Table of Contents
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 June 30, 2024
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
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 July 25, 2024, there were 42,619,448 shares of the registrant’s common stock outstanding.
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. We intend for these 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 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 expressions, 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, 2024, and also include, among others, risks associated with the following:
Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or is not realized. You should thoroughly read this report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this 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 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
PART I.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and March 31, 2024
1
Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2024 and June 30, 2023
2
Unaudited Condensed Consolidated Statements of Shareholders' Equity for the three months ended June 30, 2024 and June 30, 2023
3
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2024 and June 30, 2023
4
Notes to Unaudited Condensed Consolidated Financial Statements
5
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
18
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
27
ITEM 4.
CONTROLS AND PROCEDURES
PART II.
OTHER INFORMATION
LEGAL PROCEEDINGS
28
ITEM 1A.
RISK FACTORS
ITEM 5.
ITEM 6.
EXHIBITS
EXHIBIT INDEX
29
SIGNATURES
30
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets
(Expressed in United States Dollars, except for share data)
As of
June 30, 2024
March 31, 2024
Assets
Current assets
Cash and cash equivalents
$
353,286,506
282,507,971
Trade receivables, net and accrued revenues
728,063
659,567
Due from related parties
79,242,331
52,352,942
Inventories
2,375,025
2,393,379
Available-for-sale debt securities
11,624,497
11,530,939
Derivative instruments
3,872,696
5,139,056
Prepaid expenses and other current assets
14,417,578
14,297,917
Total current assets
465,546,696
368,881,771
Fixed assets
Vessels, net
1,193,276,988
1,208,588,213
Vessel under construction
24,589,655
23,829,678
Total fixed assets
1,217,866,643
1,232,417,891
Other non-current assets
Deferred charges, net
11,633,800
12,544,098
4,989,886
4,145,153
Due from related parties—non-current
25,300,000
Restricted cash—non-current
75,319
75,798
Operating lease right-of-use assets
183,794,058
191,700,338
2,584,495
2,585,116
Total assets
1,911,790,897
1,837,650,165
Liabilities and shareholders’ equity
Current liabilities
Trade accounts payable
7,993,668
10,185,962
Accrued expenses
4,537,580
3,948,420
Due to related parties
7,266
7,283
Deferred income
556,427
486,868
Current portion of long-term operating lease liabilities
33,075,348
32,491,122
Current portion of long-term debt
53,654,384
53,543,315
Dividends payable
1,406,175
1,149,665
Total current liabilities
101,230,848
101,812,635
Long-term liabilities
Long-term debt—net of current portion and deferred financing fees
538,411,109
551,549,215
Long-term operating lease liabilities
150,735,999
159,226,326
Other long-term liabilities
1,548,006
1,528,906
Total long-term liabilities
690,695,114
712,304,447
Total liabilities
791,925,962
814,117,082
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, 53,995,027 and 51,995,027 shares issued, 42,619,448 and 40,619,448 shares outstanding (net of treasury stock), as of June 30, 2024 and March 31, 2024, respectively
539,950
519,950
Additional paid-in-capital
858,357,646
772,714,486
Treasury stock, at cost; 11,375,579 and 11,375,579 shares as of June 30, 2024 and March 31, 2024, respectively
(126,837,239)
Retained earnings
387,804,578
377,135,886
Total shareholders’ equity
1,119,864,935
1,023,533,083
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Unaudited Condensed Consolidated Statements of Operations
(Expressed in United States Dollars)
Three months ended
June 30, 2023
Revenues
Net pool revenues—related party
109,407,054
104,386,551
Time charter revenues
3,414,351
6,423,472
Other revenues, net
1,531,637
752,884
Total revenues
114,353,042
111,562,907
Expenses
Voyage expenses
804,985
298,383
Charter hire expenses
10,645,140
10,546,810
Vessel operating expenses
20,480,279
19,842,386
Depreciation and amortization
17,170,986
16,655,317
General and administrative expenses
10,424,070
9,218,137
Total expenses
59,525,460
56,561,033
Other income—related parties
645,943
620,433
Operating income
55,473,525
55,622,307
Other income/(expenses)
Interest and finance costs
(9,518,430)
(10,403,849)
Interest income
3,728,507
1,690,220
Unrealized gain/(loss) on derivatives
(421,627)
2,859,274
Realized gain on derivatives
1,717,249
1,847,764
Other gain/(loss), net
308,916
105,421
Total other income/(expenses), net
(4,185,385)
(3,901,170)
Net income
51,288,140
51,721,137
Weighted average shares outstanding:
Basic
40,905,196
40,137,687
Diluted
41,115,667
40,378,835
Earnings per common share—basic
1.25
1.29
Earnings per common share—diluted
1.28
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
capital
Earnings
Total
Balance, April 1, 2023
51,630,593
516,306
(122,896,838)
764,383,292
231,843,562
873,846,322
Net income for the period
Restricted share award issuances
23,750
238
(238)
Dividend ($2.50 per common share)
(40,382,730)
Stock-based compensation
776,607
Purchase of treasury stock
(352,627)
Balance, June 30, 2023
51,654,343
516,544
(123,249,465)
765,159,661
243,181,969
885,608,709
Balance, April 1, 2024
51,995,027
Common share issuance
2,000,000
20,000
84,367,701
84,387,701
Dividend ($1.00 per common share)
(40,619,448)
1,275,459
Balance, June 30, 2024
53,995,027
Unaudited Condensed Consolidated Statements of Cash Flows
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash lease expense
7,901,447
5,866,606
Amortization of financing costs
317,511
314,554
Unrealized (gain)/loss on derivatives
421,627
(2,859,274)
Stock-based compensation expense
Unrealized foreign currency loss, net
12,181
149,067
Other non-cash items, net
(356,408)
(276,465)
Changes in operating assets and liabilities
Trade receivables, inventories, prepaid expenses, and other current and non-current assets
188,315
(3,253,374)
(26,889,389)
2,032,587
Operating lease liabilities—current and long-term
(7,901,255)
(5,864,274)
(1,471,968)
474,385
Accrued expenses and other liabilities
524,776
(277,192)
(17)
73,985
Payments for drydocking costs
(1,256,621)
(2,268,317)
Net cash provided by operating activities
41,224,784
63,265,349
Cash flows from investing activities:
Payments for vessels under construction and vessel capital expenditures
(1,251,982)
(2,344,946)
Net cash used in investing activities
Cash flows from financing activities:
Repayment of long-term debt borrowings
(13,344,548)
(13,238,108)
Repurchase of common stock
(323,221)
Dividends paid
(40,362,938)
(40,491,657)
Proceeds from common share issuances
89,000,000
Equity offering costs paid
(4,462,214)
Net cash provided by/(used in) financing activities
30,830,300
(54,052,986)
Effects of exchange rates on cash and cash equivalents
(25,046)
(116,102)
Net increase in cash, cash equivalents, and restricted cash
70,778,056
6,751,315
Cash, cash equivalents, and restricted cash at the beginning of the period
282,583,769
148,873,650
Cash, cash equivalents, and restricted cash at the end of the period
353,361,825
155,624,965
Supplemental disclosure of cash flow information
Cash paid for interest excluding interest capitalized to vessels
8,920,873
9,693,964
Cash paid for operating leases
10,627,185
9,710,098
Capitalized drydocking costs included in liabilities
206,717
1,588,716
Vessel-related capital expenditures included in liabilities
1,201,213
1,482,839
Unpaid dividends included in liabilities
1,146,934
Financing costs included in liabilities
663,600
Equity offering costs included in liabilities
150,085
Reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total amount of such items reported in the statements of cash flows:
155,548,745
76,220
Cash and cash equivalents and restricted cash at end of period shown in the statement of cash flows
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 June 30, 2024, our fleet consists of twenty-five VLGCs, including one dual-fuel 84,000 cbm ECO-design VLGC, or our Dual-fuel ECO VLGC; nineteen fuel-efficient 84,000 cbm ECO-design VLGCs, or our ECO VLGCs; one 82,000 cbm modern VLGC; three time chartered-in dual-fuel Panamax size VLGCs; and one time chartered-in ECO VLGC. On November 24, 2023, we entered into a shipbuilding contract for a newbuilding Very Large Gas Carrier / Ammonia Carrier (“VLGC/AC”) with a cargo carrying capacity of 93,000 cbm that can transport LPG or ammonia and is expected to be delivered from Hanwha Ocean Co. Ltd. in the second calendar quarter of 2026. We provide in-house commercial 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 MOL Energia (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.
Fifteen of our ECO-VLGCs, including one of our time chartered-in ECO-VLGCs, are equipped with exhaust gas cleaning systems (commonly referred to as “scrubbers”) to reduce sulfur emissions and, as of June 30, 2024, we have additional commitments to commission scrubbers on one of our VLGCs and on our newbuilding VLGC/AC. Additionally, one of the chartered-in dual-fuel Panamax size VLGCs is equipped with a shaft generator, which generates additional electricity that can be used to reduce fuel consumption and carbon emissions.
On April 1, 2015, Dorian and MOL Energia Pte. Ltd. (“MOL Energia”), formerly known as Phoenix Tankers Pte. Ltd., 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. 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, 2024 included in our Annual Report on Form 10-K filed with the SEC on May 29, 2024.
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 June 30, 2024, 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)
CJNP LPG Transport LLC
VLGC
Captain John NP
2007
82,000
Comet LPG Transport LLC
Comet
2014
84,000
Corsair LPG Transport LLC
Corsair(2)
Corvette LPG Transport LLC
Corvette
2015
Dorian Shanghai LPG Transport LLC
Cougar(2)
Concorde LPG Transport LLC
Concorde
Dorian Houston LPG Transport LLC
Cobra
Dorian Sao Paulo LPG Transport LLC
Continental
Dorian Ulsan LPG Transport LLC
Constitution
Dorian Amsterdam LPG Transport LLC
Commodore
Dorian Dubai LPG Transport LLC
Cresques(2)
Constellation LPG Transport LLC
Constellation
Dorian Monaco LPG Transport LLC
Cheyenne
Dorian Barcelona LPG Transport LLC
Clermont
Dorian Geneva LPG Transport LLC
Cratis(2)
Dorian Cape Town LPG Transport LLC
Chaparral(2)
Dorian Tokyo LPG Transport LLC
Copernicus(2)
Commander LPG Transport LLC
Commander
Dorian Explorer LPG Transport LLC
Challenger
Dorian Exporter LPG Transport LLC
Caravelle(2)
2016
Dorian Sakura LPG Transport LLC
Captain Markos(2)
2023
Dorian LPG Ammonia Transport LLC
VLGC/AC
Hull No. 2373
2026(3)
93,000
Management and Other Subsidiaries
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
Dorian LPG US Lease Finance LLC
Dorian LPG Nippon Lease LLC
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, 2024 (refer to Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024).
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” expanding reportable segment disclosure requirements of a public entity through enhanced disclosures of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity
6
to disclose the title and position of the CODM. ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments, but does require that all segment-related disclosures required by FASB Topic 280 (Segment Reporting) be made by entities that have a single reportable segment. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 with early adoption is permitted. There were no recent updates to the Accounting Standards Codification issued by the Financial Accounting Standards Board that were applicable to our unaudited condensed consolidated financial statements. We are currently evaluating the impact that adoption of this accounting standard will have on our financial disclosures.
SEC Climate-Related Disclosures
In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, intended to enhance and standardize climate-related disclosures in registration statements and annual reports. The rules will require disclosure of certain climate-related information in registration statements and annual reports, including information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on its business, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will be required in the registrant’s audited financial statements. In April 2024, the SEC voluntarily stayed the final rule as a result of pending legal challenges. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025, pending resolution of the stay. We are currently evaluating the impact of these new rules on our financial statements and 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 June 30, 2024 and 2023.
As of June 30, 2024 and March 31, 2024, there was nothing due from DHSA.
Helios LPG Pool LLC
On April 1, 2015, Dorian and MOL Energia 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 MOL Energia 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 (see below for description of 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
7
investor. Further, in accordance with the guidance in ASC 810-10-25-38D, the Company and MOL Energia are not related parties as defined in ASC 850 nor are they de facto 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 June 30, 2024, the Helios Pool operated thirty VLGCs, including twenty-four vessels from our fleet (including four vessels time chartered-in from unrelated parties) and five MOL Energia vessels, and one time chartered-in vessel.
As of June 30, 2024, we had net receivables from the Helios Pool of $104.5 million (net of amounts due to Helios Pool less than $0.1 million which are reflected under “Due to related Parties”), including $25.3 million of working capital contributed for the operation of our vessels in the pool. As of March 31, 2024, we had net receivables from the Helios Pool of $77.6 million (net of an amount due to Helios Pool of $0.1 million which are reflected under “Due to related Parties”), including $25.3 million of working capital contributed for the operation of our vessels in the pool. Our maximum exposure to losses from the pool as of June 30, 2024 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 (DK) ApS and MOL Energia and has appointed both as the exclusive commercial managers of pool vessels. Fees for such services earned by Dorian LPG (DK) ApS are included in “Other income-related parties” in the unaudited interim condensed consolidated statement of operations and were $0.6 million for both the three months ended June 30, 2024, and 2023, respectively. Additionally, we receive reimbursement of expenses such as costs for security guards, war risk insurance, and certain other voyage costs for vessels operating in the Helios Pool, for which we earned $0.8 million and $0.1 million for the three months ended June 30, 2024, and 2023, 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 three months ended June 30, 2024 and 2023. 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 as variable rate time charter hire for the relevant vessel to participants based on pool points (vessel attributes such as cargo carrying capacity, scrubber-equipped, fuel efficiency, fuel-type consumed, and speed are taken into consideration) and number of days the vessel participated in the pool in the period. In accordance with the pool participation agreements, pool points are finalized in arrears every six months ending September 30 and March 31 and pool profits are reallocated based on the actual recorded speed and consumption performance for each vessel operating in the Helios Pool during the preceding six-month period. 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. 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 12.
4. Deferred Charges, Net
The analysis and movement of deferred charges is presented in the table below:
Drydocking
costs
Additions
283,560
Amortization
(1,193,858)
8
5. Vessels, Net
Accumulated
Cost
depreciation
Net book Value
1,733,196,909
(524,608,696)
Other additions
665,903
Depreciation
(15,977,128)
1,733,862,812
(540,585,824)
Additions to vessels, net, mainly consisted of scrubber purchases and installation costs and other capital improvements for certain of our VLGCs during the three months ended June 30, 2024. Our vessels, with a total carrying value of $1,161.1 million and $1,175.6 million as of June 30, 2024 and March 31, 2024, respectively, are first-priority mortgaged as collateral for our long-term debt (refer to Note 7 below). Captain John NP is our only VLGC that is not first-priority mortgaged as collateral for our long-term debt as of June 30, 2024 and March 31, 2024. As of June 30, 2024, we obtained independent appraisals of the technically managed VLGCs in our fleet and concluded that there were no indicators of impairment in accordance with ASC 360 Property, Plant, and Equipment.
6. Vessel Under Construction
On November 24, 2023 we entered into an agreement for a newbuilding VLGC/AC with a cargo carrying capacity of 93,000 cbm that can transport LPG or ammonia, which is expected to be delivered from Hanwha Ocean Co. Ltd. in the second calendar quarter of 2026. The analysis and movement of vessel under construction is presented in the table below:
Other capitalized expenditures
759,977
7. Long-term Debt
2023 A&R Debt 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, 2024 for information on the $240.0 million amended and restated debt financing facility that we entered into on December 22, 2023 with Crédit Agricole Corporate and Investment Bank (“CACIB”), ING Bank N.V. (“ING”), Skandinaviska Enskilda Banken AB (publ) (“SEB”), BNP Paribas (“BNP”), and Danish Ship Finance A/S (“DSF”) (the “2023 A&R Debt Facility”).
We were in compliance with all financial covenants as of June 30, 2024.
BALCAP 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, 2024 for information on our $83.4 million debt financing facility that we entered into on December, 29 2021 with Banc of America Leasing & Capital, LLC and other financial institutions (the “BALCAP Facility”).
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, 2024 for information on the refinancing of our 2014-built VLGC, Corsair, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Corsair Japanese Financing”).
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Cresques 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, 2024 for information on the refinancing of our 2015-built VLGC, Cresques, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Cresques Japanese Financing”).
Cratis 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, 2024 for information on the refinancing of our 2015-built VLGC, Cratis, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Cratis Japanese Financing”).
Copernicus 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, 2024 for information on the refinancing of our 2015-built VLGC, Copernicus, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Copernicus Japanese Financing”).
Chaparral 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, 2024 for information on the refinancing of our 2015-built VLGC, Chaparral, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Chaparral Japanese Financing”).
Caravelle 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, 2024 for information on the refinancing of our 2016-built VLGC, Caravelle, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Caravelle Japanese Financing”).
Cougar 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, 2024 for information on the refinancing of our 2016-built VLGC, Cougar, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Cougar Japanese Financing”).
Captain Markos Dual-Fuel 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, 2024 for information on the financing of our 2023-built Dual-fuel VLGC, Captain Markos, pursuant to a memorandum of agreement and a bareboat charter agreement (the “Captain Markos Japanese Financing”).
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Debt Obligations
The table below presents our debt obligations:
2023 A&R Debt Facility/2022 Debt Facility
200,000,000
205,000,000
Japanese Financings
30,333,334
31,145,834
25,166,835
25,608,991
40,480,000
41,500,000
59,264,225
59,896,473
41,600,000
42,500,000
42,800,000
43,700,000
52,640,000
53,270,000
Total Japanese Financings
332,764,394
339,121,298
64,342,815
66,330,459
Total debt obligations
597,107,209
610,451,757
Less: deferred financing fees
5,041,716
5,359,227
Debt obligations—net of deferred financing fees
592,065,493
605,092,530
Presented as follows:
Deferred Financing Fees
The analysis and movement of deferred financing fees is presented in the table below:
Financing
(317,511)
8. Leases
Time charter-in contracts
During the three months ended June 30, 2024, we did not take delivery of any time chartered-in VLGCs and, as such, no new right-of-use asset or lease liability were recognized during the three months ended June 30, 2024. As of June 30, 2024, right-of-use assets and lease liabilities related to all of our time charter-in VLGCs totaled $182.7 million and were recognized on our balance sheet. Our time chartered-in VLGCs were deployed in the Helios Pool and earned net pool revenues of $17.7 million and $18.3 million for the three months ended June 30, 2024 and 2023, respectively.
Charter hire expenses for the VLGCs time chartered in were as follows:
Office leases
We currently have operating leases for our offices in Stamford, Connecticut, USA; Copenhagen, Denmark; and Athens, Greece, which we determined to be operating leases and record the lease expense as part of general and administrative expenses in our unaudited interim condensed consolidated statements of operations. We did not enter into any new office leases and did not renew any office leases during the three months ended June 30, 2024.
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Operating lease rent expense related to our office leases was as follows:
Operating lease rent expense
131,537
153,022
For our office leases and time charter-in agreements, the discount rate used ranged from 4.92% to 6.34%. The weighted average discount rate used to calculate the lease liability was 5.82%. The weighted average remaining lease term of our office leases and time chartered-in vessel as of June 30, 2024 is 64.6 months.
Our operating lease right-of-use asset and lease liabilities as of June 30, 2024 and March 31, 2024 were as follows:
Description
Location on Balance Sheet
Assets:
Non-current
1,085,613
1,194,974
Time charter-in VLGCs
182,708,445
190,505,364
Liabilities:
Current
Office Leases
Current portion of long-term operating leases
434,099
448,317
32,641,249
32,042,805
Long-term
Long-term operating leases
668,803
763,767
150,067,196
158,462,559
Maturities of operating lease liabilities as of June 30, 2024 were as follows:
Less than one year
42,700,728
One to three years
81,610,978
Three to five years
64,080,000
More than five years
25,154,389
Total undiscounted lease payments
213,546,095
Less: imputed interest
(29,734,748)
Carrying value of operating lease liabilities
183,811,347
9. Dividends
On April 25, 2024, we announced that our Board of Directors declared an irregular cash dividend of $1.00 per share of our common stock to all shareholders of record as of the close of business on May 8, 2024, totaling $40.6 million. We paid $40.4 million on May 29, 2024, with the remaining $0.2 million deferred until certain shares of restricted stock vest.
This was an irregular dividend. All declarations of dividends are subject to the determination and discretion of our Board of Directors based on its consideration of various factors, including our results of operations, financial condition, level of indebtedness, anticipated capital requirements, contractual restrictions, restrictions in our debt agreements, restrictions under applicable law, our business prospects and other factors that our Board of Directors may deem relevant.
10. Common Stock
On June 7, 2024, we issued 2 million shares to the public at a price of $44.50 per share with proceeds totaling $89.0 million, less (i) $2.225 per share, or $4.5 million, of underwriting discounts and commissions, and (ii) $0.1 million of legal and other offering costs included in liabilities as of June 30, 2024.
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On February 2, 2022, our Board of Directors authorized the repurchase of up to $100.0 million of our common shares (the “2022 Common Share Repurchase Authority”). Under this authorization, when in force, purchases were and may be made at our discretion in the form of open market repurchase programs, privately negotiated transactions, accelerated share repurchase programs or a combination of these methods. The actual amount and timing of share repurchases are subject to capital availability, our determination that share repurchases are in the best interests of our shareholders, and market conditions. As of June 30, 2024, our total purchases under the 2022 Common Share Repurchase Authority totaled 75,000 shares for an aggregate consideration of $1.8 million. No repurchases were made during the three months ended June 30, 2024. We are not obligated to make any common share repurchases.
11. Stock-Based Compensation Plans
Our stock-based compensation expense is included within general and administrative expenses in the unaudited condensed consolidated statements of operations and was $1.3 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively. Unrecognized compensation cost was $3.3 million as of June 30, 2024 and will be recognized over a remaining weighted average life of 1.06 years. For more information on our equity incentive plan, refer to Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024.
A summary of the activity of restricted shares and units awarded under our equity incentive plan as of June 30, 2024 and changes during the three months ended June 30, 2024, is as follows:
Weighted-Average
Grant-Date
Incentive Share/Unit Awards
Number of Shares/Units
Fair Value
Unvested as of April 1, 2024
307,873
23.16
Unvested as of June 30, 2024
No restricted shares vested during the three months ended June 30, 2024. The total fair value of restricted shares that vested during the three months ended June 30, 2023 totaled $1.7 million, which is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date.
12. Revenues
Revenues comprise the following:
Net pool revenues—related party depend upon the net results of the Helios Pool, and the operating days and pool points for each vessel. Refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024.
Other revenues, net mainly represent claim reimbursements and income from charterers relating to reimbursement of voyage expenses, such as costs for war risk insurance and security guards.
13. Financial Instruments and Fair Value Disclosures
Our principal financial assets consist of cash and cash equivalents, investment securities, amounts due from related parties, derivative instruments, and trade accounts receivable. Our principal financial liabilities consist of long-term debt, accounts payable, amounts due to related parties, and accrued liabilities.
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The following table summarizes the location on the balance sheet of the financial assets and liabilities that are carried at fair value on a recurring basis, which comprise our financial derivatives, all of which are considered Level 2 items in accordance with the fair value hierarchy as of:
Derivatives not designated as hedging instruments
Interest rate swap agreements
The effect of derivative instruments within the unaudited interim condensed consolidated statements of operations for the periods presented is as follows:
Location of gain/(loss) recognized
Interest rate swaps—change in fair value
Interest rate swaps—realized gain
Gain on derivatives, net
1,295,622
4,707,038
As of June 30, 2024 and March 31, 2024, no fair value measurements for assets or liabilities under Level 1 or Level 3 were recognized in the consolidated balance sheets with the exception of Level 1 items cash and cash equivalents, restricted cash, and investment securities. We did not have any other assets or liabilities measured at fair value on a non-recurring basis during the three months ended June 30, 2024 and 2023.
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The summary of gains and losses on our investment securities included in other gain/(loss), net on our unaudited interim condensed consolidated statements of operations for the periods presented is as follows:
Unrealized gain on investment securities
312,794
421,253
We have long-term bank debt, the 2023 A&R Debt Facility, for which we believe the carrying value approximates fair value as the facility bears interest at variable interest rates based on SOFR at June 30, 2024 and 2023, which is observable at commonly quoted intervals for the full terms of the loans, and hence are considered as a Level 2 item in accordance with the fair value hierarchy. We have long-term debt related to the Corsair Japanese Financing, Cresques Japanese Financing, Cratis Japanese Financing, Copernicus Japanese Financing, Chaparral Japanese Financing, Cougar Japanese Financing, Caravelle Japanese Financing, and Captain Markos Dual-Fuel Japanese Financing, (collectively, the “Japanese Financings”) that incur interest at a fixed rate. We have long-term debt related to the BALCAP Facility that incurs interest at a fixed rate. The Japanese Financings and BALCAP Facility are considered Level 2 items in accordance with the fair value hierarchy and the fair value of each is based on a discounted cash flow analysis using current observable interest rates. The following table summarizes the carrying value and estimated fair value of our fixed rate debt obligations as of:
Carrying Value
28,710,602
29,624,330
25,549,611
26,180,173
37,066,740
38,302,845
56,736,562
57,627,652
38,005,274
39,003,038
40,637,586
43,715,910
53,704,974
54,923,798
60,059,393
62,186,682
14. Earnings Per Share (“EPS”)
Basic EPS represents net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period. Our restricted stock shares include rights to receive dividends that are subject to the risk of forfeiture if service requirements are not satisfied, thus these shares are not considered participating securities and are excluded from the basic weighted-average shares outstanding calculation. Diluted EPS represent net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period.
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The calculations of basic and diluted EPS for the periods presented are as follows:
(In U.S. dollars except share data)
Numerator:
Denominator:
Basic weighted average number of common shares outstanding
Effect of dilutive restricted stock and restricted stock units
210,471
241,148
Diluted weighted average number of common shares outstanding
EPS:
There were no shares of unvested restricted stock excluded from the calculation of diluted EPS because the effect of their inclusion would be anti-dilutive for the three months ended June 30, 2024 and 2023.
15. Commitments and Contingencies
Commitments under Newbuilding Contracts
On November 24, 2023, we entered into an agreement for a newbuilding VLGC/AC with a cargo carrying capacity of 93,000 cbm that can transport LPG or ammonia, which is expected to be delivered from Hanwha Ocean Co. Ltd. in the second calendar quarter of 2026. As of June 30, 2024, we had the following commitments related to the construction of the newbuilding:
24,084,224
74,324,763
98,408,987
Commitments under Contracts for Scrubbers and Other Vessel Upgrades
We had contractual commitments for contracts to fabricate scrubbers to reduce sulfur emissions and other vessel upgrades as follows:
2,364,860
171,517
2,536,377
Fixed Time Charter Contracts
We had the following future minimum fixed time charter hire receipts based on non-cancelable long-term fixed time charter contracts:
4,522,986
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 unaudited interim condensed consolidated financial statements. Also, if applicable, we record undiscounted receivables for probable loss
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recoveries from insurance or other parties. We are not aware of any material claim that is reasonably possible and should be disclosed in the unaudited interim condensed consolidated financial statements.
16. Subsequent Event
Dividend
On July 24, 2024, we announced that our Board of Directors has declared an irregular cash dividend of $1.00 per share of the Company’s common stock totaling $42.6 million. The dividend is payable on or about August 21, 2024 to all shareholders of record as of the close of business on August 8, 2024.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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” herein and in our Annual Report on Form 10-K for the year ended March 31, 2024, our actual results may differ materially from those anticipated in these forward-looking statements. Please also see the section entitled “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, in the LPG shipping industry. Our founding executives have managed vessels in the LPG shipping market since 2002. Our fleet currently consists of twenty-five VLGC carriers, including one dual-fuel 84,000 cbm ECO-design VLGC, or our Dual-fuel ECO VLGC; nineteen fuel-efficient 84,000 cbm ECO-design VLGCs, or our ECO VLGCs; one 82,000 cbm modern VLGC; three time chartered-in dual fuel Panamax size VLGCs; and one time chartered-in ECO VLGC. The twenty-five VLGCs in our fleet, including the four time chartered-in vessels, as of July 25, 2024, have an aggregate carrying capacity of approximately 2.1 million cbm and an average age of 7.9 years. On November 24, 2023, we entered into an agreement for a newbuilding VLGC/AC with a cargo carrying capacity of 93,000 cbm that can transport LPG or ammonia and is expected to be delivered from Hanwha Ocean Co. Ltd. in the second calendar quarter of 2026.
Currently, fifteen of our ECO VLGCs, including one of our time chartered-in ECO-VLGCs, are fitted with exhaust gas cleaning systems (commonly referred to as “scrubbers”) to reduce sulfur emissions. We have additional commitments related to the fabrication of scrubbers for installation on one of our VLGCs with installation expected to be completed during our fiscal year 2025, and on our newbuilding VLGC/AC. Vessels fitted with scrubbers allow us to reduce our emissions and to burn less refined fuel, which is frequently cheaper than more refined, lower sulfur grades. When the cost of more refined fuel exceeds that of less refined fuel, we are typically able to earn a higher TCE for spot voyages and to potentially contract time charters at higher rates compared to vessels without scrubbers. Additionally, one of the chartered-in dual-fuel Panamax size VLGCs is equipped with a shaft generator, which generates additional electricity that can be used to reduce fuel consumption and carbon emissions.
On April 1, 2015, Dorian and MOL Energia began operations of the Helios Pool, which entered into pool participation agreements for the purpose of establishing and operating, as charterer, under a variable rate time charter to be entered into with owners or disponent owners of VLGCs, a commercial pool of VLGCs whereby revenues and expenses are shared. The vessels entered into the Helios Pool may operate either in the spot market, pursuant to contracts of affreightment, or COAs, or on time charters of two years' duration or less. As of July 25, 2024, twenty-four of our twenty-five VLGCs were employed in the Helios Pool, including our four time chartered-in VLGCs.
Our customers, either directly or through the Helios Pool, include or have included global energy companies such as Exxon Mobil Corp., Chevron Corp., China International United Petroleum & Chemicals Co., Ltd., Royal Dutch Shell plc, Equinor ASA, Total S.A., and Sunoco LP, commodity traders such as Glencore plc, Itochu Corporation, Bayegan Group, Gunvor Group, and the Vitol Group and importers such as E1 Corp., Indian Oil Corporation, SK Gas Co. Ltd., and Astomos Energy Corporation, or subsidiaries of the foregoing.
We continue 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, shorter-term time charters, spot market voyages and COAs. Currently, two of our VLGCs are on fixed-rate time charters outside of the Helios Pool. See “Our Fleet” below for more information and the definition of Pool-TCO.
Recent Development
Our Fleet
The following table sets forth certain information regarding our fleet as of July 25, 2024:
Scrubber
Time
Capacity
ECO
Equipped
Charter-Out
(Cbm)
Shipyard
Year Built
Vessel(1)
or Dual-Fuel
Employment
Expiration(2)
Dorian VLGCs
Hyundai
Pool(4)
X
S
Corsair(3)
Time Charter(6)
Q4 2024
Cougar(3)
Pool-TCO(5)
Q2 2025
Q2 2027
Cresques(3)
Daewoo
Cratis(3)
Chaparral(3)
Copernicus(3)
Q3 2026
Caravelle(3)
Captain Markos(3)
Kawasaki
DF
1,762,000
Time chartered-in VLGCs
Future Diamond(7)
80,876
2020
HLS Citrine(8)
86,090
HLS Diamond(9)
Cristobal(10)
86,980
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Results of Operations – For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023
The following table compares our revenues for the three months ended June 30:
Increase /
Percent
2024
(Decrease)
Change
5,020,503
4.8
%
(3,009,121)
(46.8)
778,753
103.4
2,790,135
2.5
Revenues, which represent net pool revenues—related party, time charters and other revenues, net, were $114.4 million for the three months ended June 30, 2024, an increase of $2.8 million, or 2.5%, from $111.6 million for the three months ended June 30, 2023 primarily due to an increase in fleet size, partially offset by a reduction of fleet utilization. Our available days increased from 2,219 for the three months ended June 30, 2023 to 2,275 for the three months ended June 30, 2024. Our fleet utilization decreased from 98.0% during the three months ended June 30, 2023 to 90.4% during the three months ended June 30, 2024. Average TCE rates increased by $4,072 per operating day from $51,156 for the three months ended June 30, 2023 to $55,228 for the three months ended June 30, 2024, but was relatively flat when comparing TCE rates per available day with a slight decrease from $50,164 for the three months ended June 30, 2023 to $49,911 for the three months ended June 30, 2024.
Vessel Operating Expenses
Vessel operating expenses were $20.5 million during the three months ended June 30, 2024, or $10,717 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time-period for the technically-managed vessels that were in our fleet and increased by $0.7 million, or 3.2% from $19.8 million for the three months ended June 30, 2023.The increase of $334 per vessel per calendar day, from $10,383 for the three months ended June 30, 2023 to $10,717 per vessel per calendar day for the three months ended June 30, 2024 was primarily the result of increases of $159 per vessel per calendar day for spares and stores and $102 per vessel per calendar day for crew wages and related costs. Excluding non-capitalizable drydock-related operating expenses, daily operating expenses increased by $523 from $10.094 for the three months ended June 30, 2023 to $10.617 for the three months ended June 30, 2024.
General and Administrative Expenses
General and administrative expenses were $10.4 million for the three months ended June 30, 2024, an increase of $1.2 million, or 13.1%, from $9.2 million for the three months ended June 30, 2023 and was driven by increases of $0.5 million in stock-based compensation, $0.5 million in cash bonuses, and $0.2 million in other general and administrative expenses.
Interest and Finance Costs
Interest and finance costs amounted to $9.5 million for the three months ended June 30, 2024, a decrease of $0.9 million, or 8.5%, from $10.4 million for the three months ended June 30, 2023. The decrease of $0.9 million during this period was mainly due to a decrease of $0.9 million in loan interest on our long-term debt, which was driven by a decrease in average indebtedness, excluding deferred financing fees, from $658.2 million for the three months ended June 30, 2023 to $606.6 million for the three months ended June 30, 2024.
Interest Income
Interest income amounted to $3.7 million for the three months ended June 30, 2024, compared to $1.7 million for the three months ended June 30, 2023. The increase of $2.0 million is mainly attributable to (i) higher average cash
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balances for the three months ended June 30, 2024 when compared to the three months ended June 30, 2023, and (ii) an increase in interest rates over the periods presented.
Unrealized Gain/(Loss) on Derivatives
Unrealized loss on derivatives amounted to $0.4 million for the three months ended June 30, 2024, compared to a gain of $2.9 million for the three months ended June 30, 2023. The $3.3 million unfavorable change is primarily attributable to changes in forward SOFR yield curves and reduced notional amounts.
Operating Statistics and Reconciliation of GAAP to non-GAAP Measures
To supplement our financial statements presented in accordance with U.S.GAAP, we present certain operating statistics and non-GAAP measures to assist in the evaluation of our business performance. These non-GAAP measures include Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and time charter equivalent rate. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for net income and revenues, which are the most directly comparable measures of performance prepared in accordance with GAAP.
We use these non-GAAP measures in assessing the performance of our ongoing operations and in planning and forecasting future periods. These adjusted measures provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance. We believe that these adjusted measures, when considered together with the corresponding U.S. GAAP measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our business results and assessing our prospects for future performance.
(in U.S. dollars, except fleet data)
Financial Data
Adjusted EBITDA
77,957,393
74,849,872
Fleet Data(1)
Calendar days
1,911
Time chartered-in days
364
Available days
2,275
2,219
Operating days
2,056
2,175
Fleet utilization
90.4
98.0
Average Daily Results(1)
Time charter equivalent rate
55,228
51,156
Daily vessel operating expenses
10,717
10,383
Adjusted EBITDA has certain limitations in use and should not be considered an alternative to net income/(loss), 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/(loss). 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.
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The following table sets forth a reconciliation of net income to Adjusted EBITDA (unaudited) for the periods presented:
(in U.S. dollars)
9,518,430
10,403,849
Realized gain on interest rate swaps
(1,717,249)
(1,847,764)
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The following table sets forth a reconciliation of revenues to TCE rate (unaudited) for the periods presented:
(in U.S. dollars, except operating days)
(804,985)
(298,383)
Time charter equivalent
113,548,057
111,264,524
Pool adjustment*
(2,050)
895,272
Time charter equivalent excluding pool adjustment*
113,546,007
112,159,796
TCE rate:
TCE rate excluding pool adjustment*
55,227
51,568
* Adjusted for the effects of reallocations of pool profits in accordance with the pool participation agreements primarily resulting from the actual speed and consumption performance of the vessels operating in the Helios Pool exceeding the originally estimated speed and consumption levels.
Company Methodology:
Operating Days
Fleet Utilization
Alternate Methodology:
2,218
100.0
49,911
50,164
We believe that the Company Methodology using the underlying vessel employment provides more meaningful insight into market conditions and the performance of our vessels.
Liquidity and Capital Resources
Our business is capital intensive, and our future success depends on our ability to maintain a high-quality fleet. As of June 30, 2024, we had cash and cash equivalents of $353.3 million and non-current restricted cash of $0.1 million.
Our primary sources of capital during the three months ended June 30, 2024 were (i) the net cash proceeds from the issuance of our common stock in June 2024 (excluding $0.1 million of legal and other offering costs included in liabilities as of June 30, 2024) amounted to approximately $84.5 million after the deduction of underwriting discounts and commission and (ii) $41.2 million in cash generated from operations. As of June 30, 2024, the outstanding balance of our long-term debt, net of deferred financing fees of $5.0 million, was $592.1 million including $53.7 million of principal on our long-term debt scheduled to be repaid within the next twelve months.
Operating expenses, including expenses to maintain the quality of our vessels in order to comply with international shipping standards and environmental laws and regulations, the funding of working capital requirements, long-term debt repayments, financing costs, commitments for the building of a VLGC/AC, drydocking and fabrication
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and installation of scrubbers represent our short-term, medium-term and long-term liquidity needs as of June 30, 2024. We anticipate satisfying our liquidity needs for at least the next twelve months with cash on hand, cash from operations and, if needed, drawdowns on the revolving credit facility available under the 2023 A&R Debt Facility. We may also seek additional liquidity through alternative sources of debt financings and/or through equity financings by way of private or public offerings. However, if these sources are insufficient to satisfy our short-term liquidity needs, or to satisfy our future medium-term or long-term liquidity needs, we may need to seek alternative sources of financing and/or modifications of our existing credit facility and financing arrangements. There is no assurance that we will be able to obtain any such financing or modifications to our existing credit facility and financing arrangements on terms acceptable to us, or at all.
This was an irregular dividend. All declarations of dividends are subject to the determination and discretion of our Board of Directors based on its consideration of various factors, including our results of operations, financial condition, level of indebtedness, anticipated capital requirements, contractual restrictions, restrictions in our debt agreements, restrictions under applicable law, our business prospects and other factors that our Board of Directors may deem relevant. Our dividend policy will also impact our future liquidity position. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent by the payment of such a dividend.
As part of our growth strategy, we will continue to consider strategic opportunities, including the acquisition or charter-in of additional vessels. We may choose to pursue such opportunities through internal growth, joint ventures, business acquisitions, or other transactions. We expect to finance the purchase price of any future acquisitions either through internally generated funds, public or private debt financings, public or private issuances of additional equity securities or a combination of these forms of financing.
Cash Flows
The following table summarizes our cash and cash equivalents provided by/(used in) operating, financing and investing activities for the three months ended June 30:
Operating Cash Flows. Net cash provided by operating activities for the three months ended June 30, 2024 was $41.2 million, compared to $63.3 million for the three months ended June 30, 2023. The decrease in cash generated from
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operations of $22.1 million is primarily related to the timing of changes in working capital from an increase in amounts due from the Helios Pool.
Net cash flow from operating activities depends upon our overall profitability, market rates for vessels employed on voyage charters and in the Helios Pool, charter rates agreed to for time charters, the timing and amount of payments for drydocking expenditures and unscheduled repairs and maintenance, fluctuations in working capital balances and bunker costs.
Investing Cash Flows. Net cash used in investing activities was $1.3 million for the three months ended June 30, 2024 compared with net cash used in investing activities of $2.3 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, net cash used in investing activities was comprised of $1.3 million of payments for vessels under construction and vessel capital expenditures. For the three months ended June 30, 2023, net cash used in investing activities was comprised of $2.3 million of capital expenditure payments for vessels under construction and vessel capital expenditures.
Financing Cash Flows. Net cash provided by financing activities was $30.8 million for the three months ended June 30, 2024, compared with net cash used in financing activities of $54.1 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, net cash provided by financing activities consisted of $89.0 million of gross proceeds from an issuance of common shares, partially offset by (i) dividend payments of $40.4 million; (ii) repayments of long-term debt of $13.3 million; and (iii) equity offering costs paid of $4.5 million.
For the three months ended June 30, 2023, net cash used in financing activities primarily consisted of (i) dividend payments of $40.5 million; (ii) repayments of long-term debt of $13.2 million; and (iii) payments to repurchase common stock of $0.3 million.
Capital Expenditures. LPG transportation is a capital‑intensive business, requiring significant investment to maintain an efficient fleet and to stay in regulatory compliance.
We are generally required to complete a special survey for a vessel once every five years. Drydocking of vessels occurs every five years unless an extension is granted by the classification society to seven and one-half years and the vessel is not older than 15 years of age. Intermediate surveys are performed every two and one-half years after every special survey. Drydocking each vessel takes approximately 15 to 25 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 cash outlay for a VLGC special survey to be approximately $1.2 million per vessel (excluding any capital improvements, such as scrubbers and ballast water management systems, to the vessel that may be made during such drydockings) and the cost of an intermediate survey to be between $150,000 and $250,000 per vessel. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking and classification society survey costs. In order to comply with current emissions regulations, we have installed scrubbers on fourteen of our vessels and have one chartered-in scrubber-equipped vessel, which allows us to burn heavy fuel oil. Our other non-dual fuel vessels currently consume compliant fuels on board (0.5% sulfur), which are readily available globally, but at a significantly higher cost. We have entered into contracts to fabricate scrubbers for installation on one of our VLGCs and on our newbuilding VLGC/AC with commitments on these contracts totaling $1.2 million as of June 30, 2024. We also have one newbuilding Dual-fuel ECO VLGC and three chartered-in dual-fuel vessels that have the capability to burn LPG as fuel, which we believe may provide an economic benefit over traditional fuel. Please see “Item 1A. Risk Factors—Risks Relating to Our Company—We may incur increasing costs for the drydocking, maintenance or replacement of our vessels as they age, and, as our vessels age, the risks associated with older vessels could adversely affect our ability to obtain profitable charters” in our Annual Report on Form 10-K for the year ended March 31, 2024.
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On November 24, 2023, we entered into an agreement for a newbuilding VLGC/AC with a cargo carrying capacity of 93,000 cbm that can transport LPG or ammonia, which is expected to be delivered from Hanwha Ocean Co. Ltd. in the second calendar quarter of 2026. As of June 30, 2024 we had approximately $98.4 million of commitments under the newbuilding contracts outstanding that we expect to settle during certain milestones through the expected delivery of the vessel.
For information relating to our secured term loan facilities and Japanese financing arrangements, refer to Note 9 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024 and Note 7 to our unaudited interim condensed consolidated financial statements for June 30, 2024 included herein.
Off-Balance Sheet Arrangements
We currently do not have any off‑balance sheet arrangements.
Critical Accounting Estimates
The following is an update to the Critical Accounting Estimates set forth in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended March 31, 2024.
Impairment of long-lived assets. We review our vessels for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. In addition, we compare independent appraisals to our carrying value for indicators of impairment to our vessels. When such indicators are present, an asset is tested for recoverability by comparing the estimate of future undiscounted net operating cash flows expected to be generated by the use of the asset over its remaining useful life and its eventual disposition to its carrying amount. An impairment charge is recognized if the carrying value is in excess of the estimated future undiscounted net operating cash flows. The impairment loss is measured based on the excess of the carrying amount over the fair market value of the asset. The new lower cost basis would result in a lower annual depreciation than before the impairment.
Our estimates of fair market value assume that our vessels are all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including:
As we obtain information from various industry and other sources, our estimates of fair market value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may not be indicative of the current or future fair market value of our vessels or prices that we could achieve if we were to sell them.
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As of June 30, 2024, independent appraisals of our technically-managed VLGCs in our fleet had no indications of impairment on any of our VLGCs in accordance with ASC 360 Property, Plant, and Equipment. No impairment charges were recognized for the three months ended June 30, 2024.
Recent Accounting Pronouncements
Refer to Note 2 to our unaudited interim condensed consolidated financial statements included herein for a discussion of recent accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For additional discussion of our exposure to market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in our Annual Report on Form 10-K for the year ended March 31, 2024.
Interest Rate Risk
The LPG shipping industry is capital intensive, requiring significant amounts of investment. Much of this investment is provided in the form of long-term debt. One of our debt agreements, as described in Note 7 to our unaudited interim condensed consolidated financial statements, contains interest rates that fluctuate with SOFR. We have entered into interest rate swap agreements to hedge exposure to fluctuations of interest rate risk associated with that debt financing agreement and have hedged $160 million of amortizing principal under the 2023 A&R Debt Facility as of June 30, 2024 (corresponding to 80% of the outstanding indebtedness under that agreement) and thus increasing interest rates could adversely impact our future earnings due to additional interest expense on the unhedged portion of that debt. For the 12 months following June 30, 2024, a hypothetical increase or decrease of 20 basis points in the underlying SOFR rates would result in an increase or decrease of our interest expense on all of our non-hedged interest-bearing debt by $0.1 million assuming all other variables are held constant.
ITEM 4. CONTROLS AND PROCEDURES
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 Exchange Act) as of June 30, 2024. 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 have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
ITEM 1A. RISK FACTORS
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 shares. The following is an update to the risk factors that may cause actual results to differ materially from those anticipated as set forth in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2024.
ITEM 5. OTHER INFORMATION
During the three months ended June 30, 2024, and as of June 30, 2024, no director or officer (as defined under Exchange Act Rule 16a-1(f)) of the Company has adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement”, as defined under Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
See accompanying Exhibit Index for a list of exhibits filed or furnished with this report.
Exhibit Number
31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†
Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Document
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Schema Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Schema Definition Linkbase
101.LAB
Inline XBRL Taxonomy Extension Schema Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Schema Presentation Linkbase
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)
†
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, as amended.
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.
(Registrant)
Date: July 31, 2024
/s/ John C. Hadjipateras
John C. Hadjipateras
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Theodore B. Young
Theodore B. Young
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)