lpg_Current_Folio_10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q 

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

For the quarterly period ended December 31, 2016

OR

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

For the transition period from __________   to __________ 

Commission File Number: 001-36437 

 

Picture 21

Dorian LPG Ltd.

(Exact name of registrant as specified in its charter) 

 

 

 

 

Marshall Islands

 

66-0818228

(State or other jurisdiction of incorporation or organization)

 

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

c/o Dorian LPG (USA) LLC

 

06902

27 Signal Road, Stamford, CT

 

 

(Address of principal executive offices)

 

(Zip Code)

 

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

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No  

 

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

 

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

 

 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer 

 

Non-accelerated filer

 

Smaller reporting company

 

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

As of January 26, 2017, there were 54,967,332 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, 2016, 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 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 December 31, 2016 and March 31, 2016

 

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2016 and December 31, 2015 

 

Unaudited Condensed Consolidated Statements of Shareholders' Equity for the nine months ended December 31, 2016 and December 31, 2015

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2016 and December 31, 2015

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

ITEM 2. 

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

16 

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

29 

ITEM 6. 

EXHIBITS

29 

 

 

 

SIGNATURES 

 

30 

EXHIBIT INDEX 

 

31 

 

 

 

 


 

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PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Dorian LPG Ltd.

Unaudited Condensed Consolidated Balance Sheets

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

 

 

 

 

 

 

 

 

 

 

    

As of

    

As of

 

 

 

December 31, 2016

 

March 31, 2016

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,839,639

 

$

46,411,962

 

Trade receivables, net and accrued revenues

 

 

1,382,311

 

 

107,317

 

Prepaid expenses and other receivables

 

 

2,079,074

 

 

2,247,706

 

Due from related parties

 

 

24,693,405

 

 

54,504,359

 

Inventories

 

 

2,886,237

 

 

2,288,073

 

Total current assets

 

 

62,880,666

 

 

105,559,417

 

Fixed assets

 

 

 

 

 

 

 

Vessels, net

 

 

1,619,392,122

 

 

1,667,224,476

 

Other fixed assets, net

 

 

386,288

 

 

591,288

 

Total fixed assets

 

 

1,619,778,410

 

 

1,667,815,764

 

Other non-current assets

 

 

 

 

 

 

 

Deferred charges, net

 

 

1,886,686

 

 

294,935

 

Derivative instruments

 

 

4,961,435

 

 

 —

 

Due from related parties—non-current

 

 

19,800,000

 

 

17,600,000

 

Restricted cash

 

 

50,812,789

 

 

50,812,789

 

Other non-current assets

 

 

93,417

 

 

95,271

 

Total assets

 

$

1,760,213,403

 

$

1,842,178,176

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade accounts payable

 

$

5,699,438

 

$

6,826,503

 

Accrued expenses

 

 

5,756,643

 

 

9,721,477

 

Due to related parties

 

 

556,364

 

 

708,210

 

Deferred income

 

 

8,110,293

 

 

4,606,540

 

Current portion of long-term debt

 

 

65,978,786

 

 

66,265,643

 

Total current liabilities

 

 

86,101,524

 

 

88,128,373

 

Long-term liabilities

 

 

 

 

 

 

 

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

 

 

700,715,644

 

 

746,354,613

 

Derivative instruments

 

 

69,750

 

 

21,647,965

 

Other long-term liabilities

 

 

427,008

 

 

447,988

 

Total long-term liabilities

 

 

701,212,402

 

 

768,450,566

 

Total liabilities

 

 

787,313,926

 

 

856,578,939

 

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, 58,335,007 and 58,057,493 shares issued, 54,967,332 and 56,125,028 shares outstanding (net of treasury stock), as of December 31, 2016 and March 31, 2016, respectively

 

 

583,350

 

 

580,575

 

Additional paid-in-capital

 

 

851,827,474

 

 

848,179,471

 

Treasury stock, at cost; 3,367,675 and 1,932,465 shares as of December 31, 2016 and March 31, 2016, respectively

 

 

(33,897,269)

 

 

(20,943,816)

 

Retained earnings

 

 

154,385,922

 

 

157,783,007

 

Total shareholders’ equity

 

 

972,899,477

 

 

985,599,237

 

Total liabilities and shareholders’ equity

 

$

1,760,213,403

 

$

1,842,178,176

 

 

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

1


 

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Operations  

(Expressed in United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

    

December 31, 2016

    

December 31, 2015

    

December 31, 2016

    

December 31, 2015

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net pool revenues—related party

 

$

22,301,512

 

$

66,044,777

 

$

80,798,208

 

$

130,701,023

 

Time charter revenues

 

 

11,921,875

 

 

11,237,746

 

 

36,919,910

 

 

26,169,581

 

Voyage charter revenues

 

 

1,296,952

 

 

15,567,844

 

 

1,296,952

 

 

46,013,858

 

Other revenues

 

 

214,649

 

 

433,341

 

 

846,927

 

 

988,138

 

Total revenues

 

 

35,734,988

 

 

93,283,708

 

 

119,861,997

 

 

203,872,600

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Voyage expenses

 

 

1,193,265

 

 

4,347,222

 

 

2,415,287

 

 

11,411,841

 

Vessel operating expenses

 

 

17,114,358

 

 

14,265,183

 

 

49,549,255

 

 

30,479,158

 

Depreciation and amortization

 

 

16,385,921

 

 

13,536,900

 

 

48,944,183

 

 

26,697,882

 

General and administrative expenses

 

 

5,166,239

 

 

7,506,740

 

 

15,981,464

 

 

20,002,555

 

Loss on disposal of assets

 

 

 —

 

 

 —

 

 

 —

 

 

105,549

 

Total expenses

 

 

39,859,783

 

 

39,656,045

 

 

116,890,189

 

 

88,696,985

 

Other income—related parties

 

 

670,836

 

 

383,642

 

 

1,776,659

 

 

1,150,927

 

Operating income/(loss)

 

 

(3,453,959)

 

 

54,011,305

 

 

4,748,467

 

 

116,326,542

 

Other income/(expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and finance costs

 

 

(7,332,260)

 

 

(4,633,454)

 

 

(21,530,588)

 

 

(5,700,583)

 

Interest income

 

 

27,711

 

 

22,382

 

 

81,206

 

 

137,226

 

Unrealized gain on derivatives

 

 

24,381,306

 

 

7,389,868

 

 

26,539,650

 

 

3,665,324

 

Realized loss on derivatives

 

 

(8,390,014)

 

 

(2,007,426)

 

 

(12,980,717)

 

 

(4,482,250)

 

Foreign currency loss, net

 

 

(193,160)

 

 

(121,352)

 

 

(255,103)

 

 

(418,789)

 

Total other income/(expenses), net

 

 

8,493,583

 

 

650,018

 

 

(8,145,552)

 

 

(6,799,072)

 

Net income/(loss)

 

$

5,039,624

 

$

54,661,323

 

$

(3,397,085)

 

$

109,527,470

 

Earnings/(loss) per common share—basic

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

Earnings/(loss) per common share—diluted

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

 

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

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

                           

 

Additional

 

                           

 

 

 

 

 

 

common

 

Common

 

Treasury

 

paid-in

 

Retained

 

 

 

 

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2015

 

58,057,493

 

 

580,575

 

 

 —

 

 

844,539,059

 

 

28,094,625

 

 

873,214,259

 

Net income for the period      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

109,527,470

 

 

109,527,470

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

2,684,152

 

 

 —

 

 

2,684,152

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(10,070,645)

 

 

 —

 

 

 —

 

 

(10,070,645)

 

Balance, December 31, 2015

 

58,057,493

 

$

580,575

 

$

(10,070,645)

 

$

847,223,211

 

$

137,622,095

 

$

975,355,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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      

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,397,085)

 

 

(3,397,085)

 

Restricted share award issuances

 

277,514

 

 

2,775

 

 

 —

 

 

(2,775)

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

3,650,778

 

 

 —

 

 

3,650,778

 

Purchase of treasury stock

 

 —

 

 

 —

 

 

(12,953,453)

 

 

 —

 

 

 —

 

 

(12,953,453)

 

Balance, December 31, 2016

 

58,335,007

 

$

583,350

 

$

(33,897,269)

 

$

851,827,474

 

$

154,385,922

 

$

972,899,477

 

 

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

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Nine months ended

 

 

 

December 31, 2016

 

December 31, 2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income/(loss)

 

$

(3,397,085)

 

$

109,527,470

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

48,944,183

 

 

26,697,882

 

Amortization of financing costs

 

 

2,820,407

 

 

1,553,730

 

Unrealized gain on derivatives

 

 

(26,539,650)

 

 

(3,665,324)

 

Stock-based compensation expense

 

 

3,238,940

 

 

3,050,819

 

Loss on disposal of assets

 

 

 —

 

 

105,549

 

Unrealized exchange differences

 

 

346,165

 

 

322,455

 

Other non-cash items

 

 

256,630

 

 

61,323

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Trade receivables, net and accrued revenue

 

 

(1,274,994)

 

 

10,305,211

 

Prepaid expenses and other receivables

 

 

168,632

 

 

(2,253,247)

 

Due from related parties

 

 

27,610,954

 

 

(73,632,993)

 

Inventories

 

 

(598,164)

 

 

1,252,001

 

Other non-current assets

 

 

1,854

 

 

(8)

 

Trade accounts payable

 

 

(1,460,727)

 

 

3,386,722

 

Accrued expenses and other liabilities

 

 

(227,353)

 

 

6,241,601

 

Due to related parties

 

 

(151,846)

 

 

32,127

 

Payments for drydocking costs

 

 

(533,096)

 

 

 —

 

Net cash provided by operating activities

 

 

49,204,850

 

 

82,985,318

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Payments for vessels and vessels under construction

 

 

(1,755,832)

 

 

(839,065,088)

 

Restricted cash deposits

 

 

 —

 

 

(16,502,789)

 

Proceeds from disposal of assets

 

 

 —

 

 

136,660

 

Payments to acquire other fixed assets

 

 

(7,029)

 

 

(443,417)

 

Net cash used in investing activities

 

 

(1,762,861)

 

 

(855,874,634)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from long-term debt borrowings

 

 

 —

 

 

634,648,196

 

Repayment of long-term debt borrowings

 

 

(48,646,448)

 

 

(20,939,276)

 

Purchase of treasury stock

 

 

(12,953,453)

 

 

(10,070,645)

 

Financing costs paid

 

 

(99,785)

 

 

(13,210,445)

 

Net cash (used in)/provided by financing activities

 

 

(61,699,686)

 

 

590,427,830

 

Effects of exchange rates on cash and cash equivalents

 

 

(314,626)

 

 

(324,778)

 

Net decrease in cash and cash equivalents

 

 

(14,572,323)

 

 

(182,786,264)

 

Cash and cash equivalents at the beginning of the period

 

 

46,411,962

 

 

204,821,183

 

Cash and cash equivalents at the end of the period

 

$

31,839,639

 

$

22,034,919

 

 

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

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Dorian LPG Ltd.

Notes to Unaudited Condensed Consolidated Financial Statements

(Expressed in United States Dollars)

1. Basis of Presentation and General Information

 

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

 

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

 

The accompanying unaudited condensed consolidated financial statements and related notes (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the Financial Statements. The Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 31, 2016, as subsequently amended.

 

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

 

Our subsidiaries as of December 31, 2016, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.

 

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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(2)

 


(1)

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

(2)

Owner of the Pressurized Gas Carrier (“PGC”) Grendon until it was sold in February 2016

 

 

 

 

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2. Significant Accounting Policies

 

The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as were applied in the preparation of our audited financial statements for the year ended March 31, 2016 (see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016).

 

In November 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance to require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The pronouncement is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently assessing the impact the amended guidance will have on our financial statements.

 

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

 

In March 2016, the FASB issued accounting guidance to simplify the requirements of accounting for share-based payment transactions. The guidance simplifies the accounting for taxes related to stock-based compensation, including adjustments to how excess tax benefits and an entity’s payments for tax withholdings should be classified. Additionally, an entity may make an entity-wide policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within that reporting period with early adoption permitted in any interim or annual period. We have early adopted this pronouncement and have made the entity-wide policy election to account for forfeitures when they occur. The amended guidance had no significant impact on our financial statements for the three and nine months ended December 31, 2016.

 

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

 

In July 2015, the FASB issued accounting guidance requiring entities to measure most inventory at the lower of cost and net realizable value. The pronouncement is effective prospectively for annual periods beginning after December 15, 2016, and interim periods within that reporting period. We are currently assessing the impact the amended guidance will have on our financial statements.

 

In April 2015, an accounting pronouncement was issued by the FASB to update the guidance related to the presentation of debt issuance costs, which we adopted in April 2016. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. The reclassification does not impact net income/(loss) as previously reported or any prior amounts reported on the consolidated statements of comprehensive income, or the consolidated statements of cash flows. The effect of the retrospective application of this change in accounting principle on our consolidated balance sheets as of December 31, 2016 and March 31, 2016 resulted in a reduction of “Deferred charges, net” and “Total assets” in the amount of $21.0 million and $23.7 million, respectively, with a corresponding reduction of “Long-term debt—net of current portion” and “Total long-term liabilities.”

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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.

 

As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from Dorian (Hellas), S.A. (“DHSA”) and are now provided through our wholly-owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp. Subsequent to the transition agreements, Eagle Ocean Transport, Inc. (“Eagle Ocean Transport”) continues to incur related travel costs for certain transitioned employees as well as office-related costs, for which we reimbursed Eagle Ocean Transport $0.1 million and $0.2 million for the three months ended December 31, 2016 and 2015, respectively, and $0.3 million and $0.6 million for the nine months ended December 31, 2016 and 2015, respectively. Such expenses are reimbursed based on their actual cost.

 

Dorian LPG (USA) LLC and its subsidiaries entered into an agreement with DHSA, retroactive to July 2014 and superseding an agreement between Dorian LPG (UK) Ltd. and DHSA, for the provision by Dorian LPG (USA) LLC and its subsidiaries of certain chartering and marine operation services to DHSA, for which income was earned and included in “Other income-related parties” totaling $0.1 million and less than $0.1 million for the three months ended December 31, 2016 and 2015, respectively, and $0.3 million and $0.1 million for the nine months ended December 31, 2016 and 2015, respectively.

 

As of December 31, 2016, $1.2 million was due from DHSA and included in “Due from related parties” in the unaudited condensed consolidated balance sheets and $0.5 million was due to DHSA and included in “Due to related parties” in the unaudited condensed consolidated balance sheets. As of March 31, 2016, $0.9 million was due from DHSA and included in “Due from related parties” in the unaudited condensed consolidated balance sheets and $0.5 million was due to DHSA and included in “Due to related parties” in the unaudited condensed consolidated balance sheets.

 

Helios LPG Pool LLC

 

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

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agreement with Oriental Energy Company Ltd. ("Oriental Energy") whereby Oriental Energy would contribute certain vessels to the Helios Pool, have certain of its vessels time chartered by the Helios Pool and simultaneously enter into a multi-year contract of affreightment covering Oriental Energy’s shipments from the United States Gulf. The agreement with Oriental Energy had no impact on the ownership structure or the power to direct significant activities of the Helios Pool. As of December 31, 2016, the Helios Pool operated twenty-four VLGCs, including seventeen of our vessels, three Oriental Energy vessels and four Phoenix vessels.

 

As of December 31, 2016, we had receivables from the Helios Pool of $43.2 million, including $19.8 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2016, we had receivables from the Helios Pool of $71.0 million, including $17.6 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of December 31, 2016 is limited to the receivables from the pool. The Helios Pool does not have any third-party debt obligations. The Helios Pool has entered into commercial management agreements with each of Dorian LPG (UK) Ltd. and Phoenix as commercial managers and has appointed both commercial managers as the exclusive commercial managers of pool vessels. Fees for commercial management services provided by Dorian LPG (UK) Ltd. are included in “Other income-related parties” in the unaudited condensed consolidated statement of operations and were $0.6 million and $0.4 million for the three months ended December 31, 2016 and 2015, respectively, and were $1.5 million and $1.1 million for the nine months ended December 31, 2016 and 2015, respectively. Additionally, we receive a fixed reimbursement of expenses such as costs for security guards and war risk insurance for vessels operating in high risk areas from the Helios Pool, for which we earned $0.2 million and $0.3 million for the three months ended December 31, 2016 and 2015, respectively, and $0.7 million and $0.6 million for the nine months ended December 31, 2016 and 2015, respectively, and are included in “Other revenues” in the unaudited condensed consolidated statement of operations.

 

Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three and nine months ended December 31, 2016. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and, where applicable, incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the Helios Pool calculates net pool revenues using gross revenues, less voyage expenses of all the pool vessels, less fixed time charter hire for any chartered-in vessels, less the general and administrative expenses of the pool. Net pool revenues, less any amounts required for working capital of the Helios Pool, are distributed as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 8.

 

Artwork

 

During the three and nine months ended December 31, 2015, we purchased less than $0.1 and $0.1 million, respectively, of artwork for newbuilding vessels, which have been capitalized and presented in “Vessels, net” in the unaudited condensed consolidated balance sheets, for our Athens, Greece office and for a shipyard, which are included in “General and administrative expenses” in the unaudited condensed consolidated statement of operations.  The artist is a relative of one of our executive officers. No artwork was purchased during the three and nine months ended December 31, 2016.

 

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4. Deferred Charges, Net

 

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

 

 

 

 

 

 

 

    

Drydocking

 

 

 

costs

 

Balance, April 1, 2016

 

$

294,935

 

Additions

 

 

1,699,708

 

Amortization

 

 

(107,957)

 

Balance, December 31, 2016

 

$

1,886,686

 

 

The drydocking costs incurred during the nine months ended December 31, 2016 relate to the drydocking of two of our VLGCs.

 

5. Vessels, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Accumulated

    

 

 

 

 

 

Cost

 

depreciation

 

Net book Value

 

Balance, April 1, 2016

 

$

1,727,979,929

 

$

(60,755,453)

 

$

1,667,224,476

 

Additions

 

 

984,639

 

 

 —

 

 

984,639

 

Transfers out

 

 

(195,273)

 

 

 —

 

 

(195,273)

 

Depreciation

 

 

 —

 

 

(48,621,720)

 

 

(48,621,720)

 

Balance, December 31, 2016

 

$

1,728,769,295

 

$

(109,377,173)

 

$

1,619,392,122

 

 

Additions to vessels, net were largely due to capital improvements made to two of our VLGCs during the nine months ended December 31, 2016. Vessels, with a total carrying value of $1,619.4 million and $1,667.2 million as of December 31, 2016 and March 31, 2016, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 6 below). No impairment loss was recorded for the periods presented.

 

6. Long-term Debt

 

RBS Loan Facility -  refer to Note 11 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016 for information on the RBS Loan Facility.

 

2015 Debt Facility – refer to Note 11 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016 for information on the 2015 Debt Facility.

 

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Debt Obligations

 

The table below presents our debt obligations:

 

 

 

 

 

 

 

 

 

RBS secured bank debt

    

December 31, 2016

    

March 31, 2016

 

Tranche A

 

$

35,700,000

 

$

37,400,000

 

Tranche B

 

 

25,570,000

 

 

28,127,000

 

Tranche C

 

 

42,140,000

 

 

43,967,500

 

Total RBS secured bank debt

 

$

103,410,000

 

$

109,494,500

 

 

 

 

 

 

 

 

 

2015 Debt Facility

 

 

 

 

 

 

 

Commercial Financing

 

$

230,977,160

 

$

241,442,384

 

KEXIM Direct Financing

 

 

181,945,598

 

 

194,827,596

 

KEXIM Guaranteed

 

 

179,993,011

 

 

192,736,763

 

K-sure Insured

 

 

91,396,155

 

 

97,867,129

 

Total 2015 Debt Facility

 

$

684,311,924

 

$

726,873,872

 

 

 

 

 

 

 

 

 

Total debt obligations

 

$

787,721,924

 

$

836,368,372

 

Less: deferred financing fees

 

 

21,027,494

 

 

23,748,116

 

Debt obligations—net of deferred financing fees

 

$

766,694,430

 

$

812,620,256

 

 

 

 

 

 

 

 

 

Presented as follows:

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

65,978,786

 

$

66,265,643

 

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

 

 

700,715,644

 

 

746,354,613

 

Total

 

$

766,694,430

 

$

812,620,256

 

 

 

Deferred Financing Fees

 

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

 

 

 

 

 

 

 

    

Financing

 

 

 

costs

 

Balance, April 1, 2016

 

$

23,748,116

 

Additions

 

 

99,785

 

Amortization

 

 

(2,820,407)

 

Balance, December 31, 2016

 

$

21,027,494

 

 

 

 

7. Stock-Based Compensation Plans

 

Our stock-based compensation expense is included within general and administrative expenses in the unaudited condensed consolidated statements of operations and was $1.2 million and $1.3 million for the three months ended December 31, 2016 and 2015, respectively, and $3.2 million and $3.1 million for the nine months ended December 31, 2016 and 2015, respectively. Unrecognized compensation cost was $10.6 million as of December 31, 2016 and will be recognized over the remaining weighted average life of 1.65 years. For more information on our equity incentive plan, see Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016.

 

In June 2016, we granted 250,000 shares of restricted stock to certain of our officers and employees. One-fourth of these restricted shares vested immediately on the grant date, one-fourth will vest one year after grant date, one-fourth will vest two years after grant date, and one-fourth will vest three years after grant date. The restricted shares were valued at their grant date fair market value and expensed on a straight-line basis over the vesting periods. 

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In June 2016, September 2016 and December 2016, we granted 6,950, 10,130 and 8,695 shares of stock, respectively, to our non-executive directors, which were valued and expensed at their grant date fair market value.

 

In December 2016, we granted 1,739 shares of stock to a non-employee consultant, which were valued and expensed at their grant date fair market value.

 

A summary of the activity of restricted shares awarded under our equity incentive plan as of December 31, 2016 and changes during the nine months ended December 31, 2016, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted-Average

 

 

 

 

 

Grant-Date

 

Incentive Share Awards

 

Numbers of Shares

 

Fair Value

 

Unvested as of April 1, 2016

 

929,000

 

$

19.70

 

Granted

 

277,514

 

 

7.75

 

Vested

 

(90,014)

 

 

7.60

 

Forfeited

 

(1,875)

 

 

7.82

 

Unvested as of December 31, 2016

 

1,114,625

 

$

17.72

 

 

 

8. Revenues

 

Revenues comprise the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

    

Nine months ended

 

 

 

December 31, 2016

    

December 31, 2015

 

December 31, 2016

    

December 31, 2015

 

Net pool revenues—related party

 

$

22,301,512

 

$

66,044,777

 

$

80,798,208

 

$

130,701,023

 

Time charter revenues

 

 

11,921,875

 

 

11,237,746

 

 

36,919,910

 

 

26,169,581

 

Voyage charter revenues

 

 

1,296,952

 

 

15,567,844

 

 

1,296,952

 

 

46,013,858

 

Other revenues

 

 

214,649

 

 

433,341

 

 

846,927

 

 

988,138

 

Total revenues

 

$

35,734,988

 

$

93,283,708

 

$

119,861,997

 

$

203,872,600

 

 

Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. Refer to Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016.

 

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

 

9. Financial Instruments and Fair Value Disclosures

 

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

 

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

 

(b) Interest rate risk:  Our long‑term bank loans are based on LIBOR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to the RBS Loan Facility and our 2015 Debt Facility. The interest rate swaps related to the RBS Loan

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Facility were terminated during the three months ended December 31, 2016 for $8.1 million. In September 2015, we entered into interest rate swaps with Citibank N.A. (“Citibank”) and ING Bank N.V. (“ING”) to effectively convert a notional amount of $200 million and $50 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.93% and 2.00%, respectively, each with a termination date of March 23, 2022. In October 2015, we entered into interest rate swaps with the Commonwealth Bank of Australia (“CBA”) and Citibank to effectively convert amortizing notional amounts of $85.7 million and $128.6 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% and 1.38%, respectively, each with a termination date of March 23, 2022. In June 2016, we entered into two interest rate swaps with Citibank to effectively convert amortizing notional amounts of $73.0 million and $30.0 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.21% and 1.16%, respectively, each with a termination date of March 23, 2022.

 

(c) Fair value measurements: Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

March 31, 2016

 

 

 

Other non-current assets

 

Long-term liabilities

 

Other non-current assets

 

Long-term liabilities

 

Derivatives not designated as hedging instruments

    

Derivative instruments

    

Derivative instruments

    

Derivative instruments

    

Derivative instruments

 

Interest rate swap agreements

 

$

4,961,435

 

$

69,750

 

$

 —

 

$

21,647,965

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Three months ended 

 

Derivatives not designated as hedging instruments

    

Location of gain/(loss) recognized

    

December 31, 2016

    

December 31, 2015

 

Interest Rate Swap—Change in fair value

 

Unrealized gain on derivatives

 

$

24,381,306

 

$

7,389,868

 

Interest Rate Swap—Realized loss

 

Realized loss on derivatives

 

 

(8,390,014)

 

 

(2,007,426)

 

Gain/(loss) on derivatives, net

 

 

 

$

15,991,292

 

$

5,382,442

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Nine months ended

 

Derivatives not designated as hedging instruments

    

Location of gain/(loss) recognized

    

December 31, 2016

    

December 31, 2015

 

Interest Rate Swap—Change in fair value

 

Unrealized gain on derivatives

 

$

26,539,650

 

$

3,665,324

 

Interest Rate Swap—Realized loss

 

Realized loss on derivatives

 

 

(12,980,717)

 

 

(4,482,250)

 

Gain/(loss) on derivatives, net

 

 

 

$

13,558,933

 

$

(816,926)

 

As of December 31, 2016 and March 31, 2016, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three and nine months ended December 31, 2016 and 2015.

 

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

 

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

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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.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

(In U.S. dollars except share data)

 

December 31, 2016

 

December 31, 2015

 

December 31, 2016

 

December 31, 2015

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

5,039,624

 

$

54,661,323

 

$

(3,397,085)

 

$

109,527,470

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

53,845,777

 

 

56,554,253

 

 

54,153,218

 

 

56,904,489

 

Effect of dilutive restricted stock

 

 

33,568

 

 

40,239

 

 

 —

 

 

47,939

 

Diluted weighted average number of common shares outstanding

 

 

53,879,345

 

 

56,594,492

 

 

54,153,218

 

 

56,952,428

 

EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

Diluted

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

 

For the three months ended December 31, 2016 and 2015, there were 865,500 and 655,000 shares of unvested restricted stock, respectively, and for the nine months ended December 31, 2016 and 2015, there were 1,114,625 and 655,000 shares of unvested restricted stock, respectively, which were excluded from the calculation of diluted EPS because the effect of their inclusion would be anti-dilutive.

 

11. Commitments and Contingencies

 

Commitments under Operating Leases

 

As of December 31, 2016, we had the following commitments as a lessee under operating leases relating to our United States, Greece and United Kingdom offices:

 

 

 

 

 

 

 

    

December 31, 2016

 

Less than one year

 

$

293,179

 

One to three years

 

 

176,513

 

Total

 

$

469,692

 

 

Fixed Time Charter Contracts

 

As of December 31, 2016, we had the following future minimum fixed time charter hire receipts based on non-cancelable long-term fixed time charter contracts:

 

 

 

 

 

 

 

    

December 31, 2016

 

Less than one year

 

$

49,723,113

 

One to three years

 

 

65,686,227

 

Three to five years

 

 

8,213,252

 

Total

 

$

123,622,592

 

 

Other

 

From time to time we expect to be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Such claims, even if lacking in merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any claim that is reasonably possible

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and should be disclosed or probable and for which a provision should be established in the accompanying unaudited interim condensed consolidated financial statements.

 

 

 

12. Shareholder Rights Plan

 

On December 16, 2016, our Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each share of our common stock outstanding on December 27, 2016. Each Right is attached to and trades with the associated share of common stock.  The Rights will become exercisable only if a person or group has acquired 15% or more of our outstanding common stock or announces a tender offer or exchange offer which, if consummated, would result in ownership by a person or group of 15% or more of our outstanding common stock (an "Acquiring Person").  If a person becomes an Acquiring Person, each Right will entitle its holder (other than an Acquiring Person and certain related parties) to purchase for $60 a number of shares of our common stock having a market value of twice such price.  In addition, at any time after a person or group acquires 15% or more of our outstanding common stock (unless such person or group acquires 50% or more), our Board of Directors may exchange one share of our common stock for each outstanding Right (other than Rights owned by the Acquiring Person and certain related parties, which would have become void).  Any person who, prior to the time of public announcement of the existence of the Rights, publicly disclosed in a Schedule 13D or Schedule 13G (or an amendment thereto) on file with the Securities and Exchange Commission that they beneficially owned 15% or more of our outstanding common stock is not considered to be an Acquiring Person so long as such person does not acquire additional shares in excess of certain limitations.

 

The Rights will expire on August 31, 2018.

 

 

 

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion contains forwardlooking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Item 1A—Risk Factors" herein and in our Annual Report on Form 10-K for the year ended March 31, 2016, our actual results may differ materially from those anticipated in these forwardlooking statements. Please also see the section "Forward-Looking Statements" included in this quarterly report.

 

Overview

 

We are a Marshall Islands corporation headquartered in the United States and primarily focused on owning and operating VLGCs, each with a cargocarrying capacity of greater than 80,000 cbm. Our fleet currently consists of twenty-two VLGC carriers, including nineteen fuel-efficient 84,000 cbm ECO VLGCs and three 82,000 cbm VLGCs.

 

Sixteen of our ECO VLGCs were constructed by Hyundai Heavy Industries Co., Ltd., or Hyundai, and three of our ECO VLGCs were constructed by Daewoo Shipping and Marine Engineering Ltd, or Daewoo. Our nineteen ECO VLGCs, which incorporate fuel efficiency, emission-reducing technologies, and certain custom features, were acquired by us for an aggregate purchase price of $1.4 billion, which was financed with proceeds from the 2015 Debt Facility, proceeds from equity offerings, and cash generated from operations. These nineteen ECO VLGCs were delivered to us between July 2014 and February 2016, seventeen of which were delivered during calendar year 2015 or later.

 

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 a variable rate time charter to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. The vessels entered into the Helios Pool may operate either in the spot market, pursuant to COAs or on time charters of two years' duration or less. As of December 31, 2016, seventeen of our twenty-two VLGCs were employed in the Helios Pool.

 

Our customers, either directly or through the Helios Pool, include or have included global energy companies such as Exxon Mobil Corp., China International United Petroleum & Chemicals Co., Ltd., Royal Dutch Shell plc, Statoil ASA, and Oriental Energy Company Ltd., commodity traders such as Itochu Corporation and the Vitol Group and importers such as E1 Corp., SK Gas Co. Ltd. and Indian Oil Corporation.

 

We intend to pursue a balanced chartering strategy by employing our vessels on a mix of multi-year time charters, some of which may include a profit-sharing component, shorter-term time charters, spot market voyages and COAs. Four of our vessels are currently on fixed time charters. See “Our Fleet” below for more information.

 

 

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Selected Financial Data

 

The following table presents our selected financial data and other information for the three and nine months ended December 31, 2016 and 2015, and as of December 31, 2016 and March 31, 2016, and should be read in conjunction with our unaudited interim condensed consolidated financial statements and other financial information included in this quarterly report. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

(in U.S. dollars, except fleet data)

 

December 31, 2016

    

December 31, 2015

    

December 31, 2016

    

December 31, 2015

 

Statement of Operations Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

35,734,988

 

$

93,283,708

 

$

119,861,997

 

$

203,872,600

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Voyage expenses

 

 

1,193,265

 

 

4,347,222

 

 

2,415,287

 

 

11,411,841

 

Vessel operating expenses

 

 

17,114,358

 

 

14,265,183

 

 

49,549,255

 

 

30,479,158

 

Depreciation and amortization

 

 

16,385,921

 

 

13,536,900

 

 

48,944,183

 

 

26,697,882

 

General and administrative expenses

 

 

5,166,239

 

 

7,506,740

 

 

15,981,464

 

 

20,002,555

 

Loss on disposal of assets

 

 

 —

 

 

 —

 

 

 —

 

 

105,549

 

Total expenses

 

 

39,859,783

 

 

39,656,045

 

 

116,890,189

 

 

88,696,985

 

Other income—related parties

 

 

670,836

 

 

383,642

 

 

1,776,659

 

 

1,150,927

 

Operating income/(loss)

 

 

(3,453,959)

 

 

54,011,305

 

 

4,748,467

 

 

116,326,542

 

Other income/(expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and finance costs

 

 

(7,332,260)

 

 

(4,633,454)

 

 

(21,530,588)

 

 

(5,700,583)

 

Interest income

 

 

27,711

 

 

22,382

 

 

81,206

 

 

137,226

 

Unrealized gain on derivatives

 

 

24,381,306

 

 

7,389,868

 

 

26,539,650

 

 

3,665,324

 

Realized loss on derivatives

 

 

(8,390,014)

 

 

(2,007,426)

 

 

(12,980,717)

 

 

(4,482,250)

 

Foreign currency loss, net

 

 

(193,160)

 

 

(121,352)

 

 

(255,103)

 

 

(418,789)

 

Total other income/(expenses), net

 

 

8,493,583

 

 

650,018

 

 

(8,145,552)

 

 

(6,799,072)

 

Net income/(loss)

 

$

5,039,624

 

$

54,661,323

 

$

(3,397,085)

 

$

109,527,470

 

Earnings/(loss) per common share—basic

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

Earnings/(loss) per common share—diluted

 

$

0.09

 

$

0.97

 

$

(0.06)

 

$

1.92

 

Other Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

13,927,649

 

$

68,738,066

 

$

56,757,693

 

$

145,793,680

 

Fleet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Calendar days(2)

 

 

2,024

 

 

1,744

 

 

6,050

 

 

3,498

 

Available days(3)

 

 

1,972

 

 

1,703

 

 

5,996

 

 

3,417

 

Operating days(4)(7)

 

 

1,941

 

 

1,581

 

 

5,558

 

 

3,205

 

Fleet utilization(5)(7)

 

 

98.4

%  

 

92.8

%  

 

92.7

%  

 

93.8

%

Average Daily Results

 

 

 

 

 

 

 

 

 

 

 

 

 

Time charter equivalent rate(6)(7)

 

$

17,796

 

$

56,253

 

$

21,131

 

$

60,050

 

Daily vessel operating expenses(8)

 

$

8,456

 

$

8,180

 

$

8,190

 

$

8,713

 

 

 

 

 

 

 

 

 

 

 

 

    

Dorian LPG Ltd.

 

 

As of

    

As of

    

(in U.S. dollars)

 

December 31, 2016

 

March 31, 2016

 

Balance Sheet Data

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,839,639

 

$

46,411,962

 

Restricted cash, non – current

 

 

50,812,789

 

 

50,812,789

 

Total assets

 

 

1,760,213,403

 

 

1,842,178,176

 

Current portion of long-term debt

 

 

65,978,786

 

 

66,265,643

 

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

 

 

700,715,644

 

 

746,354,613

 

Total liabilities

 

 

787,313,926

 

 

856,578,939

 

Total shareholders’ equity

 

$

972,899,477

 

$

985,599,237

 


(1)

Adjusted EBITDA is a non-GAAP financial measure and represents net income/(loss) before interest and finance costs, unrealized (gain)/loss on derivatives, realized loss on derivatives, stock-based compensation expense, impairment, and depreciation and amortization and is used as a supplemental financial measure by management to assess our financial and operating performance. We believe that adjusted EBITDA assists our management and investors by increasing the comparability of our performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of derivatives, interest and finance costs, stock-based compensation expense, impairment, loss on disposal of assets and depreciation and amortization expense, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net

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income/(loss) between periods. We believe that including adjusted EBITDA as a financial and operating measure benefits investors in selecting between investing in us and other investment alternatives.

 

Adjusted EBITDA has certain limitations in use and should not be considered an alternative to net income/(loss), operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income/(loss). Adjusted EBITDA as presented below may not be computed consistently with similarly titled measures of other companies and, therefore, might not be comparable with other companies.

 

The following table sets forth a reconciliation of net income/(loss) to Adjusted EBITDA (unaudited) for the periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

    

December 31, 2016

    

December 31, 2015

    

December 31, 2016

    

December 31, 2015

 

(in U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

5,039,624

 

$

54,661,323

 

$

(3,397,085)

 

$

109,527,470

 

Interest and finance costs

 

 

7,332,260

 

 

4,633,454

 

 

21,530,588

 

 

5,700,583

 

Unrealized gain on derivatives

 

 

(24,381,306)

 

 

(7,389,868)

 

 

(26,539,650)

 

 

(3,665,324)

 

Realized loss on derivatives

 

 

8,390,014

 

 

2,007,426

 

 

12,980,717

 

 

4,482,250

 

Stock-based compensation expense

 

 

1,161,136

 

 

1,288,831

 

 

3,238,940

 

 

3,050,819

 

Depreciation and amortization

 

 

16,385,921

 

 

13,536,900

 

 

48,944,183

 

 

26,697,882

 

Adjusted EBITDA

 

$

13,927,649

 

$

68,738,066

 

$

56,757,693

 

$

145,793,680

 

 

(2)

We define calendar days as the total number of days in a period during which each vessel in our fleet was owned. Calendar days are an indicator of the size of the fleet over a period and affect both the amount of revenues and the amount of expenses that are recorded during that period.

 

(3)

We define available days as calendar days less aggregate offhire days associated with scheduled maintenance, which include major repairs, drydockings, vessel upgrades or special or intermediate surveys. We use available days to measure the aggregate number of days in a period that our vessels should be capable of generating revenues.

 

(4)

We define operating days as available days less the aggregate number of days that our vessels are offhire for any reason other than scheduled maintenance. We use operating days to measure the number of days in a period that our operating vessels are on hire (refer to 7 below).

 

(5)

We calculate fleet utilization by dividing the number of operating days during a period by the number of available days during that period. An increase in nonscheduled offhire days would reduce our operating days, and, therefore, our fleet utilization. We use fleet utilization to measure our ability to efficiently find suitable employment for our vessels.

 

(6)

Time charter equivalent rate, or TCE rate, is a non-GAAP measure of the average daily revenue performance of a vessel. TCE rate is a shipping industry performance measure used primarily to compare periodtoperiod changes in a shipping company’s performance despite changes in the mix of charter types (such as time charters, voyage charters) under which the vessels may be employed between the periods. Our method of calculating TCE rate is to divide revenue net of voyage expenses by operating days for the relevant time period, which may not be calculated the same by other companies.

 

The following table sets forth a reconciliation of revenues to TCE rate (unaudited) for the periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

(in U.S. dollars, except operating days)

 

December 31, 2016

    

December 31, 2015

    

December 31, 2016

    

December 31, 2015

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

35,734,988

 

$

93,283,708

 

$

119,861,997

 

$

203,872,600

 

Voyage expenses

 

 

(1,193,265)

 

 

(4,347,222)

 

 

(2,415,287)

 

 

(11,411,841)

 

Time charter equivalent

 

$

34,541,723

 

$

88,936,486

 

$

117,446,710

 

$

192,460,759

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating days

 

 

1,941

 

 

1,581

 

 

5,558

 

 

3,205

 

TCE rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Time charter equivalent rate

 

$

17,796

 

$

56,253

 

$

21,131

 

$

60,050

 

 

(7)

We determine operating days for each vessel based on the underlying vessel employment, including our vessels in the Helios Pool, which resulted in 1,941 and 1,581 operating days, fleet utilization of 98.4% and 92.8%, and a TCE rate of $17,796 and $56,253 for the three months ended December 31, 2016 and 2015, respectively, and 5,558 and 3,205 operating days, fleet utilization of 92.7% and 93.8%, and a TCE rate of $21,131 and $60,050, for the nine months ended December 31, 2016 and 2015, respectively. If we were to calculate operating days for each vessel within the Helios Pool as a variable rate time charter

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for the three months ended December 31, 2016 and 2015, our operating days would be increased to 1,971 and 1,652, respectively, fleet utilization would be increased to 99.9% and 97.0%, respectively, and TCE rate would be reduced to $17,525 and $53,836, respectively. If we were to calculate operating days for each vessel within the Helios Pool as a variable rate time charter for the nine months ended December 31, 2016 and 2015, our operating days would be increased to 5,995 and 3,336, respectively, fleet utilization would be increased to 100.0% and 97.6%, respectively, and TCE rate would be reduced to $19,591 and $57,692, respectively. We believe that our methodology using the underlying vessel employment provides more meaningful insight into market conditions and the performance of our vessels.

 

(8)

Daily vessel operating expenses are calculated by dividing vessel operating expenses by calendar days for the relevant time period.

 

Our Fleet

 

The following table sets forth certain information regarding our fleet as of January 26, 2017. We classify vessel employment as either Time Charter, Pool or Pool-TCO.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

 

 

 

Capacity

 

 

 

Sister

 

 

 

ECO

 

 

 

Charter

 

 

 

(Cbm)

 

Shipyard

 

Ships

 

Year Built

 

Vessel(1)

 

Employment

 

Expiration(2)

 

VLGCs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Captain Markos NL

 

82,000

 

Hyundai

 

A

 

2006

 

 

Time Charter(3)

 

Q4 2019

 

Captain John NP

 

82,000

 

Hyundai

 

A

 

2007

 

 

Pool(4)

 

 

Captain Nicholas ML 

 

82,000

 

Hyundai

 

A

 

2008

 

 

Pool(4)

 

 

Comet

 

84,000

 

Hyundai

 

B

 

2014

 

X

 

Time Charter(5)

 

Q3 2019

 

Corsair

 

84,000

 

Hyundai

 

B

 

2014

 

X

 

Time Charter(6)

 

Q3 2018

 

Corvette 

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Cougar

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Concorde

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Cobra

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Continental

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Constitution

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Commodore

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Cresques

 

84,000

 

Daewoo

 

C

 

2015

 

X

 

Pool(4)

 

 

Constellation

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Cheyenne

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Clermont

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Cratis

 

84,000

 

Daewoo

 

C

 

2015

 

X

 

Pool(4)

 

 

Chaparral

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool(4)

 

 

Copernicus

 

84,000

 

Daewoo

 

C

 

2015

 

X

 

Pool(4)

 

 

Commander

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Time Charter(8)

 

Q4 2020

 

Challenger

 

84,000

 

Hyundai

 

B

 

2015

 

X

 

Pool-TCO(7)

 

Q2 2017

 

Caravelle

 

84,000

 

Hyundai

 

B

 

2016

 

X

 

Pool(4)

 

 

Total

 

1,842,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)

Represents vessels with very low revolutions per minute, longstroke, electronically controlled engines, larger propellers, advanced hull design, and low friction paint.

 

(2)

Represents calendar year quarters.

 

(3)

Currently on time charter with an oil major that began in December 2014.

 

(4)

“Pool” indicates that the vessel is operated in the Helios Pool on voyage charters with third parties and receives as charter hire a portion of the net revenues of the pool calculated according to a formula based on the vessel’s pro rata performance in the pool.

 

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(5)

Currently on a time charter with an oil major that began in July 2014.

 

(6)

Currently on a time charter with an oil major that began in July 2015.

 

(7)

“Pool-TCO” indicates that the vessel is operated in the Helios Pool on a time charter out to a third party and receives as charter hire a portion of the net revenues of the pool calculated according to a formula based on the vessel’s pro rata performance in the pool.

 

(8)

Currently on a time charter with a major oil company that began in November 2015.

 

 

Results of Operations – For the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 

 

Revenues

 

The following table compares our Revenues for the three months ended December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase /

 

Percent

 

 

    

2016

    

2015

    

(Decrease)

    

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net pool revenues—related party

 

$

22,301,512

 

$

66,044,777

 

$

(43,743,265)

 

(66.2)

%

Time charter revenues

 

 

11,921,875

 

 

11,237,746

 

 

684,129

 

6.1

%

Voyage charter revenues

 

 

1,296,952

 

 

15,567,844

 

 

(14,270,892)

 

(91.7)

%

Other revenues

 

 

214,649

 

 

433,341

 

 

(218,692)

 

(50.5)

%

Total

 

$

35,734,988

 

$

93,283,708

 

$

(57,548,720)

 

(61.7)

%

 

Revenues, which represent net pool revenues—related party, voyage charters, time charters and other revenues earned by our vessels, were $35.7 million for the three months ended December 31, 2016,  a decrease of $57.6 million, or 61.7%, from $93.3 million for the three months ended December 31, 2015. The decrease is primarily attributable to lower VLGC rates resulting in a decrease in revenues of $58.2 million for VLGCs that were operating in our fleet during both three-month periods, along with a decrease of $0.7 million in revenues contributed by a pressurized gas carrier operating in our fleet during the three months ended December 31, 2015 that was sold prior to the three months ended December 31, 2016. This decrease was partially offset by $1.3 million of revenues contributed by one of our newbuilding VLGCs that began operations subsequent to December 31, 2015.

 

Voyage Expenses

 

Voyage expenses were $1.2 million during the three months ended December 31, 2016,  a decrease of $3.1 million, or 72.6%, from $4.3 million for the three months ended December 31, 2015. Voyage expenses are all expenses unique to a particular voyage, including bunker fuel consumption, port expenses, canal fees, charter hire commissions, war risk insurance and security costs. Voyage expenses are typically paid by us under voyage charters and by the charterer under time charters, including our vessels chartered to the Helios Pool. Accordingly, we mainly incur voyage expenses for voyage charters or during repositioning voyages between time charters for which no cargo is available or travelling to or from drydocking. The decrease for the three months ended December 31, 2016, when compared to the three months ended December 31, 2015, was mainly attributable to the fact that only one of our VLGCs operated on voyage charters outside of the Helios Pool during the three months ended December 31, 2016, resulting in decreases in VLGC bunker costs of $2.3 million and other voyage expenses of $0.4 million. In addition, a pressurized gas carrier operating in our fleet during the three months ended December 31, 2015 incurred voyage expenses of $0.4 million for the three months ended December 31, 2015 that did not recur during the three months ended December 31, 2016 as the vessel was sold prior to the period. 

 

Vessel Operating Expenses

 

Vessel operating expenses were $17.1 million during the three months ended December 31, 2016, or $8,456 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was an increase of $2.8 million, or 20.0%, from $14.3 million for the

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three months ended December 31, 2015. The increase in vessel operating expenses was primarily the result of an increase in the number of vessels operating in our fleet during the three months ended December 31, 2016 compared to the three months ended December 31, 2015 along with additional repairs and maintenance incurred and spares and stores purchased primarily for two VLGCs that underwent drydocking during the three months ended December 31, 2016. Vessel operating expenses per vessel per calendar day increased $276 from $8,180 for the three months ended December 31, 2015 to $8,456 for the three months ended December 31, 2016.  The increase in vessel operating expenses per vessel per calendar day of $276 was substantially due to increases of $311 per vessel per calendar day relating to additional repairs and maintenance incurred and spares and stores purchased primarily for two VLGCs that underwent drydocking during the three months ended December 31, 2016 and $122 per vessel per calendar day for other vessel operating expenses. These increases were partially offset by a decrease in lubricants of $157 per vessel per calendar day relating primarily to a reduction in lubricant consumption.

 

Depreciation and Amortization

 

Depreciation and amortization was $16.4 million for the three months ended December 31, 2016,  an increase of $2.9 million, or 21.0%, from $13.5 million for the three months ended December 31, 2015 that mainly relates to depreciation expense for our additional operating vessels.

 

General and Administrative Expenses

 

General and administrative expenses were $5.2 million for the three months ended December 31, 2016, a decrease of $2.3 million, or 31.2%, from $7.5 million for the three months ended December 31, 2015. The decrease was mainly due to decreases of $1.4 million for certain non-capitalizable costs incurred prior to vessel delivery, $0.1 million for stock-based compensation and $0.8 million for other general and administrative expenses. 

 

Other Income—Related Parties

 

Other income—related parties amounted to $0.7 million for the three months ended December 31, 2016, an increase of $0.3 million, or 74.9%, from $0.4 million for the three months ended December 31, 2015. The increase was primarily attributable to an increase of $0.2 million of fees for commercial management services provided by Dorian LPG (UK) Ltd. to the Helios Pool as well an increase of $0.1 million for certain chartering and marine operation services provided by Dorian LPG (USA) LLC and its subsidiaries to DHSA.

 

Interest and Finance Costs

 

Interest and finance costs amounted to $7.3 million for the three months ended December 31, 2016,  an increase of $2.7 million, or 58.2%, from $4.6 million for the three months ended December 31, 2015. The increase of $2.7 million during this period was mainly due to a $1.6 million increase in interest incurred on our long-term debt, amortization and other financing expenses, including capitalized interest, from $5.7 million for the three months ended December 31, 2015 to $7.3 million for the three-month period ended December 31, 2016. This increase was largely due to an increase in average indebtedness, excluding deferred financing fees, from $711.8 million for the three months ended December 31, 2015 to $802.0 million for the three months ended December 31, 2016. Additionally, we had no capitalized interest during the three months ended December 31, 2016 compared to $1.1 million during the three months ended December 31, 2015. The outstanding balance of our long term debt, net of deferred financing fees of $21.0 million, as of December 31, 2016, was $766.7 million.

 

Unrealized Gain on Derivatives

 

Unrealized gain on derivatives amounted to a gain of approximately $24.4 million for the three months ended December 31, 2016, compared to a gain of $7.4 million for the three months ended December 31, 2015. The $17.0 million change is primarily attributable to changes in the fair value of our interest rate swaps due to changes in forward LIBOR yield curves along with an $8.1 million unrealized gain related to the termination of our RBS interest rate swaps.

 

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Realized Loss on Derivatives

 

Realized loss on derivatives amounted to a loss of approximately $8.4 million for the three months ended December 31, 2016, an increase of $6.4 million, or 317.9%, from a loss of $2.0 million for the three months ended December 31, 2015. The increase is primarily attributable to the termination of the interest rate swaps related to the RBS Loan Facility during the three months ended December 31, 2016.

 

Results of Operations – For the nine months ended December 31, 2016 as compared to the nine months ended December 31, 2015 

 

Revenues

 

The following table compares our Revenues for the nine months ended December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase /

 

Percent

 

 

    

2016

    

2015

    

(Decrease)

    

Change

 

Net pool revenues—related party

 

$

80,798,208

 

$

130,701,023

 

$

(49,902,815)

 

(38.2)

%

Time charter revenues

 

 

36,919,910

 

 

26,169,581

 

 

10,750,329

 

41.1

%

Voyage charter revenues

 

 

1,296,952

 

 

46,013,858

 

 

(44,716,906)

 

(97.2)

%

Other revenues

 

 

846,927

 

 

988,138

 

 

(141,211)

 

(14.3)

%

Total

 

$

119,861,997

 

$

203,872,600

 

$

(84,010,603)

 

(41.2)

%

 

Revenues, which represent net pool revenues—related party, voyage charters, time charters and other revenues earned by our vessels, were $119.9 million for the nine months ended December 31, 2016,  a decrease of $84.0 million, or 41.2%, from $203.9 million for the nine months ended December 31, 2015. The decrease is primarily attributable to lower VLGC rates resulting in a decrease in revenues of $85.9 million for VLGCs that were operating in our fleet during both nine-month periods, along with a decrease of $2.7 million in revenues contributed by a pressurized gas carrier operating in our fleet during the nine months ended December 31, 2015 that was sold prior to the nine months ended December 31, 2016. This decrease was partially offset by $4.6 million of revenues contributed by one of our newbuilding VLGCs that began operations subsequent to December 31, 2015.

 

Voyage Expenses

 

Voyage expenses were $2.4 million during the nine months ended December 31, 2016,  a decrease of $9.0 million, or 78.8%, from $11.4 million for the nine months ended December 31, 2015. Voyage expenses are all expenses unique to a particular voyage, including bunker fuel consumption, port expenses, canal fees, charter hire commissions, war risk insurance and security costs. Voyage expenses are typically paid by us under voyage charters and by the charterer under time charters, including our vessels chartered to the Helios Pool. Accordingly, we mainly incur voyage expenses for voyage charters or during repositioning voyages between time charters for which no cargo is available or travelling to or from drydocking. The decrease for the nine months ended December 31, 2016, when compared to the nine months ended December 31, 2015, was mainly attributable to the fact that only one of our VLGCs operated on voyage charters outside of the Helios Pool during the nine months ended December 31, 2016, resulting in decreases in VLGC bunker costs of $5.9 million, port expenses of $0.8 million, and other voyage expenses of $0.8 million. In addition, a pressurized gas carrier operating in our fleet during the nine months ended December 31, 2015 incurred voyage expenses of $1.5 million for the nine months ended December 31, 2015 that did not recur during the nine months ended December 31, 2016 as the vessel was sold prior to the period. 

 

Vessel Operating Expenses

 

Vessel operating expenses were $49.5 million during the nine months ended December 31, 2016, or $8,190 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was an increase of $19.0 million, or 62.6%, from $30.5 million for the nine months ended December 31, 2015. The increase in vessel operating expenses was primarily the result of an increase in the number of vessels operating in our fleet during the nine months ended December 31, 2016 compared to the nine months ended December 31, 2015. Vessel operating expenses per vessel per calendar day decreased $523 from $8,713 for

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the nine months ended December 31, 2015 to $8,190 for the nine months ended December 31, 2016.  The decrease in vessel operating expenses per vessel per calendar day of $523 was largely due to a $2.3 million, or $666 per vessel per calendar day, reduction in costs relating to the training of additional crew partially offset by an increase of $176 per vessel per calendar day relating to additional repairs and maintenance incurred and spares and stores purchased primarily for two VLGCs that underwent drydocking during the nine months ended December 31, 2016.

 

Depreciation and Amortization

 

Depreciation and amortization was $48.9 million for the nine months ended December 31, 2016, an increase of $22.2 million, or 83.3%, from $26.7 million for the nine months ended December 31, 2015 that mainly relates to depreciation expense for our additional operating vessels.

 

General and Administrative Expenses

 

General and administrative expenses were $16.0 million for the nine months ended December 31, 2016, a decrease of $4.0 million, or 20.1%, from $20.0 million for the nine months ended December 31, 2015. The decrease was mainly due to decreases of $3.0 million for certain non-capitalizable costs incurred prior to vessel delivery, $2.1 million in cash bonuses to various employees, and $1.0 million for other general and administrative expenses. Partially offsetting these decreases were increases of $1.0 million in salaries, wages and benefits resulting from an increase in the number of employees, $0.9 million for professional, legal, audit and accounting fees and $0.2 million for stock-based compensation.

 

Other Income—Related Parties

 

Other income—related parties amounted to $1.8 million for the nine months ended December 31, 2016,  an increase of $0.6 million, or 54.4%, from $1.2 million for the nine months ended December 31, 2015. The increase was primarily attributable to an increase of $0.4 million of fees for commercial management services provided by Dorian LPG (UK) Ltd. to the Helios Pool as well an increase of $0.2 million for certain chartering and marine operation services provided by Dorian LPG (USA) LLC and its subsidiaries to DHSA.

 

Interest and Finance Costs

 

Interest and finance costs amounted to $21.5 million for the nine months ended December 31, 2016,  an increase of $15.8 million, or 277.7%, from $5.7 million for the nine months ended December 31, 2015. The increase of $15.8 million during this period was mainly due to an $11.1 million increase in interest incurred on our long-term debt, amortization and other financing expenses, including capitalized interest, from $10.4 million for the nine months ended December 31, 2015 to $21.5 million for the nine months ended December 31, 2016. This increase was largely due to an increase in average indebtedness, excluding deferred financing fees, from $448.4 million for the nine months ended    December 31, 2015 to $818.6 million for the nine months ended December 31, 2016. Additionally, we had no capitalized interest during the nine months ended December 31, 2016 compared to $4.7 million during the nine months ended December 31, 2015. The outstanding balance of our long term debt, net of deferred financing fees of $21.0 million, as of December 31, 2016, was $766.7 million.

 

Unrealized Gain on Derivatives

 

Unrealized gain on derivatives amounted to a gain of approximately $26.5 million for the nine months ended December 31, 2016, compared to a gain of $3.7 million for the nine months ended December 31, 2015. The $22.9 million change is primarily attributable to changes in the fair value of our interest rate swaps due to changes in forward LIBOR yield curves along with an $8.1 million unrealized gain related to the termination of our RBS interest rate swaps.

 

Realized Loss on Derivatives

 

Realized loss on derivatives amounted to a loss of approximately $13.0 million for the nine months ended December 31, 2016, an increase of $8.5 million, or 189.6%, from a loss of $4.5 million for the nine months ended December 31, 2015. The increase is primarily attributable to the termination of the interest rate swaps related to the RBS Loan Facility during the three months ended December 31, 2016.

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Liquidity and Capital Resources

 

Our business is capital intensive, and our future success depends on our ability to maintain a highquality fleet. As of December 31, 2016, we had cash and cash equivalents of $31.8 million and restricted cash of $50.8 million.

 

Our primary source of capital during the nine months ended December 31, 2016 was $49.2 million in cash generated from operations. As of December 31, 2016, the outstanding balance of our long term debt, net of deferred financing fees of $21.0 million, was $766.7 million. Within the next twelve months, $66.0 million of our long-term debt is scheduled to be repaid.

 

Operating expenses, including expenses to maintain the quality of our vessels in order to comply with international shipping standards and environmental laws and regulations, the funding of working capital requirements, long-term debt repayments, financing costs, including the repayment of principal and interest under our debt facilities, and repurchases of our own securities represent our shortterm, mediumterm and longterm liquidity needs as of December 31, 2016. We anticipate satisfying these needs with cash on hand and cash from operations, and if these sources are insufficient, we may need to seek alternative sources of finance and/or modifications of our existing credit facilities to satisfy short-term liquidity needs. However, there is no assurance that we will be able to obtain any such financing or modifications to our existing credit facilities on terms acceptable to us, or at all.

 

Our dividend policy will also impact our future liquidity position. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. In addition, under the terms of our credit facilities, we may only declare or pay any dividends from our free cash flow and may not do so if i) an event of default is occurring or ii) the payment of such dividend would result in an event of default. Our vessel owning subsidiaries that are party to the RBS Loan Facility, as described in our Annual Report on Form 10-K for the year ended March 31, 2016, are prohibited from paying dividends without the consent of the lender. However, the loan facility permits the borrowers to make expenditures to fund the administration and operation of Dorian.

 

As part of our growth strategy, we will continue to consider strategic opportunities, including the acquisition of additional vessels and repurchases of our own securities. We may choose to pursue such opportunities through internal growth or joint ventures or business acquisitions. We expect to finance the purchase price of any future acquisitions either through internally generated funds, public or private debt financings, public or private issuances of additional equity securities or a combination of these forms of financing.

 

Cash Flows

 

The following table summarizes our cash and cash equivalents provided by/(used in) operating, financing and investing activities for the nine months ended December 31:

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

2016

 

2015

 

Net cash provided by operating activities

$

49,204,850

 

$

82,985,318

 

Net cash used in investing activities

 

(1,762,861)

 

 

(855,874,634)

 

Net cash (used in)/provided by financing activities

 

(61,699,686)

 

 

590,427,830

 

Net decrease in cash and cash equivalents

$

(14,572,323)

 

$

(182,786,264)

 

 

Operating Cash Flows.  Net cash provided by operating activities for the nine months ended December 31, 2016 was $49.2 million, compared to $83.0 million for the nine months ended December 31, 2015. The decrease of $33.8 million is primarily related to a decrease in cash flows from operating profits, partially offset by the timing of changes in working capital primarily from a reduction in amounts due from the Helios Pool.

 

Net cash flow from operating activities depends upon our overall profitability, market rates for vessels employed on voyage charters, charter rates agreed to for time charters, the timing and amount of payments for drydocking

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expenditures and unscheduled repairs and maintenance, fluctuations in working capital balances; timing of distributions from the Helios Pool; and bunker costs to the extent we have vessels employed on voyage charters.

 

Investing Cash Flows.  Net cash used in investing activities was $1.8 million for the nine months ended December 31, 2016, comprised primarily of $1.8 million of payments for capitalized costs related to our fleet. Net cash used in investing activities was $855.9 million for the nine months ended December 31, 2015, comprised mainly of $839.1 million of scheduled payments to the shipyards, supervision costs, management fees, and other capitalized costs related to our newbuildings and $16.5 million of restricted cash deposits.

 

Financing Cash Flows.  Net cash used in financing activities was $61.7 million for the nine months ended December 31, 2016 and consisted of repayments of long term debt of $48.6 million and repurchase of treasury stock of $13.0 million. Net cash provided by financing activities was $590.4 million for the nine months ended December 31, 2015 and consisted of cash proceeds from drawdowns of the 2015 Debt Facility totaling $634.6 million, offset partially by repayments of long term debt of $20.9 million, payment of financing costs of $13.2 million and repurchase of treasury stock of $10.1 million.

 

Capital Expenditures.  LPG transportation is a capitalintensive business, requiring significant investment to maintain an efficient fleet and to stay in regulatory compliance.

 

We are required to complete a special survey for a vessel once every five years and an intermediate survey every 2.5 years after the first special survey. Drydocking each vessel takes approximately 1020 days. We spend significant amounts for scheduled drydocking (including the cost of classification society surveys) for each of our vessels.

 

As our vessels age and our fleet expands, our drydocking expenses will increase. We estimate the current cost of a VLGC special survey to be approximately $1,000,000 per vessel (excluding any capital improvements to the vessel that may be made during such drydockings) and the cost of an intermediate survey to be approximately $100,000 per vessel. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking and classification society survey costs. We are not aware of any future regulatory changes or environmental laws that we expect to have a material impact on our current or future results of operations that we have not already considered. Please see “Item 1A. Risk Factors—Risks Relating to Our Company—We may incur substantial costs for the drydocking or replacement of our vessels as they age" in our Annual Report on Form 10-K for the year ended March 31, 2016.

 

Debt Agreements

 

For information relating to our secured term loan facilities, please see Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2016 and Note 6 to our unaudited interim condensed consolidated financial statements for the three and nine months ended December 31, 2016 included herein.  

 

Off-Balance Sheet Arrangements

 

We currently do not have any offbalance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

The following is an update to the Critical Accounting Estimates set forth in “Item 7. — Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended March 31, 2016.

 

Impairment of long-lived assets. We review our vessels and other fixed assets for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. In addition, we compare independent appraisals to our carrying value for indicators of impairment to our vessels. When such indicators are present, an asset is tested for recoverability by comparing the estimate of future undiscounted net operating cash flows expected to be generated by the use of the asset over its remaining useful life and its eventual disposition to its carrying amount. An

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impairment charge is recognized if the carrying value is in excess of the estimated future undiscounted net operating cash flows. The impairment loss is measured based on the excess of the carrying amount over the fair market value of the asset. The new lower cost basis would result in a lower annual depreciation than before the impairment.

 

Our estimates of fair market value assume that our vessels are all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including:

 

·

reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values;

 

·

news and industry reports of similar vessel sales;

 

·

approximate market values for our vessels or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated;

 

·

offers that we may have received from potential purchasers of our vessels; and

 

·

vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers.

 

As we obtain information from various industry and other sources, our estimates of fair market value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may not be indicative of the current or future fair market value of our vessels or prices that we could achieve if we were to sell them.

 

As of December 31, 2016, independent appraisals of our VLGC fleet had indicators of impairment in accordance with ASC 360 Property, Plant, and Equipment. We determined estimated net operating cash flows for these VLGCs by applying various assumptions regarding future time charter equivalent revenues net of commissions, operating expenses, scheduled drydockings, expected offhire and scrap values. These assumptions were based on historical data as well as future expectations. We estimated spot market rates by obtaining the trailing 10-year historical average spot market rates, as published by maritime industry researchers. Estimated outflows for operating expenses and drydocking expenses were based on historical and budgeted costs and were adjusted for assumed inflation. Utilization was based on our historical levels achieved in the spot market and estimates of a residual value consistent with scrap rates used in management's evaluation of scrap value. Such estimates and assumptions regarding expected net operating cash flows require considerable judgment and were based upon historical experience, financial forecasts and industry trends and conditions. Therefore, based on this analysis, we concluded that no impairment charge was necessary because we believe the vessel carrying values are recoverable. No impairment charges were recognized for the three and nine months ended December 31, 2016.

 

In addition, we performed a sensitivity analysis as of December 31, 2016, to determine the effect on recoverability of changes in TCE rates. The sensitivity analysis suggests that we would not incur an impairment charge on any of our twenty-two VLGCs if daily TCE rates fell by 30% compared to the 10-year historical average spot market rates. An impairment charge of approximately $221.4 million on nineteen of our twenty-two VLGCs would be triggered by a reduction of 40% in the 10-year historical average spot market rates. The amount, if any, and timing of any impairment charges we may recognize in the future will depend upon the then current and expected future charter rates and vessel values, which may differ materially from those used in our estimates as of December 31, 2016.

 

Recent Accounting Pronouncements

 

See Note 2 to our unaudited interim condensed consolidated financial statements included herein for a discussion of recent accounting pronouncements.

 

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

For additional discussion of our exposure to market risk, refer to “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” included in our Annual Report on Form 10-K for the year ended March 31, 2016.

 

Interest Rate Risk

 

The LPG shipping industry is capital intensive, requiring significant amounts of investment. Much of this investment is provided in the form of long-term debt. Our debt agreements contain interest rates that fluctuate with LIBOR. We have entered into interest rate swap agreements to hedge a majority of our exposure to fluctuations of interest rate risk associated with our 2015 Debt Facility. We have hedged $250 million of non-amortizing principal and $282.6 million of amortizing principal of the 2015 Debt Facility as of December 31, 2016 and thus increasing interest rates could adversely impact our future earnings due to additional interest expense on our unhedged debt. For the 12 months following December 31, 2016, a hypothetical increase or decrease of 20 basis points in the underlying LIBOR rates would result in an increase or decrease of our interest expense on all of our non-hedged interest bearing debt by approximately $0.5 million assuming all other variables are held constant.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2016. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three and nine months ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

From time to time, we expect to be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Such claims, even if lacking in merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any claim that is reasonably possible and should be disclosed or probable and for which a provision should be established in the accompanying unaudited interim condensed consolidated financial statements.

 

ITEM 1A.RISK FACTORS

 

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. The following is an update to the risk factors that may cause actual results to differ materially from those anticipated set forth in “Item 1A. — Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2016.

 

The expansion of the Panama Canal may have an adverse effect on our results of operations.

 

In June 2016, the expansion of the Panama Canal, or the Canal, was completed. The new locks allow the Canal to accommodate significantly larger vessels, including VLGCs, which we operate.  Transit from the U.S. Gulf to Asia, an important trade route for our customers, can now be shortened by approximately 15 days compared to transiting via the Cape of Good Hope.  The decrease in voyage time may increase the number of VLGCs available for cargo lifting and thereby increase industry capacity, which may have an adverse effect on TCE rates.

 

The recent downturn in spot market charter rates has had and may continue to have a negative effect on our results of operations and cash flows.

As of the date of this quarterly report, seventeen of our twenty-two vessels operate in the spot market through the Helios Pool. This exposes us to fluctuations in spot market charter rates. We also employ five of our VLGCs (including through the Helios Pool) on time charters.  As these time charters expire, we may employ these vessels in the spot market or on new time charters, the charter rates of which are highly dependent on the then prevailing spot market rates. The spot charter market can fluctuate significantly based upon the supply of and demand for LPG carriers.

The Baltic Exchange Liquid Petroleum Gas Index, an index published daily by the Baltic Exchange for the spot market rate for the benchmark Ras Tanura‑Chiba route (expressed as U.S. dollars per metric ton), has fallen 77% from a peak of $143.250 in July 2014 to $32.857 as of January 26, 2017. If future spot charter rates decline further, or remain depressed, then we may not be able to profitably operate our vessels, meet our financial obligations, including the repayment of our indebtedness, or pay dividends.

 

We are subject to regulation and liability, including environmental laws, which could require significant expenditures and adversely affect our financial conditions and results of operations.

 

The International Maritime Organization, or the IMO, adopted the BWM Convention in February 2004. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits. All ships will also have to carry a ballast water record book and an International Ballast Water Management Certificate. The BWM Convention enters into force 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world’s merchant shipping. On September 8, 2016, this threshold was met (with 52 contracting parties making up 35.14%). Thus, the BWM Convention will enter into force on September 8, 2017. Many of the implementation dates in the BWM Convention have already passed, so that once the BWM Convention enters into force, the period of installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems, or BWMS. For this reason, on December 4, 2013, the IMO

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Assembly passed a resolution revising the application dates of the BWM Convention so that they are triggered by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels constructed before the entry into force date “existing vessels” and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force of the convention. On October 27, 2016, the IMO’s Marine Environmental Protection Committee, or MPEC, adopted updated “guidelines for approval of ballast water managements systems (G8).” G8 updates previous guidelines concerning procedures to approve BWMS, including mid-ocean ballast exchange or ballast water treatment requirements. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. We do not believe that the costs of compliance with the BWM Convention will be material and there will be no significant impact of such a requirement on our operations. 

 

We have a shareholders rights agreement that could delay or prevent a change in control.

 

On December 16, 2016, our Board of Directors adopted a shareholder rights agreement (the “Rights Agreement”). The Rights Agreement may cause substantial dilution to a person or group that attempts to acquire control of our Company on terms that our Board of Directors does not believe are in our shareholders’ best interest. The Rights Agreement is intended to protect our shareholders in the event of an unfair or coercive offer to acquire control of the Company and to provide our Board of Directors with adequate time to evaluate unsolicited offers. The Rights Agreement may prevent or make takeovers or unsolicited corporate transactions with respect to our Company more difficult, even if shareholders consider such transactions favorable, possibly including transactions in which shareholders might otherwise receive a premium for their shares. For more information, please see the Rights Agreement dated December 16, 2016 filed as an exhibit to our current report on Form 8-K filed with the SEC on December 16, 2016.

 

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

On August 5, 2015, we publicly announced that our Board of Directors had authorized the repurchase of up to $100 million of our common stock on or before December 31, 2016. The table below sets forth information regarding our purchases of our common stock during the quarterly period ended December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

Purchased as

 

 

 

 

 

 

 

 

Part of

 

Maximum Dollar

 

 

Total

 

 

 

Publicly

 

Value of Shares

 

 

Number

 

Average

 

Announced

 

that May Yet Be

 

 

of Shares

 

Price Paid

 

Plans or

 

Purchased Under the

Period

 

Purchased

 

Per Share

 

Programs

 

Plan or Programs

October 1 to 31, 2016

 

15,870

 

 

6.30

 

15,870

 

 

66,288,564

November 1 to 30, 2016

 

 —

 

 

 —

 

 —

 

 

66,288,564

December 1 to 31, 2016

 

 —

 

 

 —

 

 —

 

 

66,288,564

Total

 

15,870

 

$

6.30

 

15,870

 

$

66,288,564

 

 

 

ITEM 6.EXHIBITS

 

See accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

Dorian LPG Ltd.

 

(Registrant)

 

 

Date: January 27, 2017

/s/ John Hadjipateras

 

John Hadjipateras

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

 

 

Date: January 27, 2017

/s/ Theodore B. Young

 

Theodore B. Young

 

Chief Financial Officer

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

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EXHIBIT INDEX

 

 

 

 

Exhibit Number

 

Description

 

 

 

4.1

 

Rights Agreement, dated as of December 16, 2016, between Dorian LPG Ltd. and Computershare Inc., which includes the form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Preferred Shares as Exhibit B (incorporated by reference to Exhibit 4.1 of Dorian LPG Ltd.'s Form 8-K filed on December 16, 2016)

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 

 

 

32.1†

 

Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 

 

 

32.2†

 

Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 

 

 

101.INS

 

XBRL Document 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema

 

 

 

101.CAL

 

XBRL Taxonomy Extension Schema Calculation Linkbase

 

 

 

101.DEF

 

XBRL Taxonomy Extension Schema Definition Linkbase

 

 

 

101.LAB

 

XBRL Taxonomy Extension Schema Label Linkbase

 

 

 

101.PRE

 

XBRL Taxonomy Extension Schema Presentation Linkbase


This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

 

 

31