Dorian LPG Ltd. — Form 20-F Summary
Business context and reporting period
This annual report covers the fiscal year ended March 31, 2014. Dorian LPG was formed on July 1, 2013, and acquired its initial fleet on July 29, 2013; its reported operating results therefore cover July 1, 2013 through March 31, 2014, with the four acquired vessels contributing from their acquisition date. The company focuses on international LPG shipping, particularly very large gas carriers (VLGCs). It reports under U.S. GAAP. The filing is an annual report, not a quarterly report for calendar 2013 Q4.
Financial and operating highlights
- Revenue was $29.6 million; operating income was $4.4 million; net income was $2.8 million, or $0.09 per share. Adjusted EBITDA, a non-GAAP measure, was $12.1 million.
- Operating margin was approximately 14.8% and net margin approximately 9.6%, calculated from reported revenue and income.
- Revenue comprised $17.6 million from time charters and $11.2 million from voyage charters; time charters included $6.1 million of profit-sharing revenue. Statoil accounted for 51% of revenue.
- Fleet utilization was 97.7%; average time-charter-equivalent rate was $24,402 per operating day and daily vessel operating expense was $8,531 per calendar day.
- Operating cash flow was $7.2 million. Investing cash outflow was $221.4 million, primarily for vessels, construction payments, acquisitions and restricted cash. Financing cash inflow was $493.3 million, primarily from equity issuance.
- At March 31, 2014, cash and cash equivalents were $279.1 million, with an additional $35.4 million of restricted cash. Total assets were $840.2 million, liabilities $148.0 million, and shareholders' equity $692.2 million.
- Debt outstanding was $128.7 million, including $9.6 million due within 12 months. Approximately 99% of debt exposure to interest-rate movements was economically hedged through swaps; the swaps had a $14.1 million liability fair value.
Changes versus prior periods
A like-for-like full-year comparison for Dorian is unavailable because the company began operations in 2013 and acquired its initial fleet during the year. Purchase accounting and the differing reporting entities also make the company and predecessor results not fully comparable. The predecessor reported fiscal 2013 revenue of $38.7 million and a net loss of $4.9 million, versus fiscal 2012 revenue of $34.6 million and a net loss of $9.5 million. Predecessor revenue increased 11.8%, while lower derivative losses contributed to the smaller net loss in 2013.
During the reporting period, Dorian expanded through acquisitions of vessels and newbuilding contracts and raised approximately $501 million net from private placements. After year-end, it raised further equity through a strategic placement and an IPO, delivering a reported $135 million gross IPO proceeds plus $4.7 million from the overallotment, before associated costs.
Outlook, risks and unusual items
- The company had contracts for 19 VLGC newbuildings as of March 31, 2014, with contractual payments of approximately $1.16 billion remaining at that date. It expected to fund the program with cash, equity proceeds and new borrowing; it estimated approximately $750 million of additional financing would be sought. As of July 24, remaining commitments were approximately $1.0 billion.
- Management expected existing resources and operating cash flow to fund current operations and newbuilding payments through March 31, 2015, but completion of the broader program depends on securing financing on acceptable terms. Delivery delays, cost overruns, vessel performance and employment for new vessels are material risks.
- Three of the five operating vessels were exposed to spot-market rates, and the company identified market cyclicality, seasonality, fleet oversupply and customer concentration as risks. One existing time charter was due to expire in late 2014; the company disclosed five-year Shell charters for the Captain Markos NL and Comet.
- A fire occurred on the newbuilding Corsair in April 2014. The shipyard advised that delivery would be delayed to September 2014 from August.
- The RBS facility is secured by vessels and includes financial, liquidity and security-coverage covenants and restrictions, including limits on dividends. The company reported compliance as of March 31, 2014. It had paid no dividends and stated that future distributions were uncertain and subject to capital needs, lender restrictions and board discretion.
- Management reported effective disclosure controls as of March 31, 2014. The filing did not include management's assessment or auditor attestation on internal control over financial reporting, citing newly public company transition provisions.
- The filing identifies potential U.S. tax exposure, including a $39,266 tax on U.S.-source shipping income for fiscal 2014, and uncertainty over future Section 883 exemption and passive foreign investment company status.
Most important facts for investors to verify
- Whether the company secures financing and meets installment obligations for the newbuilding program, and the updated total remaining commitments.
- Actual vessel delivery timing, including the Corsair delay, construction progress and any further cost or performance issues.
- Charter coverage, realized rates and utilization as existing contracts expire and new vessels enter service; monitor the exposure to spot rates and customer concentration.
- Debt covenant compliance, restricted-cash requirements, swap exposure and availability of cash for capital spending or any future dividends.
- Post-IPO share count, equity compensation dilution, major shareholder holdings and related-party arrangements following the transition to in-house management.