DORIAN LPG LTD. - Quarter Report: 2015 September (Form 10-Q)

---

---

---

---

FORWARD‑LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including analyses and other information based on forecasts of future results and estimates of amounts not yet determinable and statements relating to our future prospects, developments and business strategies. Forward-looking statements are generally identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and similar terms and phrases, including references to assumptions. Forward-looking statements involve risks and uncertainties that may cause actual future activities and results of operations to be materially different from those suggested or described in this quarterly report.

These risks include the risks that are identified in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, and also include, among others, risks associated with the following:

•

future operating or financial results;

•

pending or recent acquisitions, business strategy and expected capital spending or operating expenses;

•

worldwide production of oil and natural gas, including production from U.S. shale fields;

•

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

•

competition in the marine transportation industry;

•

oversupply of LPG vessels comparable to ours;

•

supply and demand for LPG, which is affected by the production levels and price of oil, refined petroleum products and natural gas;

•

global and regional economic and political conditions;

•

shipping market trends, including charter rates, factors affecting supply and demand and world fleet composition;

•

ability to employ our vessels profitably;

•

our limited number of assets and small number of customers;

•

performance by the counterparties to our charter agreements;

•

termination of our customer contracts;

•

delays and cost overruns in vessel construction projects;

•

our ability to incur additional indebtedness under and compliance with restrictions and covenants in our debt agreements;

•

our need for cash to meet our debt service obligations and to pay installments in connection with our newbuilding vessels;

•

our levels of operating and maintenance costs;

•

our dependence on key personnel;

•

availability of skilled workers and the related labor costs;

•

compliance with governmental, tax, environmental and safety regulation;

•

changes in tax laws, treaties or regulations;

•

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

•

general economic conditions and conditions in the oil and natural gas industry;

•

effects of new products and new technology in our industry;

•

operating hazards in the maritime transportation industry;

•

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

•

the volatility of the price of our common shares;

•

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

•

our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities, the terms of such financing and our ability to comply with covenants set forth in our existing and future financing arrangements; and

•

expectations regarding vessel acquisitions.

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

These forward-looking statements are made only as of the date of this quarterly 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.

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.

Dorian LPG Ltd.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Dorian LPG Ltd.

Unaudited Condensed Consolidated Balance Sheets

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

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

Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Operations

 (Expressed in United States Dollars)

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

Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Shareholders' Equity

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

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

 

Dorian LPG Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars)

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

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 and is headquartered in the United States and is engaged in the transportation of liquefied petroleum gas ("LPG") worldwide through the ownership and operation of LPG tankers. Dorian LPG Ltd. and its subsidiaries (together "we", "us", "our", "DLPG" or the "Company") is primarily focused on owning and operating very large gas carriers ("VLGCs"), each with a cargo carrying capacity of greater than 80,000 cbm. Following the deliveries of the Clermont and the Cheyenne, ECO-design VLGCs, on October 13, 2015 and October 22, 2015, respectively, our fleet consists of seventeen LPG carriers, including thirteen fuel-efficient 84,000 cbm ECO-design VLGCs, three 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have newbuilding contracts for the construction of six new fuel-efficient 84,000 cbm ECO-design VLGCs at Hyundai Heavy Industries Co., Ltd. ("Hyundai" or "HHI"), and Daewoo Shipping and Marine Engineering Ltd. ("Daewoo" or "DSME"), both of which are based in South Korea, with scheduled deliveries between October 2015 and February 2016. We refer to these contracts along with the VLGCs that were delivered between July 2014 and October 2015 as our VLGC Newbuilding Program.

On April 1, 2015, Dorian LPG Ltd. and Phoenix Tankers Pte. Ltd. ("Phoenix"), a wholly-owned subsidiary of Mitsui OSK Lines Ltd, began operation of Helios LPG Pool LLC, or the Helios Pool, a 50% joint venture, which is a pool of VLGC vessels. We believe that the operation of certain of our VLGCs in this pool will allow us to achieve better market coverage and utilization. Vessels entered into the Helios Pool are commercially managed jointly by Dorian LPG (UK) Ltd., our wholly-owned subsidiary, and Phoenix. The members of the Helios Pool share in the net pool revenues generated by the entire group of vessels in the pool, weighted according to certain technical vessel characteristics, and net pool revenues (see Note 2) are distributed as time charter hire to each participant. The vessels entered into the Helios Pool may operate either in the spot market, contracts of affreightment, or on time charters of two years' duration or less.

On May 13, 2014, we completed our initial public offering (the "IPO") and our shares trade on the New York Stock Exchange under the ticker symbol "LPG".

The accompanying unaudited condensed consolidated financial statements and related notes (the "Financial Statements") have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the Financial Statements. The Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended March 31, 2015 included in our Annual Report on Form 10-K for the year ended March 31, 2015 filed with the Securities and Exchange Commission ("SEC") on June 4, 2015.

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

 Our subsidiaries as of September 30, 2015, which are all wholly-owned and are incorporated in Republic of the Marshall Islands (unless otherwise noted), are listed below.

Vessel Owning Subsidiaries

Newbuilding Vessel Owning Subsidiaries⁽³⁾

 

 

 

(1)

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

(2)

Very Large Gas Carrier ("VLGC"), Pressurized Gas Carrier ("PGC")

(3)

Represents newbuilding vessels not yet delivered as of September 30, 2015

(4)

Represents calendar year quarters

2. Significant Accounting Policies

The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as were applied in the preparation of our audited financial statements for the year ended March 31, 2015 (see Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2015).

Additionally, as of April 1, 2015, we began operations of pooling arrangements. Net pool revenues—related party for each vessel in the pool is determined in accordance with the profit sharing terms specified within the pool agreement. In particular, the pool manager calculates the net pool revenues using gross revenues less voyage expenses of all the pool vessels and less the general and administrative expenses of the pool and distributes the net pool revenues as time charter hire to participants based on:

 

 We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of net pool revenues for the month can be estimated reliably.

 In February 2015, the Financial Accounting Standards Board ("FASB") issued accounting guidance amending consolidation analysis which focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This new standard simplifies consolidation accounting by reducing the number of consolidation models and providing incremental benefits to stakeholders. In addition, the new standard places more emphasis on risk of loss when determining a controlling financial interest, reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (a "VIE"), and changes consolidation conclusion for public and private companies in several industries that typically make use of limited partnerships or VIEs. The pronouncement is effective prospectively for annual periods beginning after December 15, 2015, and interim periods within that reporting period. We are currently assessing the impact the amended guidance will have on our financial statements.

 In April 2015, an accounting pronouncement was issued by the FASB to update the guidance related to the presentation of debt issuance costs. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. This pronouncement is effective retrospectively for fiscal years beginning after December 15, 2015 and interim periods within that reporting period, with early adoption permitted. We intend to adopt this pronouncement on April 1, 2016, and we are currently assessing the impact the amended guidance will have on our financial statements.

 In May 2014, the FASB amended its accounting guidance for revenue recognition. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and consideration that a company expects to receive for the services provided. It also requires additional disclosures necessary for the financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB voted to defer the effective date by one year for fiscal years beginning on or after December 15, 2017 and interim periods within that reporting period and permit early adoption of the standard, but not before the beginning of 2017. We are currently assessing the impact the amended guidance will have on our financial statements.

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

3. Transactions with Related Parties

 As of July 1, 2014, vessel management services and the associated agreements for our fleet were transferred from Dorian (Hellas), S.A. ("Dorian Hellas," "DHSA" or the "Manager") and are now provided through our wholly-owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp. Subsequent to the transition agreements, Eagle Ocean Transport, Inc. ("Eagle Ocean Transport") continues to incur related travel costs for certain transitioned employees as well as office-related costs, for which we reimbursed Eagle Ocean Transport $0.3 million and $0.4 million for the three and six months ended September 30, 2015, respectively. Such expenses are reimbursed based on their actual cost. Pursuant to a one year agreement that commenced on July 1, 2014 between Dorian LPG (UK) Ltd. and DHSA, chartering and operational services are provided by Dorian LPG (UK) Ltd. to DHSA. Fees for these services are included in "Other income—related parties" in the unaudited condensed consolidated statement of operations included herein and were less than $0.1 million and $0.1 million for the three and six months ended September 30, 2015, respectively.

 We outsourced the technical and commercial management of our vessels to DHSA, a related party, through June 30, 2014, pursuant to management agreements entered into by each vessel owning subsidiary on July 26, 2013, as amended. In addition, under these management agreements, strategic and financial services had also been outsourced to DHSA. DHSA had entered into agreements with each of Eagle Ocean Transport and Highbury Shipping Services Limited ("HSSL"), to provide certain of these services on behalf of the vessel owning companies. Management fees incurred related to these agreements are presented as Management fees‑related party in the consolidated statement of operations in the relevant period. There were no management fees related to these agreements subsequent to June 30, 2014.

 Additionally, a fixed monthly fee of $15,000 per hull was payable to DHSA for pre‑delivery services provided during the period from July 29, 2013 until June 30, 2014. Management fees related to the pre‑delivery services during the six months ended September 30, 2014 amounted to $0.9 million, which have been capitalized and presented in vessels under construction or vessels, net for vessels that have been delivered. There were no Management fees related to the pre-delivery services during the three months ended September 30, 2014 or for the three and six months ended September 30, 2015.

Helios LPG Pool LLC

 On April 1, 2015, Dorian LPG Ltd. and Phoenix established the Helios Pool and entered into a pool participation agreement for the purpose of establishing and operating, as charterer, under a time charter to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared as described in Note 2 above. We hold a 50% interest in the Helios Pool as a joint venture with Phoenix and all significant rights and obligations are equally shared by both parties. We have determined that the Helios Pool is a VIE that we do not consolidate as we are not the primary beneficiary and do not have a controlling financial interest. As of September 30, 2015, we had receivables from the Helios Pool of $40.5 million, including $6.6 million of working capital contributed for the operation of the vessels in the pool. Our maximum exposure to losses from the pool as of September 30, 2015 is limited to this investment of working capital. 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 services provided by Dorian LPG (UK) Ltd. are included in "Other income—related parties" in the unaudited condensed consolidated statement of operations and were $0.4 million and $0.8 million for the three and six months ended September 30, 2015.

 Through our vessel owning subsidiaries, we have chartered vessels to the Helios Pool during the three and six months ended September 30, 2015. The time charter revenue from the Helios Pool is variable depending upon the net results of the pool, operating days and pool points for each vessel. The Helios Pool enters into voyage and time charters with external parties and receives freight and related revenue and incurs voyage costs such as bunkers, port costs and commissions. At the end of each month, the pool aggregates the revenue and expenses for all the vessels in the pool and distributes net pool revenues to the participants based on the results of the pool, operating days and pool points, as variable time charter hire for the relevant vessel. We recognize net pool revenues on a monthly basis, when the vessel has participated in the pool during the period and the amount of pool revenues for the month can be estimated reliably. Revenue earned is presented in Note 9.

4. Deferred Charges, Net

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

 Financing costs incurred during the six months ended September 30, 2015 relate to a $758 million debt facility that we entered into in March 2015 (the "2015 Debt Facility"). See Note 7 below.

 There were no drydockings during the six months ended September 30, 2015.

5. Vessels, Net

 

 The additions to Vessels, net represent amounts transferred from Vessels under Construction relating to the cost of our nine newbuildings that were delivered to us during the six months ended September 30, 2015.

 Vessels, with a total carrying value of $1,047.8 million and $416.0 million as of September 30, 2015 and March 31, 2015, respectively, are first‑priority mortgaged as collateral for our long-term debt facilities (refer to Note 7 below). No impairment loss was recorded for the periods presented.

6. Vessels Under Construction

 Other capitalized expenditures for the six months ended September 30, 2015 represent LPG coolant of $2.2 million and fees paid to third party vendors of $11.7 million for supervision and other newbuilding pre‑delivery costs including engineering and technical support, liaising with the shipyard, and ensuring key suppliers are integrated into the production planning process.

7. Long-term Debt

 2015 Debt Facility – refer to Note 11 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015 for additional information related to the 2015 Debt Facility. During the six months ended September 30, 2015, we made drawdowns under the 2015 Debt Facility of $338.3 million, including $4.8 million of fees, which was secured by the Cougar, Concorde, Cobra, Continental, Constitution, Commodore, Cresques and Constellation and was divided into the four separate tranches. As of September 30, 2015, $338.6 million was available to be drawn under the facility.

Debt Obligations

The table below presents our debt obligations:

8. Stock-Based Compensation Plans

 Our stock-based compensation expense was $0.9 million and $1.8 million for the three and six months ended September 30, 2015, respectively, and was $0.8 million for the three and six months ended September 30, 2014. Stock-based compensation expense is included within general and administrative expenses in the unaudited condensed consolidated statements of operations. Unrecognized compensation cost was $14.1 million as of September 30, 2015 and will be recognized over the remaining weighted average life of 3.95 years. For more information on our equity incentive plan, see Note 13 of the consolidated financial statements included in our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.

 A summary of the activity of restricted shares awarded under our equity incentive plan as of September 30, 2015 and changes during the six months then ended, is as follows:

9. Revenues

 Revenues comprise the following:

 Net pool revenues—related party depend upon the net results of the Helios Pool, operating days and pool points for each vessel. See Note 3 to our unaudited interim condensed consolidated financial statements.

 Time charter revenue included a profit‑sharing element of the time charter agreements of $2.2 million and $5.3 million for the three and six months ended September 30, 2014, respectively. There was no profit‑sharing element of the time charter agreements for the three and six months ended September 30, 2015. Other revenues represents income from charterers relating to reimbursement of voyage expenses such as costs for security guards and war risk insurance.

10. Financial Instruments and Fair Value Disclosures

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

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

 

 As of September 30, 2015 and March 31, 2015, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the accompanying consolidated balance sheets. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three and six months ended September 30, 2015.

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

11. Earnings Per Share ("EPS")

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

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

 For the three months ended September 30, 2015 and September 30, 2014, there were 655,000 shares of unvested restricted stock excluded from the calculation of diluted EPS because the effect of their inclusion would be anti-dilutive. For the six months ended September 30, 2015 and September 30, 2014, there were 655,000 shares of unvested restricted stock excluded from the calculation of diluted EPS because the effect of their inclusion would be anti-dilutive.

12. Commitments and Contingencies

Commitments under Newbuilding Contracts

 As of September 30, 2015, we had $405.5 million of commitments under shipbuilding contracts and supervision agreements for eight newbuildings. We expect to settle these commitments within the twelve months ended September 30, 2016.

Other

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

13. Subsequent Events

 On October 13, 2015, we took delivery of our twelfth vessel under the VLGC Newbuilding Program, the Clermont, from HHI.

 On October 20, 2015, we entered into an interest rate swap with the Commonwealth Bank of Australia to effectively convert an amortizing notional amount of $85.7 million of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% with a termination date of March 23, 2022.

 On October 22, 2015, we took delivery of our thirteenth vessel under the VLGC Newbuilding Program, the Cheyenne, from HHI.

 On October 27, 2015, we entered into an interest rate swap with Citibank, N.A. to effectively convert an amortizing notional amount of $128.6 million of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.38% with a termination date of March 23, 2022.

 During October 2015, we repurchased and held 126,100 common shares as treasury shares for $1.4 million.

 The following discussion contains forward‑looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Item 1A—Risk Factors" in our Annual Report on Form 10-K for the year ended March 31, 2015, our actual results may differ materially from those anticipated in these forward‑looking statements. Please also see the section "Forward‑Looking Statements" included in this quarterly report.

Overview

 We are a Marshall Islands corporation headquartered in the United States and primarily focused on owning and operating VLGCs, each with a cargo‑carrying capacity of greater than 80,000 cbm. Our fleet currently consists of seventeen LPG carriers, including thirteen fuel-efficient 84,000 cbm VLGCs, three 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have newbuilding contracts for the construction of six new 84,000 cbm VLGCs at Hyundai and Daewoo, with scheduled deliveries between October 2015 and February 2016.

 Each of our newbuildings will be an ECO-design vessel incorporating advanced fuel efficiency and emission-reducing technologies. Upon completion of our VLGC Newbuilding Program in February 2016, 100% of our VLGC fleet will be operated as sister ships and the average age of our VLGC fleet will be approximately 1.6 years, while the average age of the current worldwide VLGC fleet is approximately 11.0 years.

 Our principal shareholders include SeaDor Holdings, an affiliate of SEACOR Holdings, Inc. (NYSE:CKH), Kensico Capital Management, BW Euroholdings Ltd., an affiliate of BW Group Ltd., Wellington Management Group LLP, Dorian Holdings LLC and Sino Energy Holdings LLC, an affiliate of HNA Group Co., Ltd., which own 15.9%, 13.9%, 10.4%, 8.9%, 8.1% and 6.9%, respectively, of our total shares outstanding, as of October 28, 2015. SeaDor Holdings, Kensico Capital Management and Dorian Holdings LLC are all represented on our board of directors.

 Our customers include global energy companies such as Exxon, Statoil and Shell, commodity traders such as Itochu Corporation and the Vitol Group and importers such as E1 Corp., SK Gas Co. Ltd. and Indian Oil Corporation. We intend to pursue a balanced chartering strategy by employing our vessels on a mix of multi-year time charters, some of which may include a profit-sharing component, and spot market voyages and shorter-term time charters. Four of our vessels are currently on time charters with oil majors, including one vessel on time charter within Helios LPG Pool LLC. See "Our Fleet" below for more information.

Recent Developments

 On October 13, 2015, we took delivery of our twelfth vessel under the VLGC Newbuilding Program, the Clermont, from HHI.

 On October 20, 2015, we entered into an interest rate swap with the Commonwealth Bank of Australia to effectively convert an amortizing notional amount of $85.7 million of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.43% with a termination date of March 23, 2022.

 On October 22, 2015, we took delivery of our thirteenth vessel under the VLGC Newbuilding Program, the Cheyenne, from HHI.

 On October 27, 2015, we entered into an interest rate swap with Citibank, N.A. to effectively convert an amortizing notional amount of $128.6 million of debt related to our 2015 Debt Facility from a floating rate to a fixed rate of 1.38% with a termination date of March 23, 2022.

During October 2015, we repurchased and held 126,100 common shares as treasury shares for $1.4 million.

Selected Financial Data

 The following table presents our selected financial data and other information as of and for the three and six months ended September 30, 2015, as of March 31, 2015, and for the three and six months ended September 30, 2014, and should be read in conjunction with our unaudited interim condensed consolidated financial statements and other financial information included in this quarterly report.

_________________

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

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

 

Our Fleet

The following table sets forth certain information regarding our vessels as of October 28, 2015:

 

Results of Operations – For the three months ended September 30, 2015 and September 30, 2014

Revenues

The following table compares our Revenues for the three months ended September 30:

 

Revenues of $74.9 million for the three months ended September 30, 2015, which represent net pool revenues-related party, voyage charters, time charters and other revenues earned by our VLGCs and our pressurized 5,000 cbm vessel, increased $54.6 million, or 268.1%, from $20.4 million for the three months ended September 30, 2014. The increase is primarily attributable to $47.6 million of revenues contributed by eight of our newbuilding VLGCs that were delivered subsequent to September 30, 2014 along with an increase of $4.6 million of revenues related to a VLGC that was delivered at the end of September 2014. An increase of $1.2 million from the three months ended September 30, 2014 to September 30, 2015 was due to an increase in VLGC rates and operating days for four VLGCs operating in both three month periods. The Grendon's revenues increased $1.0 million to $1.2 million on 88 operating days for the three months ended September 30, 2015 from $0.2 million on 14 operating days and 10 days in drydock for the three months ended September 30, 2014.

Voyage Expenses

Voyage expenses were $3.5 million during the three months ended September 30, 2015, a decrease of $0.9 million, from $4.4 million for the three months ended September 30, 2014. This decrease was mainly attributable to a decrease in VLGC bunkers of $1.6 million resulting from lower bunker prices, partially offset by an increase in VLGC port expenses of $0.2 million and other voyage expenses of $0.2 million. The Grendon's voyage expenses increased $0.3 million to $0.6 million on 88 operating days for the three months ended September 30, 2015 from $0.3 million on 14 operating days and 10 days in drydock for the three months ended September 30, 2014.

Vessel Operating Expenses

Vessel operating expenses were $9.5 million during the three months ended September 30, 2015, or $8,663 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period. This was an increase of $4.3 million from $5.2 million for the three months ended September 30, 2014. Vessel operating expenses per calendar day decreased $3,101 from $11,764 for the three months ended September 30, 2014 to $8,663 for the three months ended September 30, 2015. The gross increase was primarily the result of an increase in the number of vessels operating in our fleet during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. The decrease in vessel operating expenses per day of $3,101 is primarily attributable to higher absorption of costs related to the training of additional crew over a greater number of calendar days on our expanded VLGC fleet and the reduced operating cost of our ECO-design VLGCs compared to the 82,000 cbm VLGCs in our fleet. The Grendon's vessel operating expenses decreased $0.4 million to $0.6 million for the three months ended September 30, 2015 from $1.0 million for the three months ended September 30, 2014 due mainly to a decrease in repairs and maintenance of $0.3 million and spares of $0.1 million.

Depreciation and Amortization

Depreciation and amortization was $8.3 million for the three months ended September 30, 2015, an increase of $5.3 million from $3.0 million for the three months ended September 30, 2014 that mainly relates to depreciation expense for our additional operating vessels.

General and Administrative Expenses

General and administrative expenses were $5.3 million for the three months ended September 30, 2015, an increase of $1.0 million from $4.3 million for the three months ended September 30, 2014, mainly due to an increase of $1.0 million for certain non-capitalizable costs incurred prior to vessel delivery. General and administrative expenses for the three months ended September 30, 2015 were comprised of $2.2 million of salaries and benefits, $1.3 million for costs to prepare new vessels for operations, $0.9 million of stock-based compensation, and $0.9 million of other general and administrative expenses.

Interest and Finance Costs

Interest and finance costs amounted to $0.9 million for the three months ended September 30, 2015, an increase of $0.9 million from less than $0.1 million for the three months ended September 30, 2014. The increase of $0.9 million during this period was mainly due to a $1.0 million increase in interest incurred on our long-term debt, amortization and other financing expenses from $0.8 million in the three months ended September 30, 2014 to $1.8 million in the three month period ended September 30, 2015. These increases were offset somewhat by a $0.1 million increase in capitalized interest from $0.8 million in the three months ended September 30, 2014 to $0.9 million in the three months ended September 30, 2015. The average indebtedness during the three months ended September 30, 2015 was $415.3 million compared to $125.8 million during the three months ended September 30, 2014. The outstanding balance of our long term debt as of September 30, 2015 was $528.3 million.

Gain/(loss) on Derivatives, net

Gain/(loss) on derivatives, net, amounted to a net loss of approximately $6.3 million for three months ended September 30, 2015, compared to a net gain of $0.3 million for the three months ended September 30, 2014. The net loss on derivatives for the three months ended September 30, 2015 was comprised of an unrealized loss of $5.1 million from the changes in the fair value of the interest rate swaps primarily from new swaps entered into during the period (see Note 10 to our unaudited interim condensed consolidated financial statements), and a realized loss of $1.2 million. For the three months ended September 30, 2014, the net gain on derivatives was primarily comprised of an unrealized gain of $1.7 million from the changes in the fair value of the interest rate swaps, partially offset by a realized loss of $1.4 million.

Results of Operations – For the six months ended September 30, 2015 and September 30, 2014

Revenues

The following table compares our Revenues for the six months ended September 30:

 

Revenues of $110.6 million for the six months ended September 30, 2015, which represent net pool revenues-related party, voyage charters, time charters and other revenues earned by our VLGCs and our pressurized 5,000 cbm vessel, increased $74.4 million, or 205.4%, from $36.2 million for the six months ended September 30, 2014. The increase was primarily attributable to $56.9 million of revenues contributed by eight of our newbuilding VLGCs that were delivered subsequent to September 30, 2014 along with an increase of $9.6 million of revenues related to a VLGC that was delivered at the end of September 2014. An increase of $6.6 million from the six months ended September 30, 2014 to September 30, 2015 was due to an increase in VLGC rates and operating days for four VLGCs operating in both six month periods. The Grendon's revenues increased $1.3 million to $2.1 million on 155 operating days for the six months ended September 30, 2015 from $0.8 million on 74 operating days and 10 days in drydock for the six months ended September 30, 2014. 

Voyage Expenses

Voyage expenses were $7.1 million during the six months ended September 30, 2015, and were relatively unchanged from $7.1 million for the six months ended September 30, 2014. VLGC voyage expenses decreased $0.7 million due to a decrease in VLGC bunkers of $1.6 million resulting mainly from lower bunker prices, partially offset by an increase in VLGC port expenses of $0.7 million and other voyage expenses of $0.2 million. Offsetting the decrease in VLGC voyage expenses was an increase in the Grendon's voyage expenses of $0.7 million to $1.1 million on 155 operating days for the six months ended September 30, 2015 from $0.4 million on 74 operating days and 10 days in drydock for the six months ended September 30, 2014. The increase was mainly due to the increase in operating days along with the Grendon's time charter expiration at the end of May 2014.

Vessel Operating Expenses

Vessel operating expenses amounted to $16.2 million during the six months ended September 30, 2015, or $9,244 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period. This was an increase of $7.5 million from $8.7 million for to the six months ended September 30, 2014. Vessel operating expenses per calendar day decreased $1,527 from $10,771 for the six months ended September 30, 2014 to $9,244 for the six months ended September 30, 2015. The gross increase was primarily the result of an increase in the number of vessels operating in our fleet during the six months ended September 30, 2015 compared to the six months ended September 30, 2014. The decrease in vessel operating expenses per day of $1,527 is primarily attributable to higher absorption of costs relating to the training of additional crew over a greater number of calendar days on our expanded VLGC fleet and the reduced operating cost of our ECO-design VLGCs compared to the 82,000 cbm VLGCs in our fleet. The Grendon's vessel operating expenses decreased $0.4 million to $1.2 million for the six months ended September 30, 2015 from $1.6 million for the six months ended September 30, 2014 due mainly to a decrease in repairs and maintenance of $0.3 million and spares of $0.1 million.

 Management Fees—Related Party

Beginning July 1, 2014, we ceased to incur related-party management fees as a result of the completion of the transition agreements described in the section "Important Financial and Operational Terms and Concepts—Management Fees—Related Party" in our Annual Report on Form 10-K for the year ended March 31, 2015. There were no management fees for the six months ended September 30, 2015 compared to $1.1 million expensed for the six months ended September 30, 2014, which represent fees charged in accordance with our management agreements entered into with DHSA. The management fees were charged on a monthly basis per vessel and the total fees were affected by the number of vessels in our fleet.

Depreciation and Amortization

Depreciation and amortization was $13.2 million for the six months ended September 30, 2015, an increase of $7.7 million from $5.5 million for the six months ended September 30, 2014 that mainly relates to depreciation expense for our additional operating vessels.

General and Administrative Expenses

General and administrative expenses were $12.5 million for the six months ended September 30, 2015, an increase of $7.4 million from $5.1 million for the six months ended September 30, 2014, mainly due to vessel management services being transferred from DHSA, effective July 1, 2014, to our wholly owned subsidiaries Dorian LPG (USA) LLC, Dorian LPG (UK) Ltd. and Dorian LPG Management Corp., which caused a decline in management fees from $1.1 million for the six months ended September 30, 2014 to zero management fees for the six months ended September 30, 2015. The increase in general and administrative expenses also resulted from additional personnel and associated costs to support our larger fleet and certain non-capitalizable costs incurred prior to vessel delivery. General and administrative expenses for the six months ended September 30, 2015 were comprised of $6.6 million of salaries and benefits (inclusive of $2.1 million in discretionary cash bonuses to various employees), $1.8 million of stock-based compensation, $1.6 million for costs to prepare new vessels for operations, $0.5 million for professional, legal, audit and accounting fees, and $2.0 million of other general and administrative expenses.

Interest and Finance Costs

Interest and finance costs amounted to $1.1 million for the six months ended September 30, 2015, an increase of $0.9 million from $0.2 million for the six months ended September 30, 2014. The increase of $0.9 million during this period was mainly due to a $2.9 million increase in interest incurred on our long-term debt, amortization and other financing expenses from $1.9 million in the six months ended September 30, 2014 to $4.8 million in the six months ended September 30, 2015. These increases were offset somewhat by a $2.0 million increase in capitalized interest from $1.6 million in the six months ended September 30, 2014 to $3.6 million in the six months ended September 30, 2015.  The average indebtedness during the six months ended September 30, 2015 was $315.9 million compared to $127.0 million during the six months ended September 30, 2014. The outstanding balance of our long term debt as of September 30, 2015 was $528.3 million.

Gain/(loss) on Derivatives, net

Gain/(loss) on derivatives, net, amounted to a net loss of approximately $6.2 million for six months ended September 30, 2015, compared to a net loss of $1.0 million for the six months ended September 30, 2014. The net loss on derivatives for the three months ended September 30, 2015 was comprised of an unrealized loss of $3.7 million from the changes in the fair value of the interest rate swaps, primarily from new swaps entered into during the period (see Note 10 to our unaudited interim condensed consolidated financial statements), and a realized loss of $2.5 million. For the six months ended September 30, 2014, the net loss on derivatives was primarily comprised of a realized loss of $2.7 million, partially offset by an unrealized gain of $1.7 million from the changes in the fair value of the interest rate swaps.

Liquidity and Capital Resources

Our business is capital intensive, and our future success depends on our ability to maintain a high‑quality fleet and the delivery of the remaining vessels under the VLGC Newbuilding Program. As of September 30, 2015, we had cash and cash equivalents of $80.3 million and restricted cash of $42.0 million.

Our primary source of capital during the three months ended September 30, 2015 was $338.3 million of proceeds from the 2015 Debt Facility that we used to make the final payments for our eight VLGCs delivered during the six months ended September 30, 2015 and $46.8 million in cash generated from operations during the six months ended September 30, 2015. As of September 30, 2015 we had available debt facilities of $338.6 million and total outstanding indebtedness of $528.3 million. Within the next twelve months, $42.4 million of our long-term debt is scheduled to be repaid.

As of October 28, 2015, in addition to operating expenses and financing costs, our medium‑term and long‑term liquidity needs primarily relate to contractual commitments to build six VLGCs at shipyards with delivery dates between October 2015 and February 2016. We expect to finance the remaining payments amounting to $252.0 million for these deliveries with available cash on hand and borrowings available under the 2015 Debt Facility.

Our dividend policy and stock repurchase program will also impact our future liquidity position. Marshall Islands law generally prohibits the payment of dividends or the repurchase of stock other than from surplus or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. In addition, under the terms of one of our credit facilities, we may only declare or pay any dividends from our free cash flow and may not do so if (i) an event of default is occurring or (ii) the payment of such dividend would result in an event of default. Our vessel owning subsidiaries who are party to the RBS Loan Facility, as described in our Annual Report on Form 10-K for the year ended March 31, 2015, are prohibited from paying dividends without the consent of the lender. However, the loan facility permits the borrowers to make expenditures to fund the administration and operation of Dorian LPG Ltd.

As part of our growth strategy, we will continue to consider strategic opportunities, including the acquisition of additional vessels. We may choose to pursue such opportunities through internal growth or joint ventures or business acquisitions. We expect to finance the purchase price of any additional future acquisitions and our operations either through internally generated funds, debt financings, the issuance of additional equity securities or a combination of these forms of financing. We anticipate that our primary sources of funds for our long term liquidity needs will be from cash from operations and/or debt or equity financings.

 

Cash Flows

The following table summarizes our cash and cash equivalents provided by/(used in) operating, financing and investing activities for the six months ended September 30:

Net cash flow from operating activities depends upon our overall profitability driven by our fleet size and VLGC market rates; the timing and amount of payments for drydocking expenditures, any unscheduled repairs and maintenance activity; fluctuations in working capital balances; bunker costs; and market rates to the extent we have vessels employed on voyage charters.

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

We entered into contracts for the construction of nineteen newbuilding vessels, eleven of which were delivered as of September 30, 2015, from our VLGC Newbuilding Program. Through October 28, 2015, an additional two newbuilding vessels were delivered resulting in remaining contractual commitments of approximately $252.0 million.

We are required to complete a special survey for a vessel once every five years and an intermediate survey every 2.5 years after the first special survey. Drydocking each vessel takes approximately 10‑20 days. We spend significant amounts for scheduled drydocking (including the cost of classification society surveys) for each of our vessels.

As our vessels age and our fleet expands, our drydocking expenses will increase. We estimate the current cost of a VLGC special survey to be approximately $1,000,000 and the cost of an intermediate survey to be approximately $100,000. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking and classification society survey costs. We are not aware of any future regulatory changes or environmental laws that we expect to have a material impact on our current or future results of operations that we have not already considered. Please see "Item 1A. Risk Factors—"Risks Relating to Our Company—We may incur substantial costs for the drydocking or replacement of our vessels as they age" in our Annual Report on Form 10-K for the year ended March 31, 2015.

Debt Agreements

For information relating to our secured term loan facilities, please see Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2015 and Note 7 to our unaudited interim condensed consolidated financial statements as of and for the three and six months ended September 30, 2015 included herein.

Off-Balance Sheet Arrangements

There were no material changes in our off-balance sheet arrangements during the six months ended September 30, 2015.

Recent Accounting Pronouncements

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

For additional discussion of our exposure to market risk, refer to "Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk" included in our Annual Report on Form 10-K for the year ended March 31, 2015.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of September 30, 2015. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the six months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

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

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. For additional risk factors that may cause actual results to differ materially from those anticipated, please refer to our 2015 Annual Report on Form 10-K for the year ended March 31, 2015.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs
July 1 to 31, 2015			-			$	-				-			$	-
August 1 to 31, 2015			185,000				12.58				185,000				97,673,100
September 1 to 30, 2015			167,100				11.90				167,100				95,684,438
Total			352,100			$	12.26				352,100			$	95,684,438

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

SIGNATURES

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

 

 

Date: October 29, 2015	/s/ Theodore B. Young
	Theodore B. Young
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

 

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