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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q 

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

For the quarterly period ended September 30, 2020

OR

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

For the transition period from __________ to __________

Commission File Number: 001-36437 

Graphic

Dorian LPG Ltd.

(Exact name of registrant as specified in its charter) 

 

Marshall Islands

 

66-0818228

(State or other jurisdiction of incorporation or organization)

 

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

c/o Dorian LPG (USA) LLC

 

27 Signal Road, Stamford, CT

06902

(Address of principal executive offices)

 

(Zip Code)

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

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

    

Trading Symbol

    

Name of Each Exchange on Which Registered

Common stock, par value $0.01 per share

LPG

New York Stock Exchange

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

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

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

Large accelerated filer

Accelerated filer  

Non-accelerated filer

Smaller reporting company

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of October 28, 2020, there were 50,881,889 shares of the registrant’s common stock outstanding.

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FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), including analyses and other information based on forecasts of future results and estimates of amounts not yet determinable and statements relating to our future prospects, developments and business strategies. Such forward-looking statements are intended to be covered by the safe harbor provided for under the sections referenced in the immediately preceding sentence and the PSLRA. Forward-looking statements are generally identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “might,” “pending,” “plan,” “possible,” “potential,” “predict,” “project,” “seeks,” “should,” “targets,” “will,” “would,”  and similar terms and phrases, including references to assumptions. Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual future activities and results of operations to differ materially from future results expressed, projected, or implied by those forward-looking statements in this quarterly report.

These risks include the risks that are identified in the “Risk Factors” section of this quarterly report and of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, and also include, among others, risks associated with the following:

our future operating or financial results;

our acquisitions, business strategy, including our chartering strategy, and expected capital spending or operating expenses;

shipping trends, including changes in charter rates applicable to scrubber equipped and non-scrubber equipped vessels, scrapping rates and vessel and other asset values;

factors affecting supply of and demand for liquefied petroleum gas, or LPG, shipping;

changes in trading patterns that impact tonnage requirements;

compliance with new and existing changes in rules and regulations applicable to the LPG shipping industry, including, without limitation, legislation adopted by international organizations such as the International Maritime Organization and the European Union or by individual countries and the impact and costs of our compliance with such rules and regulations;

the timing, cost and prospects of purchasing, installing and operating exhaust gas cleaning systems (commonly referred to as “scrubbers”) to reduce sulfur emissions on certain of our vessels;

charterers’ increasing emphasis on environmental and safety concerns;

general economic conditions and specific economic conditions in the oil and natural gas industry and the countries and regions where LPG is produced and consumed;

potential turmoil in the global financial markets;

the supply of and demand for LPG, which is affected by the production levels and price of oil, refined petroleum products and natural gas, including production from U.S. shale fields;

changes in demand resulting from changes in the Organization of the Petroleum Exporting Countries’ (OPEC’s) petroleum production levels and worldwide oil consumption and storage;

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completion of infrastructure projects to support marine transportation of LPG, including export terminals and pipelines;

changes to the supply and demand for LPG vessels as a result of, among other things, oversupply of or limited demand for LPG vessels comparable to ours or higher specification vessels;

competition in the LPG shipping industry;

our ability to profitably employ our vessels, including vessels participating in the Helios Pool (defined below);

our ability to realize the expected benefits from our time chartered-in vessels, including those in the Helios Pool;

our continued ability to enter into profitable long-term time charters;

future purchase prices of newbuildings and secondhand vessels and timely deliveries of such vessels (if any);

our ability to compete successfully for future chartering opportunities and newbuilding opportunities (if any);

the failure of our or the Helios Pool’s significant customers to perform their obligations to us or to the Helios Pool;

the performance of the Helios Pool;

the loss or reduction in business from our or the Helios Pool’s significant customers;

the availability of financing and refinancing, as well as our financial condition and liquidity, including our ability to obtain such financing or refinancing in the future to fund capital expenditures, acquisitions and other general corporate purposes, the terms of such financing and our ability to comply with the restrictions and other covenants set forth in our existing and future debt agreements and financing arrangements;

our ability to repay or refinance our existing debt and settling of interest rate swaps (if any);

our costs, including crew wages, insurance, provisions, repairs and maintenance, general and administrative expenses, dry-docking, and bunker prices, as applicable;

our dependence on key personnel;

the availability of skilled workers and the related labor costs;

developments regarding the technologies relating to oil exploration and the effects of new products and new technology in our industry;

operating hazards in the maritime transportation industry, including accidents, political events, public health threats, international hostilities and instability, armed conflict, piracy, attacks on vessels or other petroleum-related infrastructures and acts by terrorists, which may cause potential disruption of shipping routes;

the impact of public health threats, pandemics and outbreaks of other highly communicable diseases;

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the length and severity of the ongoing coronavirus outbreak (COVID-19), including its impact on the demand for commercial seaborne transportation of LPG and the condition of financial markets and the potential knock-on impacts to our global operations, including with respect to our disports in China and the Far East;

the adequacy of our insurance coverage in the event of a catastrophic event;

compliance with and changes to governmental, tax, environmental and safety laws and regulations;

changes in domestic and international political and geopolitical conditions, including such changes as may result from the outcome of the U.S. presidential election and resulting energy and environmental policies and changes attendant to trade conflicts and the imposition of tariffs or otherwise on LPG or LPG products;

fluctuations in currencies and interest rates;

the impact of the discontinuance of the London Interbank Offered Rate (“LIBOR”) after 2021 on any of the Company’s debt that references LIBOR in the interest rate;

compliance with the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or other applicable regulations relating to bribery;

changes in laws, treaties or regulations;

the volatility of the price of shares of our common stock (our “common shares”);

our incorporation under the laws of the Republic of the Marshall Islands and the different rights to relief that may be available compared to other countries, including the United States; and

other factors detailed in this report, our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, and from time to time in our periodic reports.

Actual results could differ materially from expectations expressed in the forward-looking statements in this quarterly report if one or more of the underlying assumptions or expectations proves to be inaccurate or is not realized. You should thoroughly read this quarterly report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this quarterly report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the forward-looking statements by these cautionary statements.

We caution readers of this quarterly report not to place undue reliance on forward-looking statements. Any forward-looking statements contained herein are made only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

As used in this quarterly report and unless otherwise indicated, references to “Dorian,” the “Company,” “we,” “our,” “us,” or similar terms refer to Dorian LPG Ltd. and its subsidiaries.

Table of Contents

Dorian LPG Ltd.

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020

1

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2020 and September 30, 2019

2

Unaudited Condensed Consolidated Statements of Shareholders' Equity for the six months ended September 30, 2020 and September 30, 2019

3

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2020 and September 30, 2019

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

ITEM 2.

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

19

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

31

ITEM 4.

CONTROLS AND PROCEDURES

31

 

PART II.

OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

32

ITEM 1A.

RISK FACTORS

32

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

32

ITEM 6.

EXHIBITS

32

EXHIBIT INDEX

33

SIGNATURES

34

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dorian LPG Ltd.

Unaudited Condensed Consolidated Balance Sheets

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

    

As of

    

As of

 

September 30, 2020

March 31, 2020

 

Assets

Current assets

Cash and cash equivalents

$

145,059,032

 

$

48,389,688

Restricted cash—current

 

434,753

 

3,370,178

Short-term investments

14,919,384

Trade receivables, net and accrued revenues

271,105

 

820,846

Due from related parties

 

55,106,691

 

66,847,701

Inventories

 

2,175,046

 

1,996,203

Prepaid expenses and other current assets

6,373,328

 

3,270,755

Total current assets

209,419,955

 

139,614,755

Fixed assets

Vessels, net

 

1,409,385,592

 

1,437,658,833

Other fixed assets, net

 

138,791

 

185,613

Total fixed assets

1,409,524,383

 

1,437,844,446

Other non-current assets

Deferred charges, net

 

9,396,006

 

7,336,726

Due from related parties—non-current

23,100,000

23,100,000

Restricted cash—non-current

 

81,411

 

35,629,261

Operating lease right-of-use assets

22,330,097

26,861,551

Other non-current assets

247,958

1,573,104

Total assets

$

1,674,099,810

 

$

1,671,959,843

Liabilities and shareholders’ equity

Current liabilities

Trade accounts payable

$

12,113,664

 

$

13,552,796

Accrued expenses

 

5,423,768

 

4,080,952

Due to related parties

 

259,463

 

436,850

Deferred income

276,493

 

2,068,205

Derivative instruments

136,633

2,605,442

Current portion of long-term operating lease liabilities

9,408,049

9,212,589

Current portion of long-term debt

 

70,155,283

 

53,056,125

Total current liabilities

97,773,353

 

85,012,959

Long-term liabilities

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

 

564,343,412

 

581,919,094

Long-term operating lease liabilities

12,924,909

17,651,939

Derivative instruments

 

8,148,758

 

9,152,829

Other long-term liabilities

1,318,204

1,170,824

Total long-term liabilities

586,735,283

 

609,894,686

Total liabilities

684,508,636

 

694,907,645

Commitments and contingencies

Shareholders’ equity

Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued nor outstanding

 

 

Common stock, $0.01 par value, 450,000,000 shares authorized, 59,450,019 and 59,083,290 shares issued, 50,881,889 and 50,827,952 shares outstanding (net of treasury stock), as of September 30, 2020 and March 31, 2020, respectively

 

594,500

 

590,833

Additional paid-in-capital

 

869,143,327

 

866,809,371

Treasury stock, at cost; 8,568,130 and 8,255,338 shares as of September 30, 2020 and March 31, 2020, respectively

(89,688,467)

 

(87,183,865)

Retained earnings

209,541,814

 

196,835,859

Total shareholders’ equity

989,591,174

 

977,052,198

Total liabilities and shareholders’ equity

$

1,674,099,810

 

$

1,671,959,843

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

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Operations

(Expressed in United States Dollars)

Three months ended

Six months ended

    

September 30, 2020

    

September 30, 2019

    

September 30, 2020

    

September 30, 2019

 

Revenues

Net pool revenues—related party

$

49,723,556

$

80,944,577

$

116,652,977

$

131,036,714

Time charter revenues

4,177,064

10,271,398

9,263,068

21,253,429

Other revenues, net

809,657

408,900

1,959,556

500,278

Total revenues

54,710,277

91,624,875

127,875,601

152,790,421

Expenses

Voyage expenses

 

858,919

 

855,023

1,674,114

 

1,194,137

Charter hire expenses

4,518,850

2,055,000

9,234,448

4,110,000

Vessel operating expenses

 

21,435,904

 

17,393,685

38,825,267

 

33,513,638

Depreciation and amortization

 

17,202,714

 

16,473,418

34,093,127

 

32,739,839

General and administrative expenses

5,912,810

 

5,895,406

17,215,786

 

12,631,241

Total expenses

49,929,197

 

42,672,532

101,042,742

 

84,188,855

Other income—related parties

632,680

314,084

1,100,703

937,367

Operating income

5,413,760

 

49,266,427

27,933,562

 

69,538,933

Other income/(expenses)

Interest and finance costs

 

(6,665,144)

 

(9,303,373)

(15,752,380)

 

(19,000,655)

Interest income

91,349

 

344,919

216,184

 

706,955

Unrealized gain/(loss) on derivatives

 

3,968,686

 

(667,110)

3,472,880

 

(6,737,899)

Realized gain/(loss) on derivatives

(2,129,695)

709,146

(2,935,924)

1,742,141

Other gain/(loss), net

(141,006)

 

361,887

(228,367)

 

537,480

Total other income/(expenses), net

(4,875,810)

 

(8,554,531)

(15,227,607)

 

(22,751,978)

Net income

$

537,950

 

$

40,711,896

$

12,705,955

 

$

46,786,955

Weighted average shares outstanding:

Basic

50,711,714

54,646,451

50,632,392

54,599,978

Diluted

50,754,507

54,763,634

50,716,177

54,825,183

Earnings per common share—basic

 

$

0.01

 

$

0.75

$

0.25

 

$

0.86

Earnings per common share—diluted

 

$

0.01

 

$

0.74

$

0.25

 

$

0.85

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

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Table of Contents

Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

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

Number of

                           

Additional

                           

common

Common

Treasury

paid-in

Retained

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2019

 

58,882,515

$

588,826

$

(36,484,561)

$

863,583,692

$

84,994,601

 

912,682,558

Net income for the period

6,075,059

6,075,059

Restricted share award issuances

7,750

78

(78)

Stock-based compensation

1,305,827

1,305,827

Purchase of treasury stock

(983,582)

(983,582)

Balance, June 30, 2019

 

58,890,265

 

588,904

 

(37,468,143)

 

864,889,441

 

91,069,660

 

919,079,862

Net income for the period

40,711,896

40,711,896

Restricted share award issuances

183,220

1,832

(1,832)

Stock-based compensation

890,700

890,700

Purchase of treasury stock

(6,310,514)

(6,310,514)

Balance, September 30, 2019

59,073,485

$

590,736

$

(43,778,657)

$

865,778,309

$

131,781,556

$

954,371,944

Number of

Additional

common

Common

Treasury

paid-in

Retained

 

    

shares

    

stock

    

stock

    

capital

    

Earnings

    

Total

 

Balance, April 1, 2020

59,083,290

$

590,833

$

(87,183,865)

$

866,809,371

$

196,835,859

$

977,052,198

Net income for the period

12,168,005

12,168,005

Restricted share award issuances

351,629

3,516

(3,516)

Stock-based compensation

1,930,902

1,930,902

Purchase of treasury stock

(1,198,214)

(1,198,214)

Balance, June 30, 2020

59,434,919

 

$

594,349

 

$

(88,382,079)

 

$

868,736,757

 

$

209,003,864

 

$

989,952,891

Net income for the period

537,950

537,950

Restricted share award issuances

15,100

151

(151)

Stock-based compensation

406,721

406,721

Purchase of treasury stock

(1,306,388)

(1,306,388)

Balance, September 30, 2020

59,450,019

 

$

594,500

 

$

(89,688,467)

 

$

869,143,327

 

$

209,541,814

 

$

989,591,174

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

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Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars)

    

Six months ended

 

September 30, 2020

September 30, 2019

Cash flows from operating activities:

Net income

$

12,705,955

$

46,786,955

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

34,093,127

32,739,839

Amortization of operating lease right-of-use assets

4,559,804

Amortization of financing costs

3,265,563

1,479,466

Unrealized (gain)/loss on derivatives

(3,472,880)

6,737,899

Stock-based compensation expense

2,337,623

2,196,527

Unrealized foreign currency (gain)/loss, net

(111,922)

150,136

Other non-cash items, net

(75,418)

(619,937)

Changes in operating assets and liabilities

Trade receivables, net and accrued revenue

549,741

129,833

Prepaid expenses and other current assets

(2,575,710)

(289,615)

Due from related parties

11,741,010

(24,620,959)

Inventories

(178,843)

(210,334)

Other non-current assets

1,325,146

(765,940)

Operating lease liabilities—current and long-term

(4,560,428)

Trade accounts payable

774,474

334,806

Accrued expenses and other liabilities

(385,279)

(1,663,353)

Due to related parties

(177,387)

(451,826)

Payments for drydocking costs

(3,110,101)

(1,129,168)

Net cash provided by operating activities

56,704,475

60,804,329

Cash flows from investing activities:

Vessel-related capital expenditures

(7,317,186)

(4,144,490)

Purchase of investment securities

(230,841)

Proceeds from maturity of short-term investments

15,000,000

Payments to acquire other fixed assets

(11,566)

(132,505)

Net cash provided by/(used in) investing activities

7,440,407

(4,276,995)

Cash flows from financing activities:

Proceeds from long-term debt borrowings

55,378,172

Repayment of long-term debt borrowings

(55,173,254)

(31,984,207)

Purchase of treasury stock

(2,617,805)

(7,237,403)

Financing costs paid

(3,695,105)

(22,503)

Net cash used in financing activities

(6,107,992)

(39,244,113)

Effects of exchange rates on cash and cash equivalents

149,179

(87,173)

Net increase in cash, cash equivalents, and restricted cash

58,186,069

17,196,048

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

87,389,127

66,472,646

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

$

145,575,196

$

83,668,694

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

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Dorian LPG Ltd.

Notes to Unaudited Condensed Consolidated Financial Statements

(Expressed in United States Dollars)

1. Basis of Presentation and General Information

Dorian LPG Ltd. (“Dorian”) was incorporated on July 1, 2013 under the laws of the Republic of the Marshall Islands, is headquartered in the United States and is engaged in the transportation of liquefied petroleum gas (“LPG”) worldwide. Specifically, Dorian and its subsidiaries (together “we”, “us”, “our”, or the “Company”) are focused on owning and operating very large gas carriers (“VLGCs”), each with a cargo carrying capacity of greater than 80,000 cbm, in the LPG shipping industry. As of September 30, 2020, our fleet consists of twenty-four VLGCs, including nineteen fuel-efficient 84,000 cbm ECO-design VLGCs (“ECO-VLGCs”), three 82,000 cbm VLGCs and two time chartered-in VLGCs. As of September 30, 2020, ten of our ECO-VLGCs are equipped with exhaust gas cleaning systems (commonly referred to as “scrubbers”) to reduce sulfur emissions. We have commitments related to scrubbers on an additional two of our VLGCs. We provide in-house commercial and technical management services for all of our vessels, including our vessels deployed in the Helios Pool (defined below), which may also receive commercial management services from Phoenix (defined below). Excluding our time chartered-in vessels, we provide in-house technical management services for all of our vessels, including our vessels deployed in the Helios Pool (defined below).

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

The unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and related Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the unaudited interim condensed consolidated financial statements and related notes. Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations or cash flows. The unaudited interim condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2020 included in our Annual Report on Form 10-K filed with the SEC on June 12, 2020.

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

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Table of Contents

Our subsidiaries as of September 30, 2020, which are all wholly-owned and are incorporated in the Republic of the Marshall Islands (unless otherwise noted), are listed below.

Vessel Subsidiaries

    

Type of

    

    

    

 

Subsidiary

vessel

Vessel’s name

Built

CBM(1)

 

CMNL LPG Transport LLC

 

VLGC

 

Captain Markos NL(2)

 

2006

 

82,000

CJNP LPG Transport LLC

 

VLGC

 

Captain John NP(2)

 

2007

 

82,000

CNML LPG Transport LLC

 

VLGC

 

Captain Nicholas ML(2)

 

2008

 

82,000

Comet LPG Transport LLC

VLGC

Comet

2014

84,000

Corsair LPG Transport LLC

VLGC

Corsair(2)

2014

84,000

Corvette LPG Transport LLC

 

VLGC

 

Corvette(2)

 

2015

 

84,000

Dorian Shanghai LPG Transport LLC

VLGC

Cougar

2015

84,000

Concorde LPG Transport LLC

VLGC

Concorde(2)

2015

84,000

Dorian Houston LPG Transport LLC

VLGC

Cobra

2015

84,000

Dorian Sao Paulo LPG Transport LLC

VLGC

Continental

2015

84,000

Dorian Ulsan LPG Transport LLC

VLGC

Constitution

2015

84,000

Dorian Amsterdam LPG Transport LLC

VLGC

Commodore

2015

84,000

Dorian Dubai LPG Transport LLC

VLGC

Cresques(2)

2015

84,000

Constellation LPG Transport LLC

VLGC

Constellation

2015

84,000

Dorian Monaco LPG Transport LLC

VLGC

Cheyenne

2015

84,000

Dorian Barcelona LPG Transport LLC

VLGC

Clermont

2015

84,000

Dorian Geneva LPG Transport LLC

VLGC

Cratis

2015

84,000

Dorian Cape Town LPG Transport LLC

VLGC

Chaparral

2015

84,000

Dorian Tokyo LPG Transport LLC

VLGC

Copernicus

2015

84,000

Commander LPG Transport LLC

VLGC

Commander

2015

84,000

Dorian Explorer LPG Transport LLC

VLGC

Challenger

2015

84,000

 

Dorian Exporter LPG Transport LLC

VLGC

Caravelle

2016

84,000

Management and Other Non-vessel Subsidiaries

 

Subsidiary

 

Dorian LPG Management Corp.

Dorian LPG (USA) LLC (incorporated in USA)

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

Dorian LPG Finance LLC

Occident River Trading Limited (incorporated in UK)

Dorian LPG (DK) ApS (incorporated in Denmark)

Dorian LPG Chartering LLC

Dorian LPG FFAS LLC

(1)CBM: Cubic meters, a standard measure for LPG tanker capacity
(2)Operated pursuant to a bareboat charter agreement. Refer to Note 6 below for further information.

COVID-19

The outbreak of COVID-19, which originated in China in December 2019 and subsequently spread to most nations of the world, has resulted in the implementation of numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. The reduction of economic activity has significantly reduced the global demand for oil, refined petroleum products (most notably aviation fuel) and LPG. We expect that the impact of the COVID-19 virus and the uncertainty in the supply and demand for fossil fuels, including LPG, will continue to cause volatility in the commodity markets. We could also experience potential additional costs to effect crew changes. Although to date there has not been any significant effect on our operating activities due to COVID-19, other than an approximately 60-day delay associated with the drydocking of one of our vessels in China that left drydock in April 2020, the extent to which COVID-19 will impact our results of operation and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including among others, new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact or any resurgence of the virus. An estimate of the impact cannot therefore be made at this time.

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2. Significant Accounting Policies

The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as those applied in the preparation of our consolidated audited financial statements for the year ended March 31, 2020 (refer to Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020), except as discussed herein.

Accounting Pronouncements Not Yet Adopted

 

In March 2020, the Financial Accounting Standards Board issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).” ASU 2020-04 provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. This ASU is effective for adoption at any time between March 12, 2020 and December 31, 2022. We are currently evaluating the impact of this adoption on our condensed consolidated financial statements and related disclosures.

3.  Transactions with Related Parties

Dorian (Hellas), S.A.

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

Dorian LPG (USA) LLC and its subsidiaries entered into an agreement with DHSA, retroactive to July 2014 and superseding an agreement between Dorian LPG (UK) Ltd. and DHSA, for the provision by Dorian LPG (USA) LLC and its subsidiaries of certain chartering and marine operation services to DHSA, for which income was earned and included in “Other income-related parties” totaling less than $0.1 million for both the three months ended September 30, 2020 and 2019 and $0.1 million for both the six months ended September 30, 2020 and 2019.

As of September 30, 2020, $1.1 million was due from DHSA and included in “Due from related parties” in the unaudited interim condensed consolidated balance sheets. As of March 31, 2020, $1.3 million was due from DHSA and included in “Due from related parties” in the audited consolidated balance sheets.

Helios LPG Pool LLC

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

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agents pursuant to ASC 810-10, the power over the significant activities of the Helios Pool is shared, and no party is the primary beneficiary in the Helios Pool, or has a controlling financial interest. As of September 30, 2020, the Helios Pool operated thirty-six VLGCs, including twenty-two vessels from our fleet (including two vessel time chartered-in from an unrelated party), four Phoenix vessels, seven from other participants, and three time chartered-in vessels.

As of September 30, 2020, we had receivables from the Helios Pool of $76.8 million, including $24.2 million of working capital contributed for the operation of our vessels in the pool (of which $1.1 million is classified as current). As of March 31, 2020, we had net receivables from the Helios Pool of $88.1 million (net of an amount due to Helios Pool of $0.4 million which is reflected under “Due to related Parties”), including $24.2 million of working capital contributed for the operation of our vessels in the pool (of which $1.1 million is classified as current). Our maximum exposure to losses from the pool as of September 30, 2020 is limited to the receivables from the pool. The Helios Pool does not have any third-party debt obligations. The Helios Pool has entered into commercial management agreements with each of Dorian LPG (UK) Ltd. and Phoenix as commercial managers and has appointed both commercial managers as the exclusive commercial managers of pool vessels. Fees for commercial management services provided by Dorian LPG (UK) Ltd. are included in “Other income-related parties” in the unaudited interim condensed consolidated statement of operations and were $0.6 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $1.0 million and $0.8 million for the six months ended September 30, 2020 and 2019, respectively. Additionally, we receive a fixed reimbursement of expenses such as costs for security guards and war risk insurance for vessels operating in high risk areas from the Helios Pool, for which we earned $0.8 million and $0.4 million for the three months ended September 30, 2020, and 2019, respectively, and $2.0 million and $0.5 million for the six months ended  September 30, 2020, and 2019, respectively, and are included in “Other revenues, net” in the unaudited interim condensed consolidated statements of operations.

Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the six months ended September 30, 2020 and 2019. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and, where applicable, incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the Helios Pool calculates net pool revenues using gross revenues, less voyage expenses of all pool vessels, less fixed time charter hire for any chartered-in vessels, less the general and administrative expenses of the pool. Net pool revenues, less any amounts required for working capital of the Helios Pool, are distributed, to the extent they have been collected from third-party customers of the Helios Pool, as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. We recognize net pool revenues on a monthly basis, when each relevant vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably. Revenue earned from the Helios Pool is presented in Note 10.

4. Deferred Charges, Net

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

    

Drydocking

 

costs

 

Balance, April 1, 2020

$

7,336,726

Additions

3,044,006

Amortization

(984,726)

Balance, September 30, 2020

 

$

9,396,006

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5. Vessels, Net

    

    

Accumulated

    

 

Cost

depreciation

Net book Value

 

Balance, April 1, 2020

$

1,757,285,233

 

$

(319,626,400)

 

$

1,437,658,833

Other additions

4,776,772

4,776,772

Depreciation

(33,050,013)

(33,050,013)

Balance, September 30, 2020

 

$

1,762,062,005

 

$

(352,676,413)

 

$

1,409,385,592

Additions to vessels, net mainly consisted of scrubber purchase and installation costs and other capital improvements for certain of our VLGCs during the six months ended September 30, 2020. Our vessels, with a total carrying value of $1,409.4 million and $1,437.7 million as of September 30, 2020 and March 31, 2020, respectively, are first-priority mortgaged as collateral for our long-term debt (refer to Note 6 below). No impairment loss was recorded for the periods presented.

6. Long-term Debt

2015 AR Facility

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on our $758 million debt financing facility that we entered into in March 2015 with a group of banks and financial institutions (the “2015 Facility”).

Refinancing of the Commercial Tranche of the 2015 Facility

 

On April 29, 2020, we amended and restated the 2015 Facility (the “2015 AR Facility”), to among other things, refinance the commercial tranche from the 2015 Facility Agreement (the “Original Commercial Tranche”). Pursuant to the 2015 AR Facility, certain new facilities (the “New Facilities”) were made available to us, including (i) a new senior secured term loan facility in an aggregate principal amount of $155.8 million, a portion of which was used to prepay in full the outstanding principal amount under the Original Commercial Tranche and the balance for general corporate purposes and (ii) a new senior secured revolving credit facility in an aggregate principal amount of up to $25.0 million, which we intend to use for general corporate purposes. The 2015 AR Facility subjects us to substantially similar covenants and restrictions as those imposed pursuant to the 2015 Facility. On July 14, 2020 (with retroactive effect to June 30, 2020), we amended the 2015 AR Facility and received approvals from those lenders constituting the “Required Lenders” under the 2015 AR Facility, as applicable, to modify certain financial and security covenants to reflect the Company’s current financial condition. Most notably, the following changes to financial covenants and security value ratio are now in effect:

Elimination of the interest coverage ratio;
Reduction of minimum shareholders’ equity to $400 million with no upward adjustments;
Reduction of the minimum liquidity covenant from $40 million to $27.5 million;
Reduction of minimum cash balance from $2.2 million to $1.0 million per mortgaged vessel; and
Increase of the security value ratio from 135% to 145%.

 

The provision applicable to our minimum cash balance requirements were modified under the terms of the amendment to the 2015 AR Facility and as a result our minimum cash balance no longer meets the criteria to be recognized as restricted cash. Accordingly, and with retroactive effect to June 30, 2020, we no longer classify these amounts as restricted cash on our condensed consolidated balance sheets. This requirement was reduced from $2.2 million per mortgaged vessel under the initial 2015 AR Facility to $1.0 million per mortgaged vessel per the July 14, 2020 amendment.

The advances in connection with New Facilities are to be repaid on the earlier of (i) the fifth (5th) anniversary of the utilization date of the new senior secured term loan facility, described above, and (ii) March 26, 2025. The New Facilities will bear interest at the rate of LIBOR plus a margin of 2.50%. The margin can be decreased by 10 basis points if the Security Leverage Ratio (which is based on our security value ratio for vessels secured under the 2015 AR Facility) is less than .40 or increased by 10 basis points if it is greater than or equal to .60. Pursuant to the terms of the 2015 AR Facility, we have the potential to receive a 10 basis point increase or reduction in the margin applicable to the New

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Facilities for changes in our Average Efficiency Ratio (which weighs carbon emissions for a voyage against the design deadweight of a vessel and the distance traveled on such voyage). 

We were in compliance with all financial covenants as of September 30, 2020.

Corsair Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing of our 2014-built VLGC, the Corsair, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Corsair Japanese Financing”).

Concorde Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing of our 2015-built VLGC, the Concorde, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Concorde Japanese Financing”).

Corvette Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing of our 2015-built VLGC, the Corvette, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Corvette Japanese Financing”).

CJNP Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing our 2007-built VLGC, the Captain John NP, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CJNP Japanese Financing”). Refer to Note 14 below for information regarding our election to exercise our repurchase option under the CJNP Japanese Financing.

CMNL Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing our 2006-built VLGC, the Captain Markos NL, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CMNL Japanese Financing”).

CNML Japanese Financing

Refer to Note 9 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2020 for information on the refinancing our 2008-built VLGC, the Captain Nicholas ML, pursuant to a memorandum of agreement and a bareboat charter agreement (the “CNML Japanese Financing”).

Cresques Japanese Financing and Prepayment of the Relevant Tranches of the 2015 Facility

On April 21, 2020, we prepaid $28.5 million of the 2015 Facility’s then outstanding principal using cash on hand prior to the closing of the Cresques Japanese Financing (defined below). On April 23, 2020, we refinanced a 2015-built VLGC, the Cresques, pursuant to a memorandum of agreement and a bareboat charter agreement (“Cresques Japanese Financing”). In connection therewith, we transferred the Cresques to the buyer for $71.5 million and, as part of the agreement, Dorian Dubai LPG Transport LLC, our wholly-owned subsidiary, bareboat chartered the vessel back for a period of 12 years, with purchase options from the end of year 3 onwards through a mandatory buyout by 2032. We continue to technically manage, commercially charter, and operate the Cresques. We received $52.5 million in cash as part of the transaction with $19.0 million to be retained by the buyer as a deposit (the “Cresques Deposit”), which can be used by us towards the repurchase of the vessel either pursuant to an early buyout option or at the end of the 12-year bareboat charter term. This transaction is treated as a financing transaction and the Cresques continues to be recorded as

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an asset on our balance sheet. This debt financing has a floating interest rate of one-month LIBOR plus a margin of 2.5%, monthly broker commission fees of 1.25% over the 12-year term on interest and principal payments made, broker commission fees of 0.5% payable on the remaining debt outstanding at the time of the repurchase of the Cresques, and a monthly fixed straight-line principal obligation of $0.3 million over the 12-year term with a balloon payment of $11.5 million.

Debt Obligations

The table below presents our debt obligations:

    

September 30, 2020

    

March 31, 2020

 

2015 Facility/2015 AR Facility

Commercial Financing

$

155,505,698

$

163,385,998

KEXIM Direct Financing

96,561,085