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Dorian LPG Ltd.
Notes to Unaudited Condensed Consolidated Financial Statements
(Expressed in United States Dollars)
1. Basis of Presentation and General Information
Dorian LPG Ltd. (“Dorian”) was incorporated on July 1, 2013 under the laws of the Republic of the Marshall Islands, is headquartered in the United States and is engaged in the transportation of liquefied petroleum gas ("LPG") worldwide through the ownership and operation of LPG tankers. Dorian and its subsidiaries (together "we", “us”, "our", "DLPG" or the "Company") is primarily focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm. Our fleet consists of twenty-two LPG carriers, including eighteen fuel-efficient 84,000 cbm ECO-design VLGCs, three 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have a newbuilding contract for the construction of one new fuel-efficient 84,000 cbm ECO-design VLGC at Hyundai Heavy Industries Co., Ltd. ("Hyundai" or "HHI"), which is scheduled to be delivered to us in February 2016. We refer to this contract along with the VLGCs that were delivered between July 2014 and December 2015 from Hyundai and Daewoo Shipping and Marine Engineering Ltd. ("Daewoo" or “DSME”), both of which are based in South Korea, as our VLGC Newbuilding Program.
On April 1, 2015, Dorian and Phoenix Tankers Pte. Ltd. (“Phoenix”), a wholly-owned subsidiary of Mitsui OSK Lines Ltd., began operation of Helios LPG Pool LLC, or the Helios Pool, a 50% joint venture, which is a pool of VLGC vessels. We believe that the operation of certain of our VLGCs in this pool will allow us to achieve better market coverage and utilization. Vessels entered into the Helios Pool are commercially managed jointly by Dorian LPG (UK) Ltd., our wholly-owned subsidiary, and Phoenix. The members of the Helios Pool share in the net pool revenues generated by the entire group of vessels in the pool, weighted according to certain technical vessel characteristics, and net pool revenues (see Note 2) are distributed as time charter hire to each participant. The vessels entered into the Helios Pool may operate either in the spot market, contracts of affreightment, or on time charters of two years' duration or less.
On May 13, 2014, we completed our initial public offering (the “IPO”) and our shares trade on the New York Stock Exchange under the ticker symbol "LPG".
The accompanying unaudited condensed consolidated financial statements and related notes (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the Financial Statements. The Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2015 included in our Annual Report on Form 10-K for the year ended March 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on June 4, 2015.
Our interim results are subject to seasonal and other fluctuations, and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.
Our subsidiaries as of December 31, 2015, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.
Vessel Owning Subsidiaries
|
|
Type of |
|
|
|
|
|
|
|
Subsidiary |
|
vessel(2) |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CNML LPG Transport LLC |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CMNL LPG Transport LLC |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Grendon Tanker LLC |
|
PGC |
|
Grendon |
|
1996 |
|
5,000 |
|
Comet LPG Transport LLC |
|
VLGC |
|
Comet |
|
2014 |
|
84,000 |
|
Corsair LPG Transport LLC |
|
VLGC |
|
Corsair |
|
2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
VLGC |
|
Corvette |
|
2015 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC |
|
VLGC |
|
Cougar |
|
2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
VLGC |
|
Concorde |
|
2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC |
|
VLGC |
|
Cobra |
|
2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC |
|
VLGC |
|
Continental |
|
2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC |
|
VLGC |
|
Constitution |
|
2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC |
|
VLGC |
|
Commodore |
|
2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC |
|
VLGC |
|
Cresques |
|
2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
VLGC |
|
Constellation |
|
2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC |
|
VLGC |
|
Cheyenne |
|
2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC |
|
VLGC |
|
Clermont |
|
2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC |
|
VLGC |
|
Cratis |
|
2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC |
|
VLGC |
|
Chaparral |
|
2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC |
|
VLGC |
|
Copernicus |
|
2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
VLGC |
|
Commander |
|
2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC |
|
VLGC |
|
Challenger |
|
2015 |
|
84,000 |
|
Newbuilding Vessel Owning Subsidiaries(3)
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
Type of |
|
Hull |
|
|
|
vessel |
|
|
|
Subsidiary |
|
vessel(2) |
|
number |
|
Vessel's Name |
|
delivery date(4) |
|
CBM(1) |
|
Dorian Exporter LPG Transport LLC |
|
VLGC |
|
S758 |
|
Caravelle |
|
Q1 2016 |
|
84,000 |
|
(1) |
CBM: Cubic meters, a standard measure for LPG tanker capacity |
(2) |
Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”) |
(3) |
Represents the owning subsidiary of a newbuilding vessel that was not yet delivered as of December 31, 2015 |
(4) |
Represents calendar year quarters |
Management Subsidiaries
|
|
Incorporation |
|
Subsidiary |
|
Date |
|
Dorian LPG Management Corp |
|
July 2, 2013 |
|
Dorian LPG (USA) LLC (incorporated in USA) |
|
July 2, 2013 |
|
Dorian LPG (UK) Ltd. (incorporated in UK) |
|
November 18, 2013 |
|
Dorian LPG Finance LLC |
|
January 16, 2015 |
|
Occident River Trading Limited (incorporated in UK) |
|
January 9, 2015 |
|
Dormant Subsidiaries
|
|
Incorporation |
|
Subsidiary |
|
Date |
|
SeaCor LPG I LLC |
|
April 26, 2013 |
|
SeaCor LPG II LLC |
|
April 26, 2013 |
|
Capricorn LPG Transport LLC |
|
November 15, 2013 |
|
Constitution LPG Transport LLC |
|
February 17, 2014 |
|
|
2. Significant Accounting Policies
The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as were applied in the preparation of our audited financial statements for the year ended March 31, 2015 (see Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2015).
Additionally, as of April 1, 2015, we began operations of pooling arrangements. Net pool revenues—related party for each vessel in the pool is determined in accordance with the profit sharing terms specified within the pool agreement. In particular, the pool manager calculates the net pool revenues using gross revenues less voyage expenses of all the pool vessels and less the general and administrative expenses of the pool and distributes the net pool revenues as time charter hire to participants based on:
· |
pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into consideration); and |
· |
number of days the vessel participated in the pool in the period. |
We recognize net pool revenues—related party on a monthly basis, when the vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably.
In February 2015, the Financial Accounting Standards Board (“FASB”) issued accounting guidance amending consolidation analysis which focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This new standard simplifies consolidation accounting by reducing the number of consolidation models and providing incremental benefits to stakeholders. In addition, the new standard places more emphasis on risk of loss when determining a controlling financial interest, reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (a “VIE”), and changes consolidation conclusion for public and private companies in several industries that typically make use of limited partnerships or VIEs. The pronouncement is effective prospectively for annual periods beginning after December 15, 2015, and interim periods within that reporting period. We are currently assessing the impact the amended guidance will have on our financial statements.
In April 2015, an accounting pronouncement was issued by the FASB to update the guidance related to the presentation of debt issuance costs. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. This pronouncement is effective retrospectively for fiscal years beginning after December 15, 2015 and interim periods within that reporting period, with early adoption permitted. We intend to adopt this pronouncement on April 1, 2016, and the amount of debt issuance costs that would be classified on our balance sheet as a reduction of debt was $23.9 million as of December 31, 2015 and $13.3 million as of March 31, 2015.
In May 2014, the FASB amended its accounting guidance for revenue recognition. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and consideration that a company expects to receive for the services provided. It also requires additional disclosures necessary for the financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB voted to defer the effective date by one year for fiscal years beginning on or after December 15, 2017 and interim periods within that reporting period and permit early adoption of the standard, but not before the beginning of 2017. We are currently assessing the impact the amended guidance will have on our financial statements.
In July 2015, the FASB issued accounting guidance requiring entities to measure most inventory at the lower of cost and net realizable value. The pronouncement is effective prospectively for annual periods beginning after December 15, 2016, and interim periods within that reporting period. We are currently assessing the impact the amended guidance will have on our financial statements.
|
3. Transactions with Related Parties
Dorian (Hellas), S.A.
As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from Dorian (Hellas), S.A. (“Dorian Hellas,” “DHSA” or the “Manager”) and are now provided through our wholly-owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp. Subsequent to the transition agreements, Eagle Ocean Transport, Inc. (“Eagle Ocean Transport”) continues to incur related travel costs for certain transitioned employees as well as office-related costs, for which we reimbursed Eagle Ocean Transport $0.2 million and $0.1 million for the three months ended December 31, 2015 and 2014, respectively, and $0.6 million and $0.3 million for the nine months ended December 31, 2015 and 2014, respectively. Such expenses are reimbursed based on their actual cost. Pursuant to an agreement between Dorian LPG (UK) Ltd. and DHSA, chartering and operational services are provided by Dorian LPG (UK) Ltd. to DHSA. Fees for these services are included in “Other income-related parties” in the unaudited condensed consolidated statement of operations included herein and were less than $0.1 million and $0.1 million for the three and nine months ended December 31, 2015, respectively.
We outsourced the technical and commercial management of our vessels to DHSA, a related party, through June 30, 2014, pursuant to management agreements entered into by each vessel owning subsidiary on July 26, 2013, as amended. In addition, under these management agreements, strategic and financial services had also been outsourced to DHSA. DHSA had entered into agreements with each of Eagle Ocean Transport and Highbury Shipping Services Limited ("HSSL"), to provide certain of these services on behalf of the vessel owning companies. Management fees incurred related to these agreements are presented as Management fees‑related party in the consolidated statement of operations in the relevant period. There were no management fees related to these agreements subsequent to June 30, 2014.
Additionally, a fixed monthly fee of $15,000 per hull was payable to DHSA for pre‑delivery services provided during the period from July 29, 2013 until June 30, 2014. Management fees related to the pre‑delivery services during the nine months ended December 31, 2014 amounted to $0.9 million, which have been capitalized and presented in “Vessels under construction” or “Vessels, net” for vessels that have been delivered. There were no Management fees related to the pre-delivery services during the three months ended December 31, 2014 or for the three and nine months ended December 31, 2015.
Helios LPG Pool LLC
On April 1, 2015, Dorian and Phoenix began operations of the Helios Pool and entered into pool participation agreements for the purpose of establishing and operating, as charterer, under a time charter to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared as described in Note 2 above. We hold a 50% interest in the Helios Pool as a joint venture with Phoenix and all significant rights and obligations are equally shared by both parties. We have determined that the Helios Pool is a VIE as it does not have sufficient equity at risk. We do not consolidate the Helios Pool because we are not the primary beneficiary and do not have a controlling financial interest. As of December 31, 2015, we had receivables from the Helios Pool of $73.5 million, including $16.5 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of December 31, 2015 is limited to the receivables from the pool. The Helios Pool does not have any third-party debt obligations. The Helios Pool has entered into commercial management agreements with each of Dorian LPG (UK) Ltd. and Phoenix as commercial managers and has appointed both commercial managers as the exclusive commercial managers of pool vessels. Fees for commercial management services provided by Dorian LPG (UK) Ltd. are included in “Other income-related parties” in the unaudited condensed consolidated statement of operations and were $0.4 million and $1.1 million for the three and nine months ended December 31, 2015.
Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three and nine months ended December 31, 2015. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the pool aggregates the revenue and expenses for all the vessels in the pool and distributes net pool revenues to the participants based on the results of the pool, operating days and pool points, as variable time charter hire for the relevant vessel. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 9.
Artwork
During the nine months ended December 31, 2015, we purchased $0.1 million of artwork for newbuilding vessels, which have been capitalized and presented in “Vessels under construction” or “Vessels, net” for vessels that have been delivered during the period, for our Athens, Greece office and for a shipyard, which are included in “General and administrative expenses” in the unaudited condensed consolidated statement of operations. The artist is a relative of one of our executive officers.
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4. Deferred Charges, Net
The analysis and movement of deferred charges is presented in the table below:
|
|
Financing |
|
Drydocking |
|
Total deferred |
|
|||
|
|
costs |
|
costs |
|
charges, net |
|
|||
Balance, April 1, 2015 |
|
$ |
13,296,216 |
|
$ |
669,705 |
|
$ |
13,965,921 |
|
Additions |
|
|
12,200,552 |
|
|
— |
|
|
12,200,552 |
|
Amortization |
|
|
(1,553,730) |
|
|
(188,004) |
|
|
(1,741,734) |
|
Balance, December 31, 2015 |
|
$ |
23,943,038 |
|
$ |
481,701 |
|
$ |
24,424,739 |
|
Financing costs incurred during the nine months ended December 31, 2015 relate to a $758 million debt facility that we entered into in March 2015 (the “2015 Debt Facility”). See Note 7 below.
There were no drydockings during the nine months ended December 31, 2015.
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5. Vessels, Net
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2015 |
|
$ |
439,180,669 |
|
$ |
(19,204,616) |
|
$ |
419,976,053 |
|
Additions |
|
|
1,211,595,756 |
|
|
— |
|
|
1,211,595,756 |
|
Disposals |
|
|
(268,281) |
|
|
26,060 |
|
|
(242,221) |
|
Depreciation |
|
|
— |
|
|
(26,341,945) |
|
|
(26,341,945) |
|
Balance, December 31, 2015 |
|
$ |
1,650,508,144 |
|
$ |
(45,520,501) |
|
$ |
1,604,987,643 |
|
The additions to Vessels, net represent amounts transferred from Vessels under Construction relating to the cost of our fifteen newbuildings that were delivered to us during the nine months ended December 31, 2015.
Vessels, with a total carrying value of $1,601.3 million and $416.0 million as of December 31, 2015 and March 31, 2015, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 7 below). No impairment loss was recorded for the periods presented.
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6. Vessels Under Construction
Balance, April 1, 2015 |
|
$ |
398,175,504 |
|
Installment payments to shipyards |
|
|
814,098,361 |
|
Other capitalized expenditures |
|
|
21,184,618 |
|
Capitalized interest |
|
|
4,661,154 |
|
Vessels delivered (transferred to Vessels) |
|
|
(1,211,595,756) |
|
Balance, December 31, 2015 |
|
$ |
26,523,881 |
|
Other capitalized expenditures for the nine months ended December 31, 2015 represent LPG coolant of $4.8 million and fees paid to third party vendors of $16.4 million for supervision and other newbuilding pre‑delivery costs including engineering and technical support, liaising with the shipyard, and ensuring key suppliers are integrated into the production planning process.
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7. Long-term Debt
RBS Loan Facility - refer to Note 11 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.
2015 Debt Facility – refer to Note 11 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015 for additional information related to the 2015 Debt Facility. During the nine months ended December 31, 2015, we made drawdowns of $634.6 million, including $9.0 million to pay lender fees, under the 2015 Debt Facility, which was secured by fifteen newbuilding vessels delivered during that period and was comprised of four separate tranches. As of December 31, 2015, $42.2 million was available to be drawn under the facility on delivery of our final newbuilding.
Debt Obligations
The table below presents our debt obligations:
RBS secured bank debt |
|
December 31, 2015 |
|
March 31, 2015 |
|
||
Tranche A |
|
$ |
39,100,000 |
|
$ |
40,800,000 |
|
Tranche B |
|
|
28,127,000 |
|
|
30,684,000 |
|
Tranche C |
|
|
45,795,000 |
|
|
47,622,500 |
|
Total |
|
$ |
113,022,000 |
|
$ |
119,106,500 |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
231,599,393 |
|
$ |
26,695,381 |
|
KEXIM Direct Financing |
|
|
188,405,793 |
|
|
21,890,212 |
|
KEXIM Guaranteed |
|
|
186,383,877 |
|
|
21,655,293 |
|
K-sure Insured |
|
|
94,641,285 |
|
|
10,996,041 |
|
Total |
|
|
701,030,348 |
|
|
81,236,927 |
|
Total debt obligations |
|
$ |
814,052,348 |
|
$ |
200,343,427 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
65,708,060 |
|
$ |
15,677,553 |
|
Long-term debt—net of current portion |
|
|
748,344,288 |
|
|
184,665,874 |
|
Total |
|
$ |
814,052,348 |
|
$ |
200,343,427 |
|
|
8. Stock-Based Compensation Plans
Our stock-based compensation expense was $1.3 million and $3.1 million for the three and nine months ended December 31, 2015, respectively, and was $0.8 million and $1.5 million for the three and nine months ended December 31, 2014. Stock-based compensation expense is included within general and administrative expenses in the unaudited condensed consolidated statements of operations. Unrecognized compensation cost was $13.3 million as of December 31, 2015 and will be recognized over the remaining weighted average life of 3.70 years. For more information on our equity incentive plan, see Note 13 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.
A summary of the activity of restricted shares awarded under our equity incentive plan as of December 31, 2015 and changes during the nine months then ended, is as follows:
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Restricted Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of March 31, 2015 |
|
929,000 |
|
$ |
19.70 |
|
Granted |
|
— |
|
|
— |
|
Unvested as of December 31, 2015 |
|
929,000 |
|
$ |
19.70 |
|
|
9. Revenues
Revenues comprise the following:
|
|
Three months ended |
|
Nine months ended |
|
||||||||
|
|
December 31, 2015 |
|
December 31, 2014 |
|
December 31, 2015 |
|
December 31, 2014 |
|
||||
Net pool revenues—related party |
|
$ |
66,044,777 |
|
$ |
— |
|
$ |
130,701,023 |
|
$ |
— |
|
Voyage charter revenues |
|
|
15,567,844 |
|
|
25,516,971 |
|
|
46,013,858 |
|
|
47,444,311 |
|
Time charter revenues |
|
|
11,237,746 |
|
|
6,965,705 |
|
|
26,169,581 |
|
|
20,713,290 |
|
Other revenues |
|
|
433,341 |
|
|
101,314 |
|
|
988,138 |
|
|
638,440 |
|
Total |
|
$ |
93,283,708 |
|
$ |
32,583,990 |
|
$ |
203,872,600 |
|
$ |
68,796,041 |
|
Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. See Note 3 to our unaudited interim condensed consolidated financial statements.
Time charter revenue included a profit-sharing element of the time charter agreements of $2.4 million and $7.8 million for the three and nine months ended December 31, 2014, respectively. There was no profit-sharing element of the time charter agreements for the three and nine months ended December 31, 2015. Other revenues represents income from charterers relating to reimbursement of voyage expenses such as costs for security guards and war risk insurance.
|
10. Financial Instruments and Fair Value Disclosures
Our principal financial assets consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. Our principal financial liabilities consist of long‑term bank loan, interest rate swaps, accounts payable, amounts due to related parties and accrued liabilities.
(a) Concentration of credit risk: Financial instruments, which may subject us to significant concentrations of credit risk, consist principally of amounts due from our charterers, including the receivable from Helios Pool, and cash and cash equivalents. We limit our credit risk with amounts due from our charterers, including those through the Helios Pool, by performing ongoing credit evaluations of our charterers’ financial condition and generally do not require collateral from our charterers. We limit our credit risk with our cash and cash equivalents by placing it with highly-rated financial institutions. |
(b) Interest rate risk: Our long‑term bank loans are based on LIBOR and hence we are exposed to movements thereto. We entered into interest rate swap agreements in order to hedge a majority of our variable interest rate exposure related to the RBS Loan Facility and our 2015 Debt Facility. The interest rate swaps related to the RBS Loan Facility effectively convert substantially all of our RBS Loan Facility from a floating to a fixed rate. To hedge our exposure to changes in interest rates we are a party to five floating‑to‑fixed interest rate swaps with RBS. In September 2015, we entered into interest rate swaps with Citibank N.A. (“Citibank”) and ING Bank N.V. (“ING”) to effectively convert a notional amount of $200 million and $50 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate and each has a termination date of March 23, 2022. The fixed interest rate is 1.93% and 2.00% on the Citibank and ING swaps, respectively. In October 2015, we entered into interest rate swaps with the Commonwealth Bank of Australia (“CBA”) and Citibank to effectively convert amortizing notional amounts of $85.7 million and $128.6 million, respectively, of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% and 1.38%, respectively, with a termination date of March 23, 2022. Interest rate swaps are stated at fair value, which is determined using a discounted cash flow approach based on 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. |
(c) Fair value measurements: The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives all of which are considered Level 2 items in accordance with the fair value hierarchy: |
|
|
|
December 31, 2015 |
|
|
March 31, 2015 |
|
||||||
|
|
Other non-current assets |
|
Long-term liabilities |
|
Other non-current assets |
|
Long-term liabilities |
|
||||
Derivatives not designated as hedging instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
||||
Interest rate swap agreements |
|
$ |
1,869,068 |
|
$ |
10,934,205 |
|
$ |
— |
|
$ |
12,730,462 |
|
The effect of derivative instruments within the unaudited condensed consolidated statement of operations for the periods presented is as follows:
|
|
|
|
Three months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2015 |
|
December 31, 2014 |
|
||
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives, net |
|
$ |
7,389,868 |
|
$ |
(19,406) |
|
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives, net |
|
|
(2,007,426) |
|
|
(1,321,341) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
5,382,442 |
|
$ |
(1,340,747) |
|
|
|
|
|
Nine months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2015 |
|
December 31, 2014 |
|
||
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives, net |
|
$ |
3,665,324 |
|
$ |
1,637,646 |
|
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives, net |
|
|
(4,482,250) |
|
|
(4,024,228) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
(816,926) |
|
$ |
(2,386,582) |
|
As of December 31, 2015 and March 31, 2015, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three and nine months ended December 31, 2015 and 2014.
(d) Book values and fair values of financial instruments: In addition to the derivatives that we are required to record at fair value on our balance sheet (see (c) above), we have other financial instruments that are carried at historical cost. These financial instruments include trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities for which the historical carrying value approximates the fair value due to the 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. |
|
12. Commitments and Contingencies
Commitments under Newbuilding Contracts
As of December 31, 2015, we had $53.6 million of commitments under a shipbuilding contract and a supervision agreement for one newbuilding. We expect to settle these commitments within the twelve months ending December 31, 2016 with borrowings available under the 2015 Debt Facility and available cash on hand.
Other
From time to time we expect to be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Such claims, even if lacking in merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any claim that is reasonably possible and should be disclosed or probable and for which a provision should be established in the accompanying unaudited interim condensed consolidated financial statements.
|
|
|
Financing |
|
Drydocking |
|
Total deferred |
|
|||
|
|
costs |
|
costs |
|
charges, net |
|
|||
Balance, April 1, 2015 |
|
$ |
13,296,216 |
|
$ |
669,705 |
|
$ |
13,965,921 |
|
Additions |
|
|
12,200,552 |
|
|
— |
|
|
12,200,552 |
|
Amortization |
|
|
(1,553,730) |
|
|
(188,004) |
|
|
(1,741,734) |
|
Balance, December 31, 2015 |
|
$ |
23,943,038 |
|
$ |
481,701 |
|
$ |
24,424,739 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Cost |
|
depreciation |
|
Net book Value |
|
|||
Balance, April 1, 2015 |
|
$ |
439,180,669 |
|
$ |
(19,204,616) |
|
$ |
419,976,053 |
|
Additions |
|
|
1,211,595,756 |
|
|
— |
|
|
1,211,595,756 |
|
Disposals |
|
|
(268,281) |
|
|
26,060 |
|
|
(242,221) |
|
Depreciation |
|
|
— |
|
|
(26,341,945) |
|
|
(26,341,945) |
|
Balance, December 31, 2015 |
|
$ |
1,650,508,144 |
|
$ |
(45,520,501) |
|
$ |
1,604,987,643 |
|
|
Balance, April 1, 2015 |
|
$ |
398,175,504 |
|
Installment payments to shipyards |
|
|
814,098,361 |
|
Other capitalized expenditures |
|
|
21,184,618 |
|
Capitalized interest |
|
|
4,661,154 |
|
Vessels delivered (transferred to Vessels) |
|
|
(1,211,595,756) |
|
Balance, December 31, 2015 |
|
$ |
26,523,881 |
|
|
RBS secured bank debt |
|
December 31, 2015 |
|
March 31, 2015 |
|
||
Tranche A |
|
$ |
39,100,000 |
|
$ |
40,800,000 |
|
Tranche B |
|
|
28,127,000 |
|
|
30,684,000 |
|
Tranche C |
|
|
45,795,000 |
|
|
47,622,500 |
|
Total |
|
$ |
113,022,000 |
|
$ |
119,106,500 |
|
|
|
|
|
|
|
|
|
2015 Debt Facility |
|
|
|
|
|
|
|
Commercial Financing |
|
$ |
231,599,393 |
|
$ |
26,695,381 |
|
KEXIM Direct Financing |
|
|
188,405,793 |
|
|
21,890,212 |
|
KEXIM Guaranteed |
|
|
186,383,877 |
|
|
21,655,293 |
|
K-sure Insured |
|
|
94,641,285 |
|
|
10,996,041 |
|
Total |
|
|
701,030,348 |
|
|
81,236,927 |
|
Total debt obligations |
|
$ |
814,052,348 |
|
$ |
200,343,427 |
|
|
|
|
|
|
|
|
|
Presented as follows: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
65,708,060 |
|
$ |
15,677,553 |
|
Long-term debt—net of current portion |
|
|
748,344,288 |
|
|
184,665,874 |
|
Total |
|
$ |
814,052,348 |
|
$ |
200,343,427 |
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Grant-Date |
|
|
Restricted Share Awards |
|
Numbers of Shares |
|
Fair Value |
|
|
Unvested as of March 31, 2015 |
|
929,000 |
|
$ |
19.70 |
|
Granted |
|
— |
|
|
— |
|
Unvested as of December 31, 2015 |
|
929,000 |
|
$ |
19.70 |
|
|
|
|
Three months ended |
|
Nine months ended |
|
||||||||
|
|
December 31, 2015 |
|
December 31, 2014 |
|
December 31, 2015 |
|
December 31, 2014 |
|
||||
Net pool revenues—related party |
|
$ |
66,044,777 |
|
$ |
— |
|
$ |
130,701,023 |
|
$ |
— |
|
Voyage charter revenues |
|
|
15,567,844 |
|
|
25,516,971 |
|
|
46,013,858 |
|
|
47,444,311 |
|
Time charter revenues |
|
|
11,237,746 |
|
|
6,965,705 |
|
|
26,169,581 |
|
|
20,713,290 |
|
Other revenues |
|
|
433,341 |
|
|
101,314 |
|
|
988,138 |
|
|
638,440 |
|
Total |
|
$ |
93,283,708 |
|
$ |
32,583,990 |
|
$ |
203,872,600 |
|
$ |
68,796,041 |
|
|
|
|
|
December 31, 2015 |
|
|
March 31, 2015 |
|
||||||
|
|
Other non-current assets |
|
Long-term liabilities |
|
Other non-current assets |
|
Long-term liabilities |
|
||||
Derivatives not designated as hedging instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
Derivative instruments |
|
||||
Interest rate swap agreements |
|
$ |
1,869,068 |
|
$ |
10,934,205 |
|
$ |
— |
|
$ |
12,730,462 |
|
|
|
|
|
Three months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2015 |
|
December 31, 2014 |
|
||
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives, net |
|
$ |
7,389,868 |
|
$ |
(19,406) |
|
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives, net |
|
|
(2,007,426) |
|
|
(1,321,341) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
5,382,442 |
|
$ |
(1,340,747) |
|
|
|
|
|
Nine months ended |
|
||||
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) recognized |
|
December 31, 2015 |
|
December 31, 2014 |
|
||
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives, net |
|
$ |
3,665,324 |
|
$ |
1,637,646 |
|
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives, net |
|
|
(4,482,250) |
|
|
(4,024,228) |
|
Gain/(loss) on derivatives, net |
|
|
|
$ |
(816,926) |
|
$ |
(2,386,582) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|