Navigator Holdings grows fleet; Q3 profit up

Navigator Holdings

Navigator Holdings Ltd. released Preliminary Third Quarter 2021 Results.

Highlights

  • Navigator Holdings reported operating revenue of $102.7 million for the three months ended September 30, 2021, compared to $81.4 million for the three months ended September 30, 2020.
  • Net income was $6.7 million (earnings per share of $0.10) for the three months ended September 30, 2021, compared to a net income of $1.3 million (earnings per share of $0.02) for the three months ended September 30, 2020.
  • Adjusted EBITDA(1) was $40.3 million for the three months ended September 30, 2021, compared to $29.6 million for the three months ended September 30, 2020.
  • Fleet utilization was 84.0% for the three months ended September 30, 2021, an increase from the 78.8% achieved for the three months ended September 30, 2020.
  • The ethylene export marine terminal at Morgan’s Point, Texas on the Houston Ship Channel (the “Marine Export Terminal”) had throughput volumes of 128,000 tons for the three months ended September 30, 2021, compared to 170,000 tons for the three months ended September 30, 2020.
  • A fifth vessel entered a 12-month time charter with Mitsui & Co. Energy Trading Singapore Pte. Ltd. following an initial four vessels in the second quarter, transporting LPG from Pembina Pipeline Corporation’s new LPG export facility at Prince Rupert, British Columbia, West Coast Canada.
  • On August 4, 2021, the Company entered into the previously announced transaction with Naviera Ultranav Limitada (“Ultranav”) to acquire the Ultragas ApS (“Ultragas”) fleet and business activities. The addition of their vessels gives a combined fleet of 55 vessels which will enhance our capability to provide flexibility, choice and support to our customers.
  • In November 2021, the Company secured multi-year time charters for its remaining three midsize ethane carriers, with expiry of these time charters in 2026.

Recent Developments

Ultragas Transaction

During the third quarter 2021, on August 4, 2021, the Company entered into the previously announced transaction with Naviera Ultranav Limitada (“Ultranav”) to combine the Ultragas ApS (“Ultragas”) fleet and business activities with Navigator, by acquiring two entities, Othello Shipping Company S.A. with its 18 wholly owned vessel owning entities; and Ultragas ApS, (the vessels’ operator) with its subsidiary (Ultraship, an in-house technical manager), and associated entities UltraShip Crewing and Unigas Intl B.V. (the pool in which 11 of the 18 vessels operate). The acquired fleet of 18 vessels, which has a provisional book value of approximately $377.0 million, comprises:

  • seven modern 22,000cbm handysize semi-refrigerated vessels;
  • five 12,000cbm ethylene vessels and;
  • six gas carriers in the 3,770-9,000cbm range, three of which are ethylene capable.

On September 28, 2021, the Company agreed to sell one of the older acquired vessels, the Happy Bride, a 1999 built 6,400 cbm LPG carrier to a third-party for $4.75 million. The sale completed on October 12, 2021.

The acquisition price for the entities acquired comprised of approximately 21.2 million new shares of the Company’s common stock issued to Ultranav as well as the Company assuming the acquired entities approximate $175.2 million of net debt.

The debt consists of five bank loans, secured on a total of 13 of the 18 vessels acquired, the other five vessels are unencumbered. The bank loans, which in aggregate have half yearly repayments of approximately $13.6 million, mature from June 2026 and attract interest at U.S. Libor plus a margin of between 1.9% and 2.65%. In each case U.S. Libor has been fixed through an interest rate swap of approximately 2.0%. The financial covenants on these five bank loans were modified on acquisition to be consistent with those of Navigator.

Market Trends

The 12 month timecharter assessment for handysize semi-refrigerated gas carriers was quoted at $625,000 per calendar month (“pcm”) at the beginning of the third quarter 2021 and reduced 6% to $590,000 pcm for September which is the lowest level throughout 2021. However, the market has firmed over the past two months and the time charter assessment has increased 9% to $645,000 pcm. A broker’s assessment of ethylene capable handysize vessels was $750,000 pcm at the end of the third quarter and has increased to $790,000 pcm since that time. The larger, medium sized gas carriers (“MGC’s”) and very large gas carriers (“VLGC’s”) are showing moderate to strong earnings being quoted at $680,000 pcm and $970,000 pcm respectively. This reduces interest in handysize LPG cargoes from the larger vessels as they focus on their traditional segment-specific trade-routes.

Similarly, when the ethylene capable handysize vessels are carrying ethane or ethylene cargoes, they do not seek employment from the LPG or other petrochemical cargoes that the semi-refrigerated handysize vessels are employed in. We therefore see a correlation in our utilization rates relative to U.S. export activity of ethane and ethylene. The U.S. petrochemical industry was building ethylene inventory levels during the third quarter, 2021 in anticipation of the hurricane season, which led to a reduction in physical exports of ethylene from the U.S. Gulf and forced some of the ethylene capable handysize vessels to seek employment opportunities in the traditional semi-refrigerated market. This cause-effect negatively impacted our utilization rates which reduced slightly from 85% in the second quarter 2021 to 84% in the third quarter. Since October however, U.S. ethylene exports have gone from strength to strength showing record volumes for November, which in turn has had a positive impact on our vessel utilization. In addition to increased volumes to transport, trade-routes have changed from previously being the majority to shorter European destinations to now a majority to Far Eastern destinations, which doubles the ton-mile demand for each ton exported. At the beginning of 2021, we had two fully-refrigerated handysize vessels employed in ammonia trades, today we have five and we expect ammonia to become a larger part of our employment portfolio going forward. This will also have a positive effect in tightening the handysize segment, as switching handysize vessels from LPG to ammonia reduces the availability of vessels trading in LPG.

Our four MGCs with ethane and ethylene capability are contracted on multi-year ethane time charters. This means they are employed in the premium trades that they were built for, thus avoiding competing with our handysize vessels in the LPG and petrochemical markets. There is continued interest in additional spot ethane opportunities from the various petrochemical consumers and we see our Luna Pool increasingly playing an important part in adding value to this particular supply chain.

Terminal
Ethane remains competitive as a feedstock for the production of ethylene. This key fundamental underpins the continuation of U.S. produced ethylene to international markets. The arbitrage, being the price difference between U.S. product and international ethane prices, have been uncharacteristically volatile during 2021, including the third quarter. U.S. ethylene exports are likely to achieve record high export levels in November, and we expect the Marine Export Terminal to maintain nameplate capacity going forward.

Factors Affecting Comparability

You should consider the following factors when evaluating our historical financial performance and assessing our future prospects:

Our fleet size has changed. On August 4, 2021, we acquired an additional 18 LPG Carriers as part of the acquisition of Ultragas and Othello Shipping Company S.A.. These vessels comprised:
seven modern 22,000cbm handysize semi-refrigerated vessels;
five 12,000cbm ethylene vessels and;
six gas carriers in the 3,770-9,000cbm range, three of which are ethylene capable.
On September 28, 2021, the Company agreed to sell one of the older acquired vessels, the Happy Bride, a 1999 built 6,400 cbm LPG carrier to a third-party for $4.75 million. The sale completed on October 12, 2021.

Given the increase in the number of vessels operating in our fleet, our historical financial statements reflect, and in the future will reflect, significantly different levels of ownership and operating days as well as different levels of voyage expenses, vessel operating expenses, interest expense and other related costs.

We have additional financing arrangements. We have assumed five bank loan facilities with the acquisition of Ultragas and Othello Shipping Company S.A.. The loans are secured on a total of 13 of the 18 vessels acquired, the other five vessels are unencumbered. The bank loans, which in aggregate have half yearly repayments of approximately $13.6 million, mature from June 2026 and attract interest at U.S. Libor plus a margin of between 1.9% and 2.65%. In each case interest is fixed by an interest rate swap of approximately 2.0%. The financial covenants on these five bank loans were modified to align with those of Navigator.

Results of Operations for the Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2021

The following table compares our operating results for the three months ended September 30, 2020 and 2021:

Three Months
Ended
September 30,
2020
Three Months
Ended
September 30,
2021
Percentage
Change
(in thousands, except percentages)
Operating revenue $                 75,613 $         87,085         15.2 %
Operating revenue – Luna Pool collaborative arrangement 5,738         7,504         30.8 %
Operating revenue – Unigas Pool         8,155                n/a
Total operating revenues 81,351         102,744         26.3 %
Expenses:
Brokerage commissions 1,220         1,163         (4.7 %)
Voyage expenses 14,584         16,775         15.0 %
Voyage expenses – Luna Pool collaborative arrangement 4,390         4,772         8.7 %
Vessel operating expenses 27,221         34,948         28.4 %
Depreciation and amortization 19,180         24,054         25.4 %
General and administrative costs 6,525         7,749         18.8 %
Other income (77 )         (98 )         27.3 %
Total operating expenses 73,043         89,363         22.3 %
Operating income 8,308         13,381         61.1 %
Foreign currency exchange (loss) / gain on senior secured bonds (1,612 )         1,372         n/a
Unrealized gain / (loss) on non-designated derivative instruments 1,991         (227 )         n/a
Interest expense (9,341 )         (10,373 )         11.0 %
Loss on repayment of 7.75% senior unsecured bonds (479 )         n/a
Write off of deferred financing costs (155 )         n/a
Interest income 52         70         34.6 %
(Loss) / income before taxes and share of result of equity accounted joint ventures (1,236 )         4,223         n/a
Income taxes (120 )         (446 )         271.7 %
Share of result of equity accounted joint ventures 3,147         3,302         4.9 %
Net income 1,791         7,079         295.3 %
Net income attributable to non-controlling interest (446 )         (389 )         (12.8 %)
Net income attributable to stockholders of Navigator Holdings Ltd. $         1,345 $         6,690         397.4 %

Operating Revenue. Operating revenue increased by $11.5 million or 15.2% to $87.1 million for the three months ended September 30, 2021, from $75.6 million for the three months ended September 30, 2020. This increase was principally due to:

  • an increase in operating revenue of approximately $7.9 million attributable to an increase in available days which increased by 438 days to 3,822 days for the three months ended September 30, 2021, from 3,384 days for the three months ended September 30, 2020. This increase in available days was as a result of seven additional handysize vessels being acquired as part of the Ultragas transaction;
  • an increase in operating revenue of approximately $4.4 million as a result of a increase in fleet utilization to 84.0% for the three months ended September 30, 2021, from 78.8% for the three months ended September 30, 2020;
  • a decrease in operating revenue of approximately $3.0 million attributable to a decrease in average monthly time charter equivalent rates, which decreased to an average of approximately $21,891 per vessel per day ($665,800 per calendar month) for the three months ended September 30, 2021, compared to an average of approximately $22,892 per vessel per day ($696,200 per calendar month) for the three months ended September 30, 2020; and
  • an increase in operating revenue of approximately $2.2 million primarily attributable to an increase in pass through voyage costs, due to more expensive bunker fuel and additional canal transits for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The following table presents selected operating data for our vessels for the three months ended September 30, 2020 and 2021, which we believe are useful in understanding the basis for movement in our operating revenue. It does not include our 11 owned vessels in the independently managed Unigas Pool or the five Pacific Gas vessels in our Luna Pool.

Three Months
Ended
September 30, 2020
Three Months
Ended
September 30, 2021
Fleet Data:
Weighted average number of vessels         38.0         42.6
Ownership days         3,496         3,923
Available days         3,384         3,822
Operating days         2,666         3,212
Fleet utilization                    78.8 % 84.0 %
Average daily time charter equivalent rate (*) $         22,892 $         21,891

*  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 operating revenue, less any voyage expenses, by the number of operating days for the relevant period. 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 Revenue to TCE rate

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

Three Months
Ended
September 30, 2020
Three Months
Ended
September 30, 2021
(in thousands, except operating days
and average daily time charter equivalent rate)
Fleet Data:
Operating revenue (excluding collaborative arrangements) $         75,613 $         87,085
Voyage expenses (excluding collaborative arrangements)         14,584         16,775
Operating revenue less Voyage expenses         61,029         70,310
Operating days         2,666         3,212
Average daily time charter equivalent rate $         22,892 $         21,891

Operating Revenue – Luna Pool collaborative arrangement. Operating revenue – Luna Pool collaborative arrangement, which was our share of the other Luna Pool participants revenue increased by $1.8 million to $7.5 million for the three months ended September 30, 2021, compared to $5.7 million for the three months ended September 30, 2020. This increase relates to improved utilization and time charter rates for the Luna Pool vessels for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Operating Revenue – Unigas Pool. Operating revenue – Unigas Pool was $8.2 million for the three months ended September 30, 2021 and represents our share of the revenue earned on our 11 vessels operating within the Unigas Pool, based on agreed pool points. These vessels were acquired as part of the Ultragas transaction on August 4, 2021 and therefore the Operating revenue – Unigas Pool relates to revenue earned for a portion for the three months ended September 30, 2021. We had no vessels operating in the Unigas pool for the three months ended September 30, 2020.

Brokerage Commissions. Brokerage commissions, which typically vary between 0.625% and 2.5% of operating revenue, was consistent at $1.2 million for both the three months ended September 30, 2020 and 2021, notwithstanding the increased operating revenue.

Voyage Expenses. Voyage expenses increased by 15.0% to $16.8 million for the three months ended September 30, 2021, from $14.6 million for the three months ended September 30, 2020. This was primarily due to an increase in the price of bunkers used by our vessels, and an additional number of voyage charter days during the three months ended September 30, 2021 as a result of having additional vessels, as compared to the three months ended September 30, 2020. These increased voyage costs are typically pass through costs, corresponding to an increase in operating revenue of the same amount.

Voyage Expenses. – Luna Pool collaborative arrangement. Voyage expenses – Luna Pool collaborative arrangement, which was our other Luna Pool participants share of our revenue, was $4.8 million for the three months ended September 30, 2021 compared to $4.4 million for the three months ended September 30, 2020. This increase was due to improved utilization and time charter rates for the Luna Pool vessels for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Vessel Operating Expenses. Vessel operating expenses increased by 28.4% to $34.9 million for the three months ended September 30, 2021, from $27.2 million for the three months ended September 30, 2020. The increase in vessel operating expenses was as a result of an additional 18 vessels joining the fleet during the three months ended September 30, 2021. However, average daily vessel operating expenses decreased by $179 per vessel per day, or 2.3%, to $7,607 per vessel per day for the three months ended September 30, 2021, compared to $7,786 per vessel per day for the three months ended September 30, 2020.

Depreciation and Amortization. Depreciation and amortization expense increased by 25.4% to $24.1 million for the three months ended September 30, 2021 from $19.2 million for the three months ended September 30, 2020. Depreciation and amortization expense included amortization of capitalized drydocking costs of $3.7 million and $1.7 million for the three months ended September 30, 2021, and 2020 respectively.

General and Administrative Costs. General and administrative costs increased by $1.2 million or 18.8% to $7.7 million for the three months ended September 30, 2021, from $6.5 million for the three months ended September 30, 2020. The increase in general and administrative costs was primarily as a result of additional audit fees of $0.5 million for the three months ended September 30, 2021, as well as $0.6 million for general and administrative costs associated with Ultragas since the date of the transaction.

Other Income. Other income was $0.1 million for both the three months ended September 30, 2021, and September 30, 2020, and represents management fees we receive for commercial and administrative activities we perform for the Luna Pool.

Non-operating Results

Foreign Currency Exchange 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 September 30, 2021. The foreign currency exchange loss of $1.4 million for the three months ended September 30, 2021, was as a result of the Norwegian Kroner weakening against the U.S. dollar, being NOK 8.7 to USD 1.0 as of September 30, 2021, compared to NOK 8.6 to USD 1.0 as of June 30, 2021. The foreign currency exchange gain of $1.6 million for the three months ended September 30, 2020, was as a result of the Norwegian Kroner strengthening against the U.S. dollar, being NOK 9.4 to USD 1.0 as of September 30, 2020, compared to NOK 9.7 to USD 1.0 as of June 30, 2020.

Unrealized Loss on Non-designated Derivative Instruments. The unrealized loss on non-designated derivative instruments of $0.2 million for the three months ended September 30, 2021, relates to the fair value movement in our cross-currency interest rate swap and is primarily due to the weakening of the Norwegian Kroner against the U.S. dollar. The unrealized gain on this swap for the three months ended September 30, 2020, was $2.0 million.

Interest Expense. Interest expense increased by $1.0 million, or 11.0%, to $10.4 million for the three months ended September 30, 2021, from $9.3 million for the three months ended September 30, 2020. This is primarily as a result of an additional debt amount of $192.7 million assumed as part of the Ultragas transaction on August 4, 2021. This additional debt attracts interest at a fixed rate of approximately 4.0%.

Income Taxes. Income taxes related to taxes on our subsidiaries incorporated in the United Kingdom, Poland and Singapore and our consolidated variable interest entity (“VIE”), incorporated in Malta. For the three months ended September 30, 2021, we had a tax charge of $446,000 compared to taxes of $120,000 for the three months ended September 30, 2020.

Share of result of equity accounted joint venture. The share of result of the Company’s 50% ownership in the Export Terminal Joint Venture was a profit of $3.3 million for the three months ended September 30, 2021, compared to a profit of $3.1 million for the three months ended September 30, 2020, primarily as a result of the terminal being fully operational during the three months ended September 30, 2021, whereas for three months ended September 30, 2020, the new cryogenic storage tank was not yet in service.

Non-Controlling Interest. We have entered into a sale and leaseback arrangement with a wholly-owned special purpose vehicle (“lessor SPV”) of a financial institution. While 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.

Results of Operations for the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2021

The following table compares our operating results for the nine months ended September 30, 2020 and 2021:

Nine Months
Ended
September 30,
2020
Nine Months
Ended
September 30,
2021
Percentage
Change
(in thousands, except percentages)
Operating revenue $         236,739 $         247,746         4.6 %
Operating revenue – Luna Pool collaborative arrangement         8,334         18,290         119.5 %
Operating revenue – Unigas Pool         —         8,155 n/a
Total operating revenue         245,073         274,191         11.9 %
Operating expenses:
Brokerage commissions         3,780         3,330         (11.9 %)
Voyage expenses         46,856         50,080         6.9 %
Voyage expenses – Luna Pool collaborative arrangement         7,363         14,567         97.8 %
Vessel operating expenses         81,120         90,766         11.9 %
Depreciation and amortization         57,541         62,800         9.1 %
General and administrative costs         17,542         19,825         13.0 %
Other income         (124 )         (258 )         108.1 %
Total operating expenses         214,078         241,110          12.6 %
Operating income         30,995         33,081         6.7 %
Foreign currency exchange gain on senior secured bonds         4,953         1,710         (65.5 %)
Unrealized (loss) / gain on non-designated derivative instruments         (5,616 )         51         n/a
Interest expense         (32,009 )         (27,981 )         (12.6 %)
Loss on repayment of 7.75% senior unsecured bonds         (479 )         —         n/a
Write off of deferred financing costs         (155 )         —         n/a
Interest income         367         164         (55.3 %)
(Loss) / income before taxes and share of result of equity accounted joint venture               (1,944 )         7,025         n/a
Income taxes         (456 )         (781 )         71.3 %
Share of result of equity accounted joint venture         (58 )         4,698         n/a
Net Loss / income         (2,458 )         10,942         n/a
Net income attributable to non-controlling interest         (1,351 )         (1,172 )         (13.2 %)
Net (loss) / income attributable to stockholders of Navigator Holdings Ltd. $         (3,809 ) $         9,770         n/a

Operating Revenue. Operating revenue, net of address commission, increased by $11.0 million or 4.6% to $247.7 million for the nine months ended September 30, 2021, from $236.7 million for the nine months ended September 30, 2020. This increase was principally due to:

  • an increase in operating revenue of approximately $4.1 million attributable to an increase in vessel available days by 222 days to 10,452 days for the nine months ended September 30, 2021, from 10,230 days for the nine months ended September 30, 2020. This increase in available days was as a result of seven additional handysize vessels being acquired as part of the Ultragas transaction;
  • an increase in operating revenue of approximately $2.8 million attributable to an increase in average monthly time charter equivalent rates, which increased to an average of approximately $22,044 per vessel per day ($670,490 per vessel per calendar month) for the nine months ended September 30, 2021, compared to an average of approximately $21,733 per vessel day ($661,082 per vessel per calendar month) for the nine months ended September 30, 2020;
  • an increase in operating revenue of approximately $0.9 million attributable to an increase in fleet utilization which was 85.8% for the nine months ended September 30, 2021 compared to 85.4% for the nine months ended September 30, 2020; and
  • an increase in operating revenue of approximately $3.2 million primarily attributable to an increase in pass through voyage costs, due to additional fuel and canal transit costs for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The following table presents selected operating data for the nine months ended September 30, 2020 and 2021, which we believe are useful in understanding the basis for movement in our operating revenues. It does not include our 11 owned vessels in the independently managed Unigas Pool or the five Pacific Gas vessels in our Luna Pool.

Nine Months
Ended
September 30, 2020
Nine Months
Ended
September 30, 2021
Fleet Data:
Weighted average number of vessels         38.0         39.6
Ownership days         10,412         10,799
Available days         10,230         10,452
Operating days         8,737         8,967
Fleet utilization 85.4 % 85.8 %
Average daily time charter equivalent rate (*) $         21,733 $         22,044

*  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 operating revenue, less any voyage expenses, by the number of operating days for the relevant period. 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 Revenue to TCE rate

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

Nine Months
Ended
September 30, 2020
Nine Months
Ended
September 30, 2021
(in thousands, except operating days
and average daily time charter equivalent rate)
Fleet Data:
Operating revenue (excluding collaborative arrangements) $         236,739 $         247,746
Voyage expenses (excluding collaborative arrangements)         46,856         50,080
Operating revenue less Voyage expenses         189,883         197,666
Operating days         8,737         8,967
Average daily time charter equivalent rate $         21,733 $         22,044

Operating Revenue – Luna Pool collaborative arrangement. Operating revenue – Luna Pool collaborative arrangement, which was our share of the other Luna Pool participants revenue, was $18.3 million for the nine months ended September 30, 2021 compared to $8.3 million for the nine months ended September 30, 2020. The increase was principally as a result of the Luna Pool only becoming operational during the quarter ended June 30, 2020, compared to being operational for the full nine months to September 30, 2021.

Operating Revenue – Unigas Pool. Operating revenue – Unigas Pool was $8.2 million for the nine months ended September 30, 2021 and represents our share of the revenue earned on our 11 vessels operating within the Unigas Pool, based on agreed pool points. These vessels were acquired as part of the Ultragas transaction on August 4, 2021 and therefore the Operating revenue – Unigas Pool relates to revenue earned for a portion for the nine months ended September 30, 2021. We had no vessels operating in the Unigas pool for the nine months ended September 30, 2020.

Brokerage Commissions. Brokerage commissions, which typically vary between 0.625% and 2.5% of operating revenue, reduced by 11.9%, to $3.3 million for the nine months ended September 30, 2021, from $3.8 million for the nine months ended September 30, 2020, primarily due to a charter negotiation direct with the charterer where no broker commission is payable.

Voyage Expenses. Voyage expenses increased by 6.9% to $50.1 million for the nine months ended September 30, 2021, from $46.9 million for the nine months ended September 30, 2020. This was primarily due to an increase in the price of bunkers used by our vessels. These increased voyage costs are pass through costs, corresponding to an increase in operating revenue of the same amount.

Voyage Expenses. – Luna Pool collaborative arrangement. Voyage expenses – Luna Pool collaborative arrangement, which was our other Luna Pool participants share of our revenue, was $14.6 million for the nine months ended September 30, 2021 an increase of $7.2 million compared to the $7.4 million for the nine months ended September 30, 2020. The Luna Pool became operational during the quarter ended June 30, 2020 and consequently there were no Voyage Expenses – Luna Pool collaborative arrangement during the first three months ended March 31, 2020 and a reduced share of the other Luna Pool participants share of our revenue during the initial quarter of its operations.

Vessel Operating Expenses. Vessel operating expenses increased by 11.9% to $90.8 million for the nine months ended September 30, 2021, from $81.1 million for the nine months ended September 30, 2020. The increase in vessel operating expenses was as a result of an additional 18 vessels joining the fleet during August 2021 as a result of the Ultragas transaction. Average daily vessel operating expenses increased by $121 per vessel per day, or 1.6%, to $7,912 per vessel per day for the nine months ended September 30, 2021, compared to $7,791 per vessel per day for the nine months ended September 30, 2020. This was primarily due to a general reduction in vessel operating expenses across the fleet in the nine months ended September 30, 2020 as a result of COVID-19, which resulted in operating costs being deferred to subsequent quarters.

Depreciation and Amortization. Depreciation and amortization expense increased by 9.1% to $62.8 million for the nine months ended September 30, 2021, from $57.5 million for the nine months ended September 30, 2020. Depreciation and amortization expense included amortization of capitalized drydocking costs of $8.0 million and $5.8 million for the nine months ended September 30, 2021 and 2020 respectively.

General and Administrative Costs. General and administrative costs increased by $2.3 million or 13.0% to $19.8 million for the nine months ended September 30, 2021, from $17.5 million for the nine months ended September 30, 2020. This increase in general and administrative costs was primarily due to additional audit fees of $0.5 million, increased insurance premium of $0.9 million for directors & officers insurances and $0.6 million for general and administrative costs associated with Ultragas since the date of the transaction.

Non-operating Results

Foreign Currency Exchange Gain on Senior Secured Bonds. Exchange gains relate to non-cash movements on our 600 million Norwegian Kroner 2018 Bonds which are translated to U.S. Dollars at the prevailing exchange rate as of September 30, 2021. The foreign currency exchange gain of $1.7 million for the nine months ended September 30, 2021 was as a result of the Norwegian Kroner weakening against the U.S. dollar, being NOK 8.7 to USD 1.0 as of September 30, 2021 compared to NOK 8.5 to USD 1.0 as of December 31, 2020. The foreign currency exchange gain of $5.0 million for the nine months ended September 30, 2020 was as a result of the Norwegian Kroner weakening against the U.S. dollar, being NOK 9.4 to USD 1.0 as of September 30, 2020 compared to NOK 8.8 to USD 1.0 as of December 31, 2019.

Unrealized Gain/(Loss) on Non-designated Derivative Instruments. The unrealized gain on non-designated derivative instruments of $51,000 for the nine months ended September 30, 2021 relates to the fair value movement in our cross-currency interest rate swap and is primarily due to a slight weakening of the Norwegian Kroner against the U.S. dollar. The unrealized loss on this swap for the nine months ended September 30, 2020 was $5.6 million as a result of the significant volatility between the Norwegian Kroner and the U.S. dollar due to uncertainties surrounding COVID-19 during the early part of 2020.

Interest Expense. Interest expense decreased by $4.0 million, or 12.6%, to $28.0 million for the nine months ended September 30, 2021, from $32.0 million for the nine months ended September 30, 2020. This is primarily as a result of a reduction in 3-month US LIBOR interest rates and is notwithstanding interest on the additional debt of $192.7 million assumed with the Ultragas acquisition on August 4, 2021.

Income Taxes. Income taxes related to taxes on our subsidiaries incorporated in the United Kingdom, Poland and Singapore and our consolidated variable interest entity (“VIE”), incorporated in Malta. For the nine months ended September 30, 2021, we had a tax charge of $781,000, an increase from the $456,000 for the nine months ended September 30, 2020.

Share of result of equity accounted joint venture. The share of result of the Company’s 50% ownership in the Export Terminal Joint Venture was a gain of $4.7 million for the nine months ended September 30, 2021 compared to a loss of $58,000 for the nine months ended September 30, 2020, primarily as a result of increased volumes of product through the Marine Export Terminal during the nine months ended September 30, 2021, compared to the initial volumes for the nine months ended September 30, 2020, prior to the completion of the cryogenic storage tank and it becoming operational.

Non-Controlling Interest. We have entered into a sale and leaseback arrangement with a wholly-owned special purpose vehicle (“lessor SPV”) of a financial institution. While 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 $1.2 million is presented as the non-controlling interest in our financial results.

Reconciliation of Non-GAAP Financial Measures

The following table sets forth a reconciliation of net income attributable to the stockholders of the Company to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2021:

(in thousands) (in thousands)
Three months ended Nine months ended
September 30,
2020
September 30,
2021
September 30,
2020
September 30,
2021
Net income / (loss) attributable to the stockholders of Navigator Holdings Ltd. $         1,345 $         6,690 $         (3,809 ) $         9,770
Net interest expense         9,289         10,303         31,642         27,817
Income taxes         120         446         456         781
Depreciation and amortization         19,180         24,054         57,541         62,800
EBITDA(1) $         29,934 $         41,493 $         85,830 $         101,168
Foreign currency exchange (gain) / loss on senior secured bonds         1,612         (1,372 )         (4,953 )         (1,710 )
Unrealized loss / (gain) on non-designated derivative instruments         (1,991 )         227         5,616         (51 )
Adjusted EBITDA(1) $         29,555 $         40,348 $         86,493 $         99,407

1 EBITDA and Adjusted EBITDA are not measurements prepared in accordance with U.S. GAAP (non-GAAP financial measures). EBITDA represents net income attributable to stockholders of the Company before net interest expense, income taxes and depreciation and amortization. We define Adjusted EBITDA as EBITDA before foreign currency exchange gain or loss on senior secured bonds and unrealized gain or loss on non-designated derivative instruments. Management believes that EBITDA and Adjusted EBITDA are useful to investors in evaluating the operating performance of the Company. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to consolidated net income, cash generated from operations or any measure prepared in accordance with U.S. GAAP, and our calculation of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies. See the table above for a reconciliation of EBITDA and Adjusted EBITDA to net income / (loss) attributable to stockholders of the Company, our most directly comparable U.S. GAAP financial measure.

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