Dorian LPG Ltd. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended September 30, 2017. The company owns and operates 22 very large gas carriers (VLGCs) and participates in the Helios LPG Pool. Financial statements are unaudited.
Key financial results
| Metric | Three months ended Sep. 30, 2017 | Six months ended Sep. 30, 2017 |
|---|---|---|
| Revenue | $34.7 million | $75.8 million |
| Operating income (loss) | $(3.5) million | $(3.8) million |
| Net income (loss) | $(11.9) million | $(18.6) million |
| Loss per share, basic and diluted | $(0.22) | $(0.34) |
| Adjusted EBITDA (non-GAAP) | $14.1 million | $31.6 million |
| Operating cash flow | Not provided for quarter alone | $32.3 million |
| Cash and cash equivalents at Sep. 30 | $50.8 million; restricted cash was $18.1 million | |
| Total debt at Sep. 30 | $739.0 million gross; $718.8 million net of deferred financing fees |
For the quarter, revenue increased 3.3% year over year, while net loss widened from $7.1 million. For the six-month period, revenue declined 10.0%, operating results moved from $8.2 million income to a $3.8 million loss, and net loss widened from $8.4 million. The filing attributes weaker six-month revenue primarily to lower time-charter-equivalent (TCE) rates, with higher bunker costs pressuring realized rates.
Quarterly fleet utilization improved to 91.8% from 85.7%, but average TCE declined to $18,015 per day from $19,137. Six-month utilization was 90.7%, versus 89.9%, while TCE declined to $20,334 per day from $22,921. Quarterly vessel operating expense per calendar day fell to $7,777 from $8,073; the six-month figure rose slightly to $8,104 from $8,056.
Cash, debt and liquidity
Six-month operating cash flow was $32.3 million, down from $44.7 million a year earlier. Investing activities provided $32.4 million, largely reflecting the release of restricted cash; financing activities used $31.1 million. Cash increased by $33.8 million to $50.8 million.
The company repaid its RBS facility using a $97.0 million bridge loan entered into in June 2017. At September 30, $126.3 million of debt was classified as current, and current liabilities exceeded current assets by $63.5 million. The company disclosed substantial doubt about its ability to continue as a going concern absent refinancing or other additional capital; management stated that financing, cash on hand and operating cash flow were expected to cover obligations, but no assurance was given.
After quarter-end, on November 7, Dorian completed a financing transaction involving the Corsair: the vessel was transferred for $65 million and chartered back for 12 years, with purchase options. Dorian received $52.0 million and a $13.0 million buyer-retained deposit; $30.1 million of proceeds repaid bridge-loan principal. The transaction is treated as financing, so the vessel remains on the balance sheet. Management reported $66.9 million remaining on the bridge loan after that repayment, due August 8, 2018.
Other developments, outlook and risks
- The May 2017 amendment to the 2015 debt facility released $26.8 million of restricted cash for debt service and relaxed certain covenants. It also restricts dividends and share repurchases until an eligible equity offering or May 31, 2019, whichever occurs first.
- The bridge loan requires at least $50 million of consolidated liquidity, including at least $10 million freely available at the parent, alongside leverage, interest coverage, equity and collateral-value covenants.
- The company reported no impairment charge, but vessel appraisals indicated impairment triggers. Management’s sensitivity analysis estimated no impairment at a 30% reduction in assumed 10-year average spot TCE rates; a 40% reduction would trigger an estimated $143.9 million charge.
- Helios Pool receivables were $45.0 million, including $19.8 million of working capital. Pool revenues depend on pool performance, vessel days and points; the company identifies charterer credit and pool performance as risks.
- Other disclosed exposures include LPG shipping supply and demand, charter rates, bunker costs, LIBOR and unhedged interest-rate exposure, vessel values, customer performance, operating costs, regulatory compliance and financing availability. No specific financial guidance was provided.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. The company reported no legal claim requiring disclosure or accrual.
Investor verification priorities
- Confirm subsequent bridge-loan repayment and refinancing status, remaining maturity obligations, and compliance with liquidity and other debt covenants.
- Assess whether available cash, operating cash flow and financing plans are sufficient to address the disclosed going-concern uncertainty.
- Monitor Helios Pool collections and performance, including the concentration and recoverability of related-party receivables.
- Track TCE rates, bunker costs, utilization and charter renewals, and compare results with management’s impairment assumptions.
- Review the Corsair financing’s cash proceeds, continuing obligations, purchase options and associated costs.