Navigator Holdings Ltd. Form 6-K Summary
Business Context and Reporting Period
This report covers the three months ended March 31, 2016. 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, 2016, the company owned and operated 30 vessels, with a weighted average fleet size of 29.8 vessels for the quarter. The company is actively expanding its fleet with seven newbuildings in its orderbook, with deliveries scheduled through July 2017.
Key Financial Metrics
| Metric | Q1 2016 | Q1 2015 (Revised) |
|---|---|---|
| Operating Revenue | $76.4 million | $74.2 million |
| Operating Income | $27.3 million | $31.9 million |
| Net Income | $19.4 million | $23.1 million |
| Earnings Per Share (Diluted) | $0.35 | $0.42 |
| Operating Cash Flow | $17.1 million | $27.7 million |
| Investing Cash Flow | ($42.7 million) | ($52.2 million) |
| Financing Cash Flow | $14.9 million | $12.5 million |
| Cash and Equivalents (End of Period) | $77.1 million | $50.5 million |
| Total Debt (Secured + Unsecured) | $645.4 million | $625.4 million |
Note: Q1 2015 figures have been revised to correct an immaterial error regarding the capitalization of interest costs on newbuildings.
Material Changes vs. Prior Period
- Revenue Growth: Operating revenue increased 2.9% to $76.4 million, driven by a 12.1% increase in vessel ownership days and a slight improvement in average charter rates ($29,561/day vs. $29,180/day).
- Profitability Decline: Net income decreased 16.0% to $19.4 million. This was primarily due to a 24.7% increase in vessel operating expenses (due to fleet expansion and repairs) and a 14.5% increase in interest expense.
- Utilization Drop: Fleet utilization fell from 97.0% in Q1 2015 to 87.6% in Q1 2016, attributed to market softening and idle days related to the repair of the Navigator Aries.
- Expense Increases: Vessel operating expenses rose to $22.4 million, and depreciation increased to $14.6 million due to the larger fleet size.
Outlook, Risks, and Unusual Items
- Fleet Expansion: The company has contracted eight newbuildings with an aggregate price of $509.1 million. Two vessels are expected in 2016, and five in 2017. Financing for these is largely secured through existing term loans and a revolving credit facility.
- Navigator Aries Incident: The vessel Navigator Aries was involved in a collision in June 2015. Repairs were completed in January 2016, and the vessel entered a two-year time charter with Pertamina in March 2016. Insurance reimbursed $4.7 million of the $10.0 million repair cost, with $5.7 million remaining to be reimbursed (subject to a $0.1 million deductible). The company does not have loss of hire insurance for the revenue lost during repairs.
- Liquidity and Covenants: As of March 31, 2016, the company was in compliance with all financial covenants under its secured term loan facilities and senior unsecured bonds. Total contractual obligations exceed $1 billion, with significant payments due for vessels under construction in the remainder of 2016 and 2017.
- Market Risks: The company faces exposure to interest rate fluctuations (floating rate debt) and foreign currency exchange rates. It does not currently use hedging instruments for these risks.
Investor Verification Checklist
- Verify the status and expected delivery dates of the seven newbuildings in the orderbook, particularly the financing arrangements for Hull No. 8234.
- Monitor the reimbursement status of the remaining $5.7 million insurance claim for the Navigator Aries repairs.
- Assess the impact of the 87.6% fleet utilization rate on future revenue stability compared to the 97.0% rate in the prior year.
- Review the company's ability to meet liquidity covenants (minimum liquidity of $10M-$25M or 5% of Net Debt) as newbuild installments come due.
- Confirm the revised Q1 2015 financial data reflects the correction of the interest capitalization error.