Navigator Holdings Ltd. — FY 2014 Form 20-F
Reporting period: Year ended December 31, 2014. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide separate Q4 results. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars.
Business context
Navigator owns and operates liquefied gas carriers transporting LPG, petrochemical gases and ammonia. At year-end it operated 26 vessels; the fleet averaged 24.8 vessels during 2014. Twenty vessels were on time charters and six were in the spot market at year-end. One additional newbuilding was delivered in January 2015.
Key financial metrics
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $304.9 million | $238.3 million |
| Operating income | $115.5 million | $70.2 million |
| Operating margin | 37.9% | 29.4% |
| Net income | $84.5 million | $41.0 million |
| Net margin | 27.7% | 17.2% |
| EBITDA | $161.3 million | $106.8 million |
| Net cash from operating activities | $129.8 million | $78.8 million |
| Cash and cash equivalents at year-end | $62.5 million | $194.7 million |
| Total assets | $1,370.5 million | $1,325.2 million |
| Total liabilities | $564.7 million | $604.6 million |
Operating cash flow increased 64.8%. Investing activities used $228.6 million, principally for newbuilding installments; financing activities used $33.5 million. Cash fell by $132.2 million over the year. Year-end current assets were $84.5 million against current liabilities of $80.2 million.
Debt at December 31 comprised $417.9 million of secured term loans and $125.0 million of 9% senior unsecured bonds, or $542.9 million in total. Interest expense was $30.3 million. The company reported compliance with its debt covenants at year-end. No dividends were paid in 2014; management said it did not anticipate near-term cash dividends.
Material changes versus FY 2013
- Revenue rose 27.9% overall. Operating revenue increased 30.1%, primarily from fleet growth, higher average TCE rates ($29,988 per day versus $28,262) and improved utilization (97.3% versus 92.9%).
- Net income more than doubled, while operating expenses increased 12.6%, slower than revenue. Operating income rose 64.6%.
- Voyage expenses decreased 8.8%, attributed to a lower proportion of voyage charters and lower bunker prices in the second half. Vessel operating expenses rose 25.3% with the larger fleet, although daily costs edged down to $8,068 from $8,115.
- Interest expense increased 5.4% to $30.3 million. Cash declined substantially as the company funded vessel construction and repaid debt.
- 2013 included $4.1 million of other cargo revenue and matching $4.3 million cost of cargo sold related to a butane cargo affected by an engine-room fire on Navigator Capricorn; neither item recurred in 2014.
Outlook, commitments and risks
- The company had agreed to acquire 11 newbuildings for an aggregate stated price of $640.4 million, with deliveries scheduled through March 2017. The contractual-obligations table reported $561.0 million of remaining vessel-construction obligations as of year-end. Management expected to fund planned construction with existing cash, operating cash flow and credit facilities, with possible future debt or equity financing; it considered liquidity sources sufficient for the foreseeable future.
- Management anticipated continued growth in seaborne LPG and petrochemical transportation, including U.S. ethane exports, but noted uncertainty from lower oil prices, production and trade dynamics, and growth in vessel supply. No quantified earnings or rate guidance was provided.
- Customer concentration is material: five named customers accounted for 46.8% of 2014 revenue. PDVSA and Pertamina together represented approximately 21.0%; the filing highlights political, contractual and enforcement risks tied to these state-owned counterparties.
- Charter renewal and spot-rate exposure warrant attention: seven vessels were in the spot market at the filing date, and 15 of 20 time charters at year-end were scheduled to expire within one year. Rates, utilization, vessel values and demand are cyclical and may be affected by newbuild deliveries and economic conditions.
- Other key risks include substantial construction and capital needs, refinancing and covenant requirements, interest-rate exposure on LIBOR-based debt, environmental and ballast-water compliance costs, operational incidents, and the absence of loss-of-hire insurance. Management reported no material legal proceedings and no off-balance-sheet arrangements.
- KPMG gave unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective as of December 31, 2014.
Most important facts for investors to verify
- Delivery timing, remaining funding needs and charter coverage for the 11 newbuildings, especially the four midsize ethane-capable vessels.
- Cash availability, subsequent borrowing under the January 2015 facility, debt amortization, and ongoing compliance with liquidity and collateral covenants.
- Renewal rates and employment for charters expiring in 2015, plus spot-market rates and utilization.
- Revenue exposure to the largest customers and developments affecting PDVSA and Pertamina contracts.
- Whether actual cash generation and capital spending support management’s liquidity outlook without materially increasing leverage or diluting shareholders.