UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2022

Commission File Number 001-36202

 

 

NAVIGATOR HOLDINGS LTD.

(Translation of registrant’s name into English)

 

 

c/o NGT Services (UK) Ltd

10 Bressenden Place

London, SW1E 5DH

United Kingdom

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒                  Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes  ☐                No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes  ☐                No  ☒

 

 

 


NAVIGATOR HOLDINGS LTD.

REPORT ON FORM 6-K FOR THE THREE MONTHS ENDED MARCH 31, 2022

INDEX

 

     PAGE  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     3  

Quantitative and Qualitative Disclosures About Market Risk

     17  

Important Information Regarding Forward-Looking Statements

     18  

Unaudited Condensed Consolidated Financial Statements

  

Unaudited Condensed Consolidated Balance Sheets as of December 31, 2021 and March 31, 2022

     F-1  

Unaudited Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2021 and 2022

     F-2  

Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2021 and 2022

     F-3  

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2021 and 2022

     F-4  

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2021 and 2022

     F-5  

Notes to Unaudited Condensed Consolidated Financial Statements

     F-6  

SIGNATURES

  

 

2


Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this report to “Navigator Holdings,” “our,” “we,” “us” and the “Company” refer to Navigator Holdings Ltd., a Marshall Islands corporation. All references in this report to our wholly-owned subsidiary “Navigator Gas L.L.C.” refer to Navigator Gas L.L.C., a Marshall Islands limited liability company. As used in this report, unless the context indicates or otherwise requires, references to “our fleet” or “our vessels” refers to the 53 vessels we owned and operated as of March 31, 2022.

This section should be read in conjunction with the interim financial statements and notes thereto presented elsewhere in this report, as well as the audited historical consolidated financial statements and notes thereto of Navigator Holdings Ltd. included in our Annual Report on Form 20-F, filed with the United States Securities and Exchange Commission, or the SEC, on April 28, 2022 (the “2021 Annual Report”). Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, and are presented in U.S. Dollars unless otherwise indicated.

Overview

We are the owner and operator of 53 liquefied gas carriers, which includes the world’s largest fleet of handysize liquefied gas carriers. We also own a 50% share in an ethylene export marine terminal at Morgan’s Point, Texas on the Houston Ship Channel (the “Marine Export Terminal”) through a joint venture (the “Export Terminal Joint Venture”).

In August 2021, the Company acquired the fleet and businesses of two entities, Othello Shipping Company S.A. (Othello Shipping”) and Ultragas ApS (“Ultragas”) from Naviera Ultranav Limitada (“Ultranav” and such acquisition, the “Ultragas Transaction”). The Company owns 100% of Othello Shipping and Ultragas which together own and operate 16 liquefied petroleum gas (“LPG”) carriers ranging in size from 3,770 to 22,000 cbm as of March 31, 2022, all of which are semi-refrigerated vessels and eight of them are capable of carrying ethylene.

Our liquefied gas carrier fleet currently consists of 39 semi- or fully-refrigerated handysize liquefied gas carriers, nine of which are ethylene/ethane capable. We define handysize liquefied gas carriers as those liquefied gas carriers with capabilities between 15,000 and 24,999 cubic meters, or “cbm”. In addition, we have five larger 37,300 – 38,000 cbm midsize liquefied gas carriers, four of which are ethylene/ethane-capable semi-refrigerated liquefied gas carriers; five 12,000 cbm ethylene carriers and four smaller 3,770 –9,000 cbm semi-refrigerated liquefied gas carriers, of which three are also ethylene capable.

Our handysize liquefied gas carriers typically transport LPG on short or medium routes that may be uneconomical for smaller vessels and can call at ports that are unable to support larger vessels due to limited onshore capacity, absence of fully-refrigerated loading infrastructure and/or vessel size restrictions. These handysize liquefied gas carriers are amongst the largest semi-refrigerated vessels in the world, which also makes them capable of transporting petrochemicals on long routes, typically intercontinental.

We play a vital role in the liquefied gas supply chain for energy companies, industrial consumers and commodity traders, with our sophisticated vessels providing an efficient and reliable ‘floating pipeline’ between the parties. We carry LPG for major international energy companies, state-owned utilities and reputable commodities traders. LPG, which consists of propane and butane, is a relatively clean alternative energy source with more than 1,000 applications, including as a heating, cooking and transportation fuel and as a petrochemical and refinery feedstock. LPG is a by-product of oil refining and natural gas extraction, and shale gas, principally from the United States.

We also carry petrochemical gases for numerous industrial users. Petrochemical gases, including ethylene, propylene, butadiene and vinyl chloride monomer, are derived from the cracking of petroleum feedstocks such as ethane, LPG and naphtha and are primarily used as raw materials in various industrial processes, like the manufacture of plastics, vinyl and rubber, with a wide application of end uses. Our vessels also carry ammonia for the producers of fertilizers, a main use of ammonia for the agricultural industry, and for ammonia traders.

Our Marine Export Terminal has a 30,000 ton capacity cryogenic storage tank. The Marine Export Terminal has the capacity to export at least one million tons of ethylene per year and provides the capability to load ethylene from the storage tank at rates of 1,000 tons per hour. The Marine Export Terminal has entered into offtake agreements, which have minimum terms of five years for a committed 938,000 tons of ethylene through the terminal annually.

 

3


Our Fleet

The following table sets forth our vessels as of June 20, 2022:

 

Operating Vessel

   Year
Built
     Vessel Size
(cbm)
     Employment
Status
     Current
Cargo
     Time Charter
Expiration Date
 

Ethylene/ethane capable semi-refrigerated midsize

              

Navigator Aurora

     2016        37,300        Time Charter        Ethane        December 2026  

Navigator Eclipse

     2016        37,300        Time Charter        Ethane        March 2026  

Navigator Nova

     2017        37,300        Time Charter        Ethane        September 2026  

Navigator Prominence

     2017        37,300        Time Charter        Ethane        January 2026  

Ethylene/ethane capable semi-refrigerated handysize

              

Navigator Orion*

     2000        22,085        Time Charter        Ethane        September 2022  

Navigator Pluto*

     2000        22,085        Spot Market        Ethylene        —    

Navigator Saturn*

     2000        22,085        Time Charter        Ethane        June 2022  

Navigator Venus*

     2000        22,085        Spot Market        Ethylene        —    

Navigator Atlas*

     2014        21,000        Spot Market        —          —    

Navigator Europa*

     2014        21,000        Spot Market        Ethane        —    

Navigator Oberon*

     2014        21,000        Spot Market        Ethylene        —    

Navigator Triton*

     2015        21,000        Spot Market        Ethylene        —    

Navigator Umbrio*

     2015        21,000        Spot Market        Ethylene        —    

Ethylene/ethane capable semi-refrigerated smaller size

              

Happy Kestrel**

     2013        12,000        Unigas Pool        —          —    

Happy Osprey**

     2013        12,000        Unigas Pool        —          —    

Happy Peregrine**

     2014        12,000        Unigas Pool        —          —    

Happy Albatross**

     2015        12,000        Unigas Pool        —          —    

Happy Avocet**

     2017        12,000        Unigas Pool        —          —    

Semi-refrigerated handysize

              

Navigator Magellan

     1998        20,700        Spot Market        —          —    

Navigator Aries

     2008        20,750        Time Charter        LPG        January 2023  

Navigator Capricorn

     2008        20,750        Spot Market        —          —    

Navigator Gemini

     2009        20,750        Time Charter        LPG        February 2023  

Navigator Pegasus

     2009        22,200        Time Charter        Propylene        August 2022  

Navigator Phoenix

     2009        22,200        Spot Market        Propylene        —    

Navigator Scorpio

     2009        20,750        Spot Market        LPG        —    

Navigator Taurus

     2009        20,750        Spot Market        LPG        —    

Navigator Virgo

     2009        20,750        Spot Market        LPG        —    

Navigator Leo

     2011        20,600        Time Charter        LPG        December 2023  

Navigator Libra

     2012        20,600        Time Charter        LPG        December 2023  

Atlantic Gas

     2014        22,000        Time Charter        LPG        July 2022  

Adriatic Gas

     2015        22,000        Spot Market        —          —    

Balearic Gas

     2015        22,000        Spot Market        Butadiene        —    

Celtic Gas

     2015        22,000        Spot Market        LPG        —    

Navigator Centauri

     2015        21,000        Time Charter        LPG        May 2023  

Navigator Ceres

     2015        21,000        Time Charter        LPG        June 2023  

Navigator Ceto

     2016        21,000        Time Charter        LPG        May 2023  

Navigator Copernico

     2016        21,000        Time Charter        LPG        June 2023  

 

4


Operating Vessel

   Year
Built
     Vessel Size
(cbm)
     Employment
Status
     Current
Cargo
   Time Charter
Expiration Date

Bering Gas

     2016        22,000        Spot Market      Butadiene    —  

Navigator Luga

     2017        22,000        Time Charter      LPG    June 2023

Navigator Yauza

     2017        22,000        Time Charter      LPG    June 2023

Arctic Gas

     2017        22,000        Spot Market      LPG    —  

Pacific Gas

     2017        22,000        Spot Market      Butadiene    —  

Semi-refrigerated smaller size

              

Happy Falcon**

     2002        3,770        Unigas Pool      —      —  

Happy Condor**

     2008        9,000        Unigas Pool      —      —  

Happy Pelican**

     2012        6,800        Unigas Pool      —      —  

Happy Penguin**

     2013        6,800        Unigas Pool      —      —  

Fully-refrigerated

              

Navigator Glory

     2010        22,500        Time Charter      Ammonia    June 2025

Navigator Grace

     2010        22,500        Time Charter      Ammonia    October 2022

Navigator Galaxy

     2011        22,500        Time Charter      Ammonia    December 2022

Navigator Genesis

     2011        22,500        Time Charter      Ammonia    January 2023

Navigator Global

     2011        22,500        Time Charter      LPG    October 2022

Navigator Gusto

     2011        22,500        Time Charter      Ammonia    March 2023

Navigator Jorf

     2017        38,000        Time Charter      Ammonia    August 2027

 

*

denotes our owned vessels that operate within the Luna Pool

**

denotes our owned vessels that operate within the independently managed Unigas Pool

 

5


Recent Developments

Effect of Russian Invasion of Ukraine

We currently have four charterparties with a Russian counterparty that were entered into in 2012 and 2017, two of which expire in June/July 2022 and two that expire in December 2023. These charterparties cannot be terminated without the consent of both parties, unless the counterparty was to become a sanctioned entity or our dealings with that counterparty were to be otherwise prohibited by sanctions, which would render the charters void. The charter parties that expire in June 2022, will not be extended and both vessels have instead been chartered for a twelve month period with a leading Nordic producer of petrochemicals.

At the beginning of the Russian invasion of Ukraine, we had employed an aggregate of approximately 120 Russian and Ukrainian officers on board our vessels, many of whom were on the same vessels. We have thus far only experienced solidarity onboard and have had no issues in operating these vessels. The total number of combined Russian and Ukrainian officers has reduced to below 100 on our vessels. We continue to monitor this situation closely, and there may be restrictions, logistical challenges or an inability to employ both nationalities in the near future.

Marine Export Terminal

Ethylene throughput for the first quarter of 2022 at the Marine Export Terminal totaled 267,110 metric tons. Throughput to international markets in each of January and March 2022 exceeded 100,000 metric tons, affirming the capability of the terminal to export above the nameplate capacity of one million metric tons per year. February 2022 experienced less volume due to reduced ethylene demand leading up to the Lunar New Year and the Winter Olympics being held in China. April and May 2022 volumes remain strong at around 100,000 metric tons, reflecting demand from producers and end users for competitively priced U.S. ethylene monomers.

Shipping Trends

The handysize semi-refrigerated and fully-refrigerated 12 month time charter rate assessment increased by $5,000 per calendar month (“pcm”) and $15,000 pcm, respectively, during the first quarter of 2022, to $685,000 pcm and $635,000 pcm, respectively, with the most recent weekly shipbroker reports showing a further increase to $705,000 pcm and $650,000 pcm, respectively. The handysize ethylene 12 month time charter assessment has increased from $875,000 pcm at the beginning of 2022 to a current level of $900,000 pcm.

The rise in shipping rates can generally be ascribed to three principal underlying factors. First, the Ukrainian conflict is disrupting traditional supply sources, challenging the historical sourcing of product from the closest geographical location. European customers are increasingly looking further afield when sourcing products, which results in longer seaborne voyages for the gas shipping industry. This is true for all the products we transport, across LPGs, petrochemicals and ammonia. Secondly, U.S. natural gas liquid (“NGL”) production and exports are on the rise. According to EIA, U.S. propane production for April 2022 is 7% above the level for April 2021 and is likely to be the highest level on record since the commencement of shale gas production. Seaborne export volumes of propane during April 2022 were up 14% compared to April 2021. Increased production and exports are also seen across other NGLs and derivative products. U.S. ethylene exports reached a record high of 137,000 metric tons during April 2022 bringing incremental demand for seaborne transport. Thirdly, there is less substitution effect across the gas carrier segments. Increased U.S. exports of LPG are providing incremental shipping demand, which is positive for larger gas carriers, which in turn reduces competition from other size categories within the LPG shipping segment. This dynamic also applies to the handysize segment. When ethylene capable vessels are employed in ethylene or ethane trades, and when fully-refrigerated vessels are employed in ammonia trades, there are less vessels competing for LPG and the more straightforward petrochemicals, which in turn is positive for the semi-refrigerated sub-segment of the handysize vessels. One recent example was a charter extension for four of our semi-refrigerated vessels currently employed carrying LPG from the west coast of North America, which achieved a charter rate increase of approximately 20% over the charter rate agreed a year ago.

 

6


Unaudited Results of Operations for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

The following table compares our operating results for the three months ended March 31, 2021 and 2022:

 

     Three Months
Ended

March 31, 2021
     Three Months
Ended

March 31, 2022
     Percentage
Change
 
        
     (in thousands, except percentages)  

Operating revenues

   $ 80,508      $ 100,396        24.7

Operating revenues – Unigas Pool

     —          13,504        —    

Operating revenues – Luna Pool collaborative arrangements

     5,240        5,877        12.2
  

 

 

    

 

 

    

Total operating revenues

   $ 85,748      $ 119,777        39.7

Expenses:

        

Brokerage commissions

     1,193        1,407        17.9

Voyage expenses

     15,616        20,796        33.2

Voyage expenses – Luna Pool collaborative arrangements

     4,132        4,590        11.1

Vessel operating expenses

     26,992        38,051        41.0

Depreciation and amortization

     19,273        31,342        62.6

General and administrative costs

     6,280        6,343        1.0

Profit from sale of vessel

     —          (358      —    

Other income

     (72      (89      23.6
  

 

 

    

 

 

    

Total operating expenses

   $ 73,414      $ 102,082        39.0
  

 

 

    

 

 

    

Operating income

   $ 12,334      $ 17,695        43.5

Other income/(expense)

        

Foreign currency exchange gain/(loss) on senior secured bonds

     8        (777      —    

Unrealized gain on non-designated derivative instruments

     547        15,242        2,686.5

Interest expense

     (8,961      (10,963      22.3

Interest income

     31        87        180.6
  

 

 

    

 

 

    

Income before taxes and share of result of equity method investments

   $ 3,959      $ 21,284        437.6

Income taxes

     (145      (393      171.0

Share of result of equity method investments

     (605      6,503        —    
  

 

 

    

 

 

    

Net income

   $ 3,209      $ 27,394        753.7

Net income attributable to non-controlling interest

     (389      (356      (8.5 %) 
  

 

 

    

 

 

    

Net income attributable to stockholders of Navigator Holdings Ltd.

   $ 2,820      $ 27,038        858.8
  

 

 

    

 

 

    

Operating Revenues. Operating revenues, net of address commissions, was $100.4 million for the three months ended March 31, 2022, an increase of $19.9 million or 24.7% compared to $80.5 million for the three months ended March 31, 2021. This increase was primarily due to:

 

   

an increase in operating revenues of approximately $10.2 million attributable to an increase in vessel available days of 529 days, or 15.8% for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. This increase was primarily as a result of seven additional handysize vessels joining the fleet as part of the Ultragas Transaction, off-set by a reduction in available days following the sale of Navigator Neptune;

 

   

an increase in operating revenues of approximately $3.4 million attributable to an increase in average monthly time charter equivalent rates, which increased to an average of approximately $22,933 per vessel per day ($697,549 per vessel per calendar month) for the three months ended March 31, 2022, compared to an average of approximately $21,956 per vessel per day ($667,830 per vessel per calendar month) for the three months ended March 31, 2021;

 

7


   

an increase in operating revenues of approximately $1.1 million attributable to an increase in fleet utilization, which rose to 89.5% for the three months ended March 31, 2022, compared to 88.2% for the three months ended March 31, 2021; and

 

   

an increase in operating revenues of approximately $5.2 million primarily attributable to an increase in pass through voyage costs, associated with the additional vessels joining the fleet for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The following table presents selected operating data for the three months ended March 31, 2021 and 2022, which we believe are useful in understanding the basis for movement in our operating revenues. It does not include our nine owned smaller vessels in the independent commercially managed Unigas Pool or the five vessels owned by Pacific Gas in our Luna Pool.

 

     Three Months
Ended
March 31, 2021
    Three Months
Ended
March 31, 2022
 

Fleet Data:

    

Weighted average number of vessels

     38.0       44.2  

Ownership days

     3,420       3,974  

Available days

     3,350       3,879  

Operating days

     2,956       3,471  

Fleet utilization

     88.2     89.5

Average daily time charter equivalent rate (*)

   $ 21,956     $ 22,933  

 

*

Non-GAAP Financial Measure—Time charter equivalent: Time charter equivalent (“TCE”) rate is a measure of the average daily revenue performance of a vessel. TCE is not calculated in accordance with U.S. GAAP. For all charters, we calculate TCE by dividing total operating revenues (excluding collaborative arrangements and revenues from the Unigas Pool), less any voyage expenses (excluding collaborative arrangements), by the number of operating days for the relevant period. TCE rates exclude the effects of the collaborative arrangements, as operating days and fleet utilization, on which TCE rates are based, are calculated for our owned vessels, and not the average of all pool vessels. Under a time charter, the charterer pays substantially all of the vessel voyage related expenses, whereas for voyage charters, also known as spot market charters, we pay all voyage expenses. TCE rate is a shipping industry performance measure used primarily to compare period-to-period changes in a company’s performance despite changes in the mix of charter types (i.e., spot charters, time charters and contracts of affreightment) under which the vessels may be employed between the periods. We include average daily TCE rate, as we believe it provides additional meaningful information in conjunction with net operating revenues, because it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance. Our calculation of TCE rate may not be comparable to that reported by other companies.

Reconciliation of Operating Revenues to TCE rate

The following table represents a reconciliation of operating revenues to TCE rate. Operating revenues are the most directly comparable financial measure calculated in accordance with U.S. GAAP for the periods presented.

 

     Three Months
Ended
March 31, 2021
     Three Months
Ended
March 31, 2022
 
     
     (in thousands, except operating daysand
average
 daily time charter equivalent rate)
 

Fleet Data:

     

Operating revenues*

   $ 80,508      $ 100,396  

Voyage expenses*

     15,616        20,796  
  

 

 

    

 

 

 

Operating revenues less Voyage expenses

     64,892        79,600  
  

 

 

    

 

 

 

Operating days

     2,956        3,471  

Average daily time charter equivalent rate

   $ 21,956      $ 22,933  

 

*

Operating revenues and voyage expenses excluding collaborative arrangements and Unigas pool.

 

8


Operating Revenues – Unigas Pool. Operating revenues – Unigas Pool was $13.5 million for the three months ended March 31, 2022 and represents our share of the revenues earned from our nine vessels (following the sale of the Happy Bird on March 7, 2022) operating within the Unigas Pool, based on agreed pool points. These vessels were acquired as part of the Ultragas Transaction in August 2021, and therefore there are no Operating Revenues—Unigas Pool for the three months ended March 31, 2021.

Operating Revenues – Luna Pool Collaborative Arrangements. Pool earnings are aggregated and then allocated (after deducting pool overheads and managers fees) to the Pool Participants in accordance with the Pooling Agreement. Operating revenues—Luna Pool collaborative arrangements was $5.9 million for the three months ended March 31, 2022, compared to $5.2 million for the three months ended March 31, 2021 and represents our share of pool net revenues generated by the other participant’s vessels in the pool. The Luna Pool, which comprises nine of the Company’s ethylene vessels and five ethylene vessels from Pacific Gas Pte. Ltd., focuses on the transportation of ethylene and ethane to meet the growing demands of our customers.

Brokerage Commissions. Brokerage commissions, which typically vary between 1.25% and 2.5% of operating revenues, increased by $0.2 million or 17.9% to $1.4 million for the three months ended March 31, 2022, from $1.2 million for the three months ended March 31, 2021, primarily due to an increase in operating revenues on which brokerage commissions are based.

Voyage Expenses. Voyage expenses increased by $5.2 million or 33.2% to $20.8 million for the three months ended March 31, 2022, from $15.6 million for the three months ended March 31, 2021. This increase is primarily due to voyage expenses of the additional seven handysize vessels acquired as part of the Ultragas Transaction. These voyage expenses are pass through costs, corresponding to an increase in operating revenues of the same amount.

Voyage Expenses – Luna Pool Collaborative Arrangements. Voyage expenses – Luna Pool collaborative arrangements were $4.6 million for the three months ended March 31, 2022, compared to $4.1 million for the three months ended March 31, 2021. These voyages expenses – Luna Pool collaborative arrangements represent the other participant’s share of pool net revenues generated by our vessels in the pool. The net effect after deducting operating revenues – Luna Pool collaborative arrangements was that the other participant’s vessels contributed $1.3 million to our vessels in the Luna Pool for the three months ended March 31, 2022, compared to the other participant’s vessels contributing $1.1 million to our vessels for the three months ended March 31, 2021.

Vessel Operating Expenses. Vessel operating expenses increased by $11.1 million or 41.0% to $38.1 million for the three months ended March 31, 2022, from $27.0 million for the three months ended March 31, 2021, primarily as a result of the additional Ultragas vessels joining the fleet. Average daily vessel operating expenses decreased by $51 per vessel per day, or 0.6%, to $7,841 per vessel per day for the three months ended March 31, 2022, compared to $7,892 per vessel per day for the three months ended March 31, 2021.

Depreciation and Amortization. Depreciation and amortization increased by $12.1 million or 62.6% to $31.3 million for the three months ended March 31, 2022, from $19.3 million for the three months ended March 31, 2021. Of this increase, $5.9 million results from the additional 16 vessels in the fleet, acquired as part of the Ultragas Transaction and $6.1 million results from the change in the useful economic lives of the vessels in the fleet from 30 years to 25 years on January 1, 2022. Depreciation and amortization included amortization of capitalized drydocking costs of $3.7 million and $2.2 million for the three months ended March 31, 2022 and 2021 respectively.

Profit from Sale of Vessel. Profit from sale of vessel for the three months ended March 31, 2022 was $0.4 million and related to the sale of the vessel, Happy Bird. The sale of Navigator Neptune was at book value, therefore there was no profit or loss on the sale of this vessel.

General and Administrative Costs. General and administrative costs slightly increased by $0.1 million or 1.0% to $6.3 million for the three months ended March 31, 2022, from $6.3 million for the three months ended March 31, 2021, primarily as a result of the additional general and administrative costs of Ultragas of $1.2 million, off-set by a reallocation of technical management costs to vessel operating expenses of $0.7 million and a reduction of other costs of $0.3 million including cost reductions associated with the closure of our New York office.

Other Income. Other income was $0.1 million for both the three months ended March 31, 2022 and 2021 and consists of that portion of the management fees for commercial and administrative activities performed by the Company for the Luna Pool, relating to the other participant’s vessels.

Non-operating Results     

Foreign Currency Exchange Gain/(Loss) on Senior Secured Bonds. Exchange gains and losses relate to non-cash movements on our 600 million Norwegian Kroner 2018 Bonds which are translated to U.S. Dollar at the prevailing exchange rate as of March 31, 2022. The foreign currency exchange loss of $0.8 million for the three months ended March 31, 2022, was a result of the Norwegian Kroner strengthening against the U.S. Dollar, being NOK 8.7 to USD 1.0 as of March 31, 2022, compared to NOK 8.8 to USD 1.0 as of December 31, 2021.

 

9


Unrealized Gains on Non-designated Derivative Instruments. The unrealized gains on non-designated derivative instruments of $15.2 million for the three months ended March 31, 2022, primarily relates to the fair value gains of our interest rate swaps across a number of our secured term loan and revolving credit facilities of $13.0 million, as a result of significant increases in forward U.S. Libor rates relative to the fixed rates applicable on these secured term loan and revolving credit facilities; and a gain in our cross-currency interest rate swap of $2.2 million, which is due to the strengthening of the Norwegian Kroner against the U.S. Dollar. The unrealized gain on our interest rate swaps for the three months ended March 31, 2021, was $0.3 million in addition to an unrealized gain on the cross-currency interest rate swap of $0.2 million.

Interest Expense. Interest expense increased by $2.0 million, or 22.3%, to $11.0 million for the three months ended March 31, 2022, from $9.0 million for the three months ended March 31, 2021. This is primarily as a result of interest on the additional debt assumed as part of the Ultragas Transaction in August 2021.

Income Taxes. Income taxes related to taxes on our subsidiaries incorporated in the United States of America, United Kingdom, Poland and Singapore and our consolidated variable interest entity (“VIE”), incorporated in Malta. For the three months ended March 31, 2022, we had a tax charge of $0.4 million compared to taxes of $0.1 million for the three months ended March 31, 2021, with the increase primarily being as a result of taxes on our portion of the profits from the Marine Export Terminal.

Share of Result of Equity Method Investments. The share of result of the Company’s 50% ownership in the Export Terminal Joint Venture was income of $6.5 million for the three months ended March 31, 2022, compared to a loss of $0.6 million for the three months ended March 31, 2021. This increase is primarily as a result of increased volumes exported through the Marine Export Terminal, which were 267,110 tons for the three months ended March 31, 2022, compared to 90,376 tons for the three months ended March 31, 2021, following mechanical integrity concerns on the pipeline carrying the ethylene from the caverns at Mont Belvieu to the Marine Export Terminal in February and March 2021.

Non-Controlling Interest. We entered into a sale and leaseback arrangement in November 2019 with a wholly-owned special purpose vehicle (“lessor SPV”) of a financial institution. Although we do not hold any equity investments in this lessor SPV, we have determined that we are the primary beneficiary of this entity and accordingly, we are required to consolidate this VIE into our financial results. Thus, the income attributable to the financial institution of $0.4 million is presented as the non-controlling interest in our financial results for both the three months ended March 31, 2022 and 2021.

 

10


Liquidity and Capital Resources

Liquidity and Cash Needs

Our primary sources of funds are cash and cash equivalents, cash from operations, undrawn bank borrowings and proceeds from bond issuances. As of March 31, 2022, we had cash and cash equivalents of $168.1 million along with $22.8 million available to be drawn down on two of our secured revolving credit facilities.

Our secured term loan facilities and revolving credit facilities require that the borrowers have liquidity (including undrawn available lines of credit with a maturity exceeding 12 months) of no less than (i) $25.0 million, $35.0 million, or $50.0 million, as applicable to the relevant loan facility, or (ii) 5% of Net Debt or total debt which was $47.6 million as of March 31, 2022, whichever is greater. Please see “—Secured Term Loan Facilities and Revolving Credit Facilities”, “—2018 Senior Secured Bonds” and “2020 Senior Unsecured Bonds” below.

Our primary uses of funds are drydocking expenditures, voyage expenses, vessel operating expenses, general and administrative costs, expenditures incurred in connection with ensuring that our vessels comply with international and regulatory standards, financing expenses and repayment of bonds and bank loans. In addition to operating expenses, our medium-term and long-term liquidity needs relate to debt repayments, potential future newbuildings or acquisitions and any further development of the Marine Export Terminal in our Export Terminal Joint Venture or other projects.

As of March 31, 2022, we had $968.3 million in outstanding obligations, which includes principal repayments on long-term debt, including our bonds, commitments in respect of the Navigator Aurora Facility and office lease commitments. On August 4, 2021, we assumed additional debt associated with the Ultragas Transaction. This debt as of March 31, 2022, stood at $180.3 million, consisting of five bank loans, secured on a total of 13 of the 18 vessels acquired, with three vessels being unencumbered and two vessels subsequently sold following the Ultragas Transaction. The bank loans which have half-yearly aggregate repayments of approximately $13.5 million, mature starting in 2025 and accrue interest at U.S. Libor plus a margin of between 1.9% and 2.65%. In each case, U.S. Libor is fixed by an interest rate swap of approximately 2.0%. The financial covenants on these five bank loans were modified to be consistent with those of the Company’s other credit facilities. Of the total outstanding obligations, $129.0 million matures during the remainder of 2022, and $839.3 million matures after such date.

We believe, given our current cash balances, that our financial resources, including the cash expected to be generated within the year, will be sufficient to meet our liquidity and working capital needs for at least the next twelve months, taking into account our existing capital commitments and debt service requirements.

Capital Expenditures

Liquefied gas transportation is a capital-intensive business, requiring significant investment to maintain an efficient fleet and to stay in regulatory compliance.

We currently have no newbuildings on order. However, we may place newbuilding orders or acquire additional vessels as part of our growth strategy, or may invest further in terminal infrastructures, such as expanding our existing Marine Export Terminal or other import or export terminals.

 

11


Cash Flows

The following table summarizes our cash, cash equivalents and restricted cash provided by / (used in) operating, investing and financing activities for the three months ended March 31, 2021 and 2022:

 

     Three months ended
March 31, 2021
     Three months ended
March 31, 2022
 
     
     (in thousands)  

Net cash provided by operating activities

   $ 29,185      $ 34,014  

Net cash (used in) / provided by investing activities

     (2,961      34,365  

Net cash used in financing activities

     (246      (24,482
  

 

 

    

 

 

 

Net increase in cash, cash equivalents and restricted cash

   $ 25,978      $ 43,897  
  

 

 

    

 

 

 

Operating Cash Flows. Net cash provided by operating activities for the three months ended March 31, 2022 increased to $34.0 million, from $29.2 million for the three months ended March 31, 2021, an increase of $4.8 million. This increase was primarily due to an improvement in net income of $24.2 million, which included additional depreciation of $12.1 million, off-set by increased gains on derivative instruments; an increase in our share of the result from equity method investments of $7.1 million; an increase in drydocking payments of $1.8 million and changes in working capital of $8.9 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Net cash flow from operating activities depends upon charter rates attainable, fleet utilization, fluctuations in working capital balances, repairs and maintenance activity, amount and duration of drydocks, changes in interest rates and foreign currency rates.

We are required to drydock each vessel once every five years until it reaches 15 years of age, after which we drydock vessels every two and a half to three years. Drydocking each vessel takes approximately 30 days in total. Drydocking days generally include approximately 5-10 days of voyage time to and from the drydocking shipyard and approximately 15-20 days of actual drydocking time. Four of our vessels completed their respective drydockings during the three months ended March 31, 2022, with a further nine vessels scheduled for drydocking during the remainder of 2022.

We spend significant amounts of funds for scheduled drydocking (including the cost of classification society surveys) of each of our vessels. As our vessels age and our fleet expands, our drydocking expenses will increase. We estimate the current cost of the five-year drydocking of one of our vessels is approximately $1.0 million, the ten-year drydocking cost is approximately $1.3 million, and the 15 year and 17 year drydocking costs are approximately $1.5 million each. Ongoing costs for compliance with environmental regulations are primarily included as part of our drydocking, such as the requirement to install ballast water treatment plants, and classification society survey costs, with a balance included as a component of our operating expenses.

Investing Cash Flows. Net cash provided by investing activities of $34.4 million for the three months ended March 31, 2022 primarily consisted of $26.5 million relating to proceeds received from the sale of two of our vessels, distributions received from our investment in the Export Terminal Joint Venture of $7.6 million and insurance recoveries on existing damage claims of $0.9 million; offset by investment of $0.5 million in ballast water treatment systems which are being retrofitted on our vessels during dry dock to comply with the requirements of the Ballast Water Management Convention.

Net cash used in investing activities of $3.0 million for the three months ended March 31, 2021 primarily consisted of our investment of $4.0 million in capital contributions made to our Export Terminal Joint Venture and investment of $0.2 million in ballast water treatment systems, offset by $0.8 million of distributions received from equity method investments and insurance recoveries on existing damage claims of $0.4 million.

Financing Cash Flows. Net cash used in financing activities of $24.5 million for the three months ended March 31, 2022, related to regular quarterly repayments on our secured term loan facilities of $22.9 million and an extemporaneous repayment of $1.6 million on the Navigator Aurora Facility held within our consolidated lessor VIE.

Net cash used in financing activities of $0.2 million for the three months ended March 31, 2021, related to regular quarterly repayments on our secured term loan facilities of $16.4 million and an extemporaneous repayment of $1.8 million on the Navigator Aurora Facility held within our consolidated lessor VIE, offset by a final draw down of $18.0 million from the Terminal Facility.

 

12


Terminal Facility

General. In March 2019, Navigator Ethylene Terminals LLC (“Marine Terminal Borrower”), our wholly-owned subsidiary, entered into a Credit Agreement (the “Terminal Facility”) with ING Capital LLC and SG Americas Securities, LLC for a maximum principal amount of $75.0 million, to be used for the payment of capital contributions to our Export Terminal Joint Venture for construction costs of our Marine Export Terminal

Term and Facility Limits. The Terminal Facility is now converted into a term loan with a final maturity of December 31, 2025. Based on the committed throughput agreements for the Marine Export Terminal, a total of $69.0 million was drawn under the Terminal Facility of which $51.0 million was outstanding as of March 31, 2022.

Interest. The Terminal Facility is subject to quarterly repayments of principal and interest. Interest is payable at a rate of U.S. Libor plus 275 to 300 basis points over the remaining term of the facility. We have entered into floating to fixed interest rate swap agreements for approximately 80% of the amounts drawn under the Terminal Facility. The U.S. Libor element of the interest rate payable by the Marine Terminal Borrower under these interest rate swap agreements is 0.369% and 0.3615% per annum.

Financial Covenants. Under the Terminal Facility, the Marine Terminal Borrower must maintain a minimum debt service coverage ratio (as defined in the Terminal Facility) for the prior four calendar fiscal quarters (or shorter period of time if data for the prior four fiscal quarters is not available) of no less than 1.10 to 1.00.

Restrictive Covenants. Following completion of the Marine Export Terminal, the Marine Terminal Borrower can only pay dividends if the Marine Terminal Borrower satisfies certain customary conditions to paying a dividend, including maintaining a debt service coverage ratio for the immediately preceding four consecutive fiscal quarters and the projected immediately succeeding four consecutive fiscal quarters of not less than 1.20 to 1.00 and no default or event of default has occurred or is continuing. The Terminal Facility also limits the Marine Terminal Borrower from, among other things, incurring indebtedness or entering into mergers and divestitures. The Terminal Facility also contains general covenants that will require the Marine Terminal Borrower to vote its interest in the Export Terminal Joint Venture to cause the Export Terminal Joint Venture to maintain adequate insurance coverage and maintain its property (but only to the extent the Marine Terminal Borrower has the power under the organizational documents of the Export Terminal Joint Venture to cause such actions).

On May 6, 2021, the Company obtained a waiver from the lenders under the Terminal Facility, which is retrospective with effect from the date of its inception, to correct a technical inconsistency in the Terminal Facility, involving a restrictive covenant relating to taking affirmative action regarding the treatment of tax status of the borrower as a corporation for U.S. federal, state or local income tax purposes. The waiver required among other things, an amendment to the credit agreement and other loan documentation to remediate the inconsistency and to set aside and fund a tax reserve, based on the subsequent three months’ tax liabilities. The terms of the waiver were complied with and the amendment entered into on August 4, 2021.

 

13


Secured Term Loan Facilities and Revolving Credit Facilities

General. Navigator Gas L.L.C., our wholly-owned subsidiary, and certain of our vessel-owning subsidiaries have entered into various secured term loan facilities and revolving credit facilities as summarized in the table below. For additional information regarding our secured term loan facilities and revolving credit facilities, please read “Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Secured Term Loan Facilities and Revolving Credit Facilities” in the 2021 Annual Report.

The table below summarizes our secured term loan and revolving credit facilities as of March 31, 2022:

 

Facility agreement date

   Original
facility
amount
     Principal
amount
outstanding
     Undrawn
amount at
March 31, 2022
     Interest rate      Loan
maturity date
 
              
     (in millions)  

January 2015*

   $ 278.1      $ 85.5      $ —        US Libor + 270 BPS        April 2022—April 2023  

October 2016

     220.0        74.4        20.0        US Libor + 260 BPS        November 2023  

June 2017

     160.8        82.4        —          US Libor + 230 BPS        June 2023  

March 2019

     107.0        79.5        —          US Libor + 240 BPS        March 2025  

September 2020

     210.0        185.0        2.8        US Libor + 250 BPS        September 2024  

October 2019**

     69.1        53.2        —          US Libor + 185 BPS        October 2026  

August 2021 Amendment and Restatement Agreement

     67.0        52.4        —          US Libor + 190 BPS        June 2026  

DB Credit Facility A

     57.7        25.2        —          US Libor + 205 BPS        April 2027  

Santander Credit Facility A

     81.0        35.9        —          US Libor + 205 BPS        May 2027  

DB Credit Facility B

     60.9        34.3        —          US Libor + 205 BPS        December 2028  

Santander Credit Facility B

     55.8        32.6        —          US Libor + 205 BPS        January 2029  
  

 

 

    

 

 

    

 

 

       

Total

   $ 1,367.4      $ 740.4      $ 22.8        

 

*

The January 2015 facility tranches mature over a range of dates, from April 2022 to April 2023.

**

The October 2019 loan facility relates to the Navigator Aurora Facility held within a lessor entity (for which legal ownership resides with financial institutions) that we are required to consolidate under U.S. GAAP into our financial statements as a variable interest entity. Please read Note 16—Variable Interest Entities to the unaudited condensed consolidated financial statements for additional information.

Financial Covenants. The secured term loan facilities and revolving credit facilities contain financial covenants requiring the borrowers, among other things, to ensure that:

 

   

the borrowers have liquidity (including undrawn available lines of credit with a maturity exceeding 12 months) of no less than (i) $25.0 million, $35.0 million or $50.0 million, or (ii) 5% of Net Debt or total debt, as applicable, whichever is greater;

 

   

the ratio of EBITDA to Interest Expense (each as defined in the applicable secured term loan facility and revolving credit facility, as amended), on a trailing four quarter basis, is no less than 2.50 to 1.00 or 3.00 to 1.00; and

 

   

the borrower must maintain a minimum ratio of shareholder equity or value adjusted shareholder equity to total assets or value adjusted total assets of 30%;

Restrictive Covenants. The secured facilities provide that the borrowers may not declare or pay dividends to shareholders out of operating revenues generated by the vessels securing the indebtedness if an event of default has occurred and is continuing. The secured term loan facilities and revolving credit facilities also limit the borrowers from, among other things, incurring indebtedness or entering into mergers and divestitures. The secured facilities also contain general covenants that will require the borrowers to maintain adequate insurance coverage and to maintain their vessels. In addition, the secured term loan facilities include customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, representation and warranty, a cross-default to other indebtedness and non-compliance with security documents.

The borrowers are also required to deliver semi-annual compliance certificates, which include valuations of the vessels securing the applicable

facility from an independent ship broker. Upon delivery of the valuation, if the market value of the collateral vessels is less than 125% to 135% of the outstanding indebtedness under the applicable facilities, the borrowers must either provide additional collateral or repay any amount in excess of 125% to 135% of the market value of the collateral vessels, as applicable. This covenant is measured semi-annually on June 30 and December 31.

Other than as stated, our compliance with the financial covenants listed above is measured as of the end of each fiscal quarter. As of March 31, 2022, we were in compliance with all covenants under the secured term loan facilities and revolving credit facilities.

 

14


2018 Senior Secured Bonds

General. On November 2, 2018, we issued senior secured bonds in an aggregate principal amount of 600 million Norwegian Kroner (“NOK”) (approximately $71.7 million) with Nordic Trustee AS, as bond trustee and security agent (the “2018 Bonds”). The net proceeds were used to partially finance our portion of the capital cost for the construction of the Marine Export Terminal. The 2018 Bonds are governed by Norwegian law and are listed on the Nordic ABM which is operated and organized by Oslo Børs ASA.

Security. The 2018 Bonds are secured by three of the Company’s ethylene capable semi-refrigerated liquefied gas carriers.

Interest. Interest on the 2018 Bonds is payable quarterly at a rate equal to the 3-month NIBOR plus 6.0% per annum, calculated on a 360-day year basis. We have entered into a cross-currency interest rate swap agreement whereby interest is payable at a rate equal to the 3-month LIBOR plus 6.608% throughout the life of the bond. Interest is payable quarterly in arrears on February 2, May 2, August 2 and November 2.

Maturity. The 2018 Bonds will mature in full on November 2, 2023.

Optional Redemption. We may redeem the 2018 Bonds, in whole or in part, at any time. Any 2018 Bonds redeemed until November 1, 2022, are redeemable at 102.864% of par, from November 2, 2022 until May 1, 2023, are redeemable at 101.79% of par, and from May 2, 2023 to the maturity date are redeemable at 100% of par, in each case, in cash plus accrued interest. Additionally, upon the occurrence of a “Change of Control Event” (as defined in the bond agreement governing the 2018 Bonds (the “2018 Bond Agreement”)), the holders of 2018 Bonds have an option to require us to repay such holders’ outstanding principal amount of 2018 Bonds at 101% of par, plus accrued interest.

Financial Covenants. The 2018 Bond Agreement contains financial covenants requiring us, among other things, to ensure that:

 

   

we and our subsidiaries maintain a minimum liquidity of no less than $25.0 million; and

 

   

we and our subsidiaries maintain an Equity Ratio of at least 30%.

Our compliance with the covenants listed above is measured as of the end of each fiscal quarter. As of March 31, 2022, we were in compliance with all covenants under the 2018 Bonds.

Restrictive Covenants. The 2018 Bond Agreement provides that we may declare dividends so long as such dividends do not exceed 50% of our cumulative consolidated net profits after taxes since January 1, 2020. The 2018 Bond Agreement also limits us and our subsidiaries from, among other things, entering into mergers and divestitures, engaging in transactions with affiliates or incurring any additional liens which would have a material adverse effect. In addition, the 2018 Bond Agreement includes a put option exercisable following a change of control and customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, false representation and warranty, a cross-default to other indebtedness, the occurrence of a material adverse effect, or our insolvency or dissolution.

2020 Senior Unsecured Bonds

General. On September 10, 2020, we issued senior unsecured bonds in an aggregate principal amount of $100.0 million with Nordic Trustee AS as the bond trustee (the “2020 Bonds”). The net proceeds of the issuance of the 2020 Bonds were used to redeem in full all of our previously outstanding 2017 Bonds. The 2020 Bonds are governed by Norwegian law and listed on the Nordic ABM which is operated and organized by Oslo Børs ASA.

Interest. Interest on the 2020 Bonds is payable at a fixed rate of 8.0% per annum, calculated on a 360-day year basis. Interest is payable semi- annually in arrears on March 10 and September 10 of each year.

Maturity. The 2020 Bonds mature in full on September 10, 2025 and become repayable on that date.

Optional Redemption. We may redeem the 2020 Bonds, in whole or in part at any time. Any 2020 Bonds redeemed; up until September 9, 2023 will be priced at the aggregate of the net present value (based on the Norwegian government bond rate plus 50 basis points) of 103.2% of par and interest payable up to September 9, 2023; from September 10, 2023 up until September 9, 2024, are redeemable at 103.2% of par, from September 10, 2024 up until March 9, 2025, are redeemable at 101.6% of par, and from March 10, 2025 to the maturity date are redeemable at 100% of par, in each case, in cash plus accrued interest.

Additionally, upon the occurrence of a “Change of Control Event” (as defined in the bond agreement for the 2020 Bonds, (the “2020 Bond Agreement”)), the holders of 2020 Bonds have an option to require us to repay such holders’ outstanding principal amount of 2020 Bonds at 101% of par, plus accrued interest.

Financial Covenants. The 2020 Bond Agreement contains financial covenants requiring us, among other things, to ensure that:

 

   

we and our subsidiaries maintain a minimum liquidity of no less than $35.0 million; and

 

   

we and our subsidiaries maintain an Equity Ratio (as defined in the 2020 Bond Agreement) of at least 30%.

 

15


Our compliance with the covenants listed above is measured as of the end of each fiscal quarter. As of March 31, 2022, we were in compliance with all covenants under the 2020 Bonds.

Restrictive Covenants. The 2020 Bonds provide that we may declare or pay dividends to shareholders provided the Company maintains a minimum liquidity of $60.0 million, unless an event of default has occurred and is continuing. The 2020 Bond Agreement also limits us and our subsidiaries from, among other things, entering into mergers and divestitures, engaging in transactions with affiliates or incurring any additional liens which would have a material adverse effect. In addition, the 2020 Bond Agreement includes customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, false representation and warranty, a cross-default to other indebtedness, the occurrence of a material adverse effect, or our insolvency or dissolution.

Lessor VIE Debt

In October 2019, we entered into a sale and leaseback transaction to refinance one of our vessels, Navigator Aurora¸ with a lessor, OCY Aurora Ltd, a special purpose vehicle (“SPV”) and wholly owned subsidiary of Ocean Yield Malta Limited. The SPV was determined to be a variable interest entity (“VIE”). We are deemed to be the primary beneficiary of the VIE, and as a result, we are required by U.S. GAAP to consolidate the SPV into our results. The loan described below under “—Navigator Aurora Facility” relates to the VIE. Although we have no control over the funding arrangements of this entity, we are required to consolidate this loan facility into our financial results.

Upon the occurrence of a “Change of Control Event” (as defined in the sale and leaseback agreement), the lessor has an option to require us to repurchase Navigator Aurora at 103% of the outstanding lease amount, plus costs and expenses directly attributable to the termination of the lessor’s financing arrangements, such as break costs for swap arrangements.

Navigator Aurora Facility

In October 2019, the SPV, which owns Navigator Aurora, entered into secured financing agreements for $69.1 million consisting of a USD denominated loan facility, the “Navigator Aurora Facility”. The Navigator Aurora Facility is a seven year unsecured loan provided by OCY Malta Limited, the parent of OCY Aurora Ltd., The Navigator Aurora Facility is subordinated to a further bank loan where OCY Aurora Ltd is the guarantor and Navigator Aurora is pledged as security. Please read Note 6—Secured Term Loan Facilities and Revolving Credit Facilities to the unaudited condensed consolidated financial statements for additional information. The Navigator Aurora Facility bears interest at 3-month U.S. LIBOR plus a margin of 185 basis points and is repayable by the SPV with a balloon payment on maturity. As of March 31, 2022, there was $53.2 million in borrowings outstanding under the Navigator Aurora Facility (December 31, 2021, $54.8 million.).

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of our material accounting policies, please read Note 2—Summary of Significant Accounting Policies to the 2021 Annual Report.

 

16


Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in interest rates and foreign currency fluctuations, as well as inflation. We use interest rate swaps to manage interest rate risks but do not use these financial instruments for trading or speculative purposes.

Interest Rate Risk

Historically, we have been subject to limited market risks relating to changes in interest rates because we did not have significant amounts of floating rate debt outstanding. Navigator Gas L.L.C., our wholly-owned subsidiary, and certain of our vessel-owning subsidiaries are parties to secured term loan and revolving credit facilities that bear interest at an interest rate of U.S. LIBOR plus 185 to 270 basis points. At March 31, 2022, our outstanding debt that is subject to variable interest rates, net of the amount subject to interest rate swap agreements, was $451.3 million. Based on this, a variation in U.S. LIBOR of 100 basis points would result in an increase of $4.5 million in annual interest paid on our indebtedness outstanding as of March 31, 2022.

We use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with its floating-rate debt. The Company is exposed to the risk of credit loss in the event of non-performance by the counterparty to the interest rate swap agreements.

Foreign Currency Exchange Rate Risk

Our primary economic environment is the international shipping market. This market utilizes the U.S. Dollar as its functional currency. Consequently, virtually all of our revenues are in U.S. Dollars. Our expenses, however, are in the currency invoiced by each supplier, and we remit funds in the various currencies invoiced. We incur some vessel operating expenses and general and administrative costs in foreign currencies, primarily the Euro, Pound Sterling Danish Kroner and Polish Zloty and therefore there is a transactional risk that currency fluctuations could have a negative effect on our cashflows and financial condition. We believe these adverse effects would not be material and we have not entered into any derivative contracts to mitigate our exposure to foreign currency exchange rate risk during 2022.

In November 2018, we issued senior secured bonds in an aggregate amount of NOK 600 million. Please read “2018 Senior Secured Bonds”. We have entered into a cross currency interest rate swap to mitigate the risk of currency movements for both interest payments during the five-year tenor of the 2018 Bonds and for the principal repayments at maturity in November 2023. However, if the Norwegian Kroner weakens relative to the U.S. Dollar beyond a certain threshold, we are required to place cash collateral with our swap providers for the forecast future liability on the cross-currency interest rate swap. In the event the depreciation of the Norwegian Kroner relative to the U.S. Dollar is significant, the cash collateral requirements could adversely affect our liquidity and financial position.

In addition, at each quarterly interest payment date, the cross-currency interest rate swap exchanges a receipt of floating interest of 6.0% plus 3-month NIBOR on NOK 600 million for a U.S. dollar payment of floating interest of 6.608% plus 3-month U.S. LIBOR on the approximate $71.7 million principal amount. The purpose of the cross-currency interest rate swap is to economically hedge the foreign currency exposure on the payments of interest and principal of the Company’s NOK-denominated 2018 Bonds due in 2023. The cross-currency interest rate swap is remeasured to fair value at each reporting date.

Inflation

Certain of our operating expenses, including crewing, insurance and drydocking costs, are subject to fluctuations as a result of market forces. Increases in bunker costs could have a material effect on our future operations if the number and duration of our voyage charters or COAs increases. In the case of the 44 vessels owned and commercially managed by us as of March 31, 2022, 27 were employed on time charter and as such it is the charterers who pay for the fuel on those vessels. If our vessels are employed under voyage charters or COAs, freight rates are generally sensitive to the price of fuel. However, a further sharp rise in bunker prices may have a temporary negative effect on our results since freight rates generally adjust only after prices settle at a higher level.

Credit Risk

We may be exposed to credit risks in relation to vessel employment and at times may have multiple vessels employed by one charterer. We consider and evaluate concentration of credit risk continuously and perform ongoing evaluations of these charterers for credit risk. At March 31, 2022, no more than four of our vessels were employed by the same charterer. We invest our surplus funds with reputable financial institutions, with original maturities of no more than three months, in order to provide the Company with flexibility to meet all requirements for working capital and for capital investments.

 

17


IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 6-K contains certain forward-looking statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto, including our financial forecast. In addition, we and our representatives may from time to time make other oral or written statements that are also forward-looking statements. Such statements include, in particular, statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate as described in this report on Form 6-K. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue,” “scheduled,” or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this report. These risks and uncertainties include but are not limited to:

 

   

global epidemics or other health crises such as the outbreak of COVID-19, including its impact on our business;

 

   

future operating or financial results;

 

   

pending acquisitions, business strategy and expected capital spending;

 

   

operating expenses, availability of crew, number of off-hire days, drydocking requirements and insurance costs;

 

   

fluctuations in currencies and interest rates;

 

   

general market conditions and shipping market trends, including charter rates and factors affecting supply and demand;

 

   

our ability to continue to comply with all our debt covenants;

 

   

our financial condition and liquidity, including our ability to refinance our indebtedness as it matures or obtain additional financing in the future to fund capital expenditures, acquisitions and other corporate activities;

 

   

estimated future capital expenditures needed to preserve our capital base;

 

   

our expectations about the availability of vessels to purchase, or the useful lives of our vessels;

 

   

our continued ability to enter into long-term, fixed-rate time charters with our customers;

 

   

the availability and cost of low sulfur fuel oil compliant with the International Maritime Organization sulfur emission limit reductions, generally referred to as “IMO 2020,” which took effect January 1, 2020;

 

   

our vessels engaging in ship to ship transfers of LPG or petrochemical cargoes which may ultimately be discharged in sanctioned areas or to sanctioned individuals without our knowledge;

 

   

the impact of the Russian invasion of Ukraine;

 

   

changes in governmental rules and regulations or actions taken by regulatory authorities;

 

   

potential liability from future litigation;

 

   

our expectations relating to the payment of dividends;

 

   

our ability to successfully remediate the material weakness in our internal control over financial reporting and our disclosure controls and procedures;

 

   

our expectation regarding providing in-house technical management for certain vessels in our fleet and our success in providing such in-house technical management;

 

   

our expectations regarding the financial success of the Marine Export Terminal and our related Export Terminal Joint Venture or our Luna Pool collaborative arrangements;

 

   

our expectations regarding the integration, profitability and success of the vessels and businesses acquired in the Ultragas Transaction and the operational and financial benefits from the combined businesses and fleet; and

 

   

other factors detailed from time to time in other periodic reports we file with the Securities and Exchange Commission.

All forward-looking statements included in this report on Form 6-K are made only as of the date of this report. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise. We make no prediction or statement about the performance of our common stock.

 

18


NAVIGATOR HOLDINGS LTD.

 

Condensed Consolidated Balance Sheets

(Unaudited)

 

     December 31, 2021     March 31, 2022  
    
     (in thousands, except share data)  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 124,223     $ 168,120  

Accounts receivable, net of allowance for credit losses of $1,003 (December 31, 2021: $1,105)

     31,906       21,235  

Accrued income

     6,150       7,541  

Prepaid expenses and other current assets

     16,293       20,855  

Bunkers and lubricant oils

     13,171       14,141  

Insurance receivable

     6,857       6,502  

Amounts due from related parties

     16,736       24,627  
  

 

 

   

 

 

 

Total current assets

     215,336       263,021  

Non-current assets

    

Vessels, net

     1,763,252       1,736,617  

Assets held for sale

     25,944       —    

Property, plant and equipment, net

     330       262  

Intangible assets, net of accumulated amortization of $417 (December 31, 2021: $387)

     400       339  

Equity method investments

     150,209       149,119  

Derivative assets

     579       9,889  

Right-of-use asset for operating leases

     923       4,998  

Prepaid expenses and other non-current assets

     452       1,134  
  

 

 

   

 

 

 

Total non-current assets

     1,942,089       1,902,358  
  

 

 

   

 

 

 

Total assets

   $ 2,157,425     $ 2,165,379  
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities

    

Current portion of secured term loan facilities, net of deferred financing costs

   $ 148,570     $ 162,164  

Current portion of operating lease liabilities

     381       283  

Accounts payable

     11,600       15,269  

Accrued expenses and other liabilities

     20,247       22,150  

Accrued interest

     5,211       3,426  

Deferred income

     18,510       19,796  

Amounts due to related parties

     224       357  
  

 

 

   

 

 

 

Total current liabilities

     204,743       223,445  
  

 

 

   

 

 

 

Non-current liabilities

    

Secured term loan facilities and revolving credit facilities, net of current portion and deferred financing costs

     604,790       569,157  

Senior secured bond, net of deferred financing costs

     67,688       68,529  

Senior unsecured bond, net of deferred financing costs

     98,551       98,650  

Derivative liabilities

     8,800       2,869  

Operating lease liabilities, net of current portion

     522       4,550  

Amounts due to related parties

     54,877       53,249  
  

 

 

   

 

 

 

Total non-current liabilities

     835,228       797,004  
  

 

 

   

 

 

 

Total Liabilities

     1,039,971       1,020,449  

Commitments and contingencies

    

Stockholders’ equity

    

Common stock—$.01 par value per share; 400,000,000 shares authorized; 77,256,145 shares issued and outstanding, (December 31, 2021: 77,180,429)

     772       773  

Additional paid-in capital

     797,324       797,460  

Accumulated other comprehensive loss

     (253     (308

Retained earnings

     316,008       343,046  
  

 

 

   

 

 

 

Total Navigator Holdings Ltd. stockholders’ equity

     1,113,851       1,140,971  

Non-controlling interest

     3,603       3,959  
  

 

 

   

 

 

 

Total equity

     1,117,454       1,144,930  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,157,425     $ 2,165,379  
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

F-1


NAVIGATOR HOLDINGS LTD.

 

Condensed Consolidated Statements of Operations

(Unaudited)

 

    

Three months ended

March 31,

(in thousands except share and per share
data)

 
     2021     2022  

Revenues

    

Operating revenues

   $ 80,508     $ 100,396  

Operating revenues - Unigas Pool

     —         13,504  

Operating revenues - Luna Pool collaborative arrangements

     5,240       5,877  
  

 

 

   

 

 

 

Total operating revenues

     85,748     $ 119,777  
  

 

 

   

 

 

 

Expenses

    

Brokerage commissions

     1,193       1,407  

Voyage expenses

     15,616       20,796  

Voyage expenses – Luna Pool collaborative arrangements

     4,132       4,590  

Vessel operating expenses

     26,992       38,051  

Depreciation and amortization

     19,273       31,342  

General and administrative costs

     6,280       6,343  

Profit from sale of vessel

     —         (358

Other Income

     (72     (89
  

 

 

   

 

 

 

Total operating expenses

     73,414       102,082  
  

 

 

   

 

 

 

Operating income

     12,334       17,695  

Other income/(expense)

    

Foreign currency exchange gain/(loss) on senior secured bonds

     8       (777

Unrealized gain on non-designated derivative instruments

     547       15,242  

Interest expense

     (8,961     (10,963

Interest income

     31       87  
  

 

 

   

 

 

 

Income before income taxes and share of result of equity method investments

     3,959       21,284  

Income taxes

     (145     (393

Share of result of equity method investments

     (605     6,503  
  

 

 

   

 

 

 

Net income

     3,209       27,394  

Net income attributable to non-controlling interest

     (389     (356
  

 

 

   

 

 

 

Net income attributable to stockholders of Navigator Holdings Ltd.

   $ 2,820     $ 27,038  
  

 

 

   

 

 

 

Earnings per share attributable to stockholders of Navigator Holdings Ltd.:

    

Basic and diluted:

   $ 0.05     $ 0.35  

Weighted average number of shares outstanding:

    

Basic:

     55,900,206       77,193,048  

Diluted:

     56,240,142       77,518,604  
  

 

 

   

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

F-2


NAVIGATOR HOLDINGS LTD.

 

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

    

Three months

ended
March 31,
(in thousands)

 
     2021      2022  

Net income

   $ 3,209      $ 27,394  

Other comprehensive income:

     

Foreign currency translation income

     81        55  
  

 

 

    

 

 

 

Total comprehensive income:

   $ 3,290      $ 27,449  

Total comprehensive income attributable to:

     

Stockholders of Navigator Holdings Ltd.:

   $ 2,901      $ 27,093  

Non-controlling interest

     389        356  
  

 

 

    

 

 

 

Total comprehensive Income:

   $ 3,290      $ 27,449  
  

 

 

    

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

F-3


NAVIGATOR HOLDINGS LTD.

 

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

For the three months ended March 31, 2021:

 

     (In thousands, except share data)  
     Common stock                                    
     Number of
shares
(Note 11)
    Amount 0.01
par value
(Note 11)
     Additional
Paid-in Capital
(Note 12)
     Accumulated
Other
Comprehensive
Income (Loss)
    Retained
Earnings
     Non-Controlling
Interest
     Total  

Balance as of January 1, 2021

     55,893,618     $ 559      $ 593,254      $ (245   $ 346,972      $ 1,855      $ 942,395  

Restricted shares issued March 17, 2021

     85,098       1        —          —         —          —          1  

Restricted shares cancelled January 1, 2021

     (7,595     —          —          —         —          —          —    

Net income

     —         —          —          —         2,820        389        3,209  

Foreign currency translation

     —         —          —          81       —          —          81  

Share-based compensation plan

     —         —          298        —         —          —          298  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Balance as of March 31, 2021

     55,971,121     $ 560      $ 593,552      $ (164   $ 349,792      $ 2,244      $ 945,984  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

For the three months ended March 31, 2022:

 

     (In thousands, except share data)  
     Common stock                                    
     Number of
shares
(Note 11)
     Amount 0.01
par value
(Note 11)
     Additional
Paid-in Capital
(Note 12)
     Accumulated
Other
Comprehensive
Income (Loss)
    Retained
Earnings
     Non-Controlling
Interest
     Total  

Balance as of January 1, 2022

     77,180,429      $ 772      $ 797,324      $ (253   $ 316,008      $ 3,603      $ 1,117,454  

Restricted shares issued March 17, 2022

     75,716        1        —          —         —          —          1  

Net income

     —          —          —          —         27,038        356        27,394  

Foreign currency translation

     —          —          —          (55     —          —          (55

Share-based compensation plan

     —          —          136        —         —          —          136  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Balance as of March 31, 2022

     77,256,145      $ 773      $ 797,460      $ (308   $ 343,046      $ 3,959      $ 1,144,930  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

F-4


NAVIGATOR HOLDINGS LTD.

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Three Months
ended
March 31,
2021
    Three Months
ended
March 31,
2022
 
    
     (in thousands)  

Cash flows from operating activities

    

Net income

   $ 3,209     $ 27,394  

Adjustments to reconcile net income to net cash provided by operating activities

    

Unrealized gain on non-designated derivative instruments

     (547     (15,242

Depreciation and amortization

     19,273       31,342  

Payment of drydocking costs

     (2,652     (4,426

Amortization of share-based compensation

     299       137  

Amortization of deferred financing costs

     828       1,002  

Share of result of equity method investments

     605       (6,503

Profit from sale of vessel

     —         (358

Unrealized foreign exchange (loss) / gain on senior secured bonds

     (8     777  

Other unrealized foreign exchange gain (loss)

     76       (49

Changes in operating assets and liabilities

       —    

Accounts receivable

     (15,912     10,671  

Insurance claim receivable

     (309     (516

Bunkers and lubricant oils

     (1,172     (970

Accrued income and prepaid expenses and other current assets

     16,730       (6,634

Accounts payable, accrued interest, accrued expenses and other liabilities

     5,635       5,147  

Amounts due to related parties

     3,130       (7,758
  

 

 

   

 

 

 

Net cash provided by operating activities

     29,185       34,014  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Additions to vessels and equipment

     (193     (546

Contributions to equity method investments

     (4,000     —    

Distributions from equity method investments

     850       7,593  

Purchase of other property, plant and equipment

     (29     (2

Net proceeds from sale of vessels

     —         26,449  

Insurance recoveries

     411       871  
  

 

 

   

 

 

 

Net cash (used in) / provided by investing activities

     (2,961     34,365  
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from secured term loan facilities and revolving credit facilities

     18,000     —    

Issuance costs of secured term loan facilities

     (26     —    

Repayment of financing of vessel to related parties

     (1,774     (1,628

Repayment of secured term loan facilities and revolving credit facilities

     (16,446     (22,854
  

 

 

   

 

 

 

Net cash used in financing activities

     (246     (24,482
  

 

 

   

 

 

 

Net increase in cash, cash equivalents and restricted cash

     25,978       43,897  

Cash, cash equivalents and restricted cash at beginning of period

     59,271       124,223  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 85,249     $ 168,120  
  

 

 

   

 

 

 

Supplemental Information

    

Total interest paid during the period, net of amounts capitalized

   $ 9,986     $ 11,606  
  

 

 

   

 

 

 

Total tax paid during the period

   $ —       $ —    
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

F-5


Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

1.

General Information and Basis of Presentation

General Information

Navigator Holdings Ltd. (the “Company”), the ultimate parent company of the Navigator Group of companies, is registered in the Republic of the Marshall Islands. The Company has a core business of owning and operating a fleet of liquefied gas carriers. As of March 31, 2022, the Company owned and operated 53 gas carriers (the “Vessels”) each having a cargo capacity of between 3,770 cbm and 38,000 cbm, of which 21 were ethylene and ethane capable vessels. The Company owns a 50% share, through a joint venture (the “Export Terminal Joint Venture”), of an ethylene export marine terminal at Morgan’s Point, Texas on the Houston Ship Cannel ( the “Marine Export Terminal”), capable of exporting in excess of one million tons of ethylene per year. Unless the context otherwise requires, all references in the consolidated financial statements to “our”,” we” and “us” refer to the Company.

In August 2021, the company acquired the fleet and businesses of two entities, Othello Shipping Company S.A. (Othello Shipping”) and Ultragas ApS (“Ultragas”) from Naviera Ultranav Limitada (“Ultranav” and such acquisition, the “Ultragas Transaction”). The Company owns 100% of Othello Shipping and Ultragas which together own and operate 16 liquefied petroleum gas (“LPG”) carriers ranging in size from 3,770 to 22,000 cbm as of March 31, 2022, all of which are semi-refrigerated vessels and eight of them are capable of carrying ethylene.

We currently have four charterparties with a Russian counterparty that were entered into in 2012 and 2017, two of which expire in June/July 2022 and two that expire in December 2023. These charterparties cannot be terminated without the consent of both parties, unless the counterparty was to become a sanctioned entity or our dealings with that counterparty were to be otherwise prohibited by sanctions, which would render the charters void. The charter parties that expire in June 2022, will not be extended and both vessels have instead been chartered for a twelve month period with a leading Nordic producer of petrochemicals.

At the beginning of the Russian invasion of Ukraine, we had employed an aggregate of approximately 120 Russian and Ukrainian officers on board our vessels, many of whom were on the same vessels. We have thus far only experienced solidarity onboard and have had no issues in operating these vessels. The total number of combined Russian and Ukrainian officers has reduced to below 100 on our vessels. We continue to monitor this situation closely, and there may be restrictions, logistical challenges or an inability to employ both nationalities in the near future.

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and related Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In our opinion, all adjustments consisting of normal recurring items, necessary for a fair presentation of financial position, operating results and cash flows have been included in the unaudited interim condensed consolidated financial statements and related notes. The unaudited interim condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2021 included in our Annual Report on Form 20F filed with the SEC on April 28, 2022 (the “2021 Annual Report”). The results for the three months ended March 31, 2022, are not necessarily indicative of results for the year ending December 31, 2022, or any other future periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiaries and Variable Interest Entities (“VIE”) for which the Company is a primary beneficiary and are also consolidated (please read Note 16—Variable Interest Entities for additional information). All intercompany accounts and transactions have been eliminated in consolidation.

The results of operations are subject to seasonal and other fluctuations, and are therefore not necessarily indicative of results that may otherwise be expected for the entire year.

Management has evaluated the Company’s ability to continue as a going concern and considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after these financial statements are issued. As part of the assessment, management has considered the following;

 

   

the current financial condition and liquidity sources, including current funds available and forecasted future cash flows;

 

   

any likely effects of global epidemics or other health crises, such as the recent COVID-19 pandemic; and

 

F-6


 

the effects of the conflict in Ukraine on the Company’s business, including potential sanctions being imposed on the Company’s customers or on ports to which the Company’s vessels call.

Management has determined that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

With effect from December 31, 2021, Management changed the estimated useful lives of the vessels, in order to reflect the impact of climate change and sustainability on utilization rates, from 30 years to 25 years.

A discussion of the Company’s significant accounting policies can be found in the Company’s consolidated financial statements included in the 2021 Annual Report. There have been no material changes to these policies in the three months ended March 31, 2022.

Recent Accounting Pronouncements

In January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-01, Reference Rate Reform (Topic 848)—Reference Rate Reform on Financial Reporting. The amendments in this Update are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable-rate, pay-variable rate cross currency interest rate swaps as hedging instruments in investment hedges that are modified as a result of reference rate reform. This optional guidance may be applied upon issuance from any date beginning January 7, 2021, through December 31, 2022. We do not currently have any contracts that have been changed to a new reference rate, but we will continue to evaluate our contracts and the effects of this standard on our consolidated financial position, results of operations, and cash flows prior to adoption.

 

2.

Business Combinations

On August 4, 2021, the Company completed the Ultragas Transaction by acquiring two entities, Othello Shipping, with its 18 wholly vessel owning subsidiaries, and Ultragas ApS (the vessels’ operator). Ultragas has a wholly owned subsidiary Ultraship ApS (an in-house technical manager); a 33.33% share in the equity of Unigas Intl B.V. (a pool in which 11 of the 18 vessels acquired operated at the time of the acquisition); a 25% share in the equity of Ultraship Crewing Philippines Inc. (“UCPI”, “UltraShip Crewing”), a marine services provider; and a 40% share in the equity of Ultraship Services Philippines Inc. (“USPI”), an IT, accounting and administrative support provider.

The total consideration was $410.4 million, comprising $202.9 million in equity consideration to Ultranav (21.2 million shares of the Company’s common stock at $9.57 per share (closing price on August 4, 2021)) and debt and other liabilities assumed of $207.5 million. The purchase price was allocated to the assets acquired and liabilities assumed as of the acquisition date. Please see our 2021 Annual Report – Note 3 – Business Combinations.

 

3.

Operating revenues

The following table compares our operating revenues by the source of revenue stream for the three months ended March 31, 2021 and 2022:

 

     Three months ended
March 31,
(in thousands)
 
     2021      2022  

Operating revenues:

     

Time charters

   $ 42,679      $ 55,508  

Voyage charters

     37,829        44,888  

Time charters from Luna Pool collaborative arrangements

     349        —    

Voyage charters from Luna Pool collaborative arrangements

     4,891        5,877  

Operating revenues from Unigas Pool

     —          13,504  
  

 

 

    

 

 

 

Total operating revenues

   $ 85,748      $ 119,777  
  

 

 

    

 

 

 

Time charter revenues:

As of March 31, 2022, 27 of the Company’s 44 operated vessels were subject to time charters, 17 of which will expire within one year, five of which will expire within three years, four of which will expire between three to five years, and one of which will expire after more than five years from the balance sheet date. (December 31, 2021: 26 of the Company’s 45 operated vessels, were subject to time charters, 19 of which will expire within one year, two of which will expire within three years, and five of which will expire after more than five years from the balance sheet date). The estimated undiscounted cash flows for committed time charter revenues expected to be received on an annual basis for ongoing time charters, as of each March 31, is as follows:

 

F-7


     (in thousands)  

Within 1 year:

   $ 134,932  

2 years:

   $ 73,543  

3 years:

   $ 61,174  

4 years:

   $ 59,978  

5 years:

   $ 22,524  

More than 5 years:

   $ 5,347  

For time charter revenues accounted for under Topic 842, the amount of accrued income on the Company’s unaudited condensed consolidated balance sheets as of March 31, 2022, was $4.9 million (December 31, 2021: $4.5 million). The amount of hire payments received in advance under time charter contracts, recognized as a liability and reflected within deferred income on the Company’s unaudited condensed consolidated balance sheets as of March 31, 2022, was $19.4 million (December 31, 2021: $17.0 million). Deferred income allocated to time charters will be recognized ratably over time, which is expected to be within one month from March 31, 2022.

Voyage Charter revenues

Voyage charter revenues, which include revenues from contracts of affreightment, are shown net of address commissions.

As of March 31, 2022, for voyage charters and contracts of affreightment, services accounted for under Topic 606, the amount of contract assets reflected within accrued income on the Company’s unaudited condensed consolidated balance sheets was $2.6 million (December 31, 2021: $1.3 million). Changes in the contract asset balance at the balance sheet dates reflect income accrued after loading of the cargo commences but before an invoice has been raised to the charterer, as well as changes in the number of the Company’s vessels contracted under voyage charters or contracts of affreightment. The amount of contract liabilities reflected within deferred income on the Company’s unaudited condensed consolidated balance sheets was $0.4 million as of March 31, 2022 (December 31, 2021: $1.5 million).

The period opening and closing balance of receivables from voyage charters, including contracts of affreightment, was $11.1 million and $4.7 million, respectively, as of March 31, 2022 (December 31, 2021: $3.3 million and $11.1 million, respectively) and is reflected within net accounts receivable on the Company’s unaudited condensed consolidated balance sheets.

The amount allocated to costs incurred to fulfill a contract with a charterer, which are costs incurred following the commencement of a contract or charter party but before the loading of the cargo commences, was $1.0 million as of March 31, 2022 (December 31, 2021: $0.6 million) and is reflected within prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets.

Voyage and Time charter revenues from Luna Pool collaborative arrangements:

Revenues from the Luna Pool collaborative arrangements as of March 31, 2022 and 2021, which are accounted for under ASC 808 – Collaborative Arrangements, represent our share of pool net revenues generated by the other Pool Participant’s vessels in the Luna Pool. These include revenues from voyage charters and contracts of affreightment, which are accounted for under Topic 606 in addition to time charter revenues, which are accounted for under Topic 842.

 

4.

Vessels, net

 

     Vessel
(in thousands)
     Drydocking
(in thousands)
     Total
(in thousands)
 

Cost

        

January 01, 2022

   $ 2,305,857      $ 55,578      $ 2,361,435  

Additions

     546        4,046        4,592  

Write-offs of fully amortized assets

     —          (2,353      (2,353
  

 

 

    

 

 

    

 

 

 

March 31, 2022

   $ 2,306,403      $ 57,271      $ 2,363,674  
  

 

 

    

 

 

    

 

 

 

Accumulated Depreciation

        

January 01, 2022

   $ 580,357      $ 17,826      $ 598,183  

Charge for the period

     27,110        4,117        31,227  

Write-offs of fully amortized assets

     —          (2,353      (2,353
  

 

 

    

 

 

    

 

 

 

March 31, 2022

   $ 607,467      $ 19,590      $ 627,057  
  

 

 

    

 

 

    

 

 

 
  

 

 

    

 

 

    

 

 

 

Net Book Value

        

December 31, 2021

   $ 1,725,500      $ 37,752      $ 1,763,252  
  

 

 

    

 

 

    

 

 

 

March 31, 2022

   $ 1,698,936      $ 37,681      $ 1,736,617  
  

 

 

    

 

 

    

 

 

 

 

F-8


The cost and net book value of the 27 vessels that were contracted under time charter arrangements (please read Note 3—Operating Revenue for additional information) was $1,443 million and $1,043 million, respectively, as of March 31, 2022 (December 31, 2021: $1,417.1 million and $1,046.4 million, respectively, for 26 vessels contracted under time charters).

The net book value of vessels that serve as collateral for the Company’s secured bond and secured term loan and revolving credit facilities (please read Note 6—Secured Term Loan Facilities and Revolving Credit Facilities; and Note 7—Senior Secured Bond for additional information) was $1,535.3 million as of March 31, 2022 (December 31, 2021: $1,576.8 million).

The cost and net book value of vessels that are included in the table above and are subject to financing arrangements (please read Note 16—Variable Interest Entities for additional information) was $83.6 million and $68.7 million, respectively, as of March 31, 2022. (December 31, 2021: $83.6 million and $69.6 million, respectively).

On January 14, 2022, the Company sold one of its vessels, Navigator Neptune, a 2000 built 22,085 cbm ethylene carrier to a third party for $21.0 million gross, before broker commission.

On March 7, 2022, the Company sold one of the vessels acquired in the Ultragas Transaction, the Happy Bird, a 1999 built 8,600 cbm LPG carrier to a third party for $6.1 million gross, before broker commission.

 

5.

Equity Method Investments

Interests in investments which are accounted for using the equity method and are recognized initially at cost and subsequently include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees

As of December 31, 2021 and March 31, 2022, we had the following participation in investments that are accounted for using the equity method:

 

     December 31,     March 31,  
     2021     2022  

Enterprise Navigator Ethylene Terminal L.L.C. (“Export Terminal Joint Venture”)

     50     50

Luna Pool Agency Limited. (“Pool Agency”)

     50     50

Unigas International B.V. (“Unigas”)

     33.33     33.33

Dan Unity CO2 A/S

     50     50

Export Terminal Joint Venture

In January 2018, the Company entered into definitive agreements creating the Export Terminal Joint Venture. As of December 31, 2021, we had contributed to the Export Terminal Joint Venture $146.5 million being our total share of the capital cost for the construction of the Marine Export Terminal.

Cumulative interest and associated costs capitalized on the investment in the Export Terminal Joint Venture are being amortized over the estimated useful life of the Marine Export Terminal, which began commercial operations with the export of commissioning cargoes in December 2019. As of March 31, 2022, the unamortized difference between the carrying amount of the investment in the Export Terminal Joint Venture and the amount of the Company’s underlying equity in net assets of the Export Terminal Joint Venture was $6.0 million (December 31, 2021: $6.1 million). The costs amortized in the three months ended March 31, 2022 and 2021, were each $0.1 million and are presented in the share of result of the equity method investments within our consolidated statements of operations.

Equity method gains, excluding amortized costs, recognized in the share of result of equity method investments as of March 31, 2022, were $6.6 million (Three months ended March 31, 2021: Equity method loss of $0.5 million).

Luna Pool Agency Limited

In March 2020, the Company collaborated with Pacific Gas Pte. Ltd. and Greater Bay Gas Co. Ltd. to form and manage the Luna Pool. As part of the formation of the Luna Pool, a new entity, Luna Pool Agency Limited, (the “Pool Agency”), was incorporated in May 2020. The pool participants jointly own the Pool Agency on an equal basis, and both have equal board representation. As of March 31, 2022, we have recognized the Company’s initial investment of one British pound in the Pool Agency within equity method investments on our consolidated balance sheets. The Pool Agency has no activities other than as a legal custodian of the Luna Pool bank account and there will be no variability in its financial results, as it has no income, and its minimal operating expenses are reimbursed by the Pool Participants.

 

F-9


Unigas International B.V. (‘Unigas’)

Unigas based in the Netherlands is a commercial and operational manager of seagoing vessels capable of carrying liquefied petrochemical and petroleum gases on a worldwide basis. Unigas International is operator of the Unigas pool. The Company owns 33.33% interest equity interests in Unigas and accounts for it using the equity method. It was recognized initially at fair value and subsequent to initial recognition, the consolidated financial statements will include the Company’s share of the profit or loss and other comprehensive income of equity accounted entity. The Company acquired the investment as part of the Ultragas Transaction on August 4, 2021.

Dan Unity CO2 A/S

On June 3, 2021, the Company’s subsidiary, Ultragas entered into a shareholder agreement creating an equally owned joint venture, Dan Unity CO2 A/S, a Danish entity, with the aim of undertaking commercial and technical projects relating to seaborne transportation of CO2. The Company acquired the investment as part of the Ultragas Transaction on August 4, 2021.

We account for our investment using the equity method as our ownership interest is 50% and we exercise joint control over the Dan Unity CO2 A/S operating and financial policies. As of March 31, 2022, we have recognized the Company’s initial investment at cost and subsequent to initial recognition, the consolidated financial statements will include the Company’s share of the profit or loss and other comprehensive income of equity accounted investees, until the date on which joint control ceases. We disclose our proportionate share of profits and losses from equity method unconsolidated affiliates in the statement of operations and adjust the carrying amount of our equity method investments on the balance sheet accordingly.

The table below represents movement in the Company’s equity method investments, as of December 31, 2021, and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Equity method investments at January 1

   $ 148,665      $ 150,209  

Contributions to equity method investments

     4,000        —    

Equity method investments – acquired

     2,580        —    

Share of results

     11,147        6,503  

Distributions received from equity method investments

     (16,183      (7,593
  

 

 

    

 

 

 

Total equity method investments

   $ 150,209      $ 149,119  
  

 

 

    

 

 

 

 

6.

Secured Term Loan Facilities and Revolving Credit Facilities

The following table shows the breakdown of all secured term loan facilities and total deferred financing costs split between current and non-current liabilities at December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Current Liability

     

Current portion of secured term loan facilities

   $ 151,586      $ 165,003  

Less: current portion of deferred financing costs

     (3,016      (2,839
  

 

 

    

 

 

 

Current portion of secured term loan facilities, net of deferred financing costs

   $ 148,570      $ 162,164  
  

 

 

    

 

 

 

Non-Current Liability

     

Secured term loan facilities and revolving credit facilities net of current portion*

   $ 664,356      $ 626,455  

Less: non-current portion of deferred financing costs

     (4,689      (4,049
  

 

 

    

 

 

 

Non-current secured term loan facilities and revolving credit facilities, net of current portion and non-current deferred financing costs

   $ 659,667      $ 622,406  
  

 

 

    

 

 

 

 

*

Includes amounts relating to the Navigator Aurora Facility held within a lessor entity (for which legal ownership resides with a financial institution) that we are required to consolidate under U.S. GAAP into our financial statements as a variable interest entity.

 

F-10


7.

Senior Secured Bond

In November 2018, the Company issued senior secured bonds in an aggregate principal amount of NOK 600 million with Nordic Trustee AS as the bond trustee and security agent (the “2018 Bonds”). The net proceeds were used to partially finance our portion of the capital cost for the construction of the Marine Export Terminal. The 2018 Bonds are governed by Norwegian law and are listed on the Nordic ABM which is operated and organized by Oslo Børs ASA. The 2018 Bonds bear interest at a rate equal to the 3-month NIBOR plus 6.0% per annum, calculated on a 360-day year basis and mature on November 2, 2023. Interest is payable quarterly in arrears on February 2, May 2, August 2 and November 2. The 2018 Bonds are secured by three of the Company’s ethylene capable semi-refrigerated liquefied gas carriers.

The following table shows the breakdown of our senior secured bond and total deferred financing costs as of December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Senior Secured Bond

     

Total Bond

   $ 68,154      $ 68,931  

Less deferred financing costs

     (466      (402
  

 

 

    

 

 

 

Total Bond, net of deferred financing costs

   $ 67,688      $ 68,529  
  

 

 

    

 

 

 

 

8.

Senior Unsecured Bond

In September 2020, the Company issued senior unsecured bonds in an aggregate principal amount of $100.0 million with Nordic Trustee AS as the bond trustee (the “2020 Bonds”). The net proceeds of the issuance of the 2020 Bonds were used to redeem in full previously issued bonds which were due to mature and become repayable in full in February 2021. The 2020 Bonds are governed by Norwegian law and listed on the Nordic ABM which is operated and organized by Oslo Børs ASA.

The 2020 Bonds bear interest at a rate of 8.0% per annum and mature on September 10, 2025. Interest is payable semi-annually in arrears on March 10 and September 10.

The following table shows the breakdown of our senior unsecured bond and total deferred financing costs as of December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Senior Unsecured Bond

     

Total Bond

   $ 100,000      $ 100,000  

Less deferred financing costs

     (1,449      (1,350
  

 

 

    

 

 

 

Total Bond, net of deferred financing costs

   $ 98,551      $ 98,650  
  

 

 

    

 

 

 

 

9.

Derivative Instruments Accounted for at Fair Value

The following table includes the estimated fair value of those assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and March 31, 2022.

 

F-11


            December 31,
2021
     March 31,
2022
 

Fair Value Hierarchy Level

   Fair
Value
Hierarchy
Level
     Fair
Value
Asset
(Liability)
     Fair
Value
Asset
(Liability)
 
        
            (in thousands)  

Cross-currency interest rate swap agreement

     Level 2      $ (5,052    $ (2,869

Interest rate swap agreements liabilities

     Level 2        (3,748      —    

Interest rate swap agreements assets

     Level 2      $ 579      $ 9,889  

The Company uses derivative instruments in accordance with its overall risk management policy to mitigate our risk to the effects of unfavorable fluctuations in foreign exchange and interest rate movements.

The Company held no derivatives designated as hedges as of December 31, 2021 and March 31, 2022.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. The fair value accounting standard establishes a three tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

Interest Rate risk

On July 2, 2020, the Company entered into floating-to-fixed interest rate swap agreements with a termination date of December 31, 2025, to run concurrently with the Terminal Facility. The interest rate receivable by the Company under these interest rate swap agreements is 3-month LIBOR, calculated on a 360-day year basis, which resets every three months in line with the dates of interest payments on the Terminal Facility. The interest rate payable by the Company under these interest rate swap agreements is 0.369% and 0.3615% per annum calculated on a 360-day year basis.

As of March 31, 2022, the interest rate swaps had a fair value asset of $1.6 million (December 31, 2021, a fair value asset of $0.6 million) and there were unrealized gains of $1.0 million (December 31, 2021, an unrealized loss of $0.1 million) on the combined fair value of the swaps for the three months ended March 31, 2022. (Three months ended March 31, 2021, an unrealized gain of $0.4 million).

On August 4, 2021, following the Ultragas Transaction, the Company has assumed a number of existing loan facilities with associated fixed interest rate swaps. The interest rate receivable by the Company under these interest rate swap agreements is 6-month LIBOR, calculated on a 360-day year basis, which resets every six months in line with the dates of interest payments on the Term Loan Facilities. The interest rate payable by the Company under these interest rate swap agreements is in the range between 1.627% and 2.137% per annum to the two institutions listed above, calculated on a 360-day year basis.

As of March 31, 2022, the interest rate swaps had a fair value asset of $1.6 million (December 31, 2021: a fair value liability of $3.2 million) and unrealized gains of $4.8 million on the combined fair value of the swaps for the three months ended March 31, 2022 (Three months ended March 31, 2021: Nil)

On December 10, 2021, the Company entered into new floating to fixed interest rate swap agreements on our September 2020 Secured Revolving Credit Facility with a termination date of September 2025 to run concurrently with the facility. The interest rate receivable by the Company under these interest rate swap agreements is 3-month LIBOR, calculated on a 360-day year basis, which resets every three months in line with the dates of interest payments on the Secured Revolving Credit Facility. The interest rate payable by the Company under these interest rate swap agreements is 1.296% per annum to the four institutions listed above, calculated on a 360-day year basis.

As of March 31, 2022, these interest rate swaps had a fair value asset of $6.7 million (December 31, 2021: a fair value liability of $0.6 million) and unrealized gains of $7.3 million for the three months ended March 31, 2022 (Three months ended March 31, 2021: Nil, as the derivative instruments were only in place from December 2021).

All of the interest rate swaps above are remeasured to fair value at each reporting date and have been categorized as level two on the fair value measurement hierarchy. The remeasurement to fair value has no impact on the cash flows at the reporting date. There is no requirement for cash collateral to be placed with the swap providers under these swap agreements and there is no effect on restricted cash as of March 31, 2022.

Foreign Currency Exchange Rate risk

All foreign currency-denominated monetary assets and liabilities are revalued and are reported in the Company’s functional currency based on the prevailing exchange rate at the end of the period. These foreign currency transactions fluctuate based on the strength of the U.S. Dollar relative to the NOK and are included in our results of operations. The primary source of our foreign exchange gains and losses are the movements on our NOK-denominated 2018 Bonds, which we have mitigated through the cross-currency interest rate swap. The remeasurement of all foreign currency-denominated monetary assets and liabilities at each reporting date results in unrealized foreign currency exchange differences but do not impact our cash flows.

 

F-12


The Company entered into a cross-currency interest rate swap agreement concurrently with the issuance of its NOK denominated senior secured bonds (please read Note 7—Senior Secured Bond to our consolidated financial statements) and pursuant to this swap, the Company receives the principal amount of NOK 600 million in exchange for a payment of a fixed amount of $71.7 million on the maturity date of the swap.

In addition, at each quarterly interest payment date, the cross-currency interest rate swap exchanges a receipt of floating interest of 6.0% plus 3-month NIBOR on NOK 600 million for a U.S. Dollar payment of floating interest of 6.608% plus 3-month U.S. LIBOR on the $71.7 million principal amount. The purpose of the cross-currency interest rate swap is to economically hedge the foreign currency exposure on the payments of interest and principal of the Company’s NOK denominated 2018 Bonds due to mature in 2023.

The fair value of this non-designated derivative instrument is presented in the Company’s consolidated balance sheets and the change in fair value is presented in the consolidated statements of operations. As of March 31, 2022, the cross-currency interest rate swap had a fair value liability of $2.9 million (December 31, 2021, a fair value liability of $5.1 million) and an unrealized gain of $2.2 million for the three months ended March 31,2022 (Three months ended March 31, 2021: an unrealized gain of $0.2 million).

The remeasurement to fair value has no impact on the cash flows at the reporting date except for the effect on restricted cash. Amounts included in restricted cash (if any) represent those required to be set aside as collateral by a contractual agreement with a banking institution for the forecast future liability on the cross-currency interest rate swap agreement at the reporting date. The Company has not offset the fair value of the derivative with any cash collateral account, notwithstanding there is a master netting agreement in place.

Credit risk

The Company is exposed to credit loss in the event of non-performance by the counterparty to the cross-currency interest rate swap agreement. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are reputable financial institutions, highly rated by a recognized rating agency. As of March 31, 2022, there was immaterial credit risk as the cross-currency interest rate swap was in a liability position whilst all of our interest rate swaps were in an asset position from the perspective of the Company.

The fair values of our interest rate swap agreements and the cross-currency interest rate swap is the estimated amount that we would pay to sell or transfer the swap at the reporting date, taking into account current interest rates and the current credit worthiness of the swap counterparties, in addition to foreign exchange rates for the cross-currency swap agreement. The estimated amount is the present value of future cash flows, adjusted for credit risk. The Company transacts all of these derivative instruments through investment-grade rated financial institutions at the time of the transaction. It is possible that the amount recorded as a derivative asset or liability could vary by a material amount in the near term if there is volatility in the credit markets or if credit risk were to change significantly.

The fair value of our interest rate swap agreements and cross-currency interest rate swap agreement at the end of each period is most significantly affected by the interest rate implied by the benchmark interest yield curve, including its relative steepness and the forward foreign exchange rates respectively. Interest rates and foreign exchange rates have experienced significant volatility in recent years in both the short and long term. While the fair value of our swap agreements is typically more sensitive to changes in short-term rates, significant changes in the long-term benchmark interest, foreign exchange rates and the credit risk of the counterparties or the Company also materially impact the fair values of our swap agreements.

 

10.

Fair Value of Financial Instruments Not Accounted for at Fair Value

The principal financial assets of the Company as of March 31, 2022 and December 31, 2021 consist of cash, cash equivalents, and restricted cash and accounts receivable. The principal financial liabilities of the Company as of March 31, 2022 and December 31, 2021 consist of accounts payable, accrued expenses and other liabilities, secured term loan facilities, revolving credit facilities, the 2020 Bonds and the 2018 Bonds.

The carrying values of cash, cash equivalents and restricted cash, accounts receivable, accounts payable, accrued expenses and other liabilities are reasonable estimates of their fair value due to the short-term nature or liquidity of these financial instruments.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. The fair value accounting standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The 2020 Bonds and the 2018 Bonds are classified as a level two liability and the fair values have been calculated based on the most recent trades of the bond on the Oslo Børs prior to March 31, 2022. These trades are infrequent and therefore not considered to be an active market. The 2018 Bonds are denominated in Norwegian Kroner (“NOK”) and the fair value has been translated to the functional currency of the Company using the prevailing exchange rate as of March 31, 2022 and December 31, 2021.

 

F-13


The fair value of secured term loan facilities and revolving credit facilities is estimated to approximate the carrying value in the balance sheet since they bear a variable interest rate, which is reset on a quarterly basis. This has been categorized at level two on the fair value measurement hierarchy as of March 31, 2022.

The following table includes the estimated fair value and carrying value of those assets and liabilities where the fair value does not approximate to carrying value. The table excludes cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other liabilities because the fair value approximates carrying value and, for accounts receivable and payable, are due in one year or less.

 

            December 31, 2021     March 31, 2022  

Financial Asset/Liability

   Fair
Value
Hierarchy
Level
     Carrying
Amount
Asset
(Liability)
    Fair Value
Asset
(Liability)
    Carrying
Amount
Asset
(Liability)
    Fair Value
Asset
(Liability)
 
           
            (in thousands)        

2018 Bonds (note 7)

     Level 2      $ (68,154   $ (69,970   $ (68,931   $ (69,620

2020 Bonds (note 8)

     Level 2        (100,000     (104,000     (100,000     (102,125

Secured term loan facilities and revolving credit facilities (note 6)

     Level 2      $ (815,942   $ (815,942   $ (791,458   $ (791,458

 

11.

Earnings per share

Basic earnings per share is calculated by dividing the net income/(loss) available to common shareholders by the average number of common shares outstanding during the periods. Diluted earnings per share is calculated by adjusting the weighted average number of common shares used for calculating basic earnings per share for the effects of all potentially dilutive shares. The following table shows calculation of both basic and diluted number of weighted average outstanding shares for the three months ended March 31, 2021 and 2022:

 

    

Three months

ended
March 31,

 
     2021      2022  

Basic and diluted income available to common stockholders of Navigator Holdings Ltd. (in thousands)

   $ 2,820      $ 27,038  

Basic weighted average number of shares:

     55,900,206        77,193,048  

Effect of dilutive potential share options:

     339,936        325,556  
  

 

 

    

 

 

 

Diluted weighted average number of shares

     56,240,142        77,518,604  
  

 

 

    

 

 

 

 

12.

Share-Based Compensation

Share Awards

On March 17, 2022, under the Navigator Holdings Ltd. 2013 Long-Term Incentive Plan (the “2013 Plan”) the Company granted a total of 75,716 restricted shares, 12,019 of which were granted to the Non-Executive Chairman of the Board, 45,383 of which were granted to other non-employee directors and 18,314 of which were granted to the officers and employees of the Company. The weighted average value of all shares was $10.65 per share. The restricted shares granted to the Non-Executive Chairman and the non-employee directors vest on the first anniversary of the grant date and the restricted shares granted to the officers and employees of the Company vest on March 17, 2025, being the third anniversary of the grant date. In April 2022, two non-employee directors resigned from the Board of the Company and the 11,538 restricted shares granted to them vested immediately upon their resignation.

In March 2022, 29,295 shares that were previously granted to non-employee directors under the 2013 Plan with a weighted average grant value of $10.26 per share, vested at a fair value of $311,992. In addition, 28,497 shares that were granted in 2019 to officers and employees of the Company, all of which had a weighted average grant value of $11.06, vested at a fair value of $312,612.

On March 17, 2021, the Company granted 29,295 restricted shares under the 2013 Plan to non-employee directors with a weighted average value of $10.26 per share. These restricted shares vested on the first anniversary of the grant date. On the same date the Company granted 20,048 restricted shares to the then Executive Chairman of the Board, which vested on December 31, 2021, and 35,920 restricted shares were granted to the officers and employees of the Company with a weighted average value of $10.26 per share. These restricted shares will vest on March 17, 2024, being the third anniversary of the grant date.

 

F-14


In March 2021, 30,380 shares that were previously granted to non-employee directors under the 2013 Plan with a weighted average grant value of $7.90 per share, vested at a fair value of $295,294. In addition, 91,942 shares that were granted in 2018 to the then Chief Executive Officer and officers and employees of the Company, all of which had a weighted average grant value of $12.04, vested at a fair value of $893,676.

During the three months ended March 31, 2021, 7,595 shares awarded to a non-employee director in 2020 at a value of $7.90 were forfeited.

Restricted share grant activity for the year ended December 31, 2021, and the three months ended March 31, 2022, was as follows:

 

     Number of
non-vested
restricted
shares
     Weighted
average
grant date
fair value
     Weighted
average
remaining
contractual term
 

Balance as of January 1, 2021

     306,242      $ 10.54        0.93 years  

Granted

     100,263        9.99     

Vested

     (286,895      10.66     

Forfeited

     (16,123      8.89     
  

 

 

    

 

 

    

 

 

 

Balance as of December 31, 2021

     103,487      $ 9.92        1.06 years  

Granted

     75,716        10.65     

Vested

     (57,792      10.65     
  

 

 

    

 

 

    

 

 

 

Balance as of March 31, 2022

     121,411      $ 10.02        1.53 years  
  

 

 

    

 

 

    

 

 

 

We account for forfeitures as they occur. Using the graded straight-line method of expensing the restricted stock grants, the weighted average estimated value of the shares calculated at the date of grant is recognized as compensation cost in the unaudited condensed consolidated statement of operations over the period to the vesting date.

During the three months ended March 31, 2022, the Company recognized $136,995 in share-based compensation costs relating to share grants (three months ended March 31, 2021: $297,594). As of March 31, 2022, there was a total of $930,289 unrecognized compensation costs relating to the expected future vesting of share-based awards (December 31, 2021: $1,373,292) which are expected to be recognized over a weighted average period of 1.53 years (December 31, 2021: 1.06 years).

Share options

Share options issued under the 2013 Plan are exercisable between the third and tenth anniversary of the grant date, after which they lapse. The fair value of any option issued is calculated on the date of grant based on the Black-Scholes valuation model. Expected volatilities are based on the historic volatility of the Company’s stock price and other factors. The Company does not currently pay dividends and it is assumed this will not change. The expected term of the options granted is anticipated to occur in the range between 4 and 6.5 years. The risk-free rate is the rate adopted from the U.S. Government Zero Coupon Bond.

The movements in the current outstanding share options during the year ended December 31, 2021, and the three months ended March 31, 2022, was as follows:

 

Options    Number of
options
outstanding
     Weighted
average exercise
price per share
     Aggregate
intrinsic value
 

Balance as of January 1, 2021

     339,936        21.40      $ —  

Post vesting cancellations during the year

     (29,080      20.45        —    
  

 

 

    

 

 

    

 

 

 

Balance as of December 31, 2021

     310,856        21.37      $ —  

Post vesting cancellations during the year

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Balance as of March 31, 2022

     310,856      $ 21.37      $ —  
  

 

 

    

 

 

    

 

 

 

The weighted-average remaining contractual term of options outstanding and exercisable at March 31, 2022 was 2.41 years (December 31, 2021: 2.66 years). All share-based compensation costs relating to options under the 2013 Plan have been expensed in prior years. As of December 31, 2021, there were 310,856 share options which had vested but had not been exercised. The weighted average exercise price of the share options exercisable as of March 31, 2022 and December 31, 2021, was $21.37.

 

F-15


13.

Commitments and Contingencies

The contractual obligations schedule set forth below summarizes our contractual obligations excluding interest payable as of March 31, 2022.

 

     2022      2023      2024      2025      2026      Thereafter      Total  
                    
     (in thousands)  

Secured term loan facilities and revolving credit facilities

   $ 128,731      $ 229,460      $ 209,633      $ 92,380      $ 50,403      $ 27,602      $ 738,209  

2020 Bonds

     —          —          —          100,000        —          —          100,000  

2018 Bonds

     —          71,697        —          —          —          —          71,697  

Office operating leases1

     239        238        972        1,297        1,101        1,363        5,210  

Navigator Aurora Facility2

     —          —          —          —          53,150        —          53,150  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations

   $ 128,970      $ 301,395      $ 210,605      $ 193,677      $ 104,654      $ 28,965      $ 968,266  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

The Company occupies office space in London with a new lease commenced in January 2022 for a period of 10 years with a mutual break option in January 2027, which is the fifth anniversary from the lease commencement date. The annual gross rent under this lease is approximately $1.1 million, with an initial rent free period of 27 months, of which 13 months of the rent free period is repayable in the event that the break option is exercised.

The Company entered into a lease for office space in New York that expired on May 31, 2022. The annual gross rent under this lease was approximately $0.4 million, subject to certain adjustments.

The lease term for our representative office in Gdynia, Poland was revised during 2021 for an amended period to May 31, 2025. The gross rent per year is approximately $64,000.

The Company occupies office space in Denmark with a lease commenced in September 2021 that now expires in December 2025. The gross rent per year is approximately $180,000.

The weighted average remaining contractual lease term for the above four office leases on March 31, 2022, was 4.8 years (December 31, 2021: 3.1 years).

 

2 

The Navigator Aurora Facility is a loan facility held within a lessor entity (for which legal ownership resides with financial institutions) that we are required to consolidate under U.S. GAAP into our financial statements as a variable interest entity. Please read Note 16—Variable Interest Entities to our consolidated financial statements.

 

14.

Operating Lease Liabilities

The Company’s unaudited condensed consolidated balance sheets include a right-of-use (“ROU”) asset and a corresponding liability for operating lease contracts where the Company is a lessee. The discount rate used to measure the lease liability presented on the Company’s unaudited condensed consolidated balance sheets is the incremental cost of borrowing since the rate implicit in the lease cannot be determined.

The liabilities described below are for the Company’s offices in London, Gdynia, New York, and Denmark which are denominated in various currencies. At March 31, 2022, the weighted average discount rate across the three leases was 2.90% (December 31, 2021: 3.20%).

At March 31, 2022, based on the remaining lease liabilities, the weighted average remaining operating lease term was 4.6 years (December 31, 2021: 3.0 years).

Under ASC 842, the ROU asset is a nonmonetary asset and is remeasured into the Company’s reporting currency of the U.S. Dollar using the exchange rate for the applicable currency as at the adoption date of ASC 842. The operating lease liability is a monetary liability and is remeasured quarterly using the current exchange rates, with changes recognized in a manner consistent with other foreign-currency-denominated liabilities in general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income. As of March 31, 2022, the total operating lease liabilities have increased by $3.9 million compared to December 31, 2021, mainly due to the renewal of the leases for the Company’s offices in London and Poland.

 

F-16


A maturity analysis of the annual undiscounted cash flows of the Company’s operating lease liabilities as of December 31, 2021 and March 31, 2022, is presented in the following table:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

One year

   $ 398      $ 356  

Two years

     181        1,345  

Three years

     181        1,341  

Four years

     181        1,243  

Five years

     —          907  
  

 

 

    

 

 

 

Total undiscounted operating lease commitments

   $ 941      $ 5,192  

Less: Discount adjustment

     (38      (359
  

 

 

    

 

 

 

Total operating lease liabilities

     903        4,833  

Less: current portion

     (381      (283
  

 

 

    

 

 

 

Operating lease liabilities, non-current portion

   $ 522      $ 4,550  
  

 

 

    

 

 

 

 

15.

Cash and Cash Equivalents

The following table shows the breakdown of cash and cash equivalents as of December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Cash and Cash Equivalents

     

Cash and cash equivalents

   $ 123,886      $ 167,790  

Cash and cash equivalents held by VIE

     337        330  
  

 

 

    

 

 

 

Total cash and cash equivalents

   $ 124,223      $ 168,120  
  

 

 

    

 

 

 

 

16.

Variable Interest Entities

As of March 31, 2022 and December 31, 2021, the Company has consolidated 100% of PT Navigator Khatulistiwa, a VIE for which the Company is deemed to be the primary beneficiary, i.e. it has a controlling financial interest in this entity with the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the right to residual gains or the obligation to absorb losses that could potentially be significant to the VIE. The Company owns 49% of the VIE’s common stock, all of its secured debt and has voting control. All economic interests in the residual net assets reside with the Company. By virtue of the accounting principle of consolidation, transactions between PT Navigator Khatulistiwa and the Company are eliminated on consolidation.

On October 21, 2019, the Company entered into a sale and leaseback to refinance one of its vessels, Navigator Aurora. Following the sale and leaseback refinancing transaction, Navigator Aurora is owned by OCY Aurora Ltd., a Maltese limited liability company. OCY Aurora Ltd. is a wholly owned subsidiary of Ocean Yield Malta Limited, whose parent is Ocean Yield ASA, a listed company on the Oslo stock exchange. The Company does not hold any shares or voting rights in OCY Aurora Ltd. Under U.S. GAAP the entity, OCY Aurora Ltd, is considered to be a VIE.

As of December 31, 2021, and March 31, 2022, the Company has consolidated 100% of OCY Aurora Ltd., the lessor variable interest entity (‘‘lessor VIE’’) that we have leased Navigator Aurora from under a sale and leaseback arrangement. The lessor VIE is a wholly-owned, newly formed special purpose vehicle (“SPV”) of a financial institution. We have applied the guidance within Topic 810 – Consolidation and concluded that the Company has a variable interest in the SPV because the bareboat charter has fixed price call options to acquire Navigator Aurora from the SPV at various dates throughout the 13 year lease/bareboat charter term, commencing from the fifth year, initially at USD 44.8 million. The call options are considered to be variable interests as each option effectively transfers substantially all of the rewards from Navigator Aurora to us and limits the SPV’s ability to benefit from the rewards of ownership. The SPV is categorized under U.S. GAAP as a VIE and the Company has concluded it is the primary beneficiary and must therefore consolidate the SPV within its financial statements.

 

F-17


The Company has performed an analysis and concluded that the Company exercises power through the exercise of the call options in the lease agreement. The call options, although not an activity of the SPV, if exercised would significantly impact the SPV’s economic performance as the SPV owns no other revenue generating assets. The options transfer to the Company the right to receive benefits as they are agreed at a predetermined price. The SPV is protected from decreases in the value of the vessel, as if the vessel’s market value were to decline, the call option provides the SPV protection up to the point where it would not be economically viable for the Company to exercise the option. In addition, the Company has the power to direct decisions over the activities and care of the vessel which directly impact its value such as for the day-to-day commercial, technical management and operation of the vessel.

On August 4, 2021, the Company completed the Ultragas Transaction. Ultragas owns a 25% and 40% share in equity of Ultraship Crewing Philippines Inc. (“UCPI”, “UltraShip Crewing”) and Ultraship Services Philippines Inc. (“USPI”), respectively. These companies are established primarily to provide marine services as principal or agent to ship owners, ship operators, managers engaged in international maritime business and business support services, respectively.

The Company has determined that it has a variable interest in UCPI and USPI and is considered to be the primary beneficiary as a result of having a controlling financial interest in the entities and has the power to direct the activities that most significantly impact UCPI’s and USPI’s economic performance.

As of March 31, 2022, the VIE’s had total assets and liabilities of $189.9 million and $73.4 million respectively which have been included in the Company’s consolidated balance sheet as of that date (December 31, 2021: $198.5 million and $74.2 million, respectively).

 

17.

Related Party Transactions

The following table summarizes our transactions with related parties for the three months ended March 31, 2021 and 2022:

 

     Three months ended  
     March 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Net income / (expenses)

     

Luna Pool Agency Limited

   $ —        $ (18

Ocean Yield Malta Limited

     (315      (284

Ultranav Business Support ApS

     —          (249

Naviera Ultranav Limitada

     —          (15
  

 

 

    

 

 

 

Total

   $ (315    $ (566
  

 

 

    

 

 

 

The following table sets out the balances due from related parties as of December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Due from Related Parties

     

Luna Pool Agency Limited

   $ 8,450      $ 16,821  

Unigas Pool

     8,049        7,478  

Dan Unity

     109        19  

Naviera Ultranav Limitada

     128        309  
  

 

 

    

 

 

 

Total

   $ 16,736      $ 24,627  
  

 

 

    

 

 

 

The following table sets out the balances due to related parties as of December 31, 2021 and March 31, 2022:

 

     December 31,
2021
     March 31,
2022
 
     
     (in thousands)  

Due to Related Parties

     

Ocean Yield Malta Limited

   $ 55,074      $ 53,446  

Naviera Ultranav Limitada

     27        160  
  

 

 

    

 

 

 

Total

   $ 55,101      $ 53,606  
  

 

 

    

 

 

 

 

F-18


Naviera Ultranav Limitada: On August 4, 2021, in connection with Ultragas Transaction, we issued 21,202,671 new shares of our common stock, representing an approximate 27.5% ownership interest in us, to subsidiaries of Naviera Ultranav Limitada (“Ultranav”). As of March 31, 2022, Ultranav remained a 27.5% shareholder and was one of our principal shareholders. They may exert considerable influence on the outcome of matters on which our shareholders are entitled to vote, including the election of our directors to our board of directors and other significant corporate actions.

Ultranav Business Support ApS: On August 4, 2021, in connection with the Ultragas Transaction, we entered into a Transitional Services Agreement (“TSA”) with Ultranav Business Support ApS (“UBS”) to provide back office services, such as accounting and payroll, IT, treasury, financial controlling, tax and compliance, communications and CSR, HR, administrative and branding. The company pays UBS a fee for services provided of $173,659 per month.

 

F-19


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    NAVIGATOR HOLDINGS LTD.
Date: June 21, 2022     By:  

/s/ Niall J Nolan

    Name:   Niall J Nolan
    Title:   Chief Financial Officer
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