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Dynagas LNG Partners LP Reports Results for the Three Months and Year Ended December 31, 2017

MONACO, Feb. 15, 2018 (GLOBE NEWSWIRE) -- Dynagas LNG Partners LP (NYSE:DLNG) (“Dynagas Partners” or the “Partnership”), an owner and operator of liquefied natural gas (“LNG”) carriers, today announced its results for the three months and year ended December 31, 2017.

Highlights:

  • Net income during the three months and year ended December 31, 2017 of $5.6 million and $17.3 million, respectively;
  • Earnings per common unit for the three months and year ended December 31, 2017 of $0.11 and $0.27, respectively;
  • Adjusted Net Income(1) for the three months and year ended December 31, 2017 of $7.6 million and $33.7 million, respectively;
  • Adjusted Earnings per common unit (1) (2) for the three months and year ended December 31, 2017 of $0.16 and $0.74, respectively;
  • Distributable Cash Flow(1) during the three months and year ended December 31, 2017 of $11.8 million and $49.9 million, respectively;
  • Adjusted EBITDA(1) for the three months and year ended December 31, 2017 of $26.9 million and $107.5 million, respectively;
  • Reported cash of $67.5 million and available liquidity of $97.5 million each as of December 31, 2017;
  • Quarterly cash distribution of $0.4225 per common unit in respect of the fourth quarter of 2017 and $0.5625 per preferred unit in respect of the most recent period.

(1) Adjusted Net Income, Adjusted Earnings per common unit, Distributable Cash Flow and Adjusted EBITDA are not recognized measures under U.S. GAAP. Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

(2) Adjusted Earnings per common unit presentation excludes the Series A Preferred Units interest on the Partnership’s net income for the periods presented.

Recent Developments:

New long-term time charter contract for the Arctic Aurora: On December 20, 2017, the Partnership entered into a new three year charter agreement with Statoil ASA ("Statoil") for the employment of the Arctic Aurora, its 2013-built, 155,000 cubic meter, tri-fuel diesel engine, ice class LNG carrier. This new charter for the Arctic Aurora is expected to commence in the third quarter of 2018 in direct continuation of the current charter with Statoil, following the vessel's mandatory statutory class five-year special survey and dry-docking and has a firm period of about 3 years +/- 30 days. Statoil will have options to extend this charter by two consecutive 12-month periods at escalated rates.

Quarterly Common and Subordinated Unit Cash Distribution: On January 4, 2018, the Partnership announced a quarterly cash distribution of $0.4225 per common unit in respect of the fourth quarter of 2017. This cash distribution was paid on January 18, 2018 to all common unitholders of record as of January 11, 2018.

Series A Preferred Units Cash Distribution: On January 24, 2018, the Partnership’s Board of Directors also announced a cash distribution of $0.5625 per unit of its Series A Preferred Units (NYSE: DLNG PR A) for the period from November 12, 2017 to February 11, 2018, which was paid on February 12, 2018 to all unitholders of record as of February 5, 2018.

Optional Vessels purchase option deadline extension: On February 6, 2018, the Partnership agreed with its Sponsor to extend the deadline for exercising the purchase options relating to both the Clean Horizon and the Clean Vision previously granted to the Partnership under the Omnibus Agreement retroactively from their initial expiration in July 2017 and January 2018, respectively, to December 31, 2018.

CEO Commentary:

Tony Lauritzen, Chief Executive Officer of the Partnership, commented:

“We are pleased to report our earnings for the three months and year ended December 31, 2017.

“Our reported earnings for the fourth quarter of 2017 were, as expected, below those of the fourth quarter of 2016 and were impacted by the following: (i) the temporary employment of the Clean Energy on the spot market until July 2018, when the vessel will commence a time charter with Gazprom for a term of approximately 8 years, and (ii) the longer term nature of our contracts following our decision to reduce the charter hire rate on two vessels, the Yenisei River and the Lena River, with effect from November 2016, in exchange for securing the long-term charter with Gazprom, mentioned above, for the employment of the Clean Energy. These transactions contributed substantially to our contracted backlog, thereby enhancing significantly our revenue visibility.

“On January 18, 2018, we paid quarterly cash distribution of $0.4225 per common unit with respect to the fourth quarter of 2017. Since our initial public offering in November 2013, we have paid total cash distributions of $6.79 per common unit. In addition, on February 12, 2018, we paid a cash distribution of $0.5625 per unit on our Series A Preferred Units for the period from November 12, 2017 to February 11, 2018.

“Part of our strategy has been to enter into longer term charters for the employment of the vessels in our fleet. In general, based on the conditions of the charter market, long-term charters may be priced at day rates above or below shorter term charters. With our fleet 85% contracted through 2018, 92% contracted through 2019 and 100% contracted through 2020, and with an estimated fleet-wide average remaining contract duration of 10.4 years, we believe we have significant cash flow visibility. We expect to increase contract coverage going forward on the back of an improving LNG shipping market.

“Our revenues are derived from the employment of our vessels on fixed multi-year charter contracts. The revenues we earn under those charter contracts are earned on a fixed day rate basis and not linked in any way to commodity price fluctuations.

“Our intent is to seek additional contract coverage, particularly in 2018, to manage our operating expenses and to continue the safe operation of our fleet.

“We look forward to working towards meeting our goals, which we believe will continue to benefit our unitholders.”

Financial Results Overview:

Three Months Ended Year Ended
(U.S. dollars in thousands, except per unit data) December
31, 2017

(unaudited)
December
31, 2016

(unaudited)
December
31, 2017

(unaudited)
December
31, 2016
Voyage Revenues $34,452$41,385 $138,990$169,851
Net Income $5,625$15,475 $17,339$66,854
Adjusted Net Income (1)$7,559$17,368 $33,731$74,145
Operating Income $17,424$24,303 $63,944$102,079
Adjusted EBITDA(1)$26,919$33,893 $107,545$139,531
Earnings per common unit$0.11$0.39 $0.27$1.69
Adjusted Earnings per common unit (1)$0.16$0.44 $0.74$1.90
Distributable Cash Flow (1)$11,793$21,272 $49,922$89,592

(1) Adjusted Net Income, Adjusted EBITDA, Adjusted Earnings per common unit and Distributable Cash Flow are not recognized measures under U.S. GAAP. Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Three Months Ended December 31, 2017 and 2016 Financial Results

Net Income for the three months ended December 31, 2017 was $5.6 million as compared to Net Income of $15.5 million in the corresponding period of 2016, which represents a 63.7% decrease. The decrease, as further discussed below, was mainly attributable to (i) the decrease in operating revenues and (ii) the increased interest costs for servicing the Term Loan B (defined below).

Adjusted Net Income for the three months ended December 31, 2017 was $7.6 million as compared to Adjusted Net Income of $17.4 million in the corresponding period of 2016, which represents a 56.5% decrease. The decrease in Adjusted Net Income, which excludes non-cash and non-recurring items, discussed above and further presented in Appendix B, was mainly due to the lower net revenues earned on certain of the Partnership’s LNG carriers and higher financing costs, as discussed in further detail below.

Adjusted EBITDA for the three months ended December 31, 2017 was $26.9 million compared to Adjusted EBITDA of $33.9 million for the corresponding period of 2016, which represents a decrease of 20.6% and was due to the factors discussed above.

The Partnership's Distributable Cash Flow for the three-month period ended December 31, 2017 was $11.8 million, compared to $21.3 million in the corresponding period of 2016, which represents a decrease of $9.5 million, or 44.6%, which was due to the factors discussed above.

For the three-month period ended December 31, 2017, the Partnership reported Earnings per common unit and Adjusted Earnings per common unit, basic and diluted, of $0.11 and $0.16, respectively, after taking into account the Series A Preferred Units interest on the Partnership’s net income. Earnings per common unit and Adjusted Earnings per common unit, basic and diluted are calculated on the basis of a weighted average number of 35,490,000 units outstanding during the period, in the case of Adjusted Earnings per common unit after reflecting the impact of the non-cash items presented in Appendix B.

Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Voyage revenues were $34.5 million for the three-month period ended December 31, 2017 as compared to $41.4 million for the same period of 2016, which represents a decrease of $6.9 million, or 16.8%. This decrease was primarily due to the lower charter rate earned for the Clean Energy during the fourth quarter of 2017 in comparison to the corresponding quarter of 2016 and (ii) the charter hire reductions on the Yenisei River and the Lena River, with effect from November 2016.

Vessel operating expenses were $6.7 million in both the three-month periods ended December 31, 2017 and 2016, which corresponds to a daily rate of $12,192 in the three-month period ended December 31, 2017 and a daily rate of $12,149 in the same period of 2016.

Interest and finance costs were $11.8 million in the fourth quarter of 2017 as compared to $8.9 million in the fourth quarter of 2016, which represents an increase of $3.0 million, or 33.3%. As discussed above, this increase is due to the increase in the fourth quarter 2017 weighted average interest mainly as a result of the increased costs associated with the Term Loan B facility that the Partnership entered into on May 18, 2017.

The Partnership reported average daily hire gross of commissions(1) of approximately $65,900 per day per vessel in the three months ended December 31, 2017, compared to approximately $78,250 per day per vessel in the same period of 2016. During the three-month period ended December 31, 2017, the Partnership’s vessels operated at 99.3% utilization compared to 100% utilization in the same period of 2016.

(1) Average daily hire gross of commissions represents voyage revenue without taking into consideration the non-cash time charter amortization expense and amortization of prepaid charter revenue, divided by the Available Days in the Partnership’s fleet as described in Appendix B.

Amounts relating to variations in period–on–period comparisons shown in this section are derived from the condensed financials presented below.

Liquidity/ Financing/ Cash Flow Coverage

As of December 31, 2017, the Partnership reported free cash of $67.5 million. Total indebtedness outstanding as of December 31, 2017 was $727.6 million (gross of unamortized deferred loan fees), which also includes the Partnership’s $250.0 million senior unsecured notes due October 2019. As of December 31, 2017, $4.8 million of the Partnership’s outstanding indebtedness was repayable within one year.

The Partnership’s liquidity profile is further enhanced by the $30.0 million of borrowing capacity under the Partnership’s revolving credit facility with its Sponsor, which is available to the Partnership at any time until November 2018 and remains available in its entirety as of the date of this release.

As of December 31, 2017, the Partnership reported working capital surplus of $47.5 million (Q4 2016: $7.1 million) which is the result on the strengthening of the Partnership’s balance sheet following the Term Loan B refinancing.

During the three months ended December 31, 2017, the Partnership generated net cash from operating activities of $15.0 million as compared to $23.3 million in the same period of 2016, which represents a decrease of 8.3 million, or 35.7%. This decrease was attributable to the decrease in period net income due to the factors discussed above.

Vessel Employment

As of February 15, 2018, the Partnership had contracted time charter coverage(2) for 85% of its fleet estimated Available Days (as defined in Appendix B) for 2018, 92% of its fleet estimated Available Days for 2019 and 100% of its fleet estimated Available Days for 2020.

As of the same date, the Partnership’s contracted revenue backlog estimate (3) was approximately $1.49 billion, with an average remaining contract term of 10.4 years.

(2) Time charter coverage for the Partnership’s fleet is calculated by dividing the fleet contracted days on the basis of the earliest estimated delivery and redelivery dates prescribed in the Partnership’s current time charter contracts net of scheduled class survey repairs by the number of expected Available days during that period.

(3) The Partnership calculates its contracted revenue backlog by multiplying the contractual daily hire rate by the expected number of days committed under the contracts (assuming earliest delivery and redelivery and excluding options to extend), assuming full utilization. The actual amount of revenues earned and the actual periods during which revenues are earned may differ from the amounts and periods disclosed due to, for example, dry-docking and/or special survey downtime, maintenance projects, off-hire downtime and other factors that result in lower revenues than the Partnership’s average contract backlog per day. Certain time charter contracts that the Partnership recently entered into with Yamal Trade Pte. are subject to the satisfaction of important conditions, which, if not satisfied, or waived by the charterer, may result in their cancellation or amendment before or after the charter term commences and in such case the Partnership may not receive the contracted revenues thereunder.

Conference Call and Webcast: February 16, 2018

As announced, the Partnership’s management team will host a conference call on Friday, February 16, 2018 at 08:30 a.m. Eastern Time to discuss the Partnership’s financial results.

Conference Call details:

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or (+44) (0) 1452 542 301 (Standard International Dial In). Please quote "Dynagas."

A telephonic replay of the conference call will be available until Friday, February 23, 2018. The United States replay number is 1 (866) 247-4222; from the UK 0(800) 953-1533; the standard international replay number is (+44) (0) 1452 550 000 and the access code required for the replay is: 59711562#.

Audio Webcast - Slides Presentation:

There will be a live and then archived audio webcast of the conference call, via the internet through the Dynagas LNG Partners website www.dynagaspartners.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

The slide presentation on the fourth quarter ended December 31, 2017 financial results will be available in PDF format 10 minutes prior to the conference call and webcast, accessible on the company's website www.dynagaspartners.com on the webcast page. Participants to the webcast can download the PDF presentation.

About Dynagas LNG Partners LP

Dynagas LNG Partners LP (NYSE:DLNG) is a growth-oriented partnership formed by Dynagas Holding Ltd., its sponsor, to own and operate liquefied natural gas (“LNG”) carriers employed on multi-year charters. The Partnership’s current fleet consists of six LNG carriers, with an aggregate carrying capacity of approximately 914,000 cubic meters.

Visit the Partnership’s website at www.dynagaspartners.com

Contact Information:
Dynagas LNG Partners LP
23, Rue Basse, 98000 Monaco
Attention: Michael Gregos
Tel. +377 99996445
Email: management@dynagaspartners.com

Investor Relations / Financial Media:
Nicolas Bornozis
President Capital Link, Inc.
230 Park Avenue, Suite 1536
New York, NY 10169
Tel. (212) 661-7566
E-mail: dynagas@capitallink.com

Forward-Looking Statement

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The Partnership desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “expected,” “pending,” “will” and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, examination by the Partnership’s management of historical operating trends, data contained in its records and other data available from third parties. Although the Partnership believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Partnership’s control, the Partnership cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in the Partnership’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for Liquefied Natural Gas (LNG) shipping capacity, changes in the Partnership’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Partnership’s vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessel breakdowns and instances of off-hires, the amount of cash available for distribution, and other factors. Please see the Partnership’s filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties. The information set forth herein speaks only as of the date hereof, and the Partnership disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.

APPENDIX A

DYNAGAS LNG PARTNERS LP
Unaudited Condensed Consolidated Statements of Income

(In thousands of U.S. dollars except units and per unit data) Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
REVENUES
Voyage revenues$34,452 $41,385 $138,990 $169,851
EXPENSES
Voyage expenses (including related party) (685) (740) (3,619) (2,961)
Vessel operating expenses (6,730) (6,706) (27,067) (26,451)
Dry-docking and special survey costs 34 (81) (6,193) (81)
General and administrative expenses (including related party) (452) (405) (1,686) (1,885)
Management fees -related party (1,553) (1,508) (6,162) (5,999)
Depreciation (7,642) (7,642) (30,319) (30,395)
Operating income 17,424 24,303 63,944 102,079
Interest and finance costs, net (11,718) (8,883) (46,078) (34,991)
Other, net (81) 55 (527) (234)
Net Income$5,625 $15,475 $17,339 $66,854
Earnings per unit, basic and diluted
Common unit (basic and diluted)$0.11 $0.39 $0.27 $1.69
Weighted average number of units outstanding, basic and diluted:
Common units 35,490,000 20,505,000 34,545,740 20,505,000


DYNAGAS LNG PARTNERS LP
Consolidated Condensed Balance Sheets (unaudited)
(Expressed in thousands of U.S. Dollars—except for unit data)

December 31,
2017
December 31,
2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$67,464$57,595
Due from related party 883 878
Other current assets 2,057 1,722
Total current assets 70,404 60,195
FIXED ASSETS, NET:
Vessels, net 977,298 1,007,617
Total fixed assets, net 977,298 1,007,617
OTHER NON CURRENT ASSETS:
Restricted cash 25,000
Due from related party 1,350 1,350
Above market acquired time charters 5,267 12,514
Total assets$1,054,319$1,106,676
LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt, net of deferred financing costs $2,655$31,688
Trade payables 4,497 3,058
Due to related party 72 302
Accrued liabilities 4,051 3,750
Unearned revenue 11,623 14,258
Total current liabilities 22,898 53,056
Deferred revenue 1,405 1,036
Long-term debt, net of current portion and deferred financing costs 711,698 684,748
Total non-current liabilities 713,103 685,784
PARTNERS’ EQUITY
General partner (35,526 units issued and outstanding as at December 31, 2017 and 2016) 47 97
Common unitholders (35,490,000 units issued and outstanding as at December 31, 2017 and 20,505,000 units issued and outstanding as at December 31, 2016) 245,055 302,952
Series A Preferred unitholders: (3,000,000 units issued and outstanding as at December 31, 2017 and 2016) 73,216 73,216
Subordinated unitholders (None issued and outstanding as at December 31, 2017 and 14,985,000 units issued and outstanding as at December 31, 2016) (8,429)
Total partners’ equity 318,318 367,836
Total liabilities and partners’ equity$1,054,319$1,106,676

DYNAGAS LNG PARTNERS LP
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. Dollars)

Year Ended December 31,
2017 2016
Cash flows from Operating Activities:
Net income:$17,339 $66,854
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 30,319 30,395
Amortization and write-off of deferred financing fees 5,387 1,984
Amortization of fair value of acquired time charter 7,247 7,268
Deferred revenue 369 (58)
Changes in operating assets and liabilities:
Trade receivables (55) 3
Prepayments and other assets (315) (178)
Inventories 35 (486)
Due from/ to related parties (235) (346)
Trade payables 1,584 (1,105)
Accrued liabilities 299 155
Unearned revenue (2,635) (868)
Net cash from Operating Activities 59,339 103,618
Cash flows from Investing Activities
Vessel Acquisitions and other additions to vessels’ cost (37,472)
Net cash used in Investing Activities (37,472)
Cash flows from Financing Activities:
Decrease in restricted cash 25,000
Payment of securities registration and other filing costs (145)
Payment of preferred units issuance costs and other filing costs (119)
Distributions declared and paid (66,857) (66,856)
Repayment of long-term debt (474,900) (32,500)
Proceeds from long-term debt 480,000 66,667
Payment of deferred finance fees (12,568) (36)
Net cash used in Financing Activities (49,470) (32,844)
Net increase in cash and cash equivalents 9,869 33,302
Cash and cash equivalents at beginning of the year 57,595 24,293
Cash and cash equivalents at end of the year$67,464 $57,595

Supplemental Information

ARCTIC LNG CARRIERS Ltd. and its operating subsidiaries

The following table sets forth summary financial information of Arctic LNG Carriers Ltd., the Partnership’s wholly owned subsidiary and borrower under the $480.0 million institutional Senior Secured Term Loan B facility due in 2023 (the “Term Loan B”) which the Partnership entered into on May 18, 2017, and each of its vessel owning subsidiaries that is a subsidiary guarantor to the Term Loan B (collectively “Arctic LNG Carriers”) as at and for the periods presented, which are derived from the unaudited financial statements of Arctic LNG Carriers and are presented in connection with certain reporting requirements governing the Term Loan B.

December 31,
(expressed in thousands of United states dollars) 2017
Balance sheet data:
Total assets $1,010,034
Total cash 24,596
Total debt, net of deferred loan fees$466,402


Three months ended
December 31,
Year Ended
December 31,
(expressed in thousands of United states dollars) 2017 2017
Income statement and other operational data:
Net income$10,172$35,605
Revenues 34,452 138,990
Adjusted EBITDA $27,383$109,223

Arctic LNG Carriers reconciliation of net income to Adjusted EBITDA

Three months ended
December 31,
Year Ended
December 31,
(In thousands of U.S. dollars) 2017 2017
Net Income$10,172 $35,605
Net interest and finance costs (1) 7,635 29,490
Depreciation 7,642 30,319
Class survey costs (34) 6,193
Amortization of fair value of acquired time charter 1,827 7,247
Charter hire amortization 141 369
Adjusted EBITDA$27,383 $109,223

(1) Includes interest and finance costs (inclusive of amortization of deferred financing costs), net of interest income, if any.

APPENDIX B

Fleet statistics

Three Months Ended
December 31,
Year Ended
December 31,
(expressed in United states dollars except for operational data) 2017 2016 2017 2016
Number of vessels at the end of period 6.0 6.0 6.0 6.0
Average number of vessels in the period (1) 6.0 6.0 6.0 6.0
Calendar Days (2) 552.0 552.0 2,190.0 2,196.0
Available Days (3) 552.0 552.0 2,140.3 2,196.0
Revenue earning days (5) 548.3 552.0 2,089.1 2,195.8
Time Charter Equivalent (4)$61,172 $73,632 $63,249 $75,997
Fleet Utilization (5) 99% 100% 98% 100%
Vessel daily operating expenses (6)$12,192 $12,149 $12,359 $12,045

(1) Represents the number of vessels that constituted the Partnership’s fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of its fleet during the period divided by the number of Calendar Days (defined below) in the period.

(2) Calendar Days are the total days the Partnership possessed the vessels in its fleet for the relevant period.

(3) Available Days are the total number of Calendar Days the Partnership’s vessels were in its possession during a period, less the total number of scheduled off-hire days during the period associated with major repairs, or dry-dockings.

(4) Time charter equivalent rate, or TCE rate, is a measure of the average daily revenue performance of a vessel. For time charters, this is calculated by dividing total voyage revenues, less any voyage expenses, by the number of Available Days during that period. Under a time charter, the charterer pays substantially all vessel voyage related expenses. However, the Partnership may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during dry-docking or due to other unforeseen circumstances. The TCE rate is not a measure of financial performance under U.S. GAAP (non-GAAP measure), and should not be considered as an alternative to voyage revenues, the most directly comparable GAAP measure, or any other measure of financial performance presented in accordance with U.S. GAAP. However, TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a company’s performance and assists the Partnership’s management in making decisions regarding the deployment and use of the Partnership’s vessels and in evaluating their financial performance. The Partnership’s calculation of TCE rates may not be comparable to that reported by other companies. The following table reflects the calculation of the Partnership’s TCE rates for the three months and years ended December 31, 2017 and 2016 (amounts in thousands of U.S. dollars, except for TCE rates, which are expressed in U.S. dollars, and Available Days):

Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
(In thousands of U.S. dollars, except for Available Days and TCE rate)
Voyage revenues$34,452 $41,385 $138,990 $169,851
Voyage Expenses (7) (685) (740) (3,619) (2,961)
Time Charter equivalent revenues$33,767 $40,645 $135,371 $166,890
Available Days (3) 552.0 552.0 2,140.3 2,196.0
Time charter equivalent (TCE) rate$61,172 $73,632 $63,249 $75,997

(5) The Partnership calculates fleet utilization by dividing the number of its Revenue earning days, which are the total number of Available Days of the Partnership’s vessels net of unscheduled off-hire days, during a period, by the number of Available Days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as unscheduled repairs but excluding scheduled off-hires for vessel upgrades, dry-dockings or special or intermediate surveys.

(6) Daily vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, spares and repairs and flag taxes, are calculated by dividing vessel operating expenses by fleet Calendar Days for the relevant time period.

(7) Voyage expenses include commissions of 1.25% paid to Dynagas Ltd., the Partnership’s Manager, and third party ship brokers, when defined in the charter parties, bunkers, port expenses and other minor voyage expenses.

Reconciliation of U.S. GAAP Financial Information to Non-GAAP Financial Information

Reconciliation of Net Income to Adjusted EBITDA

Three Months Ended
December 31,
Year Ended
December 31,
(In thousands of U.S. dollars) 2017 2016 2017 2016
Reconciliation to Net Income
Net Income$5,625 $15,475 $17,339 $66,854
Net interest and finance costs (1) 11,718 8,883 46,078 34,991
Depreciation 7,642 7,642 30,319 30,395
Class survey costs (34) 81 6,193 81
Amortization of fair value of acquired time charter 1,827 1,827 7,247 7,268
Charter hire amortization 141 (15) 369 (58)
Adjusted EBITDA$26,919 $33,893 $107,545 $139,531

(1) Includes interest and finance costs and interest income, if any

The Partnership defines Adjusted EBITDA as earnings before interest and finance costs, net of interest income (if any), gains/losses on derivative financial instruments (if any), taxes (when incurred), depreciation and amortization (when incurred), class survey costs and significant non-recurring items (if any). Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s operating performance.

The Partnership believes that Adjusted EBITDA assists its management and investors by providing useful information that increases the ability to compare the Partnership’s operating performance from period to period and against that of other companies in its industry that provide Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Adjusted EBITDA as a measure of operating performance benefits investors in (a) selecting between investing in the Partnership and other investment alternatives and (b) monitoring the Partnership’s ongoing financial and operational strength in assessing whether to continue to hold common units.

Adjusted EBITDA is not a measure of financial performance under U.S. GAAP, does not represent and should not be considered as 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 and these measures may vary among other companies. Therefore, Adjusted EBITDA as presented above may not be comparable to similarly titled measures of other companies.

Reconciliation of Net Income to Adjusted Net Income available to common unitholders and Adjusted Earnings per common unit

Three Months Ended
December 31,
Year Ended
December 31,
(In thousands of U.S. dollars except for units and per unit data) 2017 2016 2017 2016
Net Income$5,625 $15,475 $17,339 $66,854
Non-cash expense from accelerated amortization of deferred loan fees 2,583
Charter hire amortization 141 (15) 369 (58)
Amortization of fair value of acquired time charter 1,827 1,827 7,247 7,268
Class survey costs (34) 81 6,193 81
Adjusted Net Income$7,559 $17,368 $33,731 $74,145
Less: Adjusted Net Income attributable to subordinated, preferred unitholders and general partner (1,710) (8,327) (8,267) (35,285)
Common unitholders’ interest in Adjusted Net Income$5,849 $9,041 $25,464 $38,860
Weighted average number of common units outstanding, basic and diluted: 35,490,000 20,505,000 34,545,740 20,505,000
Adjusted Earnings per common unit, basic and diluted$0.16 $0.44 $0.74 $1.90

Adjusted Net Income represents net income before non-recurring expenses (if any), charter hire amortization related to time charters with escalating time charter rates and amortization of fair value of acquired time charters, all of which are significant non-cash items. Adjusted Net Income available to common unitholders represents the common unitholders interest in Adjusted Net Income for each period presented. Adjusted Earnings per common unit represents Adjusted Net Income attributable to common unitholders divided by the weighted average common units outstanding during each period presented.

Adjusted Net Income, Adjusted Net Income per common unit and Adjusted Earnings per common unit, basic and diluted, are not recognized measures under U.S. GAAP and should not be regarded as substitutes for net income and earnings per unit, basic and diluted. The Partnership’s definition of Adjusted Net Income, Adjusted Net Income per common unit and Adjusted Earnings per common unit, basic and diluted, may not be the same at that reported by other companies in the shipping industry or other industries. The Partnership believes that the presentation of Adjusted Net Income and Adjusted Earnings per unit available to common unitholders are useful to investors because they facilitate the comparability and the evaluation of companies in the Partnership’s industry. In addition, the Partnership believes that Adjusted Net Income is useful in evaluating its operating performance compared to that of other companies in the Partnership’s industry because the calculation of Adjusted Net Income generally eliminates the accounting effects of items which may vary for different companies for reasons unrelated to overall operating performance. The Partnership’s presentation of Adjusted Net Income available to common unitholders and Adjusted Earnings per common unit should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.

Distributable Cash Flow Reconciliation

Three Months Ended
December 31,
Year Ended
December 31,
(In thousands of U.S. dollars) 2017 2016 2017 2016
Net Income$5,625 $15,475 $17,339 $66,854
Depreciation 7,642 7,642 30,319 30,395
Amortization of deferred finance fees 825 495 5,387 1,984
Net interest and finance costs, excluding amortization(1) 10,893 8,388 40,691 33,007
Class survey costs (34) 81 6,193 81
Amortization of fair value of acquired time charters 1,827 1,827 7,247 7,268
Charter hire amortization 141 (15) 369 (58)
Adjusted EBITDA$26,919 $ 33,893 $107,545 $139,531
Net interest and finance costs, excluding amortization(1) (10,893) (8,388) (40,691) (33,007)
Maintenance capital expenditure reserves (1,038) (1,038) (4,152) (4,152)
Replacement capital expenditure reserves (3,195) (3,195) (12,780) (12,780)
Distributable Cash Flow$11,793 $21,272 $49,922 $89,592

(1) Includes interest and finance costs and interest income, if any.

Distributable Cash Flow with respect to any period presented means Adjusted EBITDA after considering period interest and finance costs and estimated maintenance and replacement capital expenditures. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by the Partnership’s capital assets. Distributable Cash Flow is a quantitative standard used by investors in publicly-traded partnerships to assist in evaluating a partnership’s ability to make quarterly cash distributions. The Partnership’s calculation of the Distributable Cash Flow may not be comparable to that reported by other companies. Distributable Cash Flow is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance calculated in accordance with GAAP.

Source:Dynagas LNG Partners LP