Navigator Holdings Ltd. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K covers the three months ended March 31, 2017. Navigator Holdings Ltd. is the owner and operator of the world's largest fleet of handysize liquefied gas carriers, transporting LPG, petrochemical gases, and ammonia. As of March 31, 2017, the company owned and operated 35 vessels. The fleet is expanding with newbuilding deliveries, including the Navigator Nova and Navigator Luga in January 2017, and the Navigator Yauza in April 2017.
Key Financial Metrics
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Operating Revenue | $77.3 million | $76.4 million |
| Operating Income | $15.9 million | $27.3 million |
| Net Income | $2.7 million | $19.4 million |
| Net Cash from Operating Activities | $15.9 million | $17.1 million |
| Net Cash Used in Investing Activities | ($85.6 million) | ($42.7 million) |
| Net Cash from Financing Activities | $58.1 million | $14.9 million |
| Cash and Cash Equivalents (End of Period) | $45.6 million | $77.1 million |
| Weighted Average Fleet Size | 34.6 vessels | 29.8 vessels |
| Fleet Utilization | 92.4% | 87.6% |
| Average Daily TCE Rate | $21,712 | $29,561 |
Material Changes vs. Prior Period
- Revenue: Increased 1.2% to $77.3 million, driven by a 14.7% increase in vessel ownership days and higher utilization (92.4% vs 87.6%). This growth was offset by a significant decline in average charter rates (TCE dropped from $29,561 to $21,712 per day).
- Profitability: Net income plummeted 85.9% to $2.7 million. Operating income fell 41.8% due to higher voyage expenses (up 111.5% due to more voyage charters) and increased depreciation (up 21.0%).
- One-Time Charges: The company incurred $4.2 million in non-recurring charges related to the early redemption of 2012 bonds, including a $3.5 million write-off of call premiums/redemption charges and $0.6 million in deferred financing costs.
- Debt Refinancing: In February 2017, the company issued $100 million in new 7.75% senior unsecured bonds (2017 Bonds) to fully redeem $125 million of outstanding 2012 bonds.
Outlook, Risks, and Management Commentary
- Liquidity: As of March 31, 2017, current liabilities exceeded current assets by $149.3 million. This is primarily due to the classification of $147.6 million of a term loan facility maturing in February 2018 as current, and steep repayment schedules on older vessels. Management believes cash from operations and existing credit facilities ($33.1 million available) are sufficient for the next 12 months.
- Market Conditions: The LPG freight environment remains weak due to a large orderbook of new vessels. The company is diversifying into petrochemical gases (ethylene, propylene) to improve utilization, which now accounts for 52% of charter revenue.
- Dividends: The company does not anticipate declaring or paying cash dividends in the near term to retain cash for balance sheet strength and opportunistic acquisitions.
- Capital Expenditures: The company has $90.5 million in remaining contractual obligations for vessels under construction, with deliveries expected through July 2017.
Investor Verification Checklist
- Verify the company's ability to refinance the $147.6 million term loan facility maturing in February 2018.
- Monitor the impact of the weak LPG freight market on future TCE rates and the success of the shift toward petrochemical gas transportation.
- Review the timeline and cost adherence for the remaining newbuilding deliveries scheduled for June and July 2017.
- Assess the company's compliance with debt covenants, specifically the minimum liquidity requirement of $25 million and the EBITDA to Interest Expense ratio of 3.00 to 1.00.
- Confirm the status of the in-house technical management transition for fleet vessels and its impact on operating costs.