Business Context and Reporting Period
Navigator Holdings Ltd. (NYSE: NVGS), a foreign private issuer based in London, reported preliminary financial results for the three and six months ended June 30, 2015. The company operates the world's largest fleet of handysize liquefied gas carriers, transporting petroleum gas, petrochemical gases, and ammonia. As of June 30, 2015, the active fleet consisted of 28 vessels, with 10 semi-refrigerated gas carriers under construction scheduled for delivery between August 2015 and March 2017.
Key Financial Metrics
| Metric | Q2 2015 | Q2 2014 | YTD 2015 | YTD 2014 |
|---|---|---|---|---|
| Revenue | $84.1 million | $76.1 million | $158.3 million | $145.9 million |
| Net Income | $26.3 million | $19.7 million | $48.3 million | $36.5 million |
| EBITDA | $47.7 million | $38.7 million | $92.4 million | $74.6 million |
| Earnings Per Share (Basic) | $0.48 | $0.36 | $0.87 | $0.66 |
| Cash and Equivalents (June 30) | $66.2 million | $62.5 million (Dec 31, 2014) | N/A | |
| Total Debt (Current + Non-Current) | $482.2 million | $417.9 million (Dec 31, 2014) | N/A |
Liquidity and Cash Flow: For the six months ended June 30, 2015, net cash provided by operating activities was $65.5 million. Net cash used in investing activities was $123.7 million, primarily due to payments for vessels under construction ($122.8 million). Net cash provided by financing activities was $61.9 million, driven by proceeds from secured term loan facilities ($95.4 million).
Material Changes vs. Prior Period
- Revenue Growth: Q2 2015 revenue increased 10.6% year-over-year to $84.1 million, driven by higher operating revenue.
- Profitability: Net income rose 33.8% to a record $26.3 million in Q2 2015. EBITDA increased 23.3% to $47.7 million.
- Expense Management: Voyage expenses decreased to $11.3 million in Q2 2015 from $12.2 million in Q2 2014. Charter-in costs were eliminated in Q2 2015 compared to $2.1 million in the prior year.
- Balance Sheet: Total assets increased to $1.49 billion from $1.37 billion at year-end 2014, reflecting growth in vessels under construction and insurance recoverables. Total liabilities increased to $632.5 million.
Outlook, Risks, and Unusual Items
- Vessel Sale: On August 3, 2015, the company sold the vessel Navigator Mariner for $32.6 million.
- Incident and Insurance: The vessel Navigator Aries was involved in a collision on June 28, 2015. While repair costs are expected to be covered by insurance, the company does not hold loss of hire insurance, meaning lost income during repairs may not be recoverable. An insurance receivable of $6.0 million is recorded on the balance sheet.
- Forward-Looking Risks: Management highlighted risks including future operating results, charter rates, supply and demand trends, liquidity, and the timing of newbuilding deliveries. The company disclaims any obligation to update forward-looking statements.
- Capital Expenditures: Significant cash outflows continue for the construction of 10 new vessels, with deliveries expected through March 2017.
Investor Verification Checklist
- Verify the impact of the Navigator Aries collision on future earnings, specifically the duration of repairs and the extent of unrecoverable lost income.
- Confirm the timing and cost implications of the remaining 10 newbuilding deliveries scheduled through March 2017.
- Review the detailed reconciliation of EBITDA to net income in the full Form 6-K filing to understand non-GAAP adjustments.
- Assess the company's ability to secure additional financing for capital expenditures given the increase in total debt to $482.2 million.
- Monitor the integration of the newly delivered Navigator Umbrio and the operational status of the sold vessel Navigator Mariner.