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1. Basis of Presentation and General Information
Dorian LPG Ltd. (“DLPG”) was incorporated on July 1, 2013, under the laws of the Republic of the Marshall Islands, as a wholly-owned subsidiary of Dorian Holdings LLC (“Dorian Holdings”). Dorian Holdings ceased to have control over Dorian LPG on July 29, 2013 as a consequence of the transactions described below. DLPG has a fiscal year end of March 31, and was formed to acquire, own and operate liquefied petroleum gas (“LPG”) tankers.
The terms “we,” “us,” “our,” and the “Company” mean DLPG and all entities included in its consolidated financial statements.
Effective April 25, 2014 the Company effectuated a one-for-five reverse stock split (refer Note 12). Except for the 100 shares issued at inception and subsequently cancelled, all amounts related to number of shares, per share amounts and earnings per share presented in the accompanying consolidated financial statements give retroactive effect to the reverse stock split.
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. DLPG’s shares issued under the private placements completed are listed on the Norwegian OTC A-List under the symbol DORIAN.
The Company successfully closed its initial public offering (“IPO”) on May 13, 2014 and its shares issued in the IPO were listed on the NYSE and trade under the symbol LPG.
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. No one party exercises control of the Company.
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 (collectively the “Company”).
The Company’s subsidiaries which are all wholly-owned and all are incorporated in Republic of the Marshall Islands (unless otherwise indicated below) as of March 31, 2014 are listed below.
Vessel Owning Subsidiaries
Subsidiary |
|
Acquisition |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CNML LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CMNL LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Grendon Tanker LLC |
|
July 29, 2013 |
|
PGC |
|
LPG Grendon |
|
1996 |
|
5,000 |
|
Newbuild Vessel Owning Subsidiaries
Subsidiary (Vessel’s Name) |
|
Acquisition |
|
Type of |
|
Hull |
|
Estimated |
|
CBM(1) |
|
SeaCor LPG I LLC (Comet) |
|
July 29, 2013 |
|
VLGC |
|
2656 |
|
July 2014 |
|
84,000 |
|
SeaCor LPG II LLC (Corsair) |
|
July 29, 2013 |
|
VLGC |
|
2657 |
|
September 2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
2658 |
|
December 2014 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC (Cougar) |
|
November 26, 2013 |
|
VLGC |
|
S749 |
|
April 2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC (Cobra) |
|
November 26, 2013 |
|
VLGC |
|
S750 |
|
April 2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC (Continental) |
|
November 26, 2013 |
|
VLGC |
|
S753 |
|
June 2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC (Constitution) |
|
November 26, 2013 |
|
VLGC |
|
S755 |
|
June 2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2660 |
|
June 2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC (Commodore) |
|
November 26, 2013 |
|
VLGC |
|
S751 |
|
July 2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC (Cresques) |
|
November 26, 2013 |
|
VLGC |
|
2336 |
|
August 2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC (Cheyenne) |
|
November 26, 2013 |
|
VLGC |
|
S756 |
|
September 2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2661 |
|
September 2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC (Cratis) |
|
November 26, 2013 |
|
VLGC |
|
2337 |
|
October 2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC (Clermont) |
|
November 26, 2013 |
|
VLGC |
|
S752 |
|
September 2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC (Chaparral) |
|
November 26, 2013 |
|
VLGC |
|
S754 |
|
October 2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC (Copernicus) |
|
November 26, 2013 |
|
VLGC |
|
2338 |
|
November 2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2662 |
|
November 2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC (Challenger) |
|
November 26, 2013 |
|
VLGC |
|
S757 |
|
December 2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC (Caravel) |
|
November 26, 2013 |
|
VLGC |
|
S758 |
|
January 2016 |
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dormant Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
Incorporation Date |
|
|
|
|
|
|
|
|
|
Capricorn LPG Transport LLC |
|
November 15, 2013 |
|
|
|
|
|
|
|
|
|
Comet LPG Transport LLC |
|
November 11, 2013 |
|
|
|
|
|
|
|
|
|
Constitution LPG Transport LLC |
|
February 17, 2014 |
|
|
|
|
|
|
|
|
|
Corsair LPG Transport LLC |
|
June 24, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG Management Corp |
|
July 2, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG (USA) Ltd (incorporated in USA) |
|
July 2, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG (UK) Ltd (incorporated in UK) |
|
November 18, 2013 |
|
|
|
|
|
|
|
|
|
(1) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(2) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
The Company is engaged in the transportation of liquefied petroleum gas worldwide through the ownership and operation of LPG tankers. The Company outsourced the technical and commercial management of its vessels to Dorian (Hellas), S.A. (“Dorian Hellas” or the “Manager”), a related party, for the period ended March 31, 2014.
The following charterers individually accounted for more than 10% of the Company’s revenue for the period ended March 31, 2014:
Charterer |
|
% of revenue |
|
Statoil ASA |
|
51 |
|
Naftomar Shipping and Trading Co. Ltd |
|
13 |
|
Kuwait Petroleum Corporation |
|
10 |
|
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 income 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 period 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 period 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): Trade receivables (net), 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 period 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: Vessels 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 balance sheet.
Commissions: Charter hire commissions to brokers or the Manager, 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) 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.
(q) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the consolidated financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes 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 offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of income. For the periods presented, no derivatives were accounted for as accounting hedges.
(r) 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.
(s) 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.
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3. Transactions with Related Parties
(a) Dorian Holdings: Dorian LPG Ltd. was formed by Dorian Holdings on July 1, 2013, to acquire and operate LPG tankers and initially to acquire the LPG tankers held by affiliates of Dorian Holdings. The acquisitions of the vessels from affiliates of Dorian Holdings were treated as a business acquisition, refer Notes 1 and 4. In addition on July 29, 2013, we entered into a license agreement with Dorian Holdings pursuant to which Dorian Holdings has granted us a non-transferable, non-exclusive, perpetual (subject to termination for material breach or a change of control event), world-wide, royalty-free right and license to use the Dorian logo and “Dorian LPG” in connection with our LPG business.
(b) SEACOR Holdings Inc. (“SEACOR”): On April 29, 2013, affiliates of the Company entered into a series of agreements with subsidiaries of SEACOR under which the affiliates of the Company granted certain rights to SEACOR to purchase newbuilding contracts for VLGCs and associated options. The affiliates of the Company had the right to repurchase a portion of those contracts and the associated options. As part of these agreements, subsidiaries of SEACOR paid the first installment under the newbuilding contracts to the shipyard, which, under the terms of the agreements, could be partially acquired by Dorian affiliates for the amount of the installments paid, certain agreed third party expenses, and a capital charge of 6% per annum.
As described in Note 1, the Company acquired a 100% interest in SEACOR LPG I LLC, a party to a contract for the construction of one VLGC, $49.9 million in cash and the assignment to the Company of option rights to purchase 1.5 VLGC vessels, from SEACOR in exchange for 4,667,135 shares of its common stock. This transaction was accounted for as an asset acquisition.
The fair value of the transaction was determined based on the number of shares issued by the Company. 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) which was the price per share for the Company’s common shares issued to private investors on the same date.
The total transaction value of $59.4 million (including transaction costs) was allocated to the assets purchased as follows:
Cash |
|
49,854,870 |
|
Purchase contract for one VLGC newbuilding contract (includes advance payment) |
|
7,009,675 |
|
Purchase option contracts |
|
2,529,126 |
|
|
|
59,393,671 |
|
The allocation between the newbuilding contract and the purchase options was based on their relative fair value. The fair value of the newbuilding contract and 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 for newbuilding contracts any advance to the shipyard as of the acquisition date. 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.
(c) Scorpio Tankers Inc. (“Scorpio”): On November 26, 2013, the Company issued 7,990,425 shares of its common stock to Scorpio as consideration for 100% interest in thirteen subsidiary companies, (each a party to a contract for the construction of one VLGC) and $1.9 million in cash. This transaction was accounted for as an asset acquisition.
The fair value of the transaction was determined based on the number of shares issued by the Company. The fair value of the common stock was determined to be NOK92.50 per share (or $15.16 per share at the exchange rate on November 26, 2013), which was the price per share for the Company’s common shares issued to private investors on the same date.
The total transaction value of $121.3 million (including transaction costs) was allocated to the assets purchased as follows:
Cash |
|
1,930,000 |
|
Purchase contract for thirteen VLGC newbuilding contracts (includes advance payments) |
|
119,386,040 |
|
|
|
121,316,040 |
|
The cost of the group of non-cash assets was allocated to each of the new building contracts based on their relative fair value. The fair value of each newbuilding contract was determined as the excess of the purchase consideration as of the acquisition date for similar vessels with similar delivery dates based on valuation from an independent broker over the purchase consideration of the contracts acquired plus any advance paid to the shipyard, 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.
(d) Dorian (Hellas) S.A.:
A. Ship-Owning Companies Management Agreements: Pursuant to management agreements entered into by each vessel owning subsidiary on July 26, 2013, as amended, with Dorian (Hellas), the technical, crew and commercial management as well as insurance and accounting services of its vessels was outsourced to the Manager. In addition, under these management agreements, strategic and financial services have also been outsourced to the Manager. The Manager has entered into agreements with each of Eagle Ocean Transport Inc. (“Eagle Ocean Transport”) and Highbury Shipping Services Limited (“HSSL”), to provide certain of these services on behalf of the vessel owning companies. Mr. John Hadjipateras, our Chairman, President and CEO, who is also the chairman of Dorian Holdings, owns 100% of Eagle Ocean Transport, and our Vice President of Chartering, Insurance and Legal, Nigel Grey-Turner, owns 100% of HSSL. The fees payable for the above services to our Manager amount to $93,750 per month per vessel, which is payable one month in advance. These management agreements terminated on June 30, 2014.
Management fees related to these agreements for the period July 1, 2013 to March 31, 2014 amounted to $3,028,889 and are presented in Management fees- related party in the consolidated statement of operations.
B. Pre-Delivery Services: A fixed monthly fee of $15,000 per hull is payable to the Manager for pre-delivery services provided during the period from July 29, 2013 until the date of delivery of each newbuilding. Management fees related to the pre-delivery services for the period July 1, 2013 to March 31, 2014 amounted to $1,229,003 of which $93,467 is presented in Management fees-related party in the consolidated statement of operations and $1,135,536 was capitalized and presented in vessels under construction in the consolidated balance sheet.
(e) Eagle Ocean Transport Inc.: As part of the series of agreements with SEACOR, Eagle Ocean Transport, a company 100% owned by Mr. John Hadjipateras, is entitled to retain 100% of any portion of the shipbroker fee rebated to it as compensation for its services in securing the newbuilding contracts. To the extent that any fees are received in respect of option vessels under such agreements, the fees shall be shared evenly between SEACOR and Eagle Ocean Transport. For the period from July 1, 2013 to March 31, 2014 Eagle Ocean Transport received $457,940 of shipbroker rebates for its services in securing the newbuilding contracts. In addition, Eagle Ocean Transport was reimbursed for an amount of $293,869, representing costs incurred on behalf of the Company relating to equity issuances and debt restructuring for the period July 1, 2013 to March 31, 2014.
The amounts due to/from related parties represent amounts due to/from the Manager relating to payments made by the Manager on behalf of the Company relating to the vessels operations, fees due to the Manager for services rendered, net of amounts transferred to the Manager.
|
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 |
|
Grendon |
|
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 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 are included in the consolidated statement of operations for the period ended March 31, 2014 and 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, 2012:
$ in 000’s |
|
For the year ended |
|
For the year ended |
| ||
Net revenues |
|
$ |
45,017 |
|
$ |
38,662 |
|
Net income/ (loss) |
|
$ |
6,613 |
|
$ |
(6,639 |
) |
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.
|
5. Inventories
The Company’s inventories by type were as follows:
|
|
March 31, 2014 |
|
Bunkers |
|
596,768 |
|
Lubricants |
|
358,381 |
|
Victualing |
|
83,840 |
|
Bonded stores |
|
15,354 |
|
Communication cards |
|
3,986 |
|
Total |
|
1,058,329 |
|
|
6. Vessels, Net
|
|
Vessel cost |
|
Accumulated |
|
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 |
|
The Company’s VLGC vessels with a carrying value of $188.7 million as of March 31, 2014 are first-priority mortgaged as collateral to secure the bank loan discussed in Note 11. No impairment loss was recorded for the period presented.
|
7. Vessels Under Construction
Vessels under construction is comprised of the following as of March 31, 2014:
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 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 |
|
Vessels under construction |
|
323,206,206 |
|
The installment payments to the shipyards, totaling $169.3 million, represent scheduled payments made by the Company to the shipyards subsequent to the acquisition of the newbuilding contracts and payments relating to the option exercise of three newbuilding contracts. Other capitalized expenditures 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.
On February 21, 2014, pursuant to the option agreements with Hyundai Heavy Industries Co. Ltd., three newbuilding contracts were executed with a total contract price of $216.7 million (refer Notes 3b and 4).
|
8. Other Fixed Assets, Net
Other fixed assets of $60,904 as of March 31, 2014, represent leasehold improvements, software and furniture and fixtures at cost and had no accumulated depreciation as of March 31, 2014 as they had not yet been brought into use.
|
9. Deferred Charges, Net
Deferred charges of $2,555,674 as of March 31, 2014, represent deferred offering costs of $1,304,343 related to the Company’s planned initial public offering, deferred financing costs of $716,040 and deferred drydocking costs of $535,291.
The movement of deferred financing costs and drydocking costs is presented in the table below:
|
|
Financing |
|
Drydocking |
|
On inception , July 1, 2013 |
|
— |
|
— |
|
Additions |
|
1,516,847 |
|
600,394 |
|
Amortization |
|
(800,807 |
) |
(65,103 |
) |
Balance, March 31, 2014 |
|
716,040 |
|
535,291 |
|
The drydocking costs incurred during the period ended March 31, 2014 relate to the drydocking for Captain Nicholas ML which was drydocked during the period under review.
|
10. Accrued Expenses
Accrued expenses comprised of the following:
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,439,237 |
|
Accrued IPO charges |
|
469,707 |
|
Accrued voyage and vessel operating expenses |
|
87,029 |
|
Other |
|
200,413 |
|
Total |
|
2,196,386 |
|
|
11. Long-Term Debt
The table below presents the loans outstanding as of March 31, 2014:
Secured bank debt |
|
|
|
Royal Bank of Scotland plc. (RBS) |
|
|
|
Tranche A |
|
44,200,000 |
|
Tranche B |
|
33,241,000 |
|
Tranche C |
|
51,277,500 |
|
Total |
|
128,718,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
9,612,000 |
|
Long-term debt—net of current portion |
|
119,106,500 |
|
Total |
|
128,718,500 |
|
The minimum annual principal payments, in accordance with the loan agreement, required to be made after March 31, 2014 are as follows:
Year ending March 31,: |
|
|
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
2019 |
|
57,268,000 |
|
Thereafter |
|
33,002,500 |
|
Total |
|
128,718,500 |
|
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, which replaced the prior borrowing arrangements of the Predecessor. The 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 commencing 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 commencing 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 commencing on January 21, 2014 plus a balloon of $27,520,000 payable concurrently with the last installment July 21, 2020.
The loan facility bears interest at LIBOR plus a margin of 1.5% per annum until the delivery of the vessel under construction contracted by Corsair (the “Corsair Vessel”) but no later than September 30, 2014 upon which date the margin will be 2.0%. The margin will be increased to 2.5% one year from the delivery of the Corsair Vessel until maturity.
The loan facility is secured by first priority mortgages on the vessels financed and first assignments of all freights, earnings and insurances. In addition the Borrowers were obliged to maintain $66,538,170 in a restricted cash account (the Newbuilding Cash Collateral) which is reduced on the date of the second, third and fourth pre-delivery shipyard installments for the Corsair vessel to $59,145,040, $51,751,910 and $44,358,780, respectively and on delivery of the Corsair vessel is reduced in full. The Corsair vessel will be mortgaged as security upon delivery. The restricted cash account can be reduced with the approval of the bank, if payments to the shipyard are accelerated in consideration of a reduction in the contract price, provided that it will not fall below $29,572,520 prior to delivery date. During October 2013, the Company made an accelerated payment of $28,418,740 to the shipyard in consideration of a reduction in the contract price and as a result the restricted cash account as of March 31, 2014 reduced to $30.9 million.
The 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 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 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 loan facility permits the Borrowers to make expenditures to fund the administration and operation of Dorian LPG.
Debt Covenants: The secured loan agreement contains the following financial covenants which the Company is required to comply with, calculated on a consolidated basis, determined and defined according to the provisions of the loan agreement:
· The ratio of cash flow from operations before interest and finance costs to cash debt service costs (Debt Service Coverage Ratio) shall not be less than 0.75:1 through December 31, 2013, 0.8:1 through December 31, 2014; and 1:1 at all times thereafter.
· The Minimum Shareholders’ Funds as adjusted for any reduction in the vessel fair market value shall not be less than $85 million;
· The ratio of Total Debt to Shareholders Funds shall not exceed 150% at all times;
· Minimum cash of $10 million at the end of each quarter and $1.5 million per mortgaged vessel at all times.
The Company was in compliance with the financial covenants as of March 31, 2014.
|
12. Capital Structure
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. Following the above mentioned private placements and share issuances and as of March 31, 2014, the Company’s eight board seats and common shares were held by Dorian Holdings (three board seats and 11.7% ownership), SeaDor Holdings (three board seats and 19.3% ownership), Scorpio Tankers Inc. (one board seat and 26.5% ownership), and affiliates of Kensico Capital Management (one board seat and 9.5% ownership). These parties retain the ability to exercise significant influence over our operations.
On April 23, 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 48,365,012 after the cancellation of 18 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.
|
13. Revenues
Revenues comprise the following for the period July 1, 2013 to March 31, 2014:
Time charter revenue |
|
17,602,137 |
|
Voyage charter revenue |
|
11,210,785 |
|
Other revenue |
|
820,778 |
|
Total |
|
29,633,700 |
|
Included in time charter revenue is $6,122,695, representing the profit-sharing element of the time charter agreements. Other revenue represents demurrage income and income from charterers relating to reimbursement of expenses such as costs for security guards and war risk insurance.
|
14. Voyage Expenses
Voyage expenses are comprised as follows for the period July 1, 2013 to March 31, 2014:
Bunkers |
|
5,271,126 |
|
Port charges and other related expenses |
|
552,634 |
|
Brokers’ commissions |
|
386,244 |
|
Security cost |
|
298,820 |
|
War risk insurances |
|
37,001 |
|
Other voyage expenses |
|
125,146 |
|
Total voyage expenses |
|
6,670,971 |
|
|
15. Vessel Operating Expenses
Vessel operating expenses are comprised as follows for the period July 1, 2013 to March 31, 2014:
Crew wages and related costs |
|
5,306,441 |
|
Spares and stores |
|
1,395,287 |
|
Lubricants |
|
480,279 |
|
Insurance |
|
566,021 |
|
Repairs and maintenance costs |
|
502,424 |
|
Miscellaneous expenses |
|
144,507 |
|
Total |
|
8,394,959 |
|
|
16. Interest and Finance Costs
Interest and finance costs of $1,579,206 is comprised of interest incurred of $1,666,159, $800,807 of amortization of financing costs, and $84,250 of other finance costs less capitalized interest of $972,010 for the period July 1, 2013 to March 31, 2014.
|
17. Income Taxes
The Company and its 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, derived from two vessel voyages transporting cargo from Houston to ports in Brazil 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.
|
18. Commitments and Contingencies
Commitments under Newbuilding Contracts
As of March 31, 2014, the Company had commitments under shipbuilding contracts for nineteen newbuildings. The Company expects to settle these commitments as follows:
Period ending March 31,: |
|
|
|
2015 |
|
327,577,240 |
|
2016 |
|
829,551,691 |
|
Total |
|
1,157,128,931 |
|
Other
From time to time the Company expects 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. The Company is 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.
|
19. Derivative Instruments
The Company uses interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert the Company’s debt from a floating to a fixed rate. To hedge its exposure to changes in interest rates the Company is a party to five floating-to-fixed interest rate swaps with RBS. The Company became a party to these transactions as part of the business combination with Dorian Holdings LLC whereby RBS novated the interest rate swap agreements such that the exact terms of the original agreement with the Predecessor were transferred to the corresponding entities that retain the interests in each of the vessels which are the main collateral. The principal terms of the interest rate swaps are as follows:
Subsidiary |
|
Termination |
|
Fixed |
|
Nominal value |
|
CMNL(1) |
|
Nov 2018 |
|
5.395 |
% |
20,456,000 |
|
CMNL(1) |
|
Nov 2018 |
|
4.936 |
% |
12,785,000 |
|
CJNP(2) |
|
March 2019 |
|
4.772 |
% |
33,067,125 |
|
CJNP(2) |
|
March 2019 |
|
2.960 |
% |
11,132,875 |
|
CNML(3) |
|
July 2020 |
|
4.350 |
% |
49,880,000 |
|
|
|
|
|
|
|
127,321,000 |
|
(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.
Tabular disclosure of financial derivatives is as follows:
|
|
|
|
March 31, 2014 |
| ||
Derivatives not designated as hedging instruments |
|
Balance sheet Location |
|
Asset |
|
Liability |
|
Interest rate swap agreements |
|
Long-term liabilities—Derivatives instruments |
|
— |
|
14,062,416 |
|
The effect of derivative instruments on the consolidated statement of operations for the period July 1, 2013 to March 31, 2014 is as follows:
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) |
|
July 1, 2013 to |
|
Interest Rate Swap—Change in fair value |
|
Loss on derivatives—net |
|
2,623,456 |
|
Interest Rate Swap—Realized loss |
|
Loss on derivatives—net |
|
(3,727,457 |
) |
Loss on derivatives—net |
|
|
|
(1,104,001 |
) |
|
20. Financial Instruments
The principal financial assets of the Company consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. The principal financial liabilities of the Company consist of long-term bank loan, interest rate swaps, accounts payable, amounts due to related parties and accrued liabilities.
(a) Interest rate risk: The Company’s long-term bank loan is based on LIBOR and hence the Company is exposed to movements in LIBOR. The Company entered into interest rate swap agreements, discussed in Note 19, in order to hedge its variable interest rate exposure.
(b) Fair value: The carrying values of trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments. The fair value of long-term bank loan approximates the recorded value, due to its variable interest rate, being the LIBOR. LIBOR rates are observable at commonly quoted intervals for the full terms of the loan and hence long-term bank loan is considered Level 2 item in accordance with the fair value hierarchy.
The interest rate swaps, discussed in Note 19, are stated at fair value. The fair value of the interest rate swaps 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 the Company would have to pay for the early termination of the agreements.
As of March 31, 2014, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the Company’s consolidated balance sheets. The Company did not have any other assets or liabilities measured at fair value on a nonrecurring basis during the period July 1, 2013 to March 31, 2014.
|
22. Subsequent Events
On April 25, 2014, the Company 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, the Company completed its 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.
On May 22, 2014, the Company completed the issuance of 245,521 common shares related to the overallotment exercise by the underwriters of the Company’s 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. Subsequent to this offering, the Company has 57,128,494 shares issued and outstanding.
On June 25, 2014, the Company completed the exchange offer of unregistered common shares that it previously issued in its prior equity private placements, other than the common shares owned by its 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.
On June 30, 2014, the Company granted 655,000 restricted stock awards to certain of its officers under the equity incentive plan that vest over 5 years.
On July 25, 2014, the Company took delivery of its first vessel under the VLGC Newbuilding Program, the Comet, from Hyundai Heavy Industries Co. Ltd.
|
(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 income 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 period 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 period 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): Trade receivables (net), 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 period 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: Vessels 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 balance sheet.
Commissions: Charter hire commissions to brokers or the Manager, 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) 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.
(q) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the consolidated financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes 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 offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of income. For the periods presented, no derivatives were accounted for as accounting hedges.
(r) 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.
(s) 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.
|
Vessel Owning Subsidiaries
Subsidiary |
|
Acquisition |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CNML LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CMNL LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Grendon Tanker LLC |
|
July 29, 2013 |
|
PGC |
|
LPG Grendon |
|
1996 |
|
5,000 |
|
Newbuild Vessel Owning Subsidiaries
Subsidiary (Vessel’s Name) |
|
Acquisition |
|
Type of |
|
Hull |
|
Estimated |
|
CBM(1) |
|
SeaCor LPG I LLC (Comet) |
|
July 29, 2013 |
|
VLGC |
|
2656 |
|
July 2014 |
|
84,000 |
|
SeaCor LPG II LLC (Corsair) |
|
July 29, 2013 |
|
VLGC |
|
2657 |
|
September 2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
2658 |
|
December 2014 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC (Cougar) |
|
November 26, 2013 |
|
VLGC |
|
S749 |
|
April 2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC (Cobra) |
|
November 26, 2013 |
|
VLGC |
|
S750 |
|
April 2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC (Continental) |
|
November 26, 2013 |
|
VLGC |
|
S753 |
|
June 2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC (Constitution) |
|
November 26, 2013 |
|
VLGC |
|
S755 |
|
June 2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2660 |
|
June 2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC (Commodore) |
|
November 26, 2013 |
|
VLGC |
|
S751 |
|
July 2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC (Cresques) |
|
November 26, 2013 |
|
VLGC |
|
2336 |
|
August 2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC (Cheyenne) |
|
November 26, 2013 |
|
VLGC |
|
S756 |
|
September 2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2661 |
|
September 2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC (Cratis) |
|
November 26, 2013 |
|
VLGC |
|
2337 |
|
October 2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC (Clermont) |
|
November 26, 2013 |
|
VLGC |
|
S752 |
|
September 2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC (Chaparral) |
|
November 26, 2013 |
|
VLGC |
|
S754 |
|
October 2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC (Copernicus) |
|
November 26, 2013 |
|
VLGC |
|
2338 |
|
November 2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2662 |
|
November 2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC (Challenger) |
|
November 26, 2013 |
|
VLGC |
|
S757 |
|
December 2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC (Caravel) |
|
November 26, 2013 |
|
VLGC |
|
S758 |
|
January 2016 |
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dormant Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
Incorporation |
|
|
|
|
|
|
|
|
|
Capricorn LPG Transport LLC |
|
November 15, 2013 |
|
|
|
|
|
|
|
|
|
Comet LPG Transport LLC |
|
November 11, 2013 |
|
|
|
|
|
|
|
|
|
Constitution LPG Transport LLC |
|
February 17, 2014 |
|
|
|
|
|
|
|
|
|
Corsair LPG Transport LLC |
|
June 24, 2013 |
|
|
|
|
|
|
|
|
|
(1) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(2) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
Charterer |
|
% of revenue |
|
Statoil ASA |
|
51 |
|
Naftomar Shipping and Trading Co. Ltd |
|
13 |
|
Kuwait Petroleum Corporation |
|
10 |
|
|
Cash |
|
49,854,870 |
|
Purchase contract for one VLGC newbuilding contract (includes advance payment) |
|
7,009,675 |
|
Purchase option contracts |
|
2,529,126 |
|
|
|
59,393,671 |
|
Cash |
|
1,930,000 |
|
Purchase contract for thirteen VLGC newbuilding contracts (includes advance payments) |
|
119,386,040 |
|
|
|
121,316,040 |
|
|
Fair value of total consideration
|
|
Acquisition |
|
Grendon |
|
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 |
|
$ in 000’s |
|
For the year ended |
|
For the year ended |
| ||
Net revenues |
|
$ |
45,017 |
|
$ |
38,662 |
|
Net income/ (loss) |
|
$ |
6,613 |
|
$ |
(6,639 |
) |
|
|
|
March 31, 2014 |
|
Bunkers |
|
596,768 |
|
Lubricants |
|
358,381 |
|
Victualing |
|
83,840 |
|
Bonded stores |
|
15,354 |
|
Communication cards |
|
3,986 |
|
Total |
|
1,058,329 |
|
|
|
|
Vessel cost |
|
Accumulated |
|
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 |
|
|
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 November 26, 2013 (refer Note 3c) |
|
119,386,040 |
|
Option exercise of three newbuilding contracts from Dorian Holdings and SeaDor 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 |
|
Vessels under construction |
|
323,206,206 |
|
|
|
|
Financing |
|
Drydocking |
|
On inception , July 1, 2013 |
|
— |
|
— |
|
Additions |
|
1,516,847 |
|
600,394 |
|
Amortization |
|
(800,807 |
) |
(65,103 |
) |
Balance, March 31, 2014 |
|
716,040 |
|
535,291 |
|
|
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,439,237 |
|
Accrued IPO charges |
|
469,707 |
|
Accrued voyage and vessel operating expenses |
|
87,029 |
|
Other |
|
200,413 |
|
Total |
|
2,196,386 |
|
|
Secured bank debt |
|
|
|
Royal Bank of Scotland plc. (RBS) |
|
|
|
Tranche A |
|
44,200,000 |
|
Tranche B |
|
33,241,000 |
|
Tranche C |
|
51,277,500 |
|
Total |
|
128,718,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
9,612,000 |
|
Long-term debt—net of current portion |
|
119,106,500 |
|
Total |
|
128,718,500 |
|
Year ending March 31,: |
|
|
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
2019 |
|
57,268,000 |
|
Thereafter |
|
33,002,500 |
|
Total |
|
128,718,500 |
|
|
Time charter revenue |
|
17,602,137 |
|
Voyage charter revenue |
|
11,210,785 |
|
Other revenue |
|
820,778 |
|
Total |
|
29,633,700 |
|
|
Bunkers |
|
5,271,126 |
|
Port charges and other related expenses |
|
552,634 |
|
Brokers’ commissions |
|
386,244 |
|
Security cost |
|
298,820 |
|
War risk insurances |
|
37,001 |
|
Other voyage expenses |
|
125,146 |
|
Total voyage expenses |
|
6,670,971 |
|
|
Crew wages and related costs |
|
5,306,441 |
|
Spares and stores |
|
1,395,287 |
|
Lubricants |
|
480,279 |
|
Insurance |
|
566,021 |
|
Repairs and maintenance costs |
|
502,424 |
|
Miscellaneous expenses |
|
144,507 |
|
Total |
|
8,394,959 |
|
|
Period ending March 31,: |
|
|
|
2015 |
|
327,577,240 |
|
2016 |
|
829,551,691 |
|
Total |
|
1,157,128,931 |
|
|
Subsidiary |
|
Termination |
|
Fixed |
|
Nominal value |
|
CMNL(1) |
|
Nov 2018 |
|
5.395 |
% |
20,456,000 |
|
CMNL(1) |
|
Nov 2018 |
|
4.936 |
% |
12,785,000 |
|
CJNP(2) |
|
March 2019 |
|
4.772 |
% |
33,067,125 |
|
CJNP(2) |
|
March 2019 |
|
2.960 |
% |
11,132,875 |
|
CNML(3) |
|
July 2020 |
|
4.350 |
% |
49,880,000 |
|
|
|
|
|
|
|
127,321,000 |
|
(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.
|
|
|
|
March 31, 2014 |
| ||
Derivatives not designated as hedging instruments |
|
Balance sheet Location |
|
Asset |
|
Liability |
|
Interest rate swap agreements |
|
Long-term liabilities—Derivatives instruments |
|
— |
|
14,062,416 |
|
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) |
|
July 1, 2013 to |
|
Interest Rate Swap—Change in fair value |
|
Loss on derivatives—net |
|
2,623,456 |
|
Interest Rate Swap—Realized loss |
|
Loss on derivatives—net |
|
(3,727,457 |
) |
Loss on derivatives—net |
|
|
|
(1,104,001 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Basis of Presentation and General Information
Dorian LPG Ltd. (“DLPG”) was incorporated on July 1, 2013, under the laws of the Republic of the Marshall Islands, as a wholly-owned subsidiary of Dorian Holdings LLC (“Dorian Holdings”). Dorian Holdings ceased to have control over Dorian LPG on July 29, 2013 as a consequence of the transactions described below. DLPG has a fiscal year end of March 31, and was formed to acquire, own and operate liquefied petroleum gas (“LPG”) tankers.
The terms “we,” “us,” “our,” and the “Company” mean DLPG and all entities included in its consolidated financial statements.
Effective April 25, 2014 the Company effectuated a one-for-five reverse stock split (refer Note 12). Except for the 100 shares issued at inception and subsequently cancelled, all amounts related to number of shares, per share amounts and earnings per share presented in the accompanying consolidated financial statements give retroactive effect to the reverse stock split.
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. DLPG’s shares issued under the private placements completed are listed on the Norwegian OTC A-List under the symbol DORIAN.
The Company successfully closed its initial public offering (“IPO”) on May 13, 2014 and its shares issued in the IPO were listed on the NYSE and trade under the symbol LPG.
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. No one party exercises control of the Company.
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 (collectively the “Company”).
The Company’s subsidiaries which are all wholly-owned and all are incorporated in Republic of the Marshall Islands (unless otherwise indicated below) as of March 31, 2014 are listed below.
Vessel Owning Subsidiaries
Subsidiary |
|
Acquisition |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CNML LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CMNL LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Grendon Tanker LLC |
|
July 29, 2013 |
|
PGC |
|
LPG Grendon |
|
1996 |
|
5,000 |
|
Newbuild Vessel Owning Subsidiaries
Subsidiary (Vessel’s Name) |
|
Acquisition |
|
Type of |
|
Hull |
|
Estimated |
|
CBM(1) |
|
SeaCor LPG I LLC (Comet) |
|
July 29, 2013 |
|
VLGC |
|
2656 |
|
July 2014 |
|
84,000 |
|
SeaCor LPG II LLC (Corsair) |
|
July 29, 2013 |
|
VLGC |
|
2657 |
|
September 2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
2658 |
|
December 2014 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC (Cougar) |
|
November 26, 2013 |
|
VLGC |
|
S749 |
|
April 2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC (Cobra) |
|
November 26, 2013 |
|
VLGC |
|
S750 |
|
April 2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC (Continental) |
|
November 26, 2013 |
|
VLGC |
|
S753 |
|
June 2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC (Constitution) |
|
November 26, 2013 |
|
VLGC |
|
S755 |
|
June 2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2660 |
|
June 2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC (Commodore) |
|
November 26, 2013 |
|
VLGC |
|
S751 |
|
July 2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC (Cresques) |
|
November 26, 2013 |
|
VLGC |
|
2336 |
|
August 2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC (Cheyenne) |
|
November 26, 2013 |
|
VLGC |
|
S756 |
|
September 2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2661 |
|
September 2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC (Cratis) |
|
November 26, 2013 |
|
VLGC |
|
2337 |
|
October 2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC (Clermont) |
|
November 26, 2013 |
|
VLGC |
|
S752 |
|
September 2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC (Chaparral) |
|
November 26, 2013 |
|
VLGC |
|
S754 |
|
October 2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC (Copernicus) |
|
November 26, 2013 |
|
VLGC |
|
2338 |
|
November 2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2662 |
|
November 2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC (Challenger) |
|
November 26, 2013 |
|
VLGC |
|
S757 |
|
December 2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC (Caravel) |
|
November 26, 2013 |
|
VLGC |
|
S758 |
|
January 2016 |
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dormant Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
Incorporation Date |
|
|
|
|
|
|
|
|
|
Capricorn LPG Transport LLC |
|
November 15, 2013 |
|
|
|
|
|
|
|
|
|
Comet LPG Transport LLC |
|
November 11, 2013 |
|
|
|
|
|
|
|
|
|
Constitution LPG Transport LLC |
|
February 17, 2014 |
|
|
|
|
|
|
|
|
|
Corsair LPG Transport LLC |
|
June 24, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG Management Corp |
|
July 2, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG (USA) Ltd (incorporated in USA) |
|
July 2, 2013 |
|
|
|
|
|
|
|
|
|
Dorian LPG (UK) Ltd (incorporated in UK) |
|
November 18, 2013 |
|
|
|
|
|
|
|
|
|
(1) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(2) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
The Company is engaged in the transportation of liquefied petroleum gas worldwide through the ownership and operation of LPG tankers. The Company outsourced the technical and commercial management of its vessels to Dorian (Hellas), S.A. (“Dorian Hellas” or the “Manager”), a related party, for the period ended March 31, 2014.
The following charterers individually accounted for more than 10% of the Company’s revenue for the period ended March 31, 2014:
Charterer |
|
% of revenue |
|
Statoil ASA |
|
51 |
|
Naftomar Shipping and Trading Co. Ltd |
|
13 |
|
Kuwait Petroleum Corporation |
|
10 |
1. Basis of Presentation and General Information
The accompanying combined financial statements include the accounts of entities listed below (collectively, the “Owning Companies” or “Company” or “Predecessor”). The Owning Companies have been presented on a combined basis, as they had common board of directors who functioned as the executive management and made all significant management decisions throughout the periods presented. In order to present the track record of this management team the entities are presented in a single combined set of financial statements.
Vessel owning Company |
|
Date of |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(2) |
|
Cepheus Transport Ltd. (Cepheus)(1) |
|
March 17, 2004 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
Lyra Gas Transport Ltd (Lyra)(1) |
|
January 30, 2005 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
Cetus Transport Ltd. (Cetus)(1) |
|
January 27, 2004 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Orion Tankers Limited (Orion)(1) |
|
October 26, 2005 |
|
PGC |
|
Grendon |
|
1996 |
|
5,000 |
|
(1) Incorporated in Republic of Liberia.
(2) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(3) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
The Owning Companies are engaged in providing international seaborne transportation services of liquefied petroleum gas (LPG) worldwide through the ownership of LPG tankers to LPG producers and users. The Owning Companies’ vessels are managed by Dorian (Hellas) S.A.-Panama (the “Manager”), a related party. The Manager is a company incorporated in Panama and has a registered branch in Greece, established in 1974 under the provisions of Law 89/1967, 378/1968 and article 25 of law 27/75, as amended by article 4 of law 2234/94.
The following charterers individually accounted for more than 10% of the Company’s revenues as follows:
|
|
% of total revenues |
| ||||
|
|
April 1, 2013 |
|
Year ended |
| ||
Charterer |
|
July 28, 2013 |
|
2013 |
|
2012 |
|
Statoil Hydro ASA |
|
49 |
|
53 |
|
89 |
|
Petredec Ltd. |
|
18 |
|
19 |
|
10 |
|
E1Corp. |
|
19 |
|
17 |
|
— |
|
Astomos Energy Corporation |
|
12 |
|
— |
|
— |
|
|
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 income 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 period 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 period 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): Trade receivables (net), 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 period 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: Vessels 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 balance sheet.
Commissions: Charter hire commissions to brokers or the Manager, 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) 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.
(q) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the consolidated financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes 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 offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of income. For the periods presented, no derivatives were accounted for as accounting hedges.
(r) 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.
(s) 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.
2. Significant Accounting Policies
(a) Principles of combination: The accompanying combined 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 and operating results of the legal entities comprising the Owning Companies as discussed in Note 1, which were all under common management. The combined statements represent an aggregation of the U.S. GAAP financial information of the entities comprising the Owning Companies. All intercompany balances and transactions have been eliminated upon combination.
(b) Use of estimates: The preparation of the Predecessor combined 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.
(d) Foreign currency translation: The functional currency of the Company is the U.S. Dollar. Each foreign currency transaction is measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. As of the 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 combined statement of operations.
(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) Trade receivables (net): Trade receivables (net), 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. No allowance for doubtful accounts was recorded for the periods presented.
(g) 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.
(h) Vessels: Vessels are stated at cost, less accumulated depreciation. The cost of the vessels 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 cost of vessels constructed includes financing costs incurred during the construction period. 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.
(i) 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. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Company’s vessels.
(j) 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, which is estimated to be $ 400 per lightweight ton. Management of the Owning Companies estimates the useful life of its vessels to be 20 years from the date of initial delivery from the shipyard for VLGC’s and 25 years for PGC vessels. Secondhand vessels are depreciated from the date of their acquisition through their remaining estimated useful life.
(k) Drydocking and special survey costs: Drydocking and special survey costs are accounted under deferral method whereby 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 a vessel once 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 combined statements of operations.
(l) Financing costs: Financing fees incurred for obtaining new loans and credit facilities are deferred and amortized to interest expense over the respective 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 extinguishment. 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 extinguishment. The unamortized financing costs are reflected in Deferred Charges in the accompanying combined balance sheets.
(m) Revenue 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. Accrued revenue results 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 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.
Commissions: Charter hire commissions to brokers or the Manager 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.
(n) 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.
(o) Segment reporting: Each of the Owning 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.
(p) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the combined financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes in current period earnings.
(q) 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. |
(r) Recent accounting pronouncements: There are no recent accounting pronouncements the adoption of which would have a material effect on the Company’s combined financial statements in the current period or expected to have an impact on future periods.
|
3. Transactions with Related Parties
(a) Dorian Holdings: Dorian LPG Ltd. was formed by Dorian Holdings on July 1, 2013, to acquire and operate LPG tankers and initially to acquire the LPG tankers held by affiliates of Dorian Holdings. The acquisitions of the vessels from affiliates of Dorian Holdings were treated as a business acquisition, refer Notes 1 and 4. In addition on July 29, 2013, we entered into a license agreement with Dorian Holdings pursuant to which Dorian Holdings has granted us a non-transferable, non-exclusive, perpetual (subject to termination for material breach or a change of control event), world-wide, royalty-free right and license to use the Dorian logo and “Dorian LPG” in connection with our LPG business.
(b) SEACOR Holdings Inc. (“SEACOR”): On April 29, 2013, affiliates of the Company entered into a series of agreements with subsidiaries of SEACOR under which the affiliates of the Company granted certain rights to SEACOR to purchase newbuilding contracts for VLGCs and associated options. The affiliates of the Company had the right to repurchase a portion of those contracts and the associated options. As part of these agreements, subsidiaries of SEACOR paid the first installment under the newbuilding contracts to the shipyard, which, under the terms of the agreements, could be partially acquired by Dorian affiliates for the amount of the installments paid, certain agreed third party expenses, and a capital charge of 6% per annum.
As described in Note 1, the Company acquired a 100% interest in SEACOR LPG I LLC, a party to a contract for the construction of one VLGC, $49.9 million in cash and the assignment to the Company of option rights to purchase 1.5 VLGC vessels, from SEACOR in exchange for 4,667,135 shares of its common stock. This transaction was accounted for as an asset acquisition.
The fair value of the transaction was determined based on the number of shares issued by the Company. 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) which was the price per share for the Company’s common shares issued to private investors on the same date.
The total transaction value of $59.4 million (including transaction costs) was allocated to the assets purchased as follows:
Cash |
|
49,854,870 |
|
Purchase contract for one VLGC newbuilding contract (includes advance payment) |
|
7,009,675 |
|
Purchase option contracts |
|
2,529,126 |
|
|
|
59,393,671 |
|
The allocation between the newbuilding contract and the purchase options was based on their relative fair value. The fair value of the newbuilding contract and 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 for newbuilding contracts any advance to the shipyard as of the acquisition date. 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.
(c) Scorpio Tankers Inc. (“Scorpio”): On November 26, 2013, the Company issued 7,990,425 shares of its common stock to Scorpio as consideration for 100% interest in thirteen subsidiary companies, (each a party to a contract for the construction of one VLGC) and $1.9 million in cash. This transaction was accounted for as an asset acquisition.
The fair value of the transaction was determined based on the number of shares issued by the Company. The fair value of the common stock was determined to be NOK92.50 per share (or $15.16 per share at the exchange rate on November 26, 2013), which was the price per share for the Company’s common shares issued to private investors on the same date.
The total transaction value of $121.3 million (including transaction costs) was allocated to the assets purchased as follows:
Cash |
|
1,930,000 |
|
Purchase contract for thirteen VLGC newbuilding contracts (includes advance payments) |
|
119,386,040 |
|
|
|
121,316,040 |
|
The cost of the group of non-cash assets was allocated to each of the new building contracts based on their relative fair value. The fair value of each newbuilding contract was determined as the excess of the purchase consideration as of the acquisition date for similar vessels with similar delivery dates based on valuation from an independent broker over the purchase consideration of the contracts acquired plus any advance paid to the shipyard, 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.
(d) Dorian (Hellas) S.A.:
A. Ship-Owning Companies Management Agreements: Pursuant to management agreements entered into by each vessel owning subsidiary on July 26, 2013, as amended, with Dorian (Hellas), the technical, crew and commercial management as well as insurance and accounting services of its vessels was outsourced to the Manager. In addition, under these management agreements, strategic and financial services have also been outsourced to the Manager. The Manager has entered into agreements with each of Eagle Ocean Transport Inc. (“Eagle Ocean Transport”) and Highbury Shipping Services Limited (“HSSL”), to provide certain of these services on behalf of the vessel owning companies. Mr. John Hadjipateras, our Chairman, President and CEO, who is also the chairman of Dorian Holdings, owns 100% of Eagle Ocean Transport, and our Vice President of Chartering, Insurance and Legal, Nigel Grey-Turner, owns 100% of HSSL. The fees payable for the above services to our Manager amount to $93,750 per month per vessel, which is payable one month in advance. These management agreements terminated on June 30, 2014.
Management fees related to these agreements for the period July 1, 2013 to March 31, 2014 amounted to $3,028,889 and are presented in Management fees- related party in the consolidated statement of operations.
B. Pre-Delivery Services: A fixed monthly fee of $15,000 per hull is payable to the Manager for pre-delivery services provided during the period from July 29, 2013 until the date of delivery of each newbuilding. Management fees related to the pre-delivery services for the period July 1, 2013 to March 31, 2014 amounted to $1,229,003 of which $93,467 is presented in Management fees-related party in the consolidated statement of operations and $1,135,536 was capitalized and presented in vessels under construction in the consolidated balance sheet.
(e) Eagle Ocean Transport Inc.: As part of the series of agreements with SEACOR, Eagle Ocean Transport, a company 100% owned by Mr. John Hadjipateras, is entitled to retain 100% of any portion of the shipbroker fee rebated to it as compensation for its services in securing the newbuilding contracts. To the extent that any fees are received in respect of option vessels under such agreements, the fees shall be shared evenly between SEACOR and Eagle Ocean Transport. For the period from July 1, 2013 to March 31, 2014 Eagle Ocean Transport received $457,940 of shipbroker rebates for its services in securing the newbuilding contracts. In addition, Eagle Ocean Transport was reimbursed for an amount of $293,869, representing costs incurred on behalf of the Company relating to equity issuances and debt restructuring for the period July 1, 2013 to March 31, 2014.
The amounts due to/from related parties represent amounts due to/from the Manager relating to payments made by the Manager on behalf of the Company relating to the vessels operations, fees due to the Manager for services rendered, net of amounts transferred to the Manager.
3. Transactions with Related Parties
Dorian (Hellas) S.A:
Ship-Owning Companies Management Agreements: The Owning Companies historically outsourced the technical, crew and commercial management as well as insurance and accounting services of the vessels to Dorian (Hellas) S.A., pursuant to management agreements (“Management Agreements”) with each vessel owning subsidiary. These agreements had an initial term of 12 months and thereafter could be terminated by either party giving two months written notice. For each of the periods presented, under the Management Agreements the Manager received for each VLGC and PGC vessel a commission of 1.25% or 2%, respectively, of the gross freight, demurrage, dead freights and charter hire which are due and payable (“charter hire commission”) and a fixed monthly management fee of $40,000 or $32,000 per vessel respectively. In addition, under the Management Agreements, the Manager is entitled to a commission of 1% on the contract price, for any vessel bought or sold.
The following amounts charged by the Manager are included in the combined statement of operations:
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
(i) Charter hire commissions , included in Voyage expenses—related party |
|
198,360 |
|
505,926 |
|
448,683 |
|
(ii) Management fees |
|
601,202 |
|
1,824,000 |
|
1,824,000 |
|
The amounts due to/from related parties represent amounts due to/from the Manager relating to payments made by the Manager on behalf of each of the Owning Companies net of amounts transferred to the Manager.
|
5. Inventories
The Company’s inventories by type were as follows:
|
|
March 31, 2014 |
|
Bunkers |
|
596,768 |
|
Lubricants |
|
358,381 |
|
Victualing |
|
83,840 |
|
Bonded stores |
|
15,354 |
|
Communication cards |
|
3,986 |
|
Total |
|
1,058,329 |
|
4. Inventories
Inventories by type were as follows:
|
|
March 31, |
|
Bunkers |
|
1,200,591 |
|
Victualing |
|
64,969 |
|
Bonded stores |
|
16,924 |
|
Lubricants |
|
418,987 |
|
Communication cards |
|
6,770 |
|
Total |
|
1,708,241 |
|
|
6. Vessels, Net
|
|
Vessel cost |
|
Accumulated |
|
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 |
|
The Company’s VLGC vessels with a carrying value of $188.7 million as of March 31, 2014 are first-priority mortgaged as collateral to secure the bank loan discussed in Note 11. No impairment loss was recorded for the period presented.
5. Vessels, Net
|
|
Vessel cost |
|
Accumulated |
|
Net book |
|
Balance, April 1, 2012 |
|
252,023,353 |
|
(53,743,681 |
) |
198,279,672 |
|
Vessel improvements |
|
469,929 |
|
— |
|
469,929 |
|
Depreciation |
|
— |
|
(11,671,879 |
) |
(11,671,879 |
) |
Balance, March 31, 2013 |
|
252,493,282 |
|
(65,415,560 |
) |
187,077,722 |
|
Vessel improvements |
|
90,492 |
|
— |
|
90,492 |
|
Depreciation |
|
— |
|
(3,839,271 |
) |
(3,839,271 |
) |
Balance, July 28, 2013 |
|
252,583,774 |
|
(69,254,831 |
) |
183,328,943 |
|
All the Company’s vessels were first-priority mortgaged as collateral to secure the bank loans discussed in Note 8. No impairment loss was identified or recorded for the years ended March 31, 2013.
The vessel improvements relate to improvements to the vessels and include systems to improve the consumption of the main engines lubricating oil, fuel system modification (double fuel system), and modifications to increase the vessel cargo operation flexibility.
|
9. Deferred Charges, Net
Deferred charges of $2,555,674 as of March 31, 2014, represent deferred offering costs of $1,304,343 related to the Company’s planned initial public offering, deferred financing costs of $716,040 and deferred drydocking costs of $535,291.
The movement of deferred financing costs and drydocking costs is presented in the table below:
|
|
Financing |
|
Drydocking |
|
On inception , July 1, 2013 |
|
— |
|
— |
|
Additions |
|
1,516,847 |
|
600,394 |
|
Amortization |
|
(800,807 |
) |
(65,103 |
) |
Balance, March 31, 2014 |
|
716,040 |
|
535,291 |
|
The drydocking costs incurred during the period ended March 31, 2014 relate to the drydocking for Captain Nicholas ML which was drydocked during the period under review.
6. Deferred Charges, Net
The deferred charges comprised of the following:
|
|
Financing |
|
Drydocking |
|
Total |
|
April 1, 2012 |
|
310,662 |
|
1,302,458 |
|
1,613,120 |
|
Amortization |
|
(48,307 |
) |
(352,950 |
) |
(401,257 |
) |
March 31, 2013 |
|
262,355 |
|
949,508 |
|
1,211,863 |
|
Amortization |
|
(15,437 |
) |
(116,038 |
) |
(131,475 |
) |
July 28, 2013 |
|
246,918 |
|
833,470 |
|
1,080,388 |
|
|
10. Accrued Expenses
Accrued expenses comprised of the following:
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,439,237 |
|
Accrued IPO charges |
|
469,707 |
|
Accrued voyage and vessel operating expenses |
|
87,029 |
|
Other |
|
200,413 |
|
Total |
|
2,196,386 |
|
7. Accrued Expenses
Accrued expenses comprise of the following:
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,407,673 |
|
Accrued voyage and vessel operating expenses |
|
10,912 |
|
Total |
|
1,418,585 |
|
|
11. Long-Term Debt
The table below presents the loans outstanding as of March 31, 2014:
Secured bank debt |
|
|
|
Royal Bank of Scotland plc. (RBS) |
|
|
|
Tranche A |
|
44,200,000 |
|
Tranche B |
|
33,241,000 |
|
Tranche C |
|
51,277,500 |
|
Total |
|
128,718,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
9,612,000 |
|
Long-term debt—net of current portion |
|
119,106,500 |
|
Total |
|
128,718,500 |
|
The minimum annual principal payments, in accordance with the loan agreement, required to be made after March 31, 2014 are as follows:
Year ending March 31,: |
|
|
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
2019 |
|
57,268,000 |
|
Thereafter |
|
33,002,500 |
|
Total |
|
128,718,500 |
|
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, which replaced the prior borrowing arrangements of the Predecessor. The 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 commencing 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 commencing 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 commencing on January 21, 2014 plus a balloon of $27,520,000 payable concurrently with the last installment July 21, 2020.
The loan facility bears interest at LIBOR plus a margin of 1.5% per annum until the delivery of the vessel under construction contracted by Corsair (the “Corsair Vessel”) but no later than September 30, 2014 upon which date the margin will be 2.0%. The margin will be increased to 2.5% one year from the delivery of the Corsair Vessel until maturity.
The loan facility is secured by first priority mortgages on the vessels financed and first assignments of all freights, earnings and insurances. In addition the Borrowers were obliged to maintain $66,538,170 in a restricted cash account (the Newbuilding Cash Collateral) which is reduced on the date of the second, third and fourth pre-delivery shipyard installments for the Corsair vessel to $59,145,040, $51,751,910 and $44,358,780, respectively and on delivery of the Corsair vessel is reduced in full. The Corsair vessel will be mortgaged as security upon delivery. The restricted cash account can be reduced with the approval of the bank, if payments to the shipyard are accelerated in consideration of a reduction in the contract price, provided that it will not fall below $29,572,520 prior to delivery date. During October 2013, the Company made an accelerated payment of $28,418,740 to the shipyard in consideration of a reduction in the contract price and as a result the restricted cash account as of March 31, 2014 reduced to $30.9 million.
The 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 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 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 loan facility permits the Borrowers to make expenditures to fund the administration and operation of Dorian LPG.
Debt Covenants: The secured loan agreement contains the following financial covenants which the Company is required to comply with, calculated on a consolidated basis, determined and defined according to the provisions of the loan agreement:
· The ratio of cash flow from operations before interest and finance costs to cash debt service costs (Debt Service Coverage Ratio) shall not be less than 0.75:1 through December 31, 2013, 0.8:1 through December 31, 2014; and 1:1 at all times thereafter.
· The Minimum Shareholders’ Funds as adjusted for any reduction in the vessel fair market value shall not be less than $85 million;
· The ratio of Total Debt to Shareholders Funds shall not exceed 150% at all times;
· Minimum cash of $10 million at the end of each quarter and $1.5 million per mortgaged vessel at all times.
The Company was in compliance with the financial covenants as of March 31, 2014.
8. Long-Term Debt
The table below presents the loans outstanding as of March 31, 2013:
Secured bank |
|
March 31, |
|
(a) Royal Bank of Scotland plc (RBS) |
|
|
|
Tranche B |
|
35,798,000 |
|
Tranche C |
|
47,600,000 |
|
Tranche D |
|
54,932,500 |
|
Total RBS |
|
138,330,500 |
|
(b) Deutsche Schiffsbank |
|
2,500,000 |
|
Total |
|
140,830,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
12,112,000 |
|
Long-term debt |
|
128,718,500 |
|
Total |
|
140,830,500 |
|
The minimum annual principal payments, in accordance with the loan agreements, required to be made after March 31, 2013 are as follows:
Year ending March 31, |
|
|
|
2014 |
|
12,112,000 |
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
Thereafter |
|
90,270,500 |
|
Total |
|
140,830,500 |
|
(a) The Royal Bank of Scotland plc (RBS): On August 12 2005 Cepheus, Lyra, Cetus and Cygnus Transport Ltd, (Cygnus) a related party (collectively the “Borrowers”), jointly and severally entered into a loan facility divided into four tranches. Tranche A of up to $34.9 million related to Cygnus. Tranche B of up to $51.1 million, Tranche C of up to $68.0 million and Tranche D of up to $68.8 million related to the financing of approximately 80% of the construction cost of the Captain Markos NL, the Captain John NP and the Captain Nicholas ML respectively. Tranches B, C, and D were payable in twenty four equal consecutive six monthly installments of $1,278,500; $1,700,000 and $1,720,000 commencing six months after the final draw down date of each tranche, plus a balloon payment of $ $20,456,000, $27,200,000 and 27,520,000 respectively. The loan bears interest at LIBOR plus a margin of 0.925% per annum. The agreement also requires that Borrowers to maintain a minimum market adjusted a security cover ratio equal to at least 120% of amounts due to RBS under the loan agreement. In the event of noncompliance the Borrowers will be required within 30 days of being notified in writing by RBS to make such prepayment or provide such additional security to restore the security cover ratio. As of March 31, 2013 the Borrowers were not in compliance with the security cover which reflected a shortfall of approximately $7.7 million. The shortfall was effectively remedied by June 30, 2013 following normal scheduled debt repayments, a reduction in the out of the money exposure position on the interest rate swaps and an improvement in the aggregate fair market valuations of the mortgaged vessels.
(b) Deutsche Schiffsbank: On July 25, 2007, Orion entered into a loan agreement for $8,000,000 to partially finance the acquisition of LPG Grendon. The loan is payable in twenty four (24) equal consecutive quarterly installments of $250,000, commencing in October 2007, plus a balloon payment of $2,000,000 payable together with the last installment. The loan bears interest at LIBOR plus a margin of 1.1% per annum. In addition Orion was required to maintain a minimum market adjusted asset cover ratio equal to at least 125% of the outstanding loan principal (“security cover ratio”). Orion was in compliance with the security cover ratio as of March 31, 2013. The loan was fully repaid on July 23, 2013.
Securities: All loans are secured by first priority mortgages on the vessels discussed above and first assignments of all freights, earnings and insurances. The loan agreements also contain 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, pay dividend if an event of default has occurred and is continuing, repay any shareholders loans or make any loans or advances, issue any shares in its capital other than to the shareholders, reduce its issued share capital, acquire any subsidiary and consolidate or amalgamate with, or merge into, any other entity.
|
12. Capital Structure
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. Following the above mentioned private placements and share issuances and as of March 31, 2014, the Company’s eight board seats and common shares were held by Dorian Holdings (three board seats and 11.7% ownership), SeaDor Holdings (three board seats and 19.3% ownership), Scorpio Tankers Inc. (one board seat and 26.5% ownership), and affiliates of Kensico Capital Management (one board seat and 9.5% ownership). These parties retain the ability to exercise significant influence over our operations.
On April 23, 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 48,365,012 after the cancellation of 18 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.
9. Owners’ Capital
Each ship owning entity is a body corporate duly organized under the laws of the Republic of Liberia and has an authorized share capital divided into 500 registered and/or bearer shares of no par value, all of which have been issued in the bearer form. The holders of the shares are entitled to one vote on all matters submitted to a vote of owners and to receive all dividends, if any.
Ship-owning entity |
|
Date of |
|
Cetus Transport Ltd. |
|
March 17, 2004 |
|
Lyra Gas Transport Ltd. |
|
January 30, 2005 |
|
Cepheus Transport Ltd. |
|
January 27, 2004 |
|
Orion Tankers Limited |
|
October 26,2005 |
|
As discussed in Note 1, the financial statements are comprised of the combined financial information of the entities that comprise the Owning Companies. As a result, the financial statements reflect owners’ capital and not share capital and additional paid in capital of a parent company. Owners’ capital represents contributions from owners. The owners’ capital was used to partly finance the acquisition of the vessels.
|
13. Revenues
Revenues comprise the following for the period July 1, 2013 to March 31, 2014:
Time charter revenue |
|
17,602,137 |
|
Voyage charter revenue |
|
11,210,785 |
|
Other revenue |
|
820,778 |
|
Total |
|
29,633,700 |
|
Included in time charter revenue is $6,122,695, representing the profit-sharing element of the time charter agreements. Other revenue represents demurrage income and income from charterers relating to reimbursement of expenses such as costs for security guards and war risk insurance.
10. Revenues
Revenues comprise the following:
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Time charter revenue |
|
8,850,543 |
|
24,143,606 |
|
33,399,609 |
|
Voyage charter revenue |
|
6,236,525 |
|
13,581,561 |
|
142,500 |
|
Other income |
|
296,048 |
|
936,679 |
|
1,028,933 |
|
Total |
|
15,383,116 |
|
38,661,846 |
|
34,571,042 |
|
Included in time charter revenue is the profit-sharing element of the time charter agreements of $2,702,635 for the period April 1, 2013 to July 28, 2013, $5,193,454 for the year ended March 31, 2013 and $5,966,726 for the year ended March 31, 2012. Other income represents demurrage income and income from charterers relating to expenses such as security guards and additional war risk insurance recovered from the charterers.
|
14. Voyage Expenses
Voyage expenses are comprised as follows for the period July 1, 2013 to March 31, 2014:
Bunkers |
|
5,271,126 |
|
Port charges and other related expenses |
|
552,634 |
|
Brokers’ commissions |
|
386,244 |
|
Security cost |
|
298,820 |
|
War risk insurances |
|
37,001 |
|
Other voyage expenses |
|
125,146 |
|
Total voyage expenses |
|
6,670,971 |
|
11. Voyage Expenses
Voyage expenses, including voyage expenses—related party, are comprised as follows:
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Brokers commission |
|
396,720 |
|
1,025,761 |
|
897,367 |
|
Bunkers |
|
2,755,445 |
|
6,678,660 |
|
481,903 |
|
Port charges and other related expenses |
|
391,091 |
|
746,574 |
|
180,983 |
|
Security cost |
|
206,940 |
|
582,112 |
|
668,458 |
|
War risk insurances |
|
26,673 |
|
111,626 |
|
241,854 |
|
Other voyage expenses |
|
45,363 |
|
112,450 |
|
53,816 |
|
Total voyage expenses |
|
3,822,232 |
|
9,257,183 |
|
2,524,381 |
|
|
15. Vessel Operating Expenses
Vessel operating expenses are comprised as follows for the period July 1, 2013 to March 31, 2014:
Crew wages and related costs |
|
5,306,441 |
|
Spares and stores |
|
1,395,287 |
|
Lubricants |
|
480,279 |
|
Insurance |
|
566,021 |
|
Repairs and maintenance costs |
|
502,424 |
|
Miscellaneous expenses |
|
144,507 |
|
Total |
|
8,394,959 |
|
12. Vessel Operating Expenses
Vessel operating expenses are comprised of the following:
|
|
April 1, 2013 |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Crew wages and related costs |
|
2,519,315 |
|
7,932,836 |
|
8,007,295 |
|
Spares and stores |
|
1,284,161 |
|
1,502,111 |
|
2,143,239 |
|
Lubricants |
|
176,502 |
|
686,375 |
|
851,829 |
|
Insurance |
|
298,249 |
|
942,847 |
|
997,801 |
|
Repairs and maintenance costs |
|
279,921 |
|
848,576 |
|
2,237,825 |
|
Miscellaneous expenses |
|
80,577 |
|
126,181 |
|
172,360 |
|
Total |
|
4,638,725 |
|
12,038,926 |
|
14,410,349 |
|
|
16. Interest and Finance Costs
Interest and finance costs of $1,579,206 is comprised of interest incurred of $1,666,159, $800,807 of amortization of financing costs, and $84,250 of other finance costs less capitalized interest of $972,010 for the period July 1, 2013 to March 31, 2014.
13. Interest and Finance Cost
Interest and finance cost is comprised of $659,832, $2,434,235, and $2,292,238 of interest on long-term debt and $102,983, $134,750 and $123,617 of other finance costs for the period ended July 28, 2013 and the years ended March 31, 2013 and March 31, 2012, respectively.
|
17. Income Taxes
The Company and its 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, derived from two vessel voyages transporting cargo from Houston to ports in Brazil 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.
14. Income Taxes
The Owning Companies are incorporated in the Republic of Liberia and under the laws of the Liberia, are not subject to income taxes, however, they are subject to registration and tonnage taxes, which are not income taxes and are included in vessel operating expenses in the accompanying combined statements of operations. Furthermore, the Owning Companies are subject to a 4% United States federal tax in respect of its U.S. source shipping income (imposed on gross income without the allowance for any deductions), which is not an income tax. Such taxes have been recorded within Voyage Expenses in the accompanying combined statements of operations. In many cases, these taxes are recovered from the charterers; such amounts recovered are recorded within Revenues in the accompanying combined statements of operations.
|
18. Commitments and Contingencies
Commitments under Newbuilding Contracts
As of March 31, 2014, the Company had commitments under shipbuilding contracts for nineteen newbuildings. The Company expects to settle these commitments as follows:
Period ending March 31,: |
|
|
|
2015 |
|
327,577,240 |
|
2016 |
|
829,551,691 |
|
Total |
|
1,157,128,931 |
|
Other
From time to time the Company expects 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. The Company is 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.
15. Commitments and Contingencies
From time to time the Owning Companies 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. The Owning Companies 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 financial statements.
The Company was jointly and severally liable together with a related party in respect of the related party’s outstanding loan balance of $22,290,000 due under the bank loan as of March 31, 2013 (refer Note 8(a)).
|
19. Derivative Instruments
The Company uses interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert the Company’s debt from a floating to a fixed rate. To hedge its exposure to changes in interest rates the Company is a party to five floating-to-fixed interest rate swaps with RBS. The Company became a party to these transactions as part of the business combination with Dorian Holdings LLC whereby RBS novated the interest rate swap agreements such that the exact terms of the original agreement with the Predecessor were transferred to the corresponding entities that retain the interests in each of the vessels which are the main collateral. The principal terms of the interest rate swaps are as follows:
Subsidiary |
|
Termination |
|
Fixed |
|
Nominal value |
|
CMNL(1) |
|
Nov 2018 |
|
5.395 |
% |
20,456,000 |
|
CMNL(1) |
|
Nov 2018 |
|
4.936 |
% |
12,785,000 |
|
CJNP(2) |
|
March 2019 |
|
4.772 |
% |
33,067,125 |
|
CJNP(2) |
|
March 2019 |
|
2.960 |
% |
11,132,875 |
|
CNML(3) |
|
July 2020 |
|
4.350 |
% |
49,880,000 |
|
|
|
|
|
|
|
127,321,000 |
|
(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.
Tabular disclosure of financial derivatives is as follows:
|
|
|
|
March 31, 2014 |
| ||
Derivatives not designated as hedging instruments |
|
Balance sheet Location |
|
Asset |
|
Liability |
|
Interest rate swap agreements |
|
Long-term liabilities—Derivatives instruments |
|
— |
|
14,062,416 |
|
The effect of derivative instruments on the consolidated statement of operations for the period July 1, 2013 to March 31, 2014 is as follows:
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) |
|
July 1, 2013 to |
|
Interest Rate Swap—Change in fair value |
|
Loss on derivatives—net |
|
2,623,456 |
|
Interest Rate Swap—Realized loss |
|
Loss on derivatives—net |
|
(3,727,457 |
) |
Loss on derivatives—net |
|
|
|
(1,104,001 |
) |
16. Derivative Instruments
The Owning Companies use interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert a portion of the Company’s debt from a floating to a fixed rate. To hedge its exposure to changes in interest rates the Company is a party to five floating-to-fixed interest rate swaps with RBS covering notional amounts aggregating approximately $136,718,000 as of March 31, 2013.
On March 31, 2005 and April 3, 2007 Cetus Transport Ltd entered into an interest rate swap agreement with RBS with effective date November 21, 2006 and November 17, 2006 respectively and termination dated November 21, 2018 and November 17, 2018. Under the terms of this arrangement the Company swaps the notional amount outstanding under the agreement from a floating rate of interest to a fixed rate of 5.395% and 4.936% respectively. The original notional amount of $51,140,000 is reduced semi-annually by $1,278,500 with a final settlement of $20,456,000 due in November, 2018.
On March 9, 2007 and February 7, 2012, Lyra Gas Transport Ltd entered into an interest rate swap agreement with RBS with effective date March 22, 2007 and September 24, 2011 respectively and termination dated March 22, 2019. Under the terms of this arrangement the Company swaps the notional amount outstanding under the agreement from a floating rate of interest to a fixed rate of 4.772% and 2.960% respectively. The original notional amount of $64,146,313 is reduced semi-annually by $1,700,000 with a final settlement of $28,900,000 due in March 22, 2019.
On January 8, 2009, Cepheus Transport Ltd entered into an extendable interest rate swap agreement with the RBS with effective date July 21, 2008 and termination dated July 21, 2014. RBS holds the right to extend the interest rate swap until the July 21 2020. Under the terms of this arrangement the Company swaps the notional amount outstanding under the agreement from a floating rate of interest to a fixed rate of 4.35%. The original notional amount of $68,800,000 is reduced semi-annually by $1,720,000 with a final settlement of $29,240,000 due in July 21, 2020.
Tabular disclosure of financial derivatives is as follows:
|
|
|
|
March 31, 2013 |
| ||
Derivatives not designated as |
|
Balance sheet location |
|
Asset |
|
Liability |
|
Interest Rate Swap Agreements |
|
Long-term liabilities— |
|
— |
|
21,369,878 |
|
Total derivatives not designated as hedging instruments |
|
|
|
— |
|
21,369,878 |
|
The effect of derivative instruments on the combined statements of operations for the periods April 1, 2013 to July 28, 2013 and years ended March 31, 2013 and 2012 is as follows:
Derivatives not designated as |
|
Location of |
|
April 1, 2013 |
|
Year ended March 31, |
| ||
hedging instruments |
|
gain/(loss) recognized |
|
(Unaudited) |
|
2013 |
|
2012 |
|
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives |
|
4,684,007 |
|
(13,680 |
) |
(4,607,773 |
) |
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives |
|
(1,853,802 |
) |
(5,574,799 |
) |
(6,335,543 |
) |
Total gain/(loss) on derivatives |
|
|
|
2,830,205 |
|
(5,588,479 |
) |
(10,943,316 |
) |
|
20. Financial Instruments
The principal financial assets of the Company consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. The principal financial liabilities of the Company consist of long-term bank loan, interest rate swaps, accounts payable, amounts due to related parties and accrued liabilities.
(a) Interest rate risk: The Company’s long-term bank loan is based on LIBOR and hence the Company is exposed to movements in LIBOR. The Company entered into interest rate swap agreements, discussed in Note 19, in order to hedge its variable interest rate exposure.
(b) Fair value: The carrying values of trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments. The fair value of long-term bank loan approximates the recorded value, due to its variable interest rate, being the LIBOR. LIBOR rates are observable at commonly quoted intervals for the full terms of the loan and hence long-term bank loan is considered Level 2 item in accordance with the fair value hierarchy.
The interest rate swaps, discussed in Note 19, are stated at fair value. The fair value of the interest rate swaps 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 the Company would have to pay for the early termination of the agreements.
As of March 31, 2014, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the Company’s consolidated balance sheets. The Company did not have any other assets or liabilities measured at fair value on a nonrecurring basis during the period July 1, 2013 to March 31, 2014.
17. Financial Instruments
The principal financial assets of the Company consist of cash and cash equivalents, amounts due from related parties and trade accounts receivable. The principal financial liabilities of the Company consist of long-term bank loans, interest rate swaps, accounts payable, amounts due to related parties and accrued liabilities.
(a) Interest rate risk: The Company’s long-term bank loans are based on LIBOR and hence the Company is exposed to movements in LIBOR. The Company entered into interest rate swap agreements, discussed in Note 16, in order to hedge its variable interest rate exposure.
(b) Concentration of credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of trade accounts receivable, amounts due from related parties, cash and cash equivalents. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable. The Company places its cash and cash equivalents, with high credit quality financial institutions.
(c) Fair value: The carrying values of trade accounts receivable, amounts due from related parties, cash and cash equivalents, accounts payable, amounts due to related parties and accrued liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments. The fair value of long-term bank loans approximate the recorded value, due to their variable interest rate, being the LIBOR. LIBOR rates are observable at commonly quoted intervals for the full terms of the loans and hence long-term bank loans are considered Level 2 items in accordance with the fair value hierarchy.
The interest rate swaps, discussed in Note 16, are stated at fair value. The fair value of the interest rate swaps 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 the Company would have to pay for the early termination of the agreements.
As of March 31, 2013, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the Company’s combined balance sheet. The Company did not have any other assets or liabilities measured at fair value on a nonrecurring basis during the year ended March 31, 2013.
|
22. Subsequent Events
On April 25, 2014, the Company 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, the Company completed its 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.
On May 22, 2014, the Company completed the issuance of 245,521 common shares related to the overallotment exercise by the underwriters of the Company’s 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. Subsequent to this offering, the Company has 57,128,494 shares issued and outstanding.
On June 25, 2014, the Company completed the exchange offer of unregistered common shares that it previously issued in its prior equity private placements, other than the common shares owned by its 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.
On June 30, 2014, the Company granted 655,000 restricted stock awards to certain of its officers under the equity incentive plan that vest over 5 years.
On July 25, 2014, the Company took delivery of its first vessel under the VLGC Newbuilding Program, the Comet, from Hyundai Heavy Industries Co. Ltd.
18. Subsequent Events
On July 29, 2013, the following transactions took place:
· Cepheus, Lyra and Cetus sold the Captain Nicholas ML, the Captain John NP and the Captain Markos NL to CMNL LPG Transport LLC, CJNP LPG Transport LLC and CNML LPG Transport LLC (being newly created entities of the same shareholders), respectively, which also assumed the related outstanding bank debt and interest rate swaps related to each vessel.
· 100% interest in CMNL LPG Transport LLC, CJNP LPG Transport LLC and CNML LPG Transport LLC was contributed to Dorian LPG LTD in exchange for equity in Dorian LPG LTD.
· The Grendon was sold to Grendon Tanker LLC, a wholly-owned subsidiary of Dorian LPG LTD.
|
(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 income from the effective date of acquisition and up to the effective date of disposal, as appropriate. All intercompany balances and transactions have been eliminated.
(a) Principles of combination: The accompanying combined 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 and operating results of the legal entities comprising the Owning Companies as discussed in Note 1, which were all under common management. The combined statements represent an aggregation of the U.S. GAAP financial information of the entities comprising the Owning Companies. All intercompany balances and transactions have been eliminated upon combination.
(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.
(b) Use of estimates: The preparation of the Predecessor combined 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 period presented and thus has not presented this in the statement of operations or in a separate statement.
(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.
(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 period presented, the Company had no foreign currency derivative instruments.
(d) Foreign currency translation: The functional currency of the Company is the U.S. Dollar. Each foreign currency transaction is measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. As of the 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 combined statement of operations.
(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.
(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.
(g) Trade receivables (net): Trade receivables (net), 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 period presented was zero.
(f) Trade receivables (net): Trade receivables (net), 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. No allowance for doubtful accounts was recorded for the periods presented.
(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.
(g) 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: Vessels 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.
(h) Vessels: Vessels are stated at cost, less accumulated depreciation. The cost of the vessels 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 cost of vessels constructed includes financing costs incurred during the construction period. 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.
(i) 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. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Company’s vessels.
(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.
(j) 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, which is estimated to be $ 400 per lightweight ton. Management of the Owning Companies estimates the useful life of its vessels to be 20 years from the date of initial delivery from the shipyard for VLGC’s and 25 years for PGC vessels. Secondhand 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.
(k) Drydocking and special survey costs: Drydocking and special survey costs are accounted under deferral method whereby 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 a vessel once 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 combined statements 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.
(l) Financing costs: Financing fees incurred for obtaining new loans and credit facilities are deferred and amortized to interest expense over the respective 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 extinguishment. 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 extinguishment. The unamortized financing costs are reflected in Deferred Charges in the accompanying combined balance sheets.
(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 balance sheet.
Commissions: Charter hire commissions to brokers or the Manager, 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.
(m) Revenue 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. Accrued revenue results 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 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.
Commissions: Charter hire commissions to brokers or the Manager 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.
(n) 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) 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.
(o) Segment reporting: Each of the Owning 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.
(q) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the consolidated financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes 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 offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in the consolidated statements of income. For the periods presented, no derivatives were accounted for as accounting hedges.
(p) Derivative Instruments: The Company enters into interest rate swap agreements to manage its exposure to fluctuations of interest rate risk associated with its borrowings. All derivatives are recognized in the combined financial statements 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. When such derivatives do not qualify for hedge accounting, the Company recognizes their fair value changes in current period earnings.
(r) 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.
(q) 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. |
(s) 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.
(r) Recent accounting pronouncements: There are no recent accounting pronouncements the adoption of which would have a material effect on the Company’s combined financial statements in the current period or expected to have an impact on future periods.
|
Vessel Owning Subsidiaries
Subsidiary |
|
Acquisition |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(1) |
|
CNML LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
CJNP LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
CMNL LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Grendon Tanker LLC |
|
July 29, 2013 |
|
PGC |
|
LPG Grendon |
|
1996 |
|
5,000 |
|
Newbuild Vessel Owning Subsidiaries
Subsidiary (Vessel’s Name) |
|
Acquisition |
|
Type of |
|
Hull |
|
Estimated |
|
CBM(1) |
|
SeaCor LPG I LLC (Comet) |
|
July 29, 2013 |
|
VLGC |
|
2656 |
|
July 2014 |
|
84,000 |
|
SeaCor LPG II LLC (Corsair) |
|
July 29, 2013 |
|
VLGC |
|
2657 |
|
September 2014 |
|
84,000 |
|
Corvette LPG Transport LLC |
|
July 29, 2013 |
|
VLGC |
|
2658 |
|
December 2014 |
|
84,000 |
|
Dorian Shanghai LPG Transport LLC (Cougar) |
|
November 26, 2013 |
|
VLGC |
|
S749 |
|
April 2015 |
|
84,000 |
|
Dorian Houston LPG Transport LLC (Cobra) |
|
November 26, 2013 |
|
VLGC |
|
S750 |
|
April 2015 |
|
84,000 |
|
Dorian Sao Paulo LPG Transport LLC (Continental) |
|
November 26, 2013 |
|
VLGC |
|
S753 |
|
June 2015 |
|
84,000 |
|
Dorian Ulsan LPG Transport LLC (Constitution) |
|
November 26, 2013 |
|
VLGC |
|
S755 |
|
June 2015 |
|
84,000 |
|
Concorde LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2660 |
|
June 2015 |
|
84,000 |
|
Dorian Amsterdam LPG Transport LLC (Commodore) |
|
November 26, 2013 |
|
VLGC |
|
S751 |
|
July 2015 |
|
84,000 |
|
Dorian Dubai LPG Transport LLC (Cresques) |
|
November 26, 2013 |
|
VLGC |
|
2336 |
|
August 2015 |
|
84,000 |
|
Dorian Monaco LPG Transport LLC (Cheyenne) |
|
November 26, 2013 |
|
VLGC |
|
S756 |
|
September 2015 |
|
84,000 |
|
Constellation LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2661 |
|
September 2015 |
|
84,000 |
|
Dorian Geneva LPG Transport LLC (Cratis) |
|
November 26, 2013 |
|
VLGC |
|
2337 |
|
October 2015 |
|
84,000 |
|
Dorian Barcelona LPG Transport LLC (Clermont) |
|
November 26, 2013 |
|
VLGC |
|
S752 |
|
September 2015 |
|
84,000 |
|
Dorian Cape Town LPG Transport LLC (Chaparral) |
|
November 26, 2013 |
|
VLGC |
|
S754 |
|
October 2015 |
|
84,000 |
|
Dorian Tokyo LPG Transport LLC (Copernicus) |
|
November 26, 2013 |
|
VLGC |
|
2338 |
|
November 2015 |
|
84,000 |
|
Commander LPG Transport LLC |
|
February 12, 2014 |
|
VLGC |
|
2662 |
|
November 2015 |
|
84,000 |
|
Dorian Explorer LPG Transport LLC (Challenger) |
|
November 26, 2013 |
|
VLGC |
|
S757 |
|
December 2015 |
|
84,000 |
|
Dorian Exporter LPG Transport LLC (Caravel) |
|
November 26, 2013 |
|
VLGC |
|
S758 |
|
January 2016 |
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dormant Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
Incorporation |
|
|
|
|
|
|
|
|
|
Capricorn LPG Transport LLC |
|
November 15, 2013 |
|
|
|
|
|
|
|
|
|
Comet LPG Transport LLC |
|
November 11, 2013 |
|
|
|
|
|
|
|
|
|
Constitution LPG Transport LLC |
|
February 17, 2014 |
|
|
|
|
|
|
|
|
|
Corsair LPG Transport LLC |
|
June 24, 2013 |
|
|
|
|
|
|
|
|
|
(1) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(2) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
Vessel owning Company |
|
Date of |
|
Type of |
|
Vessel’s name |
|
Built |
|
CBM(2) |
|
Cepheus Transport Ltd. (Cepheus)(1) |
|
March 17, 2004 |
|
VLGC |
|
Captain Nicholas ML |
|
2008 |
|
82,000 |
|
Lyra Gas Transport Ltd (Lyra)(1) |
|
January 30, 2005 |
|
VLGC |
|
Captain John NP |
|
2007 |
|
82,000 |
|
Cetus Transport Ltd. (Cetus)(1) |
|
January 27, 2004 |
|
VLGC |
|
Captain Markos NL |
|
2006 |
|
82,000 |
|
Orion Tankers Limited (Orion)(1) |
|
October 26, 2005 |
|
PGC |
|
Grendon |
|
1996 |
|
5,000 |
|
(1) Incorporated in Republic of Liberia.
(2) CBM: Cubic meters, a standard measure for LPG tanker capacity.
(3) Very Large Gas Carrier (“VLGC”), Pressurized Gas Carrier (“PGC”)
Charterer |
|
% of revenue |
|
Statoil ASA |
|
51 |
|
Naftomar Shipping and Trading Co. Ltd |
|
13 |
|
Kuwait Petroleum Corporation |
|
10 |
|
|
|
% of total revenues |
| ||||
|
|
April 1, 2013 |
|
Year ended |
| ||
Charterer |
|
July 28, 2013 |
|
2013 |
|
2012 |
|
Statoil Hydro ASA |
|
49 |
|
53 |
|
89 |
|
Petredec Ltd. |
|
18 |
|
19 |
|
10 |
|
E1Corp. |
|
19 |
|
17 |
|
— |
|
Astomos Energy Corporation |
|
12 |
|
— |
|
— |
|
|
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
(i) Charter hire commissions , included in Voyage expenses—related party |
|
198,360 |
|
505,926 |
|
448,683 |
|
(ii) Management fees |
|
601,202 |
|
1,824,000 |
|
1,824,000 |
|
|
|
|
March 31, 2014 |
|
Bunkers |
|
596,768 |
|
Lubricants |
|
358,381 |
|
Victualing |
|
83,840 |
|
Bonded stores |
|
15,354 |
|
Communication cards |
|
3,986 |
|
Total |
|
1,058,329 |
|
|
|
March 31, |
|
Bunkers |
|
1,200,591 |
|
Victualing |
|
64,969 |
|
Bonded stores |
|
16,924 |
|
Lubricants |
|
418,987 |
|
Communication cards |
|
6,770 |
|
Total |
|
1,708,241 |
|
|
|
|
Vessel cost |
|
Accumulated |
|
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 |
|
|
|
Vessel cost |
|
Accumulated |
|
Net book |
|
Balance, April 1, 2012 |
|
252,023,353 |
|
(53,743,681 |
) |
198,279,672 |
|
Vessel improvements |
|
469,929 |
|
— |
|
469,929 |
|
Depreciation |
|
— |
|
(11,671,879 |
) |
(11,671,879 |
) |
Balance, March 31, 2013 |
|
252,493,282 |
|
(65,415,560 |
) |
187,077,722 |
|
Vessel improvements |
|
90,492 |
|
— |
|
90,492 |
|
Depreciation |
|
— |
|
(3,839,271 |
) |
(3,839,271 |
) |
Balance, July 28, 2013 |
|
252,583,774 |
|
(69,254,831 |
) |
183,328,943 |
|
|
|
|
Financing |
|
Drydocking |
|
On inception , July 1, 2013 |
|
— |
|
— |
|
Additions |
|
1,516,847 |
|
600,394 |
|
Amortization |
|
(800,807 |
) |
(65,103 |
) |
Balance, March 31, 2014 |
|
716,040 |
|
535,291 |
|
|
|
Financing |
|
Drydocking |
|
Total |
|
April 1, 2012 |
|
310,662 |
|
1,302,458 |
|
1,613,120 |
|
Amortization |
|
(48,307 |
) |
(352,950 |
) |
(401,257 |
) |
March 31, 2013 |
|
262,355 |
|
949,508 |
|
1,211,863 |
|
Amortization |
|
(15,437 |
) |
(116,038 |
) |
(131,475 |
) |
July 28, 2013 |
|
246,918 |
|
833,470 |
|
1,080,388 |
|
|
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,439,237 |
|
Accrued IPO charges |
|
469,707 |
|
Accrued voyage and vessel operating expenses |
|
87,029 |
|
Other |
|
200,413 |
|
Total |
|
2,196,386 |
|
|
|
March 31, |
|
Accrued loan and swap interest |
|
1,407,673 |
|
Accrued voyage and vessel operating expenses |
|
10,912 |
|
Total |
|
1,418,585 |
|
|
Secured bank debt |
|
|
|
Royal Bank of Scotland plc. (RBS) |
|
|
|
Tranche A |
|
44,200,000 |
|
Tranche B |
|
33,241,000 |
|
Tranche C |
|
51,277,500 |
|
Total |
|
128,718,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
9,612,000 |
|
Long-term debt—net of current portion |
|
119,106,500 |
|
Total |
|
128,718,500 |
|
Secured bank |
|
March 31, |
|
(a) Royal Bank of Scotland plc (RBS) |
|
|
|
Tranche B |
|
35,798,000 |
|
Tranche C |
|
47,600,000 |
|
Tranche D |
|
54,932,500 |
|
Total RBS |
|
138,330,500 |
|
(b) Deutsche Schiffsbank |
|
2,500,000 |
|
Total |
|
140,830,500 |
|
Presented as follows: |
|
|
|
Current portion of long-term debt |
|
12,112,000 |
|
Long-term debt |
|
128,718,500 |
|
Total |
|
140,830,500 |
|
Year ending March 31,: |
|
|
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
2019 |
|
57,268,000 |
|
Thereafter |
|
33,002,500 |
|
Total |
|
128,718,500 |
|
Year ending March 31, |
|
|
|
2014 |
|
12,112,000 |
|
2015 |
|
9,612,000 |
|
2016 |
|
9,612,000 |
|
2017 |
|
9,612,000 |
|
2018 |
|
9,612,000 |
|
Thereafter |
|
90,270,500 |
|
Total |
|
140,830,500 |
|
|
Ship-owning entity |
|
Date of |
|
Cetus Transport Ltd. |
|
March 17, 2004 |
|
Lyra Gas Transport Ltd. |
|
January 30, 2005 |
|
Cepheus Transport Ltd. |
|
January 27, 2004 |
|
Orion Tankers Limited |
|
October 26,2005 |
|
|
Time charter revenue |
|
17,602,137 |
|
Voyage charter revenue |
|
11,210,785 |
|
Other revenue |
|
820,778 |
|
Total |
|
29,633,700 |
|
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Time charter revenue |
|
8,850,543 |
|
24,143,606 |
|
33,399,609 |
|
Voyage charter revenue |
|
6,236,525 |
|
13,581,561 |
|
142,500 |
|
Other income |
|
296,048 |
|
936,679 |
|
1,028,933 |
|
Total |
|
15,383,116 |
|
38,661,846 |
|
34,571,042 |
|
|
Bunkers |
|
5,271,126 |
|
Port charges and other related expenses |
|
552,634 |
|
Brokers’ commissions |
|
386,244 |
|
Security cost |
|
298,820 |
|
War risk insurances |
|
37,001 |
|
Other voyage expenses |
|
125,146 |
|
Total voyage expenses |
|
6,670,971 |
|
|
|
April 1, |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Brokers commission |
|
396,720 |
|
1,025,761 |
|
897,367 |
|
Bunkers |
|
2,755,445 |
|
6,678,660 |
|
481,903 |
|
Port charges and other related expenses |
|
391,091 |
|
746,574 |
|
180,983 |
|
Security cost |
|
206,940 |
|
582,112 |
|
668,458 |
|
War risk insurances |
|
26,673 |
|
111,626 |
|
241,854 |
|
Other voyage expenses |
|
45,363 |
|
112,450 |
|
53,816 |
|
Total voyage expenses |
|
3,822,232 |
|
9,257,183 |
|
2,524,381 |
|
|
Crew wages and related costs |
|
5,306,441 |
|
Spares and stores |
|
1,395,287 |
|
Lubricants |
|
480,279 |
|
Insurance |
|
566,021 |
|
Repairs and maintenance costs |
|
502,424 |
|
Miscellaneous expenses |
|
144,507 |
|
Total |
|
8,394,959 |
|
|
|
April 1, 2013 |
|
Year ended March 31, |
| ||
|
|
2013 |
|
2013 |
|
2012 |
|
Crew wages and related costs |
|
2,519,315 |
|
7,932,836 |
|
8,007,295 |
|
Spares and stores |
|
1,284,161 |
|
1,502,111 |
|
2,143,239 |
|
Lubricants |
|
176,502 |
|
686,375 |
|
851,829 |
|
Insurance |
|
298,249 |
|
942,847 |
|
997,801 |
|
Repairs and maintenance costs |
|
279,921 |
|
848,576 |
|
2,237,825 |
|
Miscellaneous expenses |
|
80,577 |
|
126,181 |
|
172,360 |
|
Total |
|
4,638,725 |
|
12,038,926 |
|
14,410,349 |
|
|
|
|
|
|
March 31, 2014 |
| ||
Derivatives not designated as hedging instruments |
|
Balance sheet Location |
|
Asset |
|
Liability |
|
Interest rate swap agreements |
|
Long-term liabilities—Derivatives instruments |
|
— |
|
14,062,416 |
|
Derivatives not designated |
|
|
|
March 31, 2013 |
| ||
as |
|
Balance sheet location |
|
Asset |
|
Liability |
|
Interest Rate Swap Agreements |
|
Long-term liabilities—Derivatives instruments |
|
— |
|
21,369,878 |
|
Total derivatives not designated as hedging instruments |
|
|
|
— |
|
21,369,878 |
|
Derivatives not designated as hedging instruments |
|
Location of gain/(loss) |
|
July 1, 2013 to |
|
Interest Rate Swap—Change in fair value |
|
Loss on derivatives—net |
|
2,623,456 |
|
Interest Rate Swap—Realized loss |
|
Loss on derivatives—net |
|
(3,727,457 |
) |
Loss on derivatives—net |
|
|
|
(1,104,001 |
) |
Derivatives not designated as |
|
Location of |
|
April 1, 2013 |
|
Year ended March 31, |
| ||
hedging instruments |
|
gain/(loss) recognized |
|
(Unaudited) |
|
2013 |
|
2012 |
|
Interest Rate Swap—Change in fair value |
|
Gain/(loss) on derivatives |
|
4,684,007 |
|
(13,680 |
) |
(4,607,773 |
) |
Interest Rate Swap—Realized loss |
|
Gain/(loss) on derivatives |
|
(1,853,802 |
) |
(5,574,799 |
) |
(6,335,543 |
) |
Total gain/(loss) on derivatives |
|
|
|
2,830,205 |
|
(5,588,479 |
) |
(10,943,316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|