Navigator Holdings Ltd. annual report, Q4 FY2022

Navigator Holdings Ltd. — FY2022 Form 20-F

Reporting period: Year ended December 31, 2022. 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 amounts below are U.S. dollars unless stated otherwise.

Business context

Navigator owns and operates liquefied gas carriers transporting LPG, petrochemical gases and ammonia, and holds a 50% interest in an ethylene export terminal at Morgan’s Point, Texas. It reported 53 vessels owned and operated at year-end; subsequent acquisitions through its 60%-owned Greater Bay joint venture brought the fleet to 56 vessels after year-end. The company’s common stock trades on the NYSE as NVGS.

Financial and operating results

Metric	FY2022	FY2021
Total operating revenue	$473.8 million	$406.5 million
Operating income/(loss)	$60.7 million	($3.0) million
Net income/(loss)	$54.9 million	($29.2) million
Net income/(loss) attributable to Navigator shareholders	$53.5 million	($31.0) million
Operating cash flow	$130.3 million	$97.9 million
Cash, cash equivalents and restricted cash at year-end	$153.2 million	$124.2 million
Total assets	$2,096.7 million	$2,157.4 million
Total liabilities	$923.3 million	$1,040.0 million
Navigator shareholders’ equity	$1,162.5 million	$1,113.9 million

Total operating revenue increased 16.6%. The $473.8 million total included $405.3 million of operating revenue, $46.3 million from the Unigas Pool and $22.1 million from Luna Pool collaborative arrangements.
Operating margin was approximately 12.8% in 2022, compared with approximately negative 0.7% in 2021; net income attributable to shareholders was approximately 11.3% of total operating revenue. These percentages are calculated from reported figures.
Non-GAAP EBITDA was $236.8 million and Adjusted EBITDA was $212.7 million. These measures are not substitutes for GAAP income or operating cash flow and may not be comparable with other companies’ measures.
Average daily TCE rate rose 5.3% to $23,317; fleet utilization improved to 89.0% from 87.4%. Average daily vessel operating expense increased 3.2% to $8,210.
Cash provided by operating activities rose 33.1% to $130.3 million. Investing activities provided $35.6 million, including vessel-sale proceeds and terminal distributions; financing activities used $134.1 million, mainly for debt repayments, bond redemption and derivative settlement.
Year-end debt was approximately $862 million, including $762.0 million of secured term loans and revolving credit facilities and $100.0 million of senior unsecured bonds. Of debt, $464.7 million was covered by interest-rate swaps and $397.3 million remained floating-rate. A 100-basis-point rate increase was estimated to add approximately $4.0 million to annual interest expense.
Cash, cash equivalents and restricted cash included $6.5 million of restricted funds. The company also reported $20.0 million available under a revolving credit facility. It stated that it complied with debt covenants at year-end.

Material changes versus FY2021

Revenue growth reflected more available vessel days following the Ultragas acquisition, higher average TCE rates and improved utilization. Time-charter revenue increased, while Luna Pool collaborative-arrangement revenue declined.
Operating results turned positive. The 2021 period included $63.6 million of vessel impairment charges; no vessel impairment was recorded in 2022. The company also recorded a $4.7 million profit on vessel sales in 2022.
Depreciation and amortization increased 42.6% to $126.2 million, including the effect of reducing estimated vessel useful lives from 30 to 25 years effective January 1, 2022, as well as additional vessels.
Interest expense increased 31.4% to $50.8 million amid higher benchmark rates and acquired debt. The company redeemed its NOK 600 million senior secured bonds in December 2022, recording a $1.1 million redemption loss and a $6.3 million realized cross-currency swap loss.
Income from the 50%-owned export terminal joint venture increased to $25.8 million from $11.1 million as terminal throughput rose to 987,529 tons from 628,257 tons.
Net income included a $25.1 million unrealized gain on non-designated derivatives, which did not itself generate cash flow. This and equity-method earnings are important context when assessing the year’s reported profit.

Outlook, commentary and risks

Management said available financial resources, including expected cash generation, should meet liquidity and working-capital needs for at least the next 12 months. It reported $866.6 million of total contractual obligations at year-end, including $212.6 million due in 2023. In March 2023, the company refinanced the 2016 and 2017 facilities approaching maturity with a new $200 million secured term loan maturing in 2029.
The company expects to contribute approximately $120–$130 million toward the ethylene terminal expansion from 2023 through 2024, funded by cash, terminal distributions and additional debt. Construction was expected to begin in Q2 2023 and commercial service in the second half of 2024; planned capacity is at least 1.5 million tons per year, with the filing also describing potential capacity up to 3 million tons.
Management cited strong 2022 vessel utilization, near-nameplate terminal throughput and a limited handysize vessel orderbook. Market performance remains exposed to charter-rate cycles, vessel supply and demand, fuel and operating costs, and charter renewals. The filing does not provide formal earnings or rate guidance.
Two vessels were on 10-year charters to a Russian counterparty scheduled to expire in December 2023; the counterparty was not sanctioned as of the report. The Ukraine conflict also creates trade, sanctions, crew availability and route risks, while disruption to ammonia supply contributed to longer voyages and demand for the company’s vessels.
Other material risks include customer concentration (the top three customers represented 26.5% of 2022 revenue), spot-market exposure, interest-rate and derivative volatility, vessel-value and impairment risk, drydocking and aging-fleet costs, environmental and emissions rules, and terminal expansion execution and financing. The company said it does not carry loss-of-hire insurance.
No material legal proceedings or uncured material payment defaults were reported. Management said the material weakness in internal control reported for 2021 had been remediated, and management and the auditor concluded internal control over financial reporting was effective at December 31, 2022.
The company did not pay dividends and said it did not anticipate paying cash dividends in the near term. A $50 million share repurchase authorization was announced in October 2022; by March 17, 2023, 2,023,998 shares had been repurchased and cancelled for $25.4 million.

Most important facts for investors to verify

Confirm the March 2023 refinancing and subsequent Greater Bay vessel purchases and borrowings, and assess the resulting amortization, balloon payments, interest costs and covenant headroom.
Track actual expansion-project spending against the $120–$130 million company commitment, funding sources, construction schedule, committed terminal throughput and expected returns.
Review time-charter renewals and re-chartering rates, particularly the Russian-counterparty charters expiring in December 2023, and customer concentration and pool performance.
Separate recurring operating performance and cash generation from derivative fair-value gains, vessel-sale gains and equity-method terminal earnings.
Assess vessel utilization, drydocking costs, useful-life assumptions and vessel valuations, including the assumptions underlying the 2022 conclusion that no impairment indicators existed.
Verify share repurchases after March 17, 2023, any dividend-policy changes, and the company’s ongoing covenant and liquidity compliance.