Navigator Holdings Ltd. — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Filed May 8, 2020; financial statements are prepared under U.S. GAAP. The company owns and operates 38 liquefied-gas carriers and holds a 50% interest in an ethylene export-terminal joint venture.
Key financial results
| Metric | FY2019 | FY2018 |
|---|---|---|
| Operating revenue | $301.4 million | $310.0 million |
| Operating income | $32.6 million | $41.5 million |
| Net loss attributable to shareholders | $16.7 million; $0.30 loss per share | $5.7 million; $0.10 loss per share |
| Operating cash flow | $49.7 million | $77.5 million |
| Cash, cash equivalents and restricted cash | $66.1 million | $71.5 million |
| Total assets | $1.874 billion | $1.833 billion |
| Total liabilities | $934.4 million | $877.6 million |
| Stockholders’ equity | $939.8 million | $955.1 million |
Operating margin was approximately 10.8% of revenue in 2019, down from 13.4% in 2018; net margin was approximately negative 5.5%. Adjusted EBITDA, a non-GAAP measure, was $107.7 million, versus $117.6 million.
Gross borrowings were approximately $885 million at year-end, including about $716.9 million under secured facilities (including the Navigator Aurora financing), a $100 million senior unsecured bond, and NOK 600 million of senior secured bonds (approximately $68 million at year-end). The filing reports covenant compliance as of December 31, 2019. Debt facilities are largely floating-rate; management estimates a 100-basis-point LIBOR increase would add about $7.2 million to annual interest expense.
Changes versus the prior comparable period
- Revenue declined 2.8%; operating income fell 21.4%, and the shareholder net loss widened from $5.7 million to $16.7 million.
- Operating cash flow decreased 35.9% to $49.7 million. Management attributed the decline to lower earnings, working-capital movements and higher drydocking payments.
- Fleet utilization declined to 86.8% from 89.0%, while average daily TCE increased to $20,831 from $20,284. The fleet remained at 38 vessels.
- Vessel operating expenses increased 4.5% to $111.5 million; general and administrative costs rose 10.3% to $20.9 million. Total operating expenses were broadly flat.
- Terminal joint-venture investment increased to $130.7 million. The terminal exported commissioning cargoes in December 2019; the company reported a $1.1 million share of joint-venture loss, primarily from commissioning costs.
Liquidity, outlook and material risks
- Going-concern warning: COVID-19-related uncertainty, possible lower demand and utilization, swap collateral requirements and the February 2021 bond maturity led management to conclude that substantial doubt existed about the company’s ability to continue as a going concern; management plans did not alleviate that doubt. The 2019 statements nevertheless use the going-concern basis.
- After year-end, the company reported depositing $12.6 million of additional collateral by May 7, 2020 for its cross-currency swap, compared with $1.3 million held at year-end. Further NOK depreciation could require more collateral and reduce liquidity or cause covenant breaches.
- The $100 million unsecured bond matures February 10, 2021 and cannot be repaid from existing cash or expected operating cash flows, according to the filing. Refinancing, maturity extension, vessel sale-and-leasebacks, additional debt and seeking deferred loan amortization were under consideration; none was assured.
- Management discussed seeking earlier access to up to $42.5 million under the terminal facility, refinancing secured facilities, borrowing against unsecured vessels, and deferring quarterly amortization of about $17 million. These were plans under consideration, not completed actions.
- The company expected to contribute a further $24.5 million toward terminal construction in 2020 and early 2021. The terminal’s eventual planned capacity is about one million tons of ethylene annually; four offtake contracts cover roughly 75% of that capacity. Completion of refrigerated storage and ramp-up remain execution risks.
- COVID-19 disruptions included delayed or cancelled crew changes, repair and drydock delays, and inspection delays. Management warned of possible weaker cargo demand, charter rates, utilization, cash flow and covenant headroom. The company also identified IMO 2020 low-sulfur fuel costs, cyclical charter markets, customer concentration, sanctions exposure and vessel values as risks.
- No near-term dividend was anticipated; bank and bond restrictions barred dividends until after December 31, 2020. The filing describes no material litigation known to management.
- Auditors gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. Three material weaknesses were identified: controls over going-concern forecasts, accounting and SEC-reporting staffing, and IT access/change controls at a third-party technical manager.
Investor verification points
- Confirm the company’s current liquidity, covenant compliance, collateral postings and the actual outcome of proposed financing or debt-maturity actions.
- Verify the customer-concentration disclosure: the filing contains inconsistent percentages, including 54.41% in one passage, 51.4% elsewhere for 2019, and an apparent 5.41% typographical error. The audited note reports four customers generated 51.4% of 2019 operating revenue.
- Track completion, funding, contracted throughput and operating performance of the ethylene terminal and its refrigerated storage project.
- Assess the remediation and independent testing of the three material weaknesses in internal controls.
- Review charter expirations, spot-market exposure, utilization, drydock schedules and low-sulfur fuel impacts; 18 of 25 time charters were stated to expire within one year.