DORIAN LPG LTD., 10-K filed on 6/4/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Mar. 31, 2015
Jun. 1, 2015
Sep. 30, 2014
Document and Entity Information
 
 
 
Entity Registrant Name
DORIAN LPG LTD. 
 
 
Entity Central Index Key
0001596993 
 
 
Document Type
10-K 
 
 
Document Period End Date
Mar. 31, 2015 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--03-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 415,899,519 
Entity Common Stock, Shares Outstanding
 
58,057,493 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
Mar. 31, 2015
Mar. 31, 2014
Current assets
 
 
Cash and cash equivalents
$ 204,821,183 
$ 279,131,795 
Restricted cash
 
30,948,702 
Trade receivables, net and accrued revenues
22,847,224 
1,966,746 
Prepaid expenses and other receivables
1,780,548 
343,047 
Due from related parties
386,743 
1,639,497 
Inventories
3,375,759 
1,058,329 
Total current assets
233,211,457 
315,088,116 
Fixed assets
 
 
Vessels, net
419,976,053 
194,834,866 
Vessels under construction
398,175,504 
323,206,206 
Other fixed assets, net
464,889 
60,904 
Total fixed assets
818,616,446 
518,101,976 
Other non-current assets
 
 
Other non-current assets
97,446 
 
Deferred charges, net
13,965,921 
2,555,674 
Restricted cash
33,210,000 
4,500,000 
Total assets
1,099,101,270 
840,245,766 
Current liabilities
 
 
Trade accounts payable
5,224,349 
2,401,456 
Accrued expenses
5,647,702 
2,196,386 
Due to related parties
525,170 
113,465 
Deferred income
1,122,239 
554,111 
Current portion of long-term debt
15,677,553 
9,612,000 
Total current liabilities
28,197,013 
14,877,418 
Long-term liabilities
 
 
Long-term debt-net of current portion
184,665,874 
119,106,500 
Derivative instruments
12,730,462 
14,062,416 
Other long-term liabilities
293,662 
 
Total long-term liabilities
197,689,998 
133,168,916 
Total liabilities
225,887,011 
148,046,334 
Shareholders' equity
 
 
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued nor outstanding
   
   
Common stock, $.01 par value, 450,000,000 shares authorized, 58,057,493, and 48,365,011 shares issued and outstanding as of March 31, 2015 and March 31, 2014, respectively
580,575 
483,650 
Additional paid-in-capital
844,539,059 
688,881,939 
Retained earnings
28,094,625 
2,833,843 
Total shareholders' equity
873,214,259 
692,199,432 
Total liabilities and shareholders' equity
$ 1,099,101,270 
$ 840,245,766 
Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2015
Mar. 31, 2014
Condensed Consolidated Balance Sheets
 
 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
50,000,000 
50,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
450,000,000 
450,000,000 
Common stock, shares issued
58,057,493 
48,365,011 
Common stock, shares outstanding
58,057,493 
48,365,011 
Consolidated Statements of Operations (USD $)
12 Months Ended
Mar. 31, 2015
Condensed Consolidated Statements of Operations
 
Revenues
$ 104,129,149 
Expenses
 
Voyage expenses
22,081,856 
Vessel operating expenses
21,256,165 
Management fees-related party
1,125,000 
Impairment
1,431,818 
Depreciation and amortization
14,093,744 
General and administrative expenses
14,145,086 
Total expenses
74,133,669 
Operating income/(loss)
29,995,480 
Other income/(expenses)
 
Other income - related party
93,929 
Interest and finance costs
(289,090)
Interest income
418,597 
Loss on derivatives, net
(3,959,203)
Foreign currency (loss)/gain, net
(998,931)
Total other expenses, net
(4,734,698)
Net income/(loss)
$ 25,260,782 
Earnings per common share, basic and diluted (in dollars per share)
$ 0.45 
Consolidated Statements of Shareholders' Equity (USD $)
Common stock
Additional paid-in capital
Retained earnings/Accumulated deficit
Due from shareholder
Total
Balance at Jun. 30, 2013
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
Cancellation (in shares)
(19)
 
 
 
 
Net income for the period
 
 
$ 2,833,843 
 
$ 2,833,843 
Balance at Mar. 31, 2014
483,650 
688,881,939 
2,833,843 
 
692,199,432 
Balance (in shares) at Mar. 31, 2014
48,365,011 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
Restricted share award issuances
9,290 
(9,290)
 
 
 
Restricted share award issuances (in shares)
929,000 
 
 
 
 
Net income for the period
 
 
25,260,782 
 
25,260,782 
Stock-based compensation
 
2,311,565 
 
 
2,311,565 
Balance at Mar. 31, 2015
$ 580,575 
$ 844,539,059 
$ 28,094,625 
 
$ 873,214,259 
Balance (in shares) at Mar. 31, 2015
58,057,493 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
9 Months Ended 12 Months Ended
Mar. 31, 2014
Mar. 31, 2015
Cash flows from operating activities:
 
 
Net income
$ 2,833,843 
$ 25,260,782 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Impairment
 
1,431,818 
Depreciation and amortization
6,620,372 
14,093,744 
Amortization of financing costs
800,806 
830,899 
Unrealized gain on derivatives
(2,623,456)
(1,331,954)
Stock-based compensation expense
 
2,311,565 
Unrealized exchange differences
(8,004)
1,244,394 
Other non-cash items
 
489,039 
Changes in operating assets and liabilities
 
 
Trade receivables, net and accrued revenue
(1,966,746)
(21,018,670)
Prepaid expenses and other receivables
(343,047)
(1,437,501)
Due from related parties
(1,639,497)
1,252,754 
Inventories
396,776 
(2,317,430)
Other non-current assets
 
(97,446)
Trade accounts payable
1,799,616 
2,731,828 
Accrued expenses and other liabilities
2,043,523 
2,306,631 
Due to related parties
(292,687)
411,705 
Payments for drydocking costs
(385,077)
(538,938)
Net cash provided by operating activities
7,236,422 
25,623,220 
Cash flows from investing activities:
 
 
Payments for vessels and vessels under construction
(172,237,529)
(314,173,298)
Net payments to acquire predecessor businesses
(13,732,896)
 
Restricted cash deposits
(35,448,702)
(28,700,000)
Restricted cash released
 
30,938,702 
Payments to acquire other fixed assets
(15,597)
(392,248)
Net cash used in investing activities
(221,434,724)
(312,326,844)
Cash flows from financing activities:
 
 
Proceeds from long-term debt borrowings
 
80,086,143 
Repayment of long-term debt borrowings
(6,506,000)
(9,612,000)
Financing costs paid
(1,516,847)
(11,220,812)
Cash proceeds from common shares issuances
510,496,990 
155,830,178 
Payments relating to issuance costs
(9,152,050)
(1,388,918)
Net cash provided by (used in) financing activities
493,322,093 
213,694,591 
Effects of exchange rates on cash and cash equivalents
8,004 
(1,301,579)
Net (decrease)/increase in cash and cash equivalents
279,131,795 
(74,310,612)
Cash and cash equivalents at the beginning of the period
 
279,131,795 
Cash and cash equivalents at the end of the period
279,131,795 
204,821,183 
Supplemental disclosure of cash flow information
 
 
Cash paid during the period for interest including interest capitalized to vessels
1,242,500 
2,552,893 
Non cash consideration of shares issued to acquire Predecessor businesses and acquisitions of assets
187,495,680 
 
Financing costs included in liabilities
 
1,039,479 
Issuance costs included in liabilities
 
$ 244,414 
Basis of Presentation and General Information
Basis of Presentation and General Information

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 and 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 LPG Ltd. and its subsidiaries (together “we”, “us”, “our”, “DLPG” or the “Company”) is primarily focused on owning and operating very large gas carriers (“VLGCs”), each with a cargo carrying capacity of greater than 80,000 cbm. After the latest delivery of our VLGC on January 2, 2015, our fleet currently consists of seven LPG carriers, including three fuel-efficient 84,000 cbm ECO-design VLGCs, three 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have newbuilding contracts for the construction of sixteen new fuel-efficient 84,000 cbm ECO-design VLGCs at Hyundai Heavy Industries Co., Ltd. (“Hyundai” or “HHI”), and Daewoo  Shipping and Marine Engineering Ltd. (“Daewoo”), both of which are based in South Korea, with scheduled deliveries between June 2015 and February 2016. We refer to these contracts along with the three VLGCs that were delivered between July 2014 and January 2015 as our VLGC Newbuilding Program.

 

The Company remained dormant until July 29, 2013 when the following transactions were completed concurrently:

 

·

DLPG completed a private placement of 9,310,054 shares of its common stock with institutional investors and other investors in Norway (“NPP”). The shares were issued at NOK 75.00 per share, equivalent to USD 12.66 per share and realized gross proceeds of $117.9 million based on the exchange rate on July 29, 2013.

 

·

DLPG acquired from Dorian Holdings the following in exchange for 4,667,135 shares of its common stock and $9.7 million in cash:

 

(a)

100% interest in three ship owning entities, CNML LPG Transport LLC (“CNML”), CJNP LPG Transport LLC (“CJNP”) and CMNL LPG Transport LLC (“CMNL”), which each owned a Very Large Gas Carrier (“VLGC”) (the  Captain Nicholas ML , the  Captain John NP  and the  Captain Markos NL  respectively), the related bank debt, interest rate swaps, and the inventory on board each vessel. The Captain Nicholas ML, Captain John NP and Captain Markos NL were previously owned by Cepheus Transport Ltd, Lyra Gas Transport Ltd and Cetus Transport Ltd., all owned by principals of Dorian Holdings until July 29, 2013 on which date they were sold to CNML, CJNP and CMNL, respectively. The sale of the vessels required approval from the bank that had provided the related financing that was assumed by the Company in connection with the transaction and resulted in a modification of the financing terms in connection with the acquisition. A further description of the loan arrangements is provided in Note 11.

 

(b)

100% interest in two entities, each a party to a contract for the construction of one VLGC, option rights to construct an additional 1.5 VLGCs and $2.67 million in cash.

 

DLPG acquired from an affiliate of Dorian Holdings a 100% interest in an LPG pressurized gas carrier, the LPG Grendon, and the inventory onboard the vessel for $6.672 million in cash.

 

The abovementioned acquisitions from Dorian Holdings and its affiliate were accounted as a business combination (refer Note 4) and the operations of  LPG Grendon  along with that of the three Very Large Gas Carriers referred to above are herein referred to as the Predecessor.

 

·

DLPG issued 4,667,135 shares of its common stock to SEACOR Holdings Inc., through its subsidiary, SeaDor Holdings LLC (“SeaDor”) as consideration for the following:

 

(a)

100% interest in a subsidiary company, SEACOR LPGI LLC, a party to a contract for the construction of one VLGC

 

(b)

$49.9 million in cash and

 

(c)

the assignment to DLPG of option rights to purchase 1.5 VLGC vessels.

 

The above mentioned acquisitions from SeaDor were accounted for as an asset acquisition. The allocation of the purchase price between the assets acquired is described in Note 3(b).

 

At the closing of the NPP, Dorian Holdings surrendered the 100 shares of capital stock of DLPG, which were then cancelled. Following the completion of the above transactions on July 29, 2013, Dorian Holdings, whose chairman is Mr. John Hadjipateras, and SeaDor, each owned approximately 25.0% of the Company’s outstanding common stock with the remaining 50% held by institutional investors and high net worth investors.

 

We successfully closed our initial public offering (“IPO”) on May 13, 2014 and our shares are listed on the NYSE and trade under the symbol LPG.

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Dorian LPG Ltd. and its subsidiaries.

 

Our subsidiaries, which are all wholly-owned and all are incorporated in Republic of the Marshall Islands (unless otherwise indicated below), as of March 31, 2015 are listed below.

 

Vessel Owning Subsidiaries

 

Subsidiary

 

Type of
vessel(2)

 

Vessel’s name

 

Built

 

CBM(1)

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML

 

2008

 

82,000

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP

 

2007

 

82,000

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL

 

2006

 

82,000

Grendon Tanker LLC

 

PGC

 

LPG Grendon

 

1996

 

5,000

Comet LPG Transport LLC

 

VLGC

 

Comet

 

2014

 

84,000

Corsair LPG Transport LLC

 

VLGC

 

Corsair

 

2014

 

84,000

Corvette LPG Transport LLC

 

VLGC

 

Corvette

 

2015

 

84,000

 

Newbuild Vessel Owning Subsidiaries(3)

 

Subsidiary

 

Type of
vessel(2)

 

Hull
number

 

Vessel’s Name

 

Estimated
vessel
delivery
date(4)

 

CBM(1)

Dorian Shanghai LPG Transport LLC

 

VLGC

 

S749

 

Cougar

 

Q2 2015

 

84,000

Dorian Houston LPG Transport LLC

 

VLGC

 

S750

 

Cobra

 

Q2 2015

 

84,000

Concorde LPG Transport LLC

 

VLGC

 

2660

 

Concorde

 

Q2 2015

 

84,000

Dorian Sao Paulo LPG Transport LLC

 

VLGC

 

S753

 

Continental

 

Q3 2015

 

84,000

Dorian Ulsan LPG Transport LLC

 

VLGC

 

S755

 

Constitution

 

Q3 2015

 

84,000

Dorian Amsterdam LPG Transport LLC

 

VLGC

 

S751

 

Commodore

 

Q3 2015

 

84,000

Constellation LPG Transport LLC

 

VLGC

 

2661

 

Constellation

 

Q3 2015

 

84,000

Dorian Dubai LPG Transport LLC

 

VLGC

 

2336

 

Cresques

 

Q3 2015

 

84,000

Dorian Monaco LPG Transport LLC

 

VLGC

 

S756

 

Cheyenne

 

Q3 2015

 

84,000

Dorian Barcelona LPG Transport LLC

 

VLGC

 

S752

 

Clermont

 

Q4 2015

 

84,000

Dorian Cape Town LPG Transport LLC

 

VLGC

 

S754

 

Chaparral

 

Q4 2015

 

84,000

Commander LPG Transport LLC

 

VLGC

 

2662

 

Commander

 

Q4 2015

 

84,000

Dorian Geneva LPG Transport LLC

 

VLGC

 

2337

 

Cratis

 

Q4 2015

 

84,000

Dorian Tokyo LPG Transport LLC

 

VLGC

 

2338

 

Copernicus

 

Q4 2015

 

84,000

Dorian Explorer LPG Transport LLC

 

VLGC

 

S757

 

Challenger

 

Q4 2015

 

84,000

Dorian Exporter LPG Transport LLC

 

VLGC

 

S758

 

Caravelle

 

Q1 2016

 

84,000

 

Management Subsidiaries

 

Subsidiary

 

Incorporation
Date

Dorian LPG Management Corp

 

July 2, 2013

Dorian LPG (USA) LLC (incorporated in USA)

 

July 2, 2013

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

 

November 18, 2013

Dorian LPG Finance LLC

 

January 16, 2015

 

Dormant Subsidiaries

 

Subsidiary

 

Incorporation
Date

SeaCor LPG I LLC

 

April 26, 2013

SeaCor LPG II LLC

 

April 26, 2013

Capricorn LPG Transport LLC

 

November 15, 2013

Constitution LPG Transport LLC

 

February 17, 2014

Occident River Trading Limited (incorporated in UK)

 

January 9, 2015

 

 

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

 

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

 

(3)Represents newbuild vessels not yet delivered as of December 31, 2014

 

(4)Represents calendar year quarters

 

The following charterers individually accounted for more than 10% of our revenue for the periods presented as follows:

 

Charterer

 

% of revenue
Year ended
March 31, 2015

 

Statoil ASA                                                                                                                  

 

27 

%

Royal Dutch Shell plc

 

19 

%

Itochu Corporation

 

14 

%

Indian Oil Corporation Ltd.

 

12 

%

Maritime Pressx Limited

 

11 

%

 

Charterer

 

% of revenue
July 1, 2013
(inception) to
March 31, 2014

 

Statoil ASA                                                                                                                  

 

51 

%

Naftomar Shipping and Trading Co. Ltd

 

13 

%

Kuwait Petroleum Corporation

 

10 

%

 

 

Significant Accounting Policies
Significant Accounting Policies

2. Significant Accounting Policies

 

(a)

Principles of consolidation:  The consolidated financial statements incorporate the financial statements of the Company and its wholly-owned subsidiaries. Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statements of operations from the effective date of acquisition and up to the effective date of disposal, as appropriate. All intercompany balances and transactions have been eliminated.

 

(b)

Use of estimates:  The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(c)

Other comprehensive income/(loss):  The Company follows the accounting guidance relating to Comprehensive Income, which requires separate presentation of certain transactions that are recorded directly as components of stockholders’ equity. The Company has no other comprehensive income/(loss) and accordingly, comprehensive income/(loss) equals net income/(loss) for the periods presented and thus has not presented this in the statement of operations or in a separate statement.

 

(d)

Foreign currency translation:  The functional currency of the Company is the U.S. Dollar. Foreign currency transactions are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. As of balance sheet date, monetary assets and liabilities that are denominated in a currency other than the functional currency are adjusted to reflect the exchange rate at the balance sheet date and any gains or losses are included in the statement of operations. For the periods presented, the Company had no foreign currency derivative instruments.

 

(e)

Cash and cash equivalents:  The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.

 

(f)

Restricted cash:  Restricted cash represents pledged cash deposits or minimum liquidity to be maintained with certain banks under the Company’s borrowing arrangements. In the event that the obligation relating to such deposits is expected to be terminated within the next twelve months or relates to general minimum liquidity requirements with no obligation to retain such funds in retention accounts, these deposits are classified as current assets otherwise they are classified as non-current assets.

 

(g)

Trade receivables, net and accrued revenues:  Trade receivables, net and accrued revenues, reflect receivables from vessel charters, net of an allowance for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. Provision for doubtful accounts for the periods presented was zero.

 

(h)

Inventories:  Inventories consist of bunkers on board the vessels when vessels are unemployed or are operating under voyage charters and lubricants and stores on board the vessels. Inventories are stated at the lower of cost or market. Cost is determined by the first in, first out method.

 

(i)

Vessels, net:  Vessels, net are stated at cost, less accumulated depreciation. The costs of the vessels acquired as part of a business acquisition are recorded at their fair value on the date of acquisition. The cost of vessels purchased consists of the contract price, less discounts, plus any direct expenses incurred upon acquisition, including improvements, commission paid, delivery expenses and other expenditures to prepare the vessel for her initial voyage. The initial purchase of LPG coolant for the refrigeration of cargo is also capitalized. Interest costs incurred to finance the cost of vessels during their construction period are capitalized. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Repairs and maintenance are expensed as incurred.

 

(j)

Impairment of long-lived assets:  The Company reviews their vessels “held and used” for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of future undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, the asset is evaluated for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset.

 

(k)

Vessel depreciation:  Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated salvage value. Each vessel’s salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Management estimates the useful life of its vessels to be 25 years from the date of initial delivery from the shipyard. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life.

 

(l)

Drydocking and special survey costs:  Drydocking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. We are required to drydock each of our vessels every five years until it reaches 15 years of age, after which we are required to drydock the applicable vessel every two and one-half years. Costs deferred are limited to actual costs incurred at the yard and parts used in the drydocking or special survey. Costs deferred include expenditures incurred relating to shipyard costs, hull preparation and painting, inspection of hull structure and mechanical components, steelworks, machinery works, and electrical works. If a survey is performed prior to the scheduled date, the remaining unamortized balances are immediately written off. Unamortized balances of vessels that are sold are written-off and included in the calculation of the resulting gain or loss in the period of the vessel’s sale. The amortization charge is presented within Depreciation and amortization in the consolidated statement of operations.

 

(m)

Financing costs:  Financing fees incurred for obtaining new loans and credit facilities are deferred and amortized to interest expense over the respective term of the loan or credit facility using the effective interest rate method. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made, subject to the accounting guidance regarding Debt—Modifications and Extinguishments. Any unamortized balance of costs related to credit facilities repaid is expensed in the period. Any unamortized balance of costs relating to credit facilities refinanced are deferred and amortized over the term of the respective credit facility in the period the refinancing occurs, subject to the provisions of the accounting guidance relating to Debt—Modifications and Extinguishments. The unamortized financing costs are reflected in Deferred charges in the accompanying consolidated balance sheet.

 

(n)

Revenues and expenses:  Revenue is recognized when an agreement exists, the vessel is made available to the charterer or services are provided, the charter hire is determinable and collection of the related revenue is reasonably assured.

 

Time charter revenue:  Time charter revenues are recorded ratably over the term of the charter as service is provided. Time charter revenues received in advance of the provision of charter service are recorded as deferred income and recognized when the charter service is rendered. Deferred income or accrued revenue also may result from straight-line revenue recognition in respect of charter agreements that provide for varying charter rates. Deferred income and accrued revenue amounts that will be recognized within the next twelve months are presented as current, with amounts to be recognized thereafter presented as non-current. Revenues earned through the profit sharing arrangements in the time charters represent contingent rental revenues that are recognized when earned and amounts are reasonably assured based on estimates provided by the charterer.

 

Voyage charter revenue:  Under a voyage charter, the revenues are recognized on a pro-rata basis over the duration of the voyage determined on a discharge—to discharge port basis but the Company does not begin recognizing revenue until a charter has been agreed to by the customer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port for its next voyage. In the event a vessel is acquired or sold while a voyage is in progress, the revenue recognized is based on an allocation formula agreed between the buyer and the seller. Demurrage income represents payments by the charterer to the vessel owner when loading or discharging time exceeds the stipulated time in the voyage charter and is recognized when earned and collection is reasonably assured. Dispatch expense represents payments by the Company to the charterer when loading or discharging time is less than the stipulated time in the voyage charter and is recognized as incurred. Voyage charter revenue relating to voyages in progress as of the balance sheet date are accrued and presented in Trade receivables and accrued revenue in the accompanying consolidated balance sheet.

 

Commissions:  Charter hire commissions to brokers or managers, if any, are deferred and amortized over the related charter period and are included in Voyage expenses.

 

Vessel operating expenses:  Vessel operating expenses are accounted for as incurred on the accrual basis. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores and other miscellaneous expenses.

 

(o)

Repairs and maintenance:  All repair and maintenance expenses, including underwater inspection costs are expensed in the period incurred. Such costs are included in Vessel operating expenses.

 

(p)

Stock-based compensation:  Stock-based payments to employees and directors are determined based on their grant date fair values, net of expected forfeitures, and are amortized against income over the vesting period. The fair value is considered to be the closing price recorded on the grant date. We estimate restricted stock award forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. As a result, we record stock-based compensation expense only for those awards that are expected to vest.

 

(q)

Segment reporting:  Each of the Company’s vessels serve the same type of customer, have similar operations and maintenance requirements, operate in the same regulatory environment, and are subject to similar economic characteristics. Based on this, the Company has determined that it operates in one reportable segment, the international transportation of liquid petroleum gas with its fleet of vessels. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.

 

(r)

Derivative instruments:  All derivatives are stated at their fair value, as either a derivative asset or a liability. The fair value of the interest rate derivatives is based on a discounted cash flow analysis and their fair value changes are recognized in current period earnings. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in fair value of the derivatives are either recognized in current period earnings or in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of operations. For the periods presented, no derivatives were accounted for as accounting hedges.

 

(s)

Fair value of financial instruments:  In accordance with the requirements of accounting guidance relating to Fair Value Measurements, the Company classifies and discloses its assets and liabilities carried at fair value in one of the following three categories:

 

Level 1:

 

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

 

(t)

Recent accounting pronouncements:  On May 28, 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This standard is effective for public entities with reporting periods beginning after December 15, 2016. Early adoption is not permitted. The Company has not yet evaluated the impact, if any, of the adoption of this new standard.

 

On April 7, 2015, the FASB issued Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. For public business entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, on a retrospective basis. Early adoption is permitted. We have not early adopted this standard. The effect from the adoption of this standard would be the presentation of the debt issuance costs as a direct deduction of the related debt liability instead of as a non-current asset.

Acquisition of Business
Acquisition of Business

4. Acquisition of Business

 

On July 29, 2013, Dorian Holdings sold to Dorian LPG in exchange for equity and $9.7 million in cash its 100% interest in CMNL, CJNP, CNML owners of the  Captain Markos NL  ,  Captain John NP  and the  Captain Nicholas ML , respectively and acquired the related inventory on board, and assumed the associated bank debt, and interest rate swap and 100% interest in two entities, each a party to a contract for the construction of one VLGC, and option rights to construct an additional 1.5 VLGCs and $2.67 million in cash. The $9.7 million cash related to the payment for inventories and LPG coolant on board of $2.3 million and to reimburse for an advance for vessels under construction of $7.4 million

 

In addition on July 29, 2013 Dorian LPG acquired 100% interest of Grendon Tanker LLC, the owner of the LPG Grendon, from an affiliate of Dorian Holdings for a cash consideration of $6,625,000 plus the value of inventory on board the vessel.

 

These acquisitions have been treated as business acquisitions and were initially recorded at fair value.

 

The following table summarizes the fair value of the consideration paid and assets/liabilities acquired.

 

Fair value of total consideration

 

 

 

Acquisition
from Dorian
Holdings

 

Grendon
 acquisition

 

Total

 

Cash

 

9,732,911

 

6,672,485

 

16,405,396

 

Equity instruments (4,667,135 common shares of the Company at NOK 75.00 per share)

 

59,092,499

 

 

59,092,499

 

Total consideration

 

68,825,410

 

6,672,485

 

75,497,895

 

Fair value of identifiable assets and liabilities acquired:

 

 

 

 

 

 

 

Cash

 

2,672,500

 

 

2,672,500

 

Vessels

 

194,457,529

 

6,625,000

 

201,082,529

 

Inventories on board the vessels

 

1,407,622

 

47,485

 

1,455,107

 

Newbuilding vessels contracted for construction

 

17,593,130

 

 

17,593,130

 

Other assets—Vessel purchase options

 

4,605,000

 

 

4,605,000

 

Long term bank debt

 

(135,224,500

)

 

(135,224,500

)

Interest rate swaps

 

(16,685,871

)

 

(16,685,871

)

Net assets acquired—fair value 

 

68,825,410

 

6,672,485

 

75,497,895

 

 

The fair value of the common stock was determined to be NOK75.00 per share (or $12.66 per share at the exchange rate on July 29, 2013) being the price the Company issued its common shares to private investors under its private placement which closed on the same date.

 

The vessels were acquired with attached charters. The attached charters for each vessel were evaluated by the Company based on market charter rates on the acquisition date and were found to be at market values, and thus none of the purchase consideration was allocated to the attached time charters or voyage charter.

 

The fair values of the vessels, excluding LPG coolant, on the date of acquisition were determined by the Company based on valuations from an independent broker. The appraised value was determined using recent transactions involving comparable vessels as adjusted for age and features. The appraisal was performed on “willing Seller and willing Buyer” basis and based on the sale and purchase market condition prevailing at the acquisition date subject to the vessel being in sound condition and made available for delivery charter free. The fair value of the LPG coolant at the date of acquisition was determined by the quantity purchased valued at the then current LPG rate. The fair value of the newbuilding contracts and vessel purchase options was computed as the excess of the purchase consideration for similar vessels with similar delivery dates based on valuation from an independent broker over the purchase consideration of the contracts acquired plus in respect of the newbuilding contracts any advance paid to the shipyard as of the acquisition date. The fair value of the interest rate swaps was determined using a discounted cash flow approach based on market-based LIBOR swap yield rates. The fair value of the bank debt and cash was determined to be its face value.

 

In addition, on July 29, 2013 Dorian Holdings granted the Company a royalty-free, non-exclusive right and license to use the then newly created Dorian logo and “Dorian LPG”. The Company evaluated the license agreement and did not assign any value to the use of this logo and name based on the fact that it was a brand new logo, created shortly prior to the NPP and never used in the market place, and for which the Company does not have exclusive use.

 

The revenue and net income relating to the Predecessor operations acquired since their acquisition date to March 31, 2014 included in the consolidated statement of operations for the period ended March 31, 2014 amount to $29,633,700 and $3,152,335, respectively.

 

Pro forma Information (unaudited)

 

The following table summarizes total net revenues and net income of the Company, had the acquisition of the Predecessor operations occurred on April 1, 2013:

 

$ in 000’s 

 

For the year ended
 March 31, 2014

 

Net revenues                                                            

 

$

45,017 

 

Net income                                                            

 

$

6,613 

 

 

The combined results in the table above have been prepared for comparative purposes only and include acquisition related adjustments for depreciation, interest charges and management fees. The combined results do not purport to be indicative of the results of operations which would have resulted had the acquisition been effected at the beginning of the applicable period noted above, or the future results of operations of the combined entity.

Inventories
Inventories

5. Inventories

 

Our inventories by type were as follows:

 

 

 

March 31, 2015

 

March 31, 2014

 

Bunkers

 

2,446,424 

 

596,768 

 

Lubricants

 

737,502 

 

358,381 

 

Victualing

 

132,017 

 

83,840 

 

Bonded stores

 

35,399 

 

15,354 

 

Communication cards

 

24,417 

 

3,986 

 

Total

 

3,375,759 

 

1,058,329 

 

 

 

Vessels, Net
Vessels, Net

6. Vessels, Net

 

 

 

Cost

 

Accumulated
depreciation

 

Net book Value

 

Balance, July 1, 2013

 

 

 

 

Vessel acquisitions through business combinations (Refer Note 4)

 

201,082,529

 

 

201,082,529

 

Other

 

307,606

 

 

307,606

 

Depreciation

 

 

(6,555,269

)

(6,555,269

)

Balance, March 31, 2014

 

201,390,135

 

(6,555,269

)

194,834,866

 

Additions

 

240,415,534

 

 

240,415,534

 

Impairment(1)

 

(2,625,000

)

1,193,182

 

(1,431,818

)

Depreciation

 

 

(13,842,529

)

(13,842,529

)

Balance, March 31, 2015

 

439,180,669

 

(19,204,616

)

419,976,053

 

 

(1)

We recognized a non-cash impairment loss of $1.4 million for the year ended March 31, 2015 and no impairment losses for the period ended March 31, 2014. We prepared future undiscounted cash flows for the PGC vessel as there were indicators of impairment for this size vessel, which provided evidence that the book value was not recoverable.

 

The additions represent amounts transferred from Vessels under Construction relating to the cost of our newbuildings, the Comet, the Corsair and the Corvette, which were delivered to us on July 25, 2014, September 26, 2014 and January 2, 2015, respectively.

 

Vessels, with a total carrying value of $416.0 million as of March 31, 2015, are first-priority mortgaged as collateral for our loan facilities (refer Note 11).

Vessels Under Construction
Vessels Under Construction

 

 

7. Vessels Under Construction

 

Balance, July 1, 2013

 

 

Acquisition of two newbuilding contracts from Dorian Holdings on July 29, 2013 (refer Note 4)

 

17,593,130 

 

Acquisition of one newbuilding contract from SeaDor on July 29,2013 (refer Note 3b)

 

7,009,675 

 

Acquisition of thirteen newbuilding contracts from Scorpio on November 26, 2013 (refer Note 3c)

 

119,386,040 

 

Acquisition cost of vessel purchase options from Dorian Holdings and SeaDor exercised on February 21, 2014 (refer Notes 3b and 4)

 

7,134,126 

 

Installment payments to shipyards

 

169,271,536 

 

Other capitalized expenditures

 

1,839,689 

 

Capitalized interest 

 

972,010 

 

Balance, March 31, 2014

 

323,206,206 

 

Installment payments to shipyards

 

300,866,261 

 

Other capitalized expenditures

 

11,016,951 

 

Capitalized interest

 

3,501,620 

 

Vessels delivered (transferred to Vessels)

 

(240,415,534)

 

Balance, March 31, 2015

 

398,175,504 

 

 

Other capitalized expenditures for the year ended March 31, 2015 represent LPG coolant of $1.4 million, fees paid to our Manager of $0.9 million, to third party vendors of $8.6 million and $0.1 million of employee-related costs for supervision fees and other newbuilding pre-delivery costs including engineering and technical support, liaising with the shipyard, and ensuring key suppliers are integrated into the production planning process. Other capitalized expenditures for the period ended March 31, 2014 represent fees paid to our Manager of $1.1 million and to third party vendors of $0.7 million for supervision fees and other newbuilding pre-delivery costs including engineering and technical support, liaising with the shipyard, and ensuring key suppliers are integrated into the production planning process.

Other Fixed Assets, Net
Other Fixed Assets, Net

8. Other Fixed Assets, Net

 

Other fixed assets of $464,889 and $60,904 as of March 31, 2015 and March 31, 2014, respectively, represent leasehold improvements, software and furniture and fixtures at cost. Accumulated depreciation on other fixed assets net as of March 31, 2015 was $46,402 and there was no accumulated depreciation as of March 31, 2014 as they had not yet been brought into use.

Deferred Charges, Net
Deferred Charges, Net

 

 

9. Deferred Charges, Net

 

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

 

 

 

Financing
costs

 

Drydocking
costs

 

Equity
offering costs

 

Total deferred
charges, net

 

On inception , July 1, 2013

 

 

 

 

 

Additions

 

1,516,847

 

600,394

 

1,304,343

 

3,421,584

 

Amortization

 

(800,807

)

(65,103

)

 

(865,910

)

Balance, March 31, 2014

 

716,040

 

535,291

 

1,304,343

 

2,555,674

 

Additions

 

13,411,075

 

323,623

 

760,680

 

14,495,378

 

Amortization

 

(830,899

)

(189,209

)

 

(1,020,108

)

Transferred to APIC

 

 

 

(2,065,023

)

(2,065,023

)

Balance, March 31, 2015 

 

13,296,216

 

669,705

 

 

13,965,921

 

 

The drydocking costs incurred during the year ended March 31, 2015 relate to the drydocking for Grendon and the drydocking costs incurred during the period ended March 31, 2014 relate to the drydocking for Captain Nicholas ML.

 

Financing costs incurred during the year ended March 31, 2015 relate to the 2015 Debt Facility.

 

Offering costs related to our IPO were transferred to additional paid-in capital (“APIC”) on completion of our IPO on May 13, 2014.

 

Accrued Expenses
Accrued Expenses

10. Accrued Expenses

 

Accrued expenses comprised of the following:

 

 

 

March 31, 2015

 

March 31, 2014

 

Accrued loan and swap interest

 

1,619,897 

 

1,439,237 

 

Accrued voyage and vessel operating expenses

 

1,406,023 

 

87,029 

 

Accrued professional services

 

1,282,639 

 

173,708 

 

Accrued financing costs

 

705,000 

 

 

Accrued employee-related costs

 

546,095 

 

 

Accrued IPO charges

 

 

469,707 

 

Other

 

88,048 

 

26,705 

 

Total

 

5,647,702 

 

2,196,386 

 

 

Long-Term Debt
Long-Term Debt

 

11. Long-Term Debt

 

Description of our Debt Obligations

 

2015 Debt Facility

 

In March 2015, we entered into a $758 million debt financing facility (the “2015 Debt Facility”) with four separate tranches.  Commercial debt financing (“Commercial Financing”) of $249 million is being provided by ABN AMRO Capital USA LLC (“ABN”); ING Bank N.V., London Branch, (“ING”); DVB Bank S.E. (“DVB”); Citibank (“Citi”); and Commonwealth Bank of Australia, New York Branch, (“CBA”),  (collectively the “Commercial Lenders”), while the Export Import Bank of Korea (“KEXIM”) is directly providing $204 million of financing (“KEXIM Direct Financing”).  The remaining $305 million of financing is being provided under tranches guaranteed by KEXIM of $202 million (“KEXIM Guaranteed”) and insured by the Korea Trade Insurance Corporation (“K-sure”) of $103 million (“K-sure Insured”).  Financing under the KEXIM guaranteed and K-sure insured tranches will be provided by certain Commercial Lenders; Deutsche Bank AG; and Santander Bank, N.A. The debt financing will be secured by, among other things, eighteen of the Company’s VLGC newbuildings, and will represent a loan-to-contract cost ratio before fees of approximately 55%.

 

The 2015 Debt Facility contains various covenants providing for, among other things, maintenance of certain financial ratios and certain limitations on payment of dividends, investments, acquisitions and indebtedness. A commitment fee is payable on the average daily unused amount under the 2015 Debt Facility of 40% of the margin on each tranche. Additionally, we incurred approximately $13.4 million of debt issuance costs associated with the 2015 Debt Facility, which have been deferred and are amortized over the life of the agreement and are included as part of interest expense. Certain terms of the borrowings under each tranche of the 2015 Debt Facility are as follows:

 

 

 

 

 

Term

 

Interest Rate Description(1)

 

Interest Rate at
March 31, 2015(2)

Tranche 1

 

Commercial Financing

 

7 years

 

London InterBank Offered Rate (“LIBOR”) plus a margin(4)

 

3.02% 

Tranche 2

 

KEXIM Direct Financing

 

12 years(3)

 

LIBOR plus a margin of 2.45%

 

2.72% 

Tranche 3

 

KEXIM Guaranteed

 

12 years(3)

 

LIBOR plus a margin of 1.40%

 

1.67% 

Tranche 4

 

K-sure Insured

 

12 years(3)

 

LIBOR plus a margin of 1.50%

 

1.77% 

 

(1)

The interest rate of the 2015 Debt Facility on Tranche 1 is determined in accordance with the agreement as three or six month LIBOR plus the applicable margin and the interest rate on Tranches 2, 3 and 4 is determined in accordance with the agreement as three month LIBOR plus the applicable margin for the respective tranches.

 

(2)

The set LIBOR rate in effect as of March 31, 2015 was 0.27%.

 

(3)

The KEXIM Direct Financing, KEXIM Guaranteed, and K-Sure tranches have put options to call for the prepayment on the final payment date of the Commercial Financing tranche subject to specific notifications and commitments for refinancing/renewal of the Commercial Financing tranche.

 

(4)

The Commercial Financing tranche margin over LIBOR is 2.75% and is reduced to 2.50% if 50% or more but less than 75% of the vessels financed in the 2015 Debt Facility are employed under time charters as defined in the agreement and to 2.25% if 75% or more of the vessels financed in the 2015 Debt Facility are employed under time charters as defined in the agreement. As of March 31, 2015, the set margin was 2.50%.

 

On March 26 2015, we made our initial drawdown under the 2015 Debt Facility of $81.2 million, including $2.5 million of deferred financing fees, which was secured by the Comet and the Corvette and was divided into the four separate tranches. As of March 31, 2015, $676.8 million was available to be drawn.

 

Royal Bank of Scotland plc. (“RBS”) secured bank debt

 

As discussed in Note 1, the Company assumed the debt obligations associated with the financing of the vessels that were acquired through the acquisition of CMNL, CJNP and CNML. The prior loan arrangements associated with those vessels required approval from the lenders to sell the vessels and agreement from the lenders to transfer the borrowings to another party. As a consequence, the Company and the lender negotiated new borrowing terms in connection with this transaction. The new terms are described below. The total borrowings outstanding immediately prior to the debt modification and immediately after remained the same.

 

CMNL, CJNP, CNML and Corsair as joint and several borrowers (Borrowers), and Dorian LPG, Ltd as parent guarantor entered into a loan facility of $135,224,500 (the “RBS Loan Facility”), which replaced the prior borrowing arrangements of the Predecessor. The RBS Loan Facility is divided into three tranches. Tranche A of $47.6 million, Tranche B of $34.5 million and Tranche C of up to $53.1 million and is associated with each of the Captain John NP, Captain Markos NL and the Captain Nicholas ML, respectively.

 

Tranche A is payable in twelve equal semi-annual installments each in the amount of $1,700,000 that commenced on September 24, 2013 plus a balloon of $27,200,000 payable concurrently with the last installment on March 24, 2019.

 

Tranche B is payable in eleven equal semi-annual installments each in the amount of $1,278,500 that commenced on November 17, 2013 plus a balloon of $20,456,000 payable concurrently with the last installment on November 17, 2018.

 

Tranche C is payable in fourteen equal semi-annual installments each in the amount of $1,827,500 that commenced on January 21, 2014 plus a balloon of $27,520,000 payable concurrently with the last installment July 21, 2020.

 

The interest rate on the RBS Loan Facility increased in accordance with the loan agreement from LIBOR plus a margin of 1.5% per annum to LIBOR plus a margin of 2.0% per annum on September 26, 2014, concurrent with the delivery of the Corsair. The margin will increase to 2.5% on September 26, 2015 until maturity.

 

The RBS Loan Facility is secured by first priority mortgages on the vessels financed and first assignments of all freights, earnings and insurances.

 

The RBS Loan Facility also requires the Borrowers to maintain a minimum market adjusted security cover ratio equal to at least 125% of the aggregate of the outstanding loan balance and 50% of the related swap exposure up to September 2014 or 100% thereafter. In the event of non-compliance the Borrowers will be required within one month of being notified in writing by the lender to make such prepayment. In the event the lender agrees to release Corsair or another borrower approved by the lender from joint and several liabilities under the agreement, the minimum market adjusted security cover is adjusted to 175% and the margin will be increased to 2.75%.

 

The RBS Loan Facility also contains customary covenants that require the Company to maintain adequate insurance coverage and to obtain the lender’s prior consent before changes are made to the flag, class or management of the vessels, or enter into a new line of business. The RBS Loan Facility also requires that Dorian Holdings maintain a minimum ownership percentage. The loan facility includes customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, representation and warranty, a cross-default to other indebtedness and non-compliance with security documents, and prohibit the Borrowers from paying dividends. However, the RBS Loan Facility permits the Borrowers to make expenditures to fund the administration and operation of Dorian LPG.

 

Debt Covenants:  The following financial covenants are the most restrictive from the 2015 Debt Facility and the RBS Loan Facility which the Company is required to comply with, calculated on a consolidated basis, determined and defined according to the provisions of the loan agreement:

 

RBS Loan Facility Covenants

 

The ratio of cash flow from operations before interest and finance costs to cash debt service costs shall not be less than 1:1;

 

Minimum shareholders’ equity, as adjusted for any reduction in the vessel fair market value, shall not be less than $85 million;

 

Minimum cash balance of $10 million at the end of each quarter and minimum cash balances of $1.5 million per mortgaged vessel in a pledged account with the lender at all times;

 

The ratio of Total Debt to Shareholders Funds shall not exceed 150% at all times;

 

The ratio of the aggregate market value of the vessels securing the loan to the principal amount outstanding under such loan, plus 100% of the related swap exposure, at all times shall be in excess of 125%; and

 

No dividends shall be paid in excess of free cash flow if an event of default is occurring.

 

2015 Debt Facility Covenants

 

The ratio of current assets divided by current liabilities shall always be greater than 1.00;

 

Maintain minimum stockholder’s equity at all times equal to the aggregate of (i) $400,000,000, (ii) 50% of any new equity raised after loan agreement date and (iii) 25% of the positive net income for the immediately preceding financial year;

 

Minimum interest coverage ratio of consolidated EBITDA to consolidated net interest expense must be maintained (i) greater than or equal to: 1.00 for the 12-month period starting in the calendar quarter following the one in which delivery of the first ship occurs, (ii) 1.50 in the subsequent year, (iii) 2.00 in the third year following the initial period, and (iv) 2.50 thereafter;

 

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

Minimum cash balance must be the higher of (a) the aggregate of (i) $25 million and (ii) $1,100,000 for every vessel delivered and financed by the 2015 Debt Facility and (b) 5% of the consolidated interest bearing debt outstanding of the Company;

 

Fair market value of the mortgaged ships plus any additional security shall be  at least 135% of the outstanding loan balance;

 

No dividends shall be paid if an event of default has occurred and is continuing, or if an event of default would result therefrom, or if we are not in compliance with any financial covenants or any payment of dividends or any form of distribution or return of capital would result us not being in compliance with any of the financial covenants.

 

We were in compliance with the financial covenants as of March 31, 2015.

 

Debt Obligations

 

The table below presents our debt obligations:

 

RBS secured bank debt

 

March 31, 2015

 

March 31, 2014

 

Tranche A

 

40,800,000 

 

44,200,000 

 

Tranche B

 

30,684,000 

 

33,241,000 

 

Tranche C

 

47,622,500 

 

51,277,500 

 

Total

 

119,106,500 

 

128,718,500 

 

 

 

 

 

 

 

2015 Debt Facility

 

 

 

 

 

Commercial Financing

 

26,695,381 

 

 

KEXIM Direct Financing

 

21,890,212 

 

 

KEXIM Guaranteed

 

21,655,293 

 

 

K-sure Insured

 

10,996,041 

 

 

Total

 

81,236,927 

 

 

Total debt obligations

 

200,343,427 

 

128,718,500 

 

 

 

 

 

 

 

Presented as follows:

 

 

 

 

 

Current portion of long-term debt

 

15,677,553 

 

9,612,000 

 

Long-term debt—net of current portion

 

184,665,874 

 

119,106,500 

 

Total

 

200,343,427 

 

128,718,500 

 

 

Future Cash Payments for Debt

 

The minimum annual principal payments, in accordance with the loan agreements, required to be made after March 31, 2015 are as follows:

 

Year ending March 31:

 

 

 

2016  

 

15,677,553 

 

2017  

 

15,677,553 

 

2018  

 

15,677,553 

 

2019

 

63,333,553 

 

2020  

 

9,720,553 

 

Thereafter  

 

80,256,662 

 

Total  

 

200,343,427 

 

 

Common Stock
Common Stock

12. Common Stock

 

Under the articles of incorporation effective July 1, 2013, the Company’s authorized capital stock consists of 500,000,000 registered shares, par value $.01 per share, of which 450,00,000 are designated as common share and 50,000,000 shares are designated as preferred shares.

 

On July 29, 2013, the Company issued the following shares:

 

·

9,310,054 common shares on completion of its NPP, at NOK75.00 per share, equivalent to USD12.66 per share based on the exchange rate on July 29, 2013

 

·

4,667,135 common shares to Dorian Holdings (refer Note 4)

 

·

4,667,135 common shares to SeaDor Holdings LLC (refer Note 3)

 

The fair value of the shares issued to Dorian and SeaDor was determined by the Company to be NOK75 (or USD12.66) per share based on the issue price of the NPP.

 

On November 26, 2013, the Company issued the following shares:

 

·

16,081,081 common shares on completion of a second Private Placement in Norway (“NPP2”), at NOK92.50 per share, equivalent to USD15.16 per share based on the exchange rate on November 26, 2013

 

·

7,990,425 common shares to Scorpio Tankers Inc. (refer Note 3)

 

On February 12, 2014, the Company issued the following shares:

 

·

5,649,200 common shares on completion of a third Private Placement in Norway (“NPP3”), at NOK110.00 per share, equivalent to USD17.92 per share based on the exchange rate on February 12, 2014

 

Each holder of common shares is entitled to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of common shares are entitled to share equally in any dividends, which the Company’s board of directors may declare from time to time, out of funds legally available for dividends. Upon dissolution, liquidation or winding-up, the holders of common shares will be entitled to share equally in all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock. Holders of common shares do not have conversion, redemption or pre-emptive rights.

 

On April 25, 2014 the Company completed a one-for-five reverse stock split and reduced the number of the Company’s issued and outstanding common shares and affected all issued and outstanding common shares, outstanding immediately prior to the effectiveness of the reverse stock split. The number of the Company’s authorized common shares was not affected by the reverse split and the par value of our common shares remained unchanged at $0.01 per share. The reverse stock split reduced the number of the Company’s common shares outstanding at March 31, 2014 from 241,825,149 to 48,365,011 after the cancellation of 19 fractional shares. No fractional shares were issued in connection with the reverse stock split. Shareholders who otherwise held a fractional share of the Company’s common stock as a result of the reverse stock split received a cash payment in lieu of such fractional share.  All amounts related to number of shares and per share amounts have been retroactively restated.

 

On April 25, 2014, we completed a private placement of 1,412,698 common shares with a strategic investor at a price of NOK 110.00 or USD 18.40 based upon the exchange rate on April 24, 2014, which represents approximately $26.0 million in gross proceeds not including closing fees.

 

On May 13, 2014, we completed an initial public offering of 7,105,263 common shares on the New York Stock Exchange at a price of $19.00 per share, or $135.0 million in gross proceeds not including underwriting fees or closing costs. The shares began trading on the New York Stock Exchange on May 8, 2014 under the ticker symbol “LPG”.

 

On May 22, 2014, we completed the issuance of 245,521 common shares related to the overallotment exercise by the underwriters of our initial public offering at a price of $19.00 per share, or $4.7 million in gross proceeds not including underwriting fees or closing costs.

 

On June 25, 2014, we completed the exchange offer of unregistered common shares that we previously issued in our prior equity private placements, other than the common shares owned by our affiliates, for 15,528,507 common shares that have been registered under the Securities Act of 1933, as amended, the complete terms and conditions of which were set forth in a prospectus dated May 8, 2014 and the related letter of transmittal.

 

In June 2014, we granted 655,000 shares of restricted stock to certain of our officers and, in March 2015, we granted 274,000 shares of restricted stock to certain of our directors, employees and non-employee consultants (see Note 13 for further discussion regarding stock-based compensation).

Stock-Based Compensation Plans
Stock-Based Compensation Plans

13. Stock-Based Compensation Plans

 

In April 2014, we adopted an equity incentive plan, which we refer to as the Equity Incentive Plan, under which we expect that directors, officers, and employees (including any prospective officer or employee) of the Company and its subsidiaries and affiliates, and consultants and service providers to (including persons who are employed by or provide services to any entity that is itself a consultant or service provider to) the Company and its subsidiaries and affiliates, as well as entities wholly-owned or generally exclusively controlled by such persons, may be eligible to receive non-qualified stock options, stock appreciation rights, stock awards, restricted stock units and performance compensation awards that the plan administrator determines are consistent with the purposes of the plan and the interests of the Company. We have reserved 2,850,000 of our common shares for issuance under the Equity Incentive Plan, subject to adjustment for changes in capitalization as provided in the Equity Incentive Plan in April 2014. The plan is administered by our compensation committee.

 

In June 2014, we granted 655,000 shares of restricted stock to certain of our officers and, in March 2015, we granted 274,000 shares of restricted stock to certain of our directors, employees and non-employee consultants. One-third of these restricted shares vest three years after grant date, one-third vest four years after grant date, and one-third vest five years after grant date. The restricted shares were valued at their fair market value on their grant date and are expensed on a straight-line basis over five years. Our stock-based compensation expense was $2.3 million for the year ended March 31, 2015 and is included within general and administrative expenses in our accompanying consolidated statements of operations. There was no stock-based compensation expense for the period of July 1, 2013 through March 31, 2014. Unrecognized compensation cost as of March 31, 2015 was $16.0 million and will be recognized over the remaining weighted average life of 4.45 years.

 

A summary of the activity of our restricted shares as of March 31, 2015 and changes during the nine months then ended, is as follows:

 

Restricted Share Awards

 

Number of Shares

 

Weighted-Average
Grant-Date
Fair Value

 

Unvested as of March 31, 2014

 

 

$

 

Granted

 

929,000 

 

19.70 

 

Unvested as of March 31, 2015

 

929,000 

 

$

19.70 

 

 

Revenues
Revenues

14. Revenues

 

Revenues comprise the following:

 

 

 

Year ended
March 31, 2015

 

July 1, 2013
(inception)
to March 31, 2014

 

Voyage charter revenues

 

$

77,331,934 

 

$

11,210,785 

 

Time charter revenues

 

26,098,290 

 

17,602,137 

 

Other revenues

 

698,925 

 

820,778 

 

Total

 

$

104,129,149 

 

$

29,633,700 

 

 

Time charter revenue included a profit-sharing element of the time charter agreements of $7.8 million and $6.1 million for the year ended March 31, 2015 and the period ended March 31, 2014, respectively. Other revenue represents income from charterers relating to reimbursement of expenses such as costs for security guards and war risk insurance.

 

Voyage Expenses
Voyage Expenses

15. Voyage Expenses

 

Voyage expenses comprise the following:

 

 

 

Year ended
March 31, 2015

 

July 1, 2013
(inception)
to March 31, 2014

 

Bunkers

 

$

15,678,905 

 

$

5,271,126 

 

Port charges and other related expenses

 

3,603,707 

 

552,634 

 

Brokers’ commissions

 

1,703,589 

 

386,244 

 

Security cost

 

709,035 

 

298,820 

 

War risk insurances

 

146,320 

 

37,001 

 

Other voyage expenses

 

240,300 

 

125,146 

 

Total

 

$

22,081,856 

 

$

6,670,971 

 

 

 

Vessel Operating Expenses
Vessel Operating Expenses

16. Vessel Operating Expenses

 

Vessel operating expenses comprise the following:

 

 

 

Year ended
March 31, 2015

 

July 1, 2013
(inception)
to March 31, 2014

 

Crew wages and related costs

 

$

14,529,018 

 

$

5,306,441 

 

Spares and stores

 

2,666,100 

 

1,395,287 

 

Insurance

 

1,343,071 

 

566,021 

 

Repairs and maintenance costs

 

1,315,028 

 

502,424 

 

Lubricants

 

964,951 

 

480,279 

 

Miscellaneous expenses

 

437,997 

 

144,507 

 

Total

 

$

21,256,165 

 

$

8,394,959 

 

 

Interest and Finance Costs
Interest and Finance Costs

17. Interest and Finance Costs

 

Interest and finance costs is comprised of the following:

 

 

 

Year ended March 31, 2015

 

July 1, 2013 (inception) to March 31, 2014

 

Interest incurred

 

$

2,657,943

 

$

1,666,159

 

Amortization of financing costs

 

830,899

 

800,806

 

Other financing costs

 

301,868

 

84,251

 

Capitalized interest

 

(3,501,620

)

(972,010

)

Total

 

$

289,090

 

$

1,579,206

 

 

Income Taxes
Income Taxes

18. Income Taxes

 

The Company and its vessel-owning subsidiaries are incorporated in the Marshall Islands and under the laws of the Marshall Islands, are not subject to tax on income or capital gains and no Marshall Islands withholding tax will be imposed on dividends paid by the Company to its shareholders. The Company is also subject to United States federal income taxation in respect of income that is derived from the international operation of ships and the performance of services directly related thereto attributable to the transport of cargo to or from the United States (“Shipping Income”), unless exempt from United States federal income taxation.

 

If the Company does not qualify for the exemption from tax under Section 883, of the Internal Revenue Code of 1986, as amended, the Company and its subsidiaries will be subject to a 4% tax on its “U.S. source shipping income,” imposed without the allowance for any deductions. For these purposes, “U.S. source shipping income” means 50% of the Shipping Income derived by the Company and its subsidiaries that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.

 

We do not believe that we were able to qualify for exemption under Section 883 and as a consequence, our gross U.S. source shipping income for our first fiscal year ended March 31, 2014 is subject to a 4% gross basis tax (without allowance for deductions) equal to $39,266 and is included in Voyage expenses in the consolidated statement of operations.

 

We believe that we will qualify for exemption under Section 883 and as a consequence, our gross U.S. source shipping income for our fiscal year ended March 31, 2015 will not be subject to a 4% gross basis tax.

Commitments and Contingencies
Commitments and Contingencies

19. Commitments and Contingencies

 

Commitments under Newbuilding Contracts

 

As of March 31, 2015, we had $871.4 million of commitments under shipbuilding contracts and supervision agreements for sixteen newbuildings. We expect to settle these commitments during the twelve months ended March 31, 2016.

 

Commitments under Operating Leases

 

We had the following commitments as a lessee under operating leases relating to our United States, Greece and United Kingdom offices:

 

 

 

March 31, 2015

 

Less than one year

 

$

376,620 

 

One to three years

 

607,020 

 

Three to five years

 

140,370 

 

Total

 

$

1,124,010 

 

 

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, which is reasonably possible and should be disclosed or probable and for which a provision should be established in the accompanying consolidated financial statements.

Financial Instruments and Fair Value Disclosures
Financial Instruments and Fair Value Disclosures

 

 

20. Financial Instruments and Fair Value Disclosures

 

Our principal financial assets consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. Our principal financial liabilities consist of long-term bank loan, interest rate swaps, accounts payable, amounts due to related parties and accrued liabilities.

 

(a)Concentration of credit risk:  Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable, amounts due from related parties, cash and cash equivalents. We limit our credit risk with accounts receivable by performing ongoing credit evaluations of our customers’ financial condition and generally do not require collateral for our trade accounts receivable. We place our cash and cash equivalents, with highly-rated financial institutions.

 

(b)Interest rate risk:  Our long-term bank loan is based on LIBOR and hence we are exposed to movements in LIBOR. We entered into interest rate swap agreements in order to hedge our variable interest rate exposure. We use interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert our debt from a floating to a fixed rate. To hedge our exposure to changes in interest rates we are a party to five floating-to-fixed interest rate swaps with RBS. Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on market-based LIBOR swap yield rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items in accordance with the fair value hierarchy. The fair value of the interest rate swap agreements approximates the amount that we would have to pay for the early termination of the agreements. The principal terms of the interest rate swaps are as follows:

 

Subsidiary

 

Termination Date

 

Fixed
 interest rate

 

Nominal value
 March 31,
 2015

 

CMNL(1)

 

Nov 2018

 

5.395 

%

20,456,000 

 

CMNL(1)

 

Nov 2018

 

4.936 

%

10,228,000 

 

CJNP(2)

 

March 2019

 

4.772 

%

30,523,500 

 

CJNP(2)

 

March 2019

 

2.960 

%

10,276,500 

 

CNML(3)

 

July 2020

 

4.350 

%

46,440,000 

 

 

 

 

 

 

 

117,924,000 

 

 

(1)

reduces semi-annually by $1,278,500 with a final settlement of $21,734,500 due in November 2018.

 

(2)

reduces semi-annually by $1,700,000 with a final settlement of $28,900,000 due in March 2019.

 

(3)

RBS exercised its right to extend the interest rate swap until July 2020 and based on the extension reduces semi-annually by $1,720,000 with a final settlement of $27,520,000 due in July 2020.

 

(c)Fair Value Measurements:

 

Fair Value on a Recurring Basis: The following table summarizes the bases used to measure the financial assets and liabilities that are carried at fair value on a recurring basis on our balance sheet, which comprise our financial derivatives:

 

 

 

 

 

March 31, 2015

 

March 31, 2014

 

Derivatives not designated as hedging
instruments

 

Balance sheet location

 

Asset
derivatives

 

Liability
derivatives

 

Asset
derivatives

 

Liability
derivatives

 

Interest rate swap agreements

 

Long-term liabilities—Derivative instruments

 

 

12,730,462 

 

 

14,062,416 

 

 

The effect of derivative instruments on the consolidated statement of operations for the periods presented are as follows:

 

Derivatives not designated as hedging instruments

 

Location of gain/(loss) recognized

 

Year ended
March 31, 2015

 

July 1, 2013
(inception) to
March 31, 2014

 

Interest Rate Swap—Change in fair value

 

Gain/(loss) on derivatives, net

 

$

1,331,954

 

$

2,623,456

 

Interest Rate Swap—Realized loss

 

Gain/(loss) on derivatives, net

 

(5,291,157

)

(3,727,457

)

Loss on derivatives—net 

 

 

 

$

(3,959,203

)

$

(1,104,001

)

 

As of March 31, 2015 and March 31, 2014, 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 year ended March 31, 2015 or during the period ended March 31, 2014.

 

Fair value on a non-recurring basis: As of March 31, 2015, we reviewed the carrying amount and the estimated recoverable amount for each of our vessels. The review indicated that the carrying amount was not recoverable for our PGC vessel. The fair value is considered a Level 2 item in the fair value hierarchy and is based on our best estimate of the value of the vessel, which is supported by three independent vessel appraisals. We recognized an impairment loss of $1.4 million during the year ended March 31, 2015 as further described in Note 6 to the consolidated financial statements.

 

We did not have any other assets or liabilities measured at fair value on a nonrecurring basis during the year ended March 31, 2015 or during the period ended March 31, 2014.

 

(d)Book values and fair values of financial instruments.  In addition to the derivatives that we are required to record at fair value on our balance sheet (refer (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.

 

 

Retirement Plans
Retirement Plans

 

21. Retirement Plans

 

Defined Contribution Plan

 

United States-based employees participate in our 401(k) retirement plan and may contribute a portion of their annual compensation to a 401(k) plan on a pre-tax basis, in accordance with Internal Revenue Service guidelines. On behalf of all participants in the plan, we provide a safe harbor contribution subject to certain limitations. Employee contributions and our safe harbor contributions are vested at all times. We recognized and paid compensation expense associated with the safe harbor contributions totaling $0.1 million for the year ended March 31, 2015. There was no compensation expense associated with the safe harbor contributions for the period ended March 31, 2014 as the plan was initiated during the year ended March 31, 2015 coinciding with the transfer of management services from the Manager to our wholly owned subsidiaries, as described in Note 3.

 

Defined Benefit Plan

 

Our Greece-based employees have a statutory required defined benefit pension plan according to provisions of Greek law 2112/20 covering all eligible employees (the “Greece Plan”). We recognized compensation expense and recorded a corresponding liability associated with our projected benefit obligation to the Greece Plan totaling $0.3 million for the year ended March 31, 2015 and no compensation expense for the period ended March 31, 2014.

 

Other

 

We contribute to retirement accounts for certain United Kingdom-based employees based on a percentage of their annual salaries. For the year ended March 31, 2015, we recognized compensation expense of $0.1 million related to these contributions. There was no compensation expense associated with these contributions for the period ended March 31, 2014.

 

Earnings Per Share("EPS")
Earnings Per Share ("EPS")

22. Earnings Per Share (“EPS”)

 

Basic EPS represents net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period. Our restricted stock shares include rights to receive dividends that are subject to the risk of forfeiture if service requirements are not satisfied, thus these shares are not considered participating securities and are excluded from the basic weighted-average shares outstanding calculation. Diluted EPS represent net income 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 were as follows:

 

(In U.S. dollars except share data)

 

Year ended
March 31, 2015

 

July 1, 2013
(inception) to
March 31, 2014

 

Numerator:

 

 

 

 

 

Net income

 

$

25,260,782 

 

$

2,833,843 

 

Denominator:

 

 

 

 

 

Weighted average number of common shares outstanding, basic and diluted

 

56,183,707 

 

32,075,897 

 

EPS:

 

 

 

 

 

Basic and diluted

 

$

0.45 

 

$

0.09 

 

 

For the year ended March 31, 2015, there were 929,000 shares of unvested restricted stock excluded from the calculation of diluted EPS because the effect of their inclusion would be anti-dilutive. There were no shares of unvested restricted stock excluded from the calculation of diluted EPS for the period ended March 31, 2014.

 

Selected Quarterly Financial Information (unaudited)
Selected Quarterly Financial Information (unaudited)

23. Selected Quarterly Financial Information (unaudited)

 

The following tables summarize the 2015 and 2014 quarterly results:

 

 

 

Three months

ended
June 30, 2014

 

Three months

ended
September 30,

2014

 

Three months

ended
December 31, 2014

 

Three months
ended 

March 31, 2015

 

Revenues

 

$

15,853,840 

 

$

20,358,211 

 

$

32,583,990 

 

$

35,333,108 

 

Operating income

 

5,200,271 

 

3,476,450 

 

10,825,590 

 

10,493,169 

 

Net income

 

$

3,667,249 

 

$

3,768,677 

 

$

8,996,605 

 

$

8,828,251 

 

Earnings per common share, basic and diluted

 

$

0.07 

 

$

0.07 

 

$

0.16 

 

$

0.15 

 

 

 

 

July 1, 2013
(inception) to
September 30, 
2013

 

Three months 
ended
December 31, 2013

 

Three months 
ended
March 31, 2014

 

Revenues              

 

$

6,055,682

 

$

13,707,591

 

$

9,870,427

 

Operating income/(loss)

 

(509,733

)

3,908,734

 

992,366

 

Net (loss)/income  

 

$

(1,425,761

)

$

5,570,247

 

$

(1,310,643

)

Earnings/(loss) per common share, basic and diluted

 

$

(0.08

)

$

0.20

 

$

(0.03

)

 

Subsequent Events
Subsequent Events

 

 

 

24. Subsequent Events

 

On April 1, 2015, we commenced operations of Helios LPG Pool LLC (“Helios LPG”). Helios LPG is jointly run by Dorian LPG and Phoenix Tankers Pte. Ltd (“Phoenix Tankers”), a 100% subsidiary of Mitsui OSK Lines Ltd. Helios LPG is operated out of offices in London and Singapore.

 

Helios LPG is operating seven VLGCs on the water, including three of Dorian LPG’s VLGCs: Corsair,  Captain John NP and Captain Nicholas ML, of which one is a ECO-design vessel.

 

On May 15, 2015, the Compensation Committee of our Board of Directors approved a $1.5 million discretionary cash bonus to executive management and $0.4 million to other employees in recognition of their contribution to the Company’s performance for the fiscal year ended March 31, 2015.  These bonuses will be recognized as compensation expense in our consolidated financial statements for the year ended March 31, 2016.

 

Significant Accounting Policies (Policies)

(a)Principles of consolidation:  The consolidated financial statements incorporate the financial statements of the Company and its wholly-owned subsidiaries. Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statements of operations from the effective date of acquisition and up to the effective date of disposal, as appropriate. All intercompany balances and transactions have been eliminated.

(b)Use of estimates:  The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(c)Other comprehensive income/(loss):  The Company follows the accounting guidance relating to Comprehensive Income, which requires separate presentation of certain transactions that are recorded directly as components of stockholders’ equity. The Company has no other comprehensive income/(loss) and accordingly, comprehensive income/(loss) equals net income/(loss) for the periods presented and thus has not presented this in the statement of operations or in a separate statement.

 

(d)Foreign currency translation:  The functional currency of the Company is the U.S. Dollar. Foreign currency transactions are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. As of balance sheet date, monetary assets and liabilities that are denominated in a currency other than the functional currency are adjusted to reflect the exchange rate at the balance sheet date and any gains or losses are included in the statement of operations. For the periods presented, the Company had no foreign currency derivative instruments.

 

(e)Cash and cash equivalents:  The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.

 

(f)Restricted cash:  Restricted cash represents pledged cash deposits or minimum liquidity to be maintained with certain banks under the Company’s borrowing arrangements. In the event that the obligation relating to such deposits is expected to be terminated within the next twelve months or relates to general minimum liquidity requirements with no obligation to retain such funds in retention accounts, these deposits are classified as current assets otherwise they are classified as non-current assets.

 

(g)Trade receivables, net and accrued revenues:  Trade receivables, net and accrued revenues, reflect receivables from vessel charters, net of an allowance for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. Provision for doubtful accounts for the periods presented was zero.

 

(h)Inventories:  Inventories consist of bunkers on board the vessels when vessels are unemployed or are operating under voyage charters and lubricants and stores on board the vessels. Inventories are stated at the lower of cost or market. Cost is determined by the first in, first out method.

 

(i)Vessels, net:  Vessels, net are stated at cost, less accumulated depreciation. The costs of the vessels acquired as part of a business acquisition are recorded at their fair value on the date of acquisition. The cost of vessels purchased consists of the contract price, less discounts, plus any direct expenses incurred upon acquisition, including improvements, commission paid, delivery expenses and other expenditures to prepare the vessel for her initial voyage. The initial purchase of LPG coolant for the refrigeration of cargo is also capitalized. Interest costs incurred to finance the cost of vessels during their construction period are capitalized. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Repairs and maintenance are expensed as incurred.

 

(j)Impairment of long-lived assets:  The Company reviews their vessels “held and used” for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When the estimate of future undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, the asset is evaluated for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset.

 

 

(k)Vessel depreciation:  Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated salvage value. Each vessel’s salvage value is equal to the product of its lightweight tonnage and estimated scrap rate. Management estimates the useful life of its vessels to be 25 years from the date of initial delivery from the shipyard. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life.

 

(l)Drydocking and special survey costs:  Drydocking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. We are required to drydock each of our vessels every five years until it reaches 15 years of age, after which we are required to drydock the applicable vessel every two and one-half years. Costs deferred are limited to actual costs incurred at the yard and parts used in the drydocking or special survey. Costs deferred include expenditures incurred relating to shipyard costs, hull preparation and painting, inspection of hull structure and mechanical components, steelworks, machinery works, and electrical works. If a survey is performed prior to the scheduled date, the remaining unamortized balances are immediately written off. Unamortized balances of vessels that are sold are written-off and included in the calculation of the resulting gain or loss in the period of the vessel’s sale. The amortization charge is presented within Depreciation and amortization in the consolidated statement of operations.

 

 

(m)Financing costs:  Financing fees incurred for obtaining new loans and credit facilities are deferred and amortized to interest expense over the respective term of the loan or credit facility using the effective interest rate method. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made, subject to the accounting guidance regarding Debt—Modifications and Extinguishments. Any unamortized balance of costs related to credit facilities repaid is expensed in the period. Any unamortized balance of costs relating to credit facilities refinanced are deferred and amortized over the term of the respective credit facility in the period the refinancing occurs, subject to the provisions of the accounting guidance relating to Debt—Modifications and Extinguishments. The unamortized financing costs are reflected in Deferred charges in the accompanying consolidated balance sheet.

 

(n)Revenues and expenses:  Revenue is recognized when an agreement exists, the vessel is made available to the charterer or services are provided, the charter hire is determinable and collection of the related revenue is reasonably assured.

 

Time charter revenue:  Time charter revenues are recorded ratably over the term of the charter as service is provided. Time charter revenues received in advance of the provision of charter service are recorded as deferred income and recognized when the charter service is rendered. Deferred income or accrued revenue also may result from straight-line revenue recognition in respect of charter agreements that provide for varying charter rates. Deferred income and accrued revenue amounts that will be recognized within the next twelve months are presented as current, with amounts to be recognized thereafter presented as non-current. Revenues earned through the profit sharing arrangements in the time charters represent contingent rental revenues that are recognized when earned and amounts are reasonably assured based on estimates provided by the charterer.

 

Voyage charter revenue:  Under a voyage charter, the revenues are recognized on a pro-rata basis over the duration of the voyage determined on a discharge—to discharge port basis but the Company does not begin recognizing revenue until a charter has been agreed to by the customer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port for its next voyage. In the event a vessel is acquired or sold while a voyage is in progress, the revenue recognized is based on an allocation formula agreed between the buyer and the seller. Demurrage income represents payments by the charterer to the vessel owner when loading or discharging time exceeds the stipulated time in the voyage charter and is recognized when earned and collection is reasonably assured. Dispatch expense represents payments by the Company to the charterer when loading or discharging time is less than the stipulated time in the voyage charter and is recognized as incurred. Voyage charter revenue relating to voyages in progress as of the balance sheet date are accrued and presented in Trade receivables and accrued revenue in the accompanying consolidated balance sheet.

 

Commissions:  Charter hire commissions to brokers or managers, if any, are deferred and amortized over the related charter period and are included in Voyage expenses.

 

Vessel operating expenses:  Vessel operating expenses are accounted for as incurred on the accrual basis. Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores and other miscellaneous expenses.

(o)Repairs and maintenance:  All repair and maintenance expenses, including underwater inspection costs are expensed in the period incurred. Such costs are included in Vessel operating expenses.

 

(p)Stock-based compensation:  Stock-based payments to employees and directors are determined based on their grant date fair values, net of expected forfeitures, and are amortized against income over the vesting period. The fair value is considered to be the closing price recorded on the grant date. We estimate restricted stock award forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. As a result, we record stock-based compensation expense only for those awards that are expected to vest.

(q)Segment reporting:  Each of the Company’s vessels serve the same type of customer, have similar operations and maintenance requirements, operate in the same regulatory environment, and are subject to similar economic characteristics. Based on this, the Company has determined that it operates in one reportable segment, the international transportation of liquid petroleum gas with its fleet of vessels. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.

 

(r)Derivative instruments:  All derivatives are stated at their fair value, as either a derivative asset or a liability. The fair value of the interest rate derivatives is based on a discounted cash flow analysis and their fair value changes are recognized in current period earnings. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in fair value of the derivatives are either recognized in current period earnings or in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of operations. For the periods presented, no derivatives were accounted for as accounting hedges.

 

(s)Fair value of financial instruments:  In accordance with the requirements of accounting guidance relating to Fair Value Measurements, the Company classifies and discloses its assets and liabilities carried at fair value in one of the following three categories:

 

Level 1:

 

Quoted market prices in active markets for identical assets or liabilities.

Level 2:

 

Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3:

 

Unobservable inputs that are not corroborated by market data.

 

 

(t)

Recent accounting pronouncements:  On May 28, 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This standard is effective for public entities with reporting periods beginning after December 15, 2016. Early adoption is not permitted. The Company has not yet evaluated the impact, if any, of the adoption of this new standard.

 

On April 7, 2015, the FASB issued Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. For public business entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, on a retrospective basis. Early adoption is permitted. We have not early adopted this standard. The effect from the adoption of this standard would be the presentation of the debt issuance costs as a direct deduction of the related debt liability instead of as a non-current asset.

 

Basis of Presentation and General Information (Tables)

 

Vessel Owning Subsidiaries

Subsidiary

 

Type of
vessel(2)

 

Vessel’s name

 

Built

 

CBM(1)

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML

 

2008

 

82,000

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP

 

2007

 

82,000

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL

 

2006

 

82,000

Grendon Tanker LLC

 

PGC

 

LPG Grendon

 

1996

 

5,000

Comet LPG Transport LLC

 

VLGC

 

Comet

 

2014

 

84,000

Corsair LPG Transport LLC

 

VLGC

 

Corsair

 

2014

 

84,000

Corvette LPG Transport LLC

 

VLGC

 

Corvette

 

2015

 

84,000

 

Newbuild Vessel Owning Subsidiaries(3)

 

Subsidiary

 

Type of
vessel(2)

 

Hull
number

 

Vessel’s Name

 

Estimated
vessel
delivery
date(4)

 

CBM(1)

Dorian Shanghai LPG Transport LLC

 

VLGC

 

S749

 

Cougar

 

Q2 2015

 

84,000

Dorian Houston LPG Transport LLC

 

VLGC

 

S750

 

Cobra

 

Q2 2015

 

84,000

Concorde LPG Transport LLC

 

VLGC

 

2660

 

Concorde

 

Q2 2015

 

84,000

Dorian Sao Paulo LPG Transport LLC

 

VLGC

 

S753

 

Continental

 

Q3 2015

 

84,000

Dorian Ulsan LPG Transport LLC

 

VLGC

 

S755

 

Constitution

 

Q3 2015

 

84,000

Dorian Amsterdam LPG Transport LLC

 

VLGC

 

S751

 

Commodore

 

Q3 2015

 

84,000

Constellation LPG Transport LLC

 

VLGC

 

2661

 

Constellation

 

Q3 2015

 

84,000

Dorian Dubai LPG Transport LLC

 

VLGC

 

2336

 

Cresques

 

Q3 2015

 

84,000

Dorian Monaco LPG Transport LLC

 

VLGC

 

S756

 

Cheyenne

 

Q3 2015

 

84,000

Dorian Barcelona LPG Transport LLC

 

VLGC

 

S752

 

Clermont

 

Q4 2015

 

84,000

Dorian Cape Town LPG Transport LLC

 

VLGC

 

S754

 

Chaparral

 

Q4 2015

 

84,000

Commander LPG Transport LLC

 

VLGC

 

2662

 

Commander

 

Q4 2015

 

84,000

Dorian Geneva LPG Transport LLC

 

VLGC

 

2337

 

Cratis

 

Q4 2015

 

84,000

Dorian Tokyo LPG Transport LLC

 

VLGC

 

2338

 

Copernicus

 

Q4 2015

 

84,000

Dorian Explorer LPG Transport LLC

 

VLGC

 

S757

 

Challenger