SOURCE: Danaos Corporation

Danaos Corporation

February 10, 2014 16:02 ET

Danaos Corporation Reports Fourth Quarter and Full Year Results for the Period Ended December 31, 2013

ATHENS, GREECE--(Marketwired - Feb 10, 2014) - Danaos Corporation ("Danaos") (NYSE: DAC), a leading international owner of containerships, today reported unaudited results for the quarter and full year ended December 31, 2013.

Highlights for the Fourth Quarter and Full Year Ended December 31, 2013:

  • Operating revenues of $147.0 million for the three months ended December 31, 2013 compared to $151.8 million for the three months ended December 31, 2012, a decrease of 3.2%. Operating revenues of $588.1 million for the year ended December 31, 2013 compared to $589.0 million for the year ended December 31, 2012, a decrease of 0.2%.
  • Adjusted EBITDA1 of $108.8 million for the three months ended December 31, 2013 compared to $112.4 million for the three months ended December 31, 2012, a decrease of 3.2%. Adjusted EBITDA1 of $434.3 million for the year ended December 31, 2013 compared to $431.7 million for the year ended December 31, 2012, an increase of 0.6%.
  • Adjusted net income1 of $15.0 million, or $0.14 per share, for the three months ended December 31, 2013 compared to $11.7 million, or $0.11 per share, for the three months ended December 31, 2012. Adjusted net income1 of $54.0 million, or $0.49 per share, for the year ended December 31, 2013 compared to $60.5 million, or $0.55 per share, for the year ended December 31, 2012.
  • The remaining average charter duration of our fleet was 8.9 years as of December 31, 2013 (weighted by aggregate contracted charter hire).
  • Total contracted operating revenues were $4.2 billion as of December 31, 2013, through 2028.
  • Charter coverage of 86% for the next 12 months in terms of contracted operating days and 93% in terms of operating revenues.
   
Three and Twelve Months Ended December 31, 2013 and 2012  
Financial Summary  
(Expressed in thousands of United States dollars, except per share amounts)  
   
    Three months ended
December 31,
    Three months ended
December 31,
    Twelve months ended
December 31,
  Twelve months ended
December 31,
 
    2013     2012     2013   2012  
    (unaudited)  
Operating revenues   $ 147,001     $ 151,826     $ 588,117   $ 589,009  
Net (loss)/income   $ (4,236 )   $ (116,478 )   $ 37,523   $ (105,204 )
Adjusted net income1   $ 14,966     $ 11,699     $ 54,049   $ 60,453  
(Losses)/Earnings per share   $ (0.04 )   $ (1.06 )   $ 0.34   $ (0.96 )
Adjusted earnings per share1   $ 0.14     $ 0.11     $ 0.49   $ 0.55  
Weighted average number of shares (in thousands)     109,657       109,622       109,654     109,613  
Adjusted EBITDA1   $ 108,807     $ 112,368     $ 434,266   $ 431,690  
                               
                               
1 Adjusted net income, adjusted earnings per share and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of net income to adjusted net income and net income to adjusted EBITDA.
   
   

Danaos' CEO Dr. John Coustas commented:

Danaos is reporting a solid fourth quarter with adjusted net income of $15 million, or 14 cents per share, which is $3.3 million higher than the $11.7 million adjusted net income for the fourth quarter of 2012. This improvement is mainly a result of reduced financing costs due to the rapid deleveraging of the Company's balance sheet. During 2013 we utilized 90% of our free cash flow generation to reduce indebtedness by $171 million, while we will reduce debt further by at least a further $200 million in 2014.

Executing on our fleet renewal program, during the 4th quarter we sold four vessels, the Hope, the Kalamata, the Lotus and the Komodo, while we acquired two 2001 built geared containerships, the 2,524 TEU Danae C, and the 3,430 TEU Dimitris C.

In January 2014, our charterer Zim reached an in principle agreement with its creditors, including Danaos Corporation, to restructure its balance sheet, which is currently in the process of documentation. This agreement, which includes an equity capital injection of $200 million by Zim's parent, Israel Corporation, resolves Zim's long standing capital structure problems. As a result of this, restructuring we recorded in this quarter an impairment loss of $19.0 million on the receivable we had accumulated on our balance sheet related to credit previously provided to Zim.

The containership market remains challenging but there are indications of recovery. Mainlane trade volumes in 2013 expanded by 2.8% on average compared to 1% in 2012, while the Asia - Europe trade grew by almost 3.5%, an improvement when considering the 4.9% contraction of 2012. On the supply side, the containership fleet grew by almost 7% in 2013 outpacing demand growth that came in at around 4.8%. This imbalance is anticipated to subside during 2014 with demand growth forecasts at around 6% and supply growth estimated at around 5%. Increased scrapping activity is an additional factor anticipated to mitigate the supply demand imbalance going forward.

Amidst a soft charter market, we maintain our strong 93% contract coverage, limiting further downside from a prolonged weak spot charter market.

We continue to be one of the most cost competitive operators in the industry with our daily vessel operating expenses averaging at $5,987 per day for the full year of 2013.

With a resilient business model both from an operating and financial standpoint, we will continue to manage our fleet efficiently, while in 2014 we will focus on further de-leveraging the company and creating value for our shareholders.

Three months ended December 31, 2013 compared to the three months ended December 31, 2012

During the three months ended December 31, 2013, Danaos had an average of 59.0 containerships compared to 64.0 containerships for the three months ended December 31, 2012. Our fleet utilization increased to 95.2% in the three months ended December 31, 2013 compared to 90.4% in the three months ended December 31, 2012, while the effective utilization for the fleet under employment, excluding two vessels on lay up, was 98.6%. During the three months ended December 31, 2013, we sold four vessels, the Hope, the Kalamata, the Lotus and the Komodo (on October 3, 2013, October 22, 2013, October 25, 2013 and November 12, 2013, respectively). Furthermore, on November 13, 2013, we acquired a 2,524 TEU containership, the Danae C, built in 2001 and on November 21, 2013, we acquired a 3,430 TEU containership, the Dimitris C, built in 2001.

Our adjusted net income was $15.0 million, or $0.14 per share, for the three months ended December 31, 2013 compared to $11.7 million, or $0.11 per share, for the three months ended December 31, 2012. We have adjusted our net income in the three months ended December 31, 2013 for an impairment loss of $19.0 million in relation to an agreement in principle we have reached with ZIM, for a restructuring of its obligations with us, as well as unrealized gains on derivatives of $5.2 million, a non-cash expense of $4.8 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees) and a loss on sale of vessels of $0.6 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of 28.2%, or $3.3 million, in adjusted net income for the three months ended December 31, 2013 compared to the three months ended December 31, 2012, was mainly the result of reduced financing costs driven by our rapid deleveraging mode. As of December 31, 2013, we had 2 vessels on cold lay-up.

On a non-adjusted basis our net loss was $4.2 million, or $0.04 per share, for the three months ended December 31, 2013, compared to net loss of $116.5 million, or $1.06 per share, for the three months ended December 31, 2012, which is mainly attributable to the impairment losses we incurred in the three months ended December 31, 2013 and 2012, respectively.

On March 27, 2013, we entered into an agreement with the lenders under the HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank credit facility. The agreement provided us the option to sell, for cash, up to 9 mortgaged vessels (the Henry, the Pride, the Independence, the Honour, the Elbe, the Hope, the Lotus, the Kalamata and the Komodo) with the sale proceeds less sale commissions from such vessels' sales to be deposited in a restricted cash account and used to finance the acquisition of new containership vessels no later than December 31, 2013. Any funds remaining in this restricted cash account after that date will be applied towards prepayment of the respective credit facility. As of December 31, 2013, we concluded the sales of all vessels under the agreement. Furthermore, we acquired a 2,452 TEU containership, the Amalia C, built in 1998, a 2,602 TEU containership, the Niledutch Zebra, built in 2001, a 2,524 TEU containership, the Danae C, built in 2001 and a 3,430 TEU containership, the Dimitris C, built in 2001. As of December 31, 2013, an amount of $11.4 million was recorded as current restricted cash, which will be applied towards prepayment of the respective credit facility within 2014.

Operating Revenues
Operating revenues decreased 3.2%, or $4.8 million, to $147.0 million in the three months ended December 31, 2013, from $151.8 million in the three months ended December 31, 2012.

Operating revenues for the three months ended December 31, 2013 reflect:

  • $1.9 million of additional revenues in the three months ended December 31, 2013 compared to the three months ended December 31, 2012, related to the Amalia C, the Niledutch Zebra, the Danae C and the Dimitris C, which were added to our fleet on May 14, 2013, June 25, 2013, November 13, 2013 and November 21, 2013, respectively.
  • $3.6 million decrease in revenues in the three months ended December 31, 2013 compared to the three months ended December 31, 2012, related to the Honour, the Elbe, the Hope, the Lotus, the Kalamata and the Komodo, which were generating revenues in the three months ended December 31, 2012 and were sold in 2013.
  • $3.1 million decrease in revenues in the three months ended December 31, 2013 compared to the three months ended December 31, 2012. This was mainly attributable to the softening of the charter market between the two periods.

Vessel Operating Expenses
Vessel operating expenses were $30.5 million in each of the three months ended December 31, 2013 and 2012, respectively, reflecting higher average daily operating cost per vessel offset by lower average number of vessels in our fleet in the 2013 period.

The average daily operating cost per vessel increased to $6,019 per day for the three months ended December 31, 2013, from $5,857 per day for the three months ended December 31, 2012.

Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs. 

Depreciation
Depreciation expense decreased 10.1%, or $3.9 million, to $34.6 million in the three months ended December 31, 2013, from $38.5 million in the three months ended December 31, 2012. The decrease in depreciation expense was due to the decreased average number of vessels in our fleet during the three months ended December 31, 2013 compared to the three months ended December 31, 2012, as well as the reduced cost base of certain vessels for which we recognized impairment charges as of December 31, 2012.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased by $0.9 million, to $1.0 million in the three months ended December 31, 2013, from $1.9 million in the three months ended December 31, 2012. The decrease reflects decreased dry-docking and special survey costs incurred within the year and amortized during the three months ended December 31, 2013 compared to the three months ended December 31, 2012.

General and Administrative Expenses
General and administrative expenses decreased 5.8%, or $0.3 million, to $4.9 million in the three months ended December 31, 2013, from $5.2 million in the three months ended December 31, 2012. The decrease was mainly the result of reduced fees paid to our Manager in the three months ended December 31, 2013 compared to the three months ended December 31, 2012, due to the decrease in the average number of vessels in our fleet.

Other Operating Expenses
Other Operating Expenses includes Voyage Expenses

Voyage Expenses
Voyage expenses decreased by $0.7 million, to $2.8 million in the three months ended December 31, 2013, from $3.5 million in the three months ended December 31, 2012. The decrease was mainly the result of the decrease in the average number of vessels in our fleet in the three months ended December 31, 2013 compared to the three months ended December 31, 2012.

Impairment loss
Israel Corporation Ltd., the parent company of ZIM Integrated Shipping Services Ltd. ("ZIM"), has announced that ZIM has reached an agreement in principle with its creditors, including us, for a restructuring of its obligations. This agreement includes a significant reduction in the charter rates payable by ZIM for the remaining life of its time charters, expiring in 2020 or 2021, for six of our vessels and our receipt of unsecured, interest bearing ZIM notes maturing in nine years and ZIM shares in exchange for such reductions and cancellation of ZIM's other obligations to us. Based on these anticipated terms, we have written down the value of our long-term receivables from ZIM as of December 31, 2013 and recognized a $19.0 million impairment charge with respect thereto. This agreement in principle remains subject to various approvals, including from each of the relevant creditor parties and ZIM's audit committee, board of directors and shareholders, as well as negotiation and execution of definitive documentation. As of December 31, 2012, we recorded vessels impairment losses of $129.6 million for thirteen of our older vessels, which were either laid up, or on short-term charters.

(Loss)/gain on sale of vessels
(Loss)/gain on sale of vessels, was a loss of $0.6 million in the three months ended December 31, 2013 compared to nil in the three months ended December 31, 2012. During the three months ended December 31, 2013, we sold the Hope, the Kalamata, the Lotus and the Komodo (on October 3, 2013, October 22, 2013, October 25, 2013 and November 12, 2013, respectively) and we realized a net loss on these sales of $0.6 million in aggregate. No vessels were sold during the 2012 period.

Interest Expense and Interest Income
Interest expense decreased by 5.2%, or $1.2 million, to $22.1 million in the three months ended December 31, 2013, from $23.3 million in the three months ended December 31, 2012. The change in interest expense was mainly due to the decrease in our average debt by $152.0 million, to $3,250.8 million in the three months ended December 31, 2013, from $3,402.8 million in the three months ended December 31, 2012, as well as the marginal decrease in the cost of debt servicing in the three months ended December 31, 2013 compared to the three months ended December 31, 2012, mainly driven by the lower average LIBOR.

It has to be noted that we are in a rapid deleveraging mode. As of December 31, 2013, the debt outstanding was $3,224.2 million compared to $3,395.2 million as of December 31, 2012.

Interest income was $0.6 million in the three months ended December 31, 2013 compared to $0.5 million in the three months ended December 31, 2012.

Other finance costs, net
Other finance costs, net, decreased by $0.1 million, to $5.0 million in the three months ended December 31, 2013, from $5.1 million in the three months ended December 31, 2012.

Unrealized gain/(loss) on derivatives
Unrealized gain/(loss) on interest rate swap hedges was a gain of $5.2 million in the three months ended December 31, 2013 compared to a gain of $7.6 million in the three months ended December 31, 2012. The unrealized gain is attributable to mark to market valuation of our swaps, as well as reclassification of unrealized losses from Accumulated Other Comprehensive Loss to our earnings (due to the discontinuation of hedge accounting).

Realized (loss)/gain on derivatives
Realized loss on interest rate swap hedges, decreased by $2.0 million, to $36.7 million in the three months ended December 31, 2013, from $38.7 million in the three months ended December 31, 2012. This decrease is mainly attributable to the lower average notional amount of swaps during the three months ended December 31, 2013 compared to the three months ended December 31, 2012.

Adjusted EBITDA
Adjusted EBITDA decreased 3.2%, or $3.6 million, to $108.8 million in the three months ended December 31, 2013, from $112.4 million in the three months ended December 31, 2012. Adjusted EBITDA for the three months ended December 31, 2013, is adjusted for an impairment loss of $19.0 million in relation to an agreement in principle we have reached with ZIM, for a restructuring of its obligations with us, as well as unrealized gain on derivatives of $5.2 million, realized losses on derivatives of $35.7 million and a loss on sale of vessels of $0.6 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012

During the twelve months ended December 31, 2013, Danaos had an average of 61.0 containerships compared to 62.6 containerships for the twelve months ended December 31, 2012. Our fleet utilization increased to 93.4% in the twelve months ended December 31, 2013 compared to 93.0% in the twelve months ended December 31, 2012, while the effective utilization for the fleet under employment, excluding vessels on lay up, was 98.4%. During the twelve months ended December 31, 2013, we sold 9 of our older vessels, the Henry, the Pride, the Independence, the Honour, the Elbe, the Hope, the Lotus, the Kalamata and the Komodo and we acquired four secondhand geared containerships, a 2,452 TEU containership, the Amalia C, built in 1998, a 2,602 TEU containership, the Niledutch Zebra, built in 2001, a 2,524 TEU containership, the Danae C, built in 2001 and a 3,430 TEU containership, the Dimitris C, built in 2001.

Our adjusted net income was $54.0 million, or $0.49 per share, for the twelve months ended December 31, 2013 compared to $60.5 million, or $0.55 per share, for the twelve months ended December 31, 2012. We have adjusted our net income in the twelve months ended December 31, 2013 for an impairment loss of $19.0 million in relation to an agreement in principle we have reached with ZIM, for a restructuring of its obligations with us, as well as unrealized gains on derivatives of $22.1 million, a non-cash expense of $19.2 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees) and a loss on sale of vessels of $0.4 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The decrease of 10.7%, or $6.5 million, in adjusted net income for the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, was mainly the result of the softening of the charter market during the last year that led to the cold lay-up of certain vessels, the re-chartering of certain vessels at lower rates, as well as the sale of 9 vessels during the twelve months ended December 31, 2013. The above was partially offset by the new vessel additions to our fleet over the course of the last year that were accretive to our operating income.

On a non-adjusted basis our net income was $37.5 million, or $0.34 per share, for the twelve months ended December 31, 2013, compared to net loss of $105.2 million, or $0.96 per share, for the twelve months ended December 31, 2012.

Operating Revenues
Operating revenues decreased 0.2%, or $0.9 million, to $588.1 million in the twelve months ended December 31, 2013, from $589.0 million in the twelve months ended December 31, 2012.

Operating revenues for the twelve months ended December 31, 2013 reflect:

  • $37.2 million of incremental revenues in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, related to five 13,100 TEU containerships (the Hyundai Together, the Hyundai Tenacity, the Hyundai Smart, the Hyundai Speed and the Hyundai Ambition, which were added to our fleet on February 16, 2012, March 8, 2012, May 3, 2012, June 7, 2012 and June 29, 2012, respectively) and one 8,530 TEU containership (the CMA CGM Melisande, which was added to our fleet on February 28, 2012).
  • $3.0 million additional revenues in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, related to the Amalia C, the Niledutch Zebra, the Danae C and the Dimitris C, which were added to our fleet on May 14, 2013, June 25, 2013, November 13, 2013 and November 21, 2013, respectively.
  • $20.7 million decrease in revenues in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, related to the Montreal, which was sold on April 27, 2012, as well as the Henry, the Pride, the Honour, the Elbe, the Hope, the Lotus, the Kalamata and the Komodo, which were generating revenues in the twelve months ended December 31, 2012 and were sold during the twelve months ended December 31, 2013.
  • $5.8 million decrease in revenues in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, related to the Duka, which was laid up in the twelve months ended December 31, 2013 and was generating revenues in the the twelve months ended December 31, 2012.
  • $14.6 million decrease in revenues in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, which was mainly attributable to the softening of the charter market between the two periods.

Vessel Operating Expenses
Vessel operating expenses decreased 1.1%, or $1.3 million, to $122.1 million in the twelve months ended December 31, 2013, from $123.4 million in the twelve months ended December 31, 2012. The reduction is mainly attributable to the decrease in the average number of vessels in our fleet during the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012.

The average daily operating cost per vessel increased to $5,987 per day for the twelve months ended December 31, 2013, from $5,907 per day for the twelve months ended December 31, 2012.

Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs. 

Depreciation
Depreciation expense decreased 4.5%, or $6.5 million, to $137.4 million in the twelve months ended December 31, 2013, from $143.9 million in the twelve months ended December 31, 2012. The decrease in depreciation expense was due to the decreased average number of vessels in our fleet during the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, as well as the reduced cost base of certain vessels for which we recognized impairment charges as of December 31, 2012.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased 9.8%, or $0.6 million, to $5.5 million in the twelve months ended December 31, 2013, from $6.1 million in the twelve months ended December 31, 2012. The decrease reflects decreased dry-docking and special survey costs incurred within the year and amortized during the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012.

General and Administrative Expenses
General and administrative expenses decreased 4.4%, or $0.9 million, to $19.5 million in the twelve months ended December 31, 2013, from $20.4 million in the twelve months ended December 31, 2012. The decrease was mainly the result of the decrease in the fees paid to our Manager in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, due to the decrease in the average number of vessels in our fleet.

(Loss)/gain on sale of vessels
(Loss)/gain on sale of vessels, was a loss of $0.4 million in the twelve months ended December 31, 2013 compared to a gain of $0.8 million in the twelve months ended December 31, 2012. During the twelve months ended December 31, 2013, we sold the Independence, the Henry, the Pride, the Honour, the Elbe, the Hope, the Kalamata, the Lotus and the Komodo (on February 13, 2013, February 28, 2013, March 25, 2013, May 14, 2013, June 13, 2013, October 3, 2013, October 22, 2013, October 25, 2013 and November 12, 2013, respectively) and we realized a net loss on these sales of $0.4 million in aggregate. During the twelve months ended December 31, 2012, we sold the Montreal (on April 27, 2012) and we realized a net gain on this sale of $0.8 million.

Other Operating Expenses
Other Operating Expenses includes Voyage Expenses

Voyage Expenses
Voyage expenses decreased by $1.7 million, to $11.8 million in the twelve months ended December 31, 2013, from $13.5 million in the twelve months ended December 31, 2012. The decrease was mainly the result of the decrease in the average number of vessels in our fleet.

Interest Expense and Interest Income
Interest expense increased by 4.5%, or $3.9 million, to $91.2 million in the twelve months ended December 31, 2013, from $87.3 million in the twelve months ended December 31, 2012. The change in interest expense was mainly due to the increase in our average debt by $13.6 million, to $3,321.9 million in the twelve months ended December 31, 2013, from $3,308.3 million in the twelve months ended December 31, 2012, which was partially offset by the decrease in the cost of servicing our credit facilities in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012 (mainly due to the decrease in the average Libor). Furthermore, the financing of our newbuilding program resulted in $3.7 million of interest being capitalized, rather than such interest being recognized as an expense, for the twelve months ended December 31, 2012 compared to nil interest being capitalized for the twelve months ended December 31, 2013, following the completion of our newbuilding program in June 2012.

Interest income was $2.2 million in the twelve months ended December 31, 2013 compared to $1.6 million in the twelve months ended December 31, 2012.

Other finance costs, net
Other finance costs, net, increased by $2.0 million, to $20.1 million in the twelve months ended December 31, 2013, from $18.1 million in the twelve months ended December 31, 2012. This increase was mainly due to the $1.1 million increase in the amortization of finance fees (which were deferred and are amortized over the term of the respective credit facilities), as well as increased accrued finance fees of $1.0 million (which accrete in our Statement of Income over the term of the respective facilities) in the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012.

Unrealized gain/(loss) on derivatives
Unrealized gain/(loss) on interest rate swap hedges was a gain of $22.1 million in the twelve months ended December 31, 2013 compared to a loss of $0.7 million in the twelve months ended December 31, 2012. The unrealized gain/(loss) is attributable to mark to market valuation of our swaps, as well as reclassification of unrealized losses from Accumulated Other Comprehensive Loss to our earnings (due to the discontinuation of hedge accounting).

Realized (loss)/gain on derivatives
Realized loss on interest rate swap hedges, decreased by $6.1 million, to $148.3 million in the twelve months ended December 31, 2013, from $154.4 million in the twelve months ended December 31, 2012. This decrease is mainly attributable to the lower average notional amount of swaps during the twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012, which was partially offset by $7.0 million of realized losses that had been deferred during the twelve months ended December 31, 2012 (as discussed below) and were not deferred in the twelve months ended December 31, 2013.

With all our newbuildings having been delivered no realized losses on cash flow hedges were deferred during the twelve months ended December 31, 2013. During the twelve months ended December 31, 2012, realized losses on cash flow hedges of $7.0 million were deferred in "Accumulated Other Comprehensive Loss", rather than being recognized as expenses, and are being reclassified into earnings over the depreciable lives of these vessels that were under construction and financed by loans with interest rates that were hedged by our interest rate swap contracts.

Adjusted EBITDA
Adjusted EBITDA increased 0.6%, or $2.6 million, to $434.3 million in the twelve months ended December 31, 2013, from $431.7 million in the twelve months ended December 31, 2012. Adjusted EBITDA for the twelve months ended December 31, 2013, is adjusted for an impairment loss of $19.0 million in relation to an agreement in principle we have reached with ZIM, for a restructuring of its obligations with us, as well as unrealized gain on derivatives of $22.1 million, realized losses on derivatives of $144.3 million and a loss on sale of vessels of $0.4 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Conference Call and Webcast
On Tuesday, February 11, 2014, at 9:00 A.M. EST, the Company's management will host a conference call to discuss the results.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 866 819 7111 (US Toll Free Dial In), 0800 953 0329 (UK Toll Free Dial In) or +44 (0)1452 542 301 (Standard International Dial In). Please quote "Danaos" to the operator.

A telephonic replay of the conference call will be available until February 18, 2014, by dialing 1 866 247 4222 (US Toll Free Dial In), 0800 953 1533 (UK Toll Free Dial In) or +44 (0)1452 550 000 (Standard International Dial In). Access Code: 1186615#

There will also be a live and then archived webcast of the conference call through the Danaos website (www.danaos.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About Danaos Corporation
Danaos Corporation is an international owner of containerships, chartering its vessels to many of the world's largest liner companies. Our current fleet of 59 containerships aggregating 345,179 TEUs ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. Danaos is one of the largest US listed containership companies based on fleet size. The Company's shares trade on the New York Stock Exchange under the symbol "DAC".

Forward-Looking Statements
Matters discussed in this release may constitute forward-looking statements within the meaning of the safeharbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although Danaos Corporation believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, Danaos Corporation cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, charter counterparty performance, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in Danaos Corporation's operating expenses, including bunker prices, dry-docking and insurance costs, ability to obtain financing and comply with covenants in our financing arrangements, actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.

Risks and uncertainties are further described in reports filed by Danaos Corporation with the U.S. Securities and Exchange Commission.

Visit our website at www.danaos.com

Appendix

Fleet Utilization

Danaos had 260 unscheduled off-hire days in the three months ended December 31, 2013 (including 184 days related to the Marathonas and the Duka, which have been off-charter and laid up). The following table summarizes vessel utilization and the impact of the off-hire days on the Company's revenue.

                               
Vessel Utilization (No. of Days)   First Quarter
2013
    Second Quarter 2013     Third Quarter 2013     Fourth Quarter 2013     Total  
Ownership Days     5,677       5,541       5,612       5,427       22,257  
Less Off-hire Days:                                        
  Scheduled Off-hire Days     --       (39 )     --       --       (39 )
  Other Off-hire Days     (593 )     (287 )     (294 )     (260 )     (1,434 )
Operating Days     5,084       5,215       5,318       5,167       20,784  
Vessel Utilization     89.6 %     94.1 %     94.8 %     95.2 %     93.4 %
                                         
Operating Revenues (in '000s of US Dollars)   $ 146,088     $ 146,580     $ 148,448     $ 147,001     $ 588,117  
Average Gross Daily Charter Rate   $ 28,735     $ 28,107     $ 27,914     $ 28,450     $ 28,297  
                                         
                                         
                                         
Vessel Utilization (No. of Days)   First Quarter
2012
    Second Quarter 2012     Third Quarter 2012     Fourth Quarter 2012     Total  
Ownership Days     5,471       5,663       5,888       5,888       22,910  
Less Off-hire Days:                                        
  Scheduled Off-hire Days     (49 )     (45 )     (58 )     (57 )     (209 )
  Other Off-hire Days     (254 )     (266 )     (376 )     (508 )     (1,404 )
Operating Days     5,168       5,352       5,454       5,323       21,297  
Vessel Utilization     94.5 %     94.5 %     92.6 %     90.4 %     93.0 %
                                         
Operating Revenues (in '000s of US Dollars)   $ 134,237     $ 146,657     $ 156,289     $ 151,826     $ 589,009  
Average Gross Daily Charter Rate   $ 25,975     $ 27,402     $ 28,656     $ 28,523     $ 27,657  
                                         
                                         

Fleet List

The following table describes in detail our fleet deployment profile as of February 10, 2014.

             
Vessel Name   Vessel Size
(TEU)
  Year Built   Expiration of Charter(1)
Containerships            
             
Hyundai Ambition   13,100   2012   June 2024
Hyundai Speed   13,100   2012   June 2024
Hyundai Smart   13,100   2012   May 2024
Hyundai Tenacity   13,100   2012   March 2024
Hyundai Together   13,100   2012   February 2024
Hanjin Italy   10,100   2011   April 2023
Hanjin Germany   10,100   2011   March 2023
Hanjin Greece   10,100   2011   May 2023
CSCL Le Havre   9,580   2006   September 2018
CSCL Pusan   9,580   2006   July 2018
CMA CGM Melisande   8,530   2012   November 2023
CMA CGM Attila   8,530   2011   April 2023
CMA CGM Tancredi   8,530   2011   May 2023
CMA CGM Bianca   8,530   2011   July 2023
CMA CGM Samson   8,530   2011   September 2023
CSCL America   8,468   2004   September 2016
CSCL Europe   8,468   2004   June 2016
CMA CGM Moliere (2)   6,500   2009   August 2021
CMA CGM Musset (2)   6,500   2010   February 2022
CMA CGM Nerval (2)   6,500   2010   April 2022
CMA CGM Rabelais (2)   6,500   2010   June 2022
CMA CGM Racine (2)   6,500   2010   July 2022
YM Mandate   6,500   2010   January 2028
YM Maturity   6,500   2010   April 2028
Marathonas   4,814   1991   Laid-up
Messologi   4,814   1991   March 2014
Mytilini   4,814   1991   March 2014
Commodore (3)   4,651   1992   March 2014
Duka   4,651   1992   Laid-up
Federal (4)   4,651   1994   March 2014
SNL Colombo   4,300   2004   March 2019
YM Singapore   4,300   2004   October 2019
YM Seattle   4,253   2007   July 2019
YM Vancouver   4,253   2007   September 2019
Derby D   4,253   2004   March 2014
Deva   4,253   2004   November 2014
ZIM Rio Grande   4,253   2008   May 2020
ZIM Sao Paolo   4,253   2008   August 2020
OOCL Istanbul (5)   4,253   2008   September 2020
ZIM Monaco   4,253   2009   November 2020
OOCL Novorossiysk (6)   4,253   2009   February 2021
ZIM Luanda   4,253   2009   May 2021
Dimitris C   3,430   2001   November 2014
Hanjin Constantza   3,400   2011   February 2021
Hanjin Algeciras   3,400   2011   November 2020
Hanjin Buenos Aires   3,400   2010   March 2020
Hanjin Santos   3,400   2010   May 2020
Hanjin Versailles   3,400   2010   August 2020
Niledutch Zebra   2,602   2001   June 2014
Amalia C   2,452   1998   June 2014
Danae C   2,524   2001   March 2014
Hyundai Advance   2,200   1997   June 2017
Hyundai Future   2,200   1997   August 2017
Hyundai Sprinter   2,200   1997   August 2017
Hyundai Stride   2,200   1997   July 2017
Hyundai Progress   2,200   1998   December 2017
Hyundai Bridge   2,200   1998   January 2018
Hyundai Highway   2,200   1998   January 2018
Hyundai Vladivostok   2,200   1997   May 2017
             
   
(1) Earliest date charters could expire. Some charters include options to extend their terms.
(2) The charters with respect to the CMA CGM Moliere, the CMACGMMusset, the CMA CGM Nerval, the CMACGMRabelais and the CMACGMRacine include an option for the charterer, CMA-CGM, to purchase the vessels eight years after the commencement of the respective charters, which will fall in September 2017, March 2018, May 2018, July 2018 and August 2018, respectively, each for $78.0 million.
(3) On February 6, 2013, the Hyundai Commodore was renamed to Commodore at the request of the charterer of this vessel.
(4) On April 6, 2013, the Hyundai Federal was renamed to Federal at the request of the charterer of this vessel.
(5) On September 30, 2013, the Zim Kingston was renamed to OOCL Istanbul at the request of the charterer of this vessel.
(6) On October 28, 2013, the Zim Dalian was renamed to OOCL Novorossiysk at the request of the charterer of this vessel.
   
   
   
DANAOS CORPORATION  
Condensed Statements of Income - Unaudited  
(Expressed in thousands of United States dollars, except per share amounts)  
   
  Three months ended
December 31,
    Three months ended
December 31,
    Twelve months ended
December 31,
    Twelve months ended
December 31,
 
  2013     2012     2013     2012  
                               
OPERATING REVENUES $ 147,001     $ 151,826     $ 588,117     $ 589,009  
                               
OPERATING EXPENSES                              
  Vessel operating expenses   (30,452 )     (30,525 )     (122,074 )     (123,356 )
  Depreciation & amortization   (35,591 )     (40,396 )     (142,896 )     (150,008 )
  Impairment loss   (19,004 )     (129,630 )     (19,004 )     (129,630 )
  General & administrative   (4,861 )     (5,202 )     (19,458 )     (20,379 )
  (Loss)/gain on sale of vessels   (605 )     --       (449 )     830  
  Other operating expenses   (2,783 )     (3,543 )     (11,770 )     (13,503 )
Income From Operations   53,705       (57,470 )     272,466       152,963  
                               
OTHER EARNINGS/(EXPENSES)                              
  Interest income   638       462       2,210       1,642  
  Interest expense   (22,123 )     (23,288 )     (91,185 )     (87,340 )
  Other finance cost, net   (4,970 )     (5,114 )     (20,120 )     (18,107 )
  Other income/(expenses), net   44       48       302       811  
  Realized (loss)/gain on derivatives   (36,690 )     (38,709 )     (148,271 )     (154,434 )
  Unrealized gain/(loss) on derivatives   5,160       7,593       22,121       (739 )
Total Other Income/(Expenses), net   (57,941 )     (59,008 )     (234,943 )     (258,167 )
                               
Net (Loss)/Income $ (4,236 )   $ (116,478 )   $ 37,523     $ (105,204 )
                               
EARNINGS PER SHARE                              
Basic & diluted net (loss)/income per share $ (0.04 )   $ (1.06 )   $ 0.34     $ (0.96 )
Basic & diluted weighted average number of common shares (in thousands of shares)   109,657       109,622       109,654       109,613  
                               
                               
   
Non-GAAP Measures*  
Reconciliation of Net Income to Adjusted Net Income - Unaudited  
   
  Three months ended
December 31,
    Three months ended
December 31,
    Twelve months ended
December 31,
    Twelve months ended
December 31,
 
  2013     2012     2013     2012  
Net (loss)/income $ (4,236 )   $ (116,478 )   $ 37,523     $ (105,204 )
Unrealized (gain)/loss on derivatives   (5,160 )     (7,593 )     (22,121 )     739  
Realized loss on over-hedging portion of derivatives   --       1,362       --       19,042  
Amortization of financing fees & finance fees accrued   4,753       4,778       19,194       17,076  
Impairment loss   19,004       129,630       19,004       129,630  
Loss/(Gain) on sale of vessels   605       --       449       (830 )
Adjusted Net Income $ 14,966     $ 11,699     $ 54,049     $ 60,453  
Adjusted Earnings Per Share $ 0.14     $ 0.11     $ 0.49     $ 0.55  
Weighted average number of shares   109,657       109,622       109,654       109,613  
                               
                               

* The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. See the Table above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and twelve months ended December 31, 2013 and 2012. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

   
DANAOS CORPORATION  
Condensed Balance Sheets - Unaudited  
(Expressed in thousands of United States dollars)  
   
    As of
December 31,
    As of
December 31,
 
    2013     2012  
ASSETS                
CURRENT ASSETS                
  Cash and cash equivalents   $ 68,153     $ 55,628  
  Restricted cash     14,717       2,821  
  Accounts receivable, net     8,038       3,741  
  Other current assets     35,958       36,483  
      126,866       98,673  
NON-CURRENT ASSETS                
  Fixed assets, net     3,842,617       3,986,138  
  Restricted cash, net of current portion     --       430  
  Deferred charges, net     67,949       88,821  
  Fair value of financial instruments     2,472       2,908  
  Other non-current assets     26,648       35,075  
      3,939,686       4,113,372  
TOTAL ASSETS   $ 4,066,552     $ 4,212,045  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES                
  Long-term debt, current portion   $ 146,462     $ 125,076  
  Vendor Financing, current portion     57,388       57,388  
  Accounts payable, accrued liabilities & other current liabilities     56,607       52,688  
  Fair value of financial instruments, current portion     109,431       130,100  
      369,888       365,252  
LONG-TERM LIABILITIES                
  Long-term debt, net of current portion     2,965,641       3,097,472  
  Vendor financing, net of current portion     64,367       121,754  
  Fair value of financial instruments, net of current portion     59,077       176,948  
  Other long-term liabilities     9,103       10,315  
      3,098,188       3,406,489  
                 
STOCKHOLDERS' EQUITY                
  Common stock     1,097       1,096  
  Additional paid-in capital     546,097       546,023  
  Accumulated other comprehensive loss     (232,697 )     (353,271 )
  Retained earnings     283,979       246,456  
      598,476       440,304  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 4,066,552     $ 4,212,045  
                 
                 
   
DANAOS CORPORATION  
Condensed Statements of Cash Flows - (Unaudited)  
(Expressed in thousands of United States dollars)  
   
  Three months ended
December 31,
    Three months ended
December 31,
    Twelve months ended
December 31,
    Twelve months ended
December 31,
 
  2013     2012     2013     2012  
Operating Activities:                              
  Net (loss)/income $ (4,236 )   $ (116,478 )   $ 37,523     $ (105,204 )
  Adjustments to reconcile net (loss)/income to net cash provided by operating activities:                              
  Depreciation   34,615       38,514       137,414       143,938  
  Impairment loss   19,004       129,630       19,004       129,630  
  Amortization of deferred drydocking & special survey costs, finance cost and other finance fees accrued   5,729       6,660       24,676       23,146  
  Stock based compensation   75       100       75       139  
  Payments for drydocking/special survey   (14 )     (2,968 )     (283 )     (9,308 )
  Amortization of deferred realized losses on cash flow interest rate swaps   1,013       1,013       4,017       3,524  
  Realized loss on cash flow interest rate swaps deferred in Other Comprehensive Loss   --       --       --       (7,035 )
  Unrealized (gain)/loss on derivatives   (5,160 )     (7,593 )     (22,121 )     739  
  Loss/(gain) on sale of vessels   605       --       449       (830 )
  Accounts receivable   (3,601 )     6,020       (4,297 )     435  
  Other assets, current and non-current   (4,708 )     (11,641 )     (10,052 )     (11,813 )
  Accounts payable and accrued liabilities   (2,568 )     (4,665 )     (2,841 )     (2,380 )
  Other liabilities, current and non-current   1,094       (1,069 )     5,461       1,577  
Net Cash provided by Operating Activities   41,848       37,523       189,025       166,558  
                               
Investing Activities:                              
  Vessel additions, vessel acquisitions and vessels under construction   (28,094 )     (46 )     (46,839 )     (375,424 )
  Net proceeds from sale of vessels   18,778       --       52,926       5,635  
Net Cash (used in)/provided by Investing Activities   (9,316 )     (46 )     6,087       (369,789 )
                               
Financing Activities:                              
  Debt draw downs   --       --       --       266,920  
  Debt repayment   (50,483 )     (16,611 )     (171,021 )     (58,981 )
  Deferred costs   --       --       (100 )     (100 )
  Decrease/(Increase) in restricted cash   5,610       (2,813 )     (11,466 )     (342 )
Net Cash (used in)/ provided by Financing Activities   (44,873 )     (19,424 )     (182,587 )     207,497  
Net (Decrease)/increase in cash and cash equivalents   (12,341 )     18,053       12,525       4,266  
Cash and cash equivalents, beginning of period   80,494       37,575       55,628       51,362  
Cash and cash equivalents, end of period $ 68,153     $ 55,628     $ 68,153     $ 55,628  
                               
                               
   
Reconciliation of Net Income to Adjusted EBITDA  
(Expressed in thousands of United States dollars)  
   
  Three months ended
December 31,
    Three months ended
December 31,
    Twelve months ended
December 31,
    Twelve months ended
December 31,
 
  2013     2012     2013     2012  
Net (loss)/income $ (4,236 )   $ (116,478 )   $ 37,523     $ (105,204 )
Depreciation   34,615       38,514       137,414       143,938  
Amortization of deferred drydocking & special survey costs   976       1,882       5,482       6,070  
Amortization of deferred finance costs and other finance fees accrued   4,753       4,778       19,194       17,076  
Amortization of deferred realized losses on interest rate swaps   1,013       1,013       4,017       3,524  
Interest income   (638 )     (462 )     (2,210 )     (1,642 )
Interest expense   22,123       23,288       91,185       87,340  
Impairment loss   19,004       129,630       19,004       129,630  
Loss/(gain) on sale of vessels   605       --       449       (830 )
Stock based compensation   75       100       75       139  
Realized loss on derivatives   35,677       37,696       144,254       150,910  
Unrealized (gain)/loss on derivatives   (5,160 )     (7,593 )     (22,121 )     739  
Adjusted EBITDA(1) $ 108,807     $ 112,368     $ 434,266     $ 431,690  
                               
                               
 (1) Adjusted EBITDA represents net income before interest income and expense, depreciation, amortization of deferred drydocking & special survey costs and deferred finance costs, unrealized (gain)/loss on derivatives, realized gain/(loss) on derivatives, stock based compensation, impairment loss and gain/(loss) on sale of vessels. However, Adjusted EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that Adjusted EBITDA is useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that Adjusted EBITDA is useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
   
  Note: Items to consider for comparability include gains and charges. Gains positively impacting net income are reflected as deductions to net income. Charges negatively impacting net income are reflected as increases to net income.
   
  The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of these financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. See the Tables above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and twelve months ended December 31, 2013 and 2012. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
   
   

Contact Information

  • For further information please contact:

    Company Contact:

    Evangelos Chatzis
    Chief Financial Officer
    Danaos Corporation
    Athens, Greece
    Tel.: +30 210 419 6480
    E-Mail: cfo@danaos.com

    Iraklis Prokopakis
    Senior Vice President and Chief Operating Officer
    Danaos Corporation
    Athens, Greece
    Tel.: +30 210 419 6400
    E-Mail: coo@danaos.com

    Investor Relations and Financial Media
    Nicolas Bornozis
    President
    Capital Link, Inc.
    New York
    Tel. 212-661-7566
    E-Mail: danaos@capitallink.com