 

2015 Debt Facility 

 

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 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”).

 

 

2017 Bridge Loan

 

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 for information on our $97.0 million bridge loan agreement (the “2017 Bridge Loan”) with DNB Capital LLC that we entered into on June 8, 2017. On June 4, 2018, we prepaid $22.3 million of the 2017 Bridge Loan’s then outstanding principal using cash on hand prior to the closing of the CJNP Japanese Financing (defined below). On June 20, 2018, we prepaid the remaining 2017 Bridge Loan’s outstanding principal of $44.6 million ($23.4 million related to the Captain Nicholas ML and $21.2 million related to the Captain Markos NL) using cash on hand prior to the closing of the CMNL Japanese Financing (defined below) and the CNML Japanese Financing (defined below).

 

Corsair Japanese Financing

 

On November 7, 2017, we refinanced our 2014-built VLGC, the Corsair, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Corsair Japanese Financing”). Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 for information on the Corsair Japanese Financing.

Concorde Japanese Financing

 

On January 31, 2018, we refinanced our 2015-built VLGC, the Concorde, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Concorde Japanese Financing”). Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 for information on the Concorde Japanese Financing.

Corvette Japanese Financing

 

On March 16, 2018, we refinanced our 2015-built VLGC, the Corvette, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Corvette Japanese Financing”). Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 for information on the Corvette Japanese Financing.

CJNP Japanese Financing

 

On June 11, 2018, we refinanced our 2007-built VLGC, the Captain John NP, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CJNP Japanese Financing”). In connection therewith, we transferred the Captain John NP to the buyer for $48.3 million and, as part of the agreement, CJNP LPG Transport LLC, our wholly-owned subsidiary, bareboat chartered the vessel back for a period of 6 years, with purchase options from the end of year 2 through a mandatory buyout by 2024. We continue to technically manage, commercially charter, and operate the Captain John NP. We received $21.7 million, which increased our unrestricted cash, as part of the transaction with $26.6 million to be retained by the buyer as a deposit (the “CJNP Deposit”), which can be used by us towards the repurchase of the vessel either pursuant to an early buyout option or at the end of the 6-year bareboat charter term. This transaction is treated as a financing transaction and the Captain John NP continues to be recorded as an asset on our balance sheet. This debt financing has a fixed interest rate of 6.0%, not including estimated financing costs of $0.1 million, monthly broker commission fees of 1.25% over the 6-year term on interest and principal payments made, broker commission fees of 1.0%

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of an exercised purchase option excluding the CJNP Deposit, and a monthly fixed straight-line principal obligation of approximately $0.1 million over the 6-year term with a balloon payment of $13.0 million.

 

CMNL Japanese Financing

 

On June 25, 2018, we refinanced our 2006-built VLGC, the Captain Markos NL, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CMNL Japanese Financing”). In connection therewith, we transferred the Captain Markos NL to the buyer for $45.8 million and, as part of the agreement, CMNL LPG Transport LLC, our wholly-owned subsidiary, bareboat chartered the vessel back for a period of 7 years, with purchase options from the end of year 2 through a mandatory buyout by 2025. We continue to technically manage, commercially charter, and operate the Captain Markos NL. We received $20.6 million, which increased our unrestricted cash, as part of the transaction with $25.2 million to be retained by the buyer as a deposit (the “CMNL Deposit”), which can be used by us towards the repurchase of the vessel either pursuant to an early buyout option or at the end of the 7-year bareboat charter term. This transaction is treated as a financing transaction and the Captain Markos NL continues to be recorded as an asset on our balance sheet. This debt financing has a fixed interest rate of 6.0%, not including estimated financing costs of $0.1 million, monthly broker commission fees of 1.25% over the 7-year term on interest and principal payments made, broker commission fees of 1.0% of an exercised purchase option excluding the CMNL Deposit, and a monthly fixed straight-line principal obligation of approximately $0.1 million over the 7-year term with a balloon payment of $11.0 million.

 

CNML Japanese Financing

 

On June 26, 2018, we refinanced our 2008-built VLGC, the Captain Nicholas ML, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CNML Japanese Financing”). In connection therewith, we transferred the Captain Nicholas ML to the buyer for $50.8 million and, as part of the agreement, CNML LPG Transport LLC, our wholly-owned subsidiary, bareboat chartered the vessel back for a period of 7 years, with purchase options from the end of year 2 through a mandatory buyout by 2025. We continue to technically manage, commercially charter, and operate the Captain Nicholas ML. We received $22.9 million, which increased our unrestricted cash, as part of the transaction with $27.9 million to be retained by the buyer as a deposit (the “CNML Deposit”), which can be used by us towards the repurchase of the vessel either pursuant to an early buyout option or at the end of the 7-year bareboat charter term. This transaction is treated as a financing transaction and the Captain Nicholas ML continues to be recorded as an asset on our balance sheet. This debt financing has a fixed interest rate of 6.0%, not including estimated financing costs of $0.1 million, monthly broker commission fees of 1.25% over the 7-year term on interest and principal payments made, broker commission fees of 1.0% of an exercised purchase option excluding the CNML Deposit, and a monthly fixed straight-line principal obligation of approximately $0.1 million over the 7-year term with a balloon payment of $13.0 million.

 

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Debt Obligations

 

The table below presents our debt obligations:

 

 

 

 

 

 

 

 

 

 

    

June 30, 2018

    

March 31, 2018

 

2015 Debt Facility

 

 

 

 

 

 

 

Commercial Financing

 

$

184,913,825

 

$

187,989,229

 

KEXIM Direct Financing

 

 

137,218,158

 

 

141,004,162

 

KEXIM Guaranteed

 

 

141,602,690

 

 

145,348,064

 

K-sure Insured

 

 

70,411,604

 

 

72,313,416

 

Total 2015 Debt Facility

 

$

534,146,277

 

$

546,654,871

 

 

 

 

 

 

 

 

 

Japanese Financings

 

 

 

 

 

 

 

Corsair Japanese Financing

 

$

49,833,333

 

$

50,645,833

 

Concorde Japanese Financing

 

 

54,384,615

 

 

55,192,308

 

Corvette Japanese Financing

 

 

54,923,077

 

 

55,730,769

 

CJNP Japanese Financing

 

 

21,591,875

 

 

 —

 

CMNL Japanese Financing

 

 

20,473,363

 

 

 —

 

CNML Japanese Financing

 

 

22,720,387

 

 

 —

 

Total Japanese Financings

 

$

223,926,650

 

$

161,568,910

 

 

 

 

 

 

 

 

 

2017 Bridge Loan

 

$

 —

 

$

66,940,405

 

 

 

 

 

 

 

 

 

Total debt obligations

 

$

758,072,927

 

$

775,164,186

 

Less: deferred financing fees

 

 

16,419,824

 

 

16,061,034

 

Debt obligations—net of deferred financing fees

 

$

741,653,103

 

$

759,103,152

 

 

 

 

 

 

 

 

 

Presented as follows:

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

63,968,414

 

$

65,067,569

 

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

 

 

677,684,689

 

 

694,035,583

 

Total

 

$

741,653,103

 

$

759,103,152

 

 

Deferred Financing Fees

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

 

 

 

 

 

 

 

    

Financing

 

 

 

costs

 

Balance, April 1, 2018

 

$

16,061,034

 

Additions

 

 

1,152,002

 

Amortization

 

 

(793,212)

 

Balance, June 30, 2018

 

$

16,419,824

 

 

 

 

7.  Stock-Based Compensation Plans

 

Our stock-based compensation expense is included within general and administrative expenses in the accompanying unaudited interim condensed consolidated statements of operations and was $1.6 million and $1.5 million for the three months ended June 30, 2018 and 2017, respectively. Unrecognized compensation cost was $6.5 million as of June 30, 2018 and will be recognized over the remaining weighted average life of 1.60 years. For more information on our equity incentive plan, refer to Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018.

 

In June 2018, we granted 200,000 shares of restricted stock to certain of our officers and employees. One-fourth of these restricted shares vested immediately on the grant date, one-fourth will vest one year after grant date, one-fourth will vest two years after grant date, and one-fourth will vest three years after grant date. The restricted shares were valued at their grant date fair market value and are expensed on a straight-line basis over the vesting periods. 

 

In June 2018, we granted 7,960 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 2018, we granted 1,592 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, 2018 and changes during the three months ended June 30, 2018, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted-Average

 

 

 

 

 

Grant-Date

 

Incentive Share Awards

 

Numbers of Shares

 

Fair Value

 

Unvested as of April 1, 2018

 

918,344

 

$

15.67

 

Granted

 

209,552

 

 

8.33

 

Vested

 

(402,211)

 

 

16.04

 

Unvested as of June 30, 2018

 

725,685

 

$

13.34

 

 

 

8.  Revenues

 

Revenues comprise the following:

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

June 30, 2018

    

June 30, 2017

 

Net pool revenues—related party

 

$

16,106,401

 

$

28,475,359

 

Time charter revenues

 

 

11,467,881

 

 

12,564,655

 

Other revenues, net

 

 

70,000

 

 

(14,542)

 

Total revenues

 

$

27,644,282

 

$

41,025,472

 

 

Net pool revenues—related party depend upon the net results of the Helios Pool, and the 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, 2018.

 

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, restricted cash amounts due from related parties, trade accounts receivable and derivative instruments. Our principal financial liabilities consist of long term debt, 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, cash and cash equivalents, and restricted cash. 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 and restricted cash 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. Refer to Note 18 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2018 for information on our interest rate swap agreements related to the 2015 Debt Facility.  

 

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(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 or receive 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: