SOURCE: Danaos Corporation

Danaos Corporation

July 28, 2014 16:02 ET

Danaos Corporation Reports Second Quarter and Half Year Results for the Period Ended June 30, 2014

ATHENS, GREECE--(Marketwired - Jul 28, 2014) -   Danaos Corporation ("Danaos") (NYSE: DAC), a leading international owner of containerships, today reported unaudited results for the period ended June 30, 2014.

Highlights for the Second Quarter and Half Year Ended June 30, 2014:

  • Operating revenues of $136.4 million for the three months ended June 30, 2014 compared to $146.6 million for the three months ended June 30, 2013, a decrease of 7.0%. Operating revenues of $271.9 million for the six months ended June 30, 2014 compared to $292.7 million for the six months ended June 30, 2013, a decrease of 7.1%.
  • Adjusted EBITDA1 of $99.0 million for the three months ended June 30, 2014 compared to $107.4 million for the three months ended June 30, 2013, a decrease of 7.8%. Adjusted EBITDA1 of $195.4 million for the six months ended June 30, 2014 compared to $216.0 million for the six months ended June 30, 2013, a decrease of 9.5%.
  • Adjusted net income1 of $11.6 million, or $0.11 per share, for the three months ended June 30, 2014 compared to $11.8 million, or $0.11 per share, for the three months ended June 30, 2013. Adjusted net income1 of $18.6 million, or $0.17 per share, for the six months ended June 30, 2014 compared to $25.7 million, or $0.23 per share, for the six months ended June 30, 2013.
  • The remaining average charter duration of our fleet was 8.5 years as of June 30, 2014 (weighted by aggregate contracted charter hire).
  • Total contracted operating revenues were $4.0 billion as of June 30, 2014, through 2028.
  • Charter coverage of 92% for the next 12 months in terms of contracted operating days and 98% in terms of operating revenues.
 
Three and Six Months Ended June 30, 2014
Financial Summary
(Expressed in thousands of United States dollars, except per share amounts)
 
    Three months ended
June 30,
  Three months ended
June 30,
  Six months ended
June 30,
  Six months ended
June 30,
    2014   2013   2014   2013
    (unaudited)
Operating revenues   $ 136,440   $ 146,580   $ 271,926   $ 292,668
Net income   $ 16,643   $ 19,539   $ 25,050   $ 32,971
Adjusted net income1   $ 11,596   $ 11,797   $ 18,572   $ 25,681
Earnings per share   $ 0.15   $ 0.18   $ 0.23   $ 0.30
Adjusted earnings per share1   $ 0.11   $ 0.11   $ 0.17   $ 0.23
Weighted average number of shares (in thousands)     109,669     109,653     109,669     109,653
Adjusted EBITDA1   $ 98,986   $ 107,402   $ 195,367   $ 215,986
                         

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 second quarter with adjusted net income of $11.6 million, or 11 cents per share, which is equivalent to the $11.8 million, or 11 cents per share of adjusted net income for the 2nd quarter of 2013. We maintained the Company's profitability between the 2 quarters through a $7.9 million improvement in financing costs together with a $2.1 million improvement in operating costs, despite a decrease in operating revenues. The decline in operating revenues between the 2 quarters mainly reflects $3 million related to softer charter market conditions and $6.1 million attributable to the reduced charter hire on six of our vessels following the previously announced restructuring of Zim, formalized on July 16, 2014.

The reduction in finance costs is expected to continue in the coming quarters as we reduce leverage and benefit from the expiration of expensive interest rate swaps. We project debt repayments in 2014 exceeding $220 million and swap expirations exceeding $1 billion in notional terms.

During the 2nd quarter signs of improvement in container market fundamentals have manifested themselves through a reduction of laid up tonnage and improved utilization rates in main trade lanes, although this has not yet translated into an improvement in charter rates. The main industry event for the quarter was the dismissal of the proposed P3 alliance by the regulatory authorities in China. We do not however believe that this is likely to affect the necessary rationalization of tonnage deployment in the industry. Tonnage deployment rationalization, together with continued cost optimization and recovery on the demand side should result in a healthier industry going forward.

Despite the soft charter market, with 98% charter coverage for the next 12 months in terms of operating revenues we are substantially insulated from market volatility and the timing of any recovery. Additionally, our $5,957 daily operating cost clearly positions us as one of the most efficient operators in the industry.

We will continue our efforts to de-lever our balance sheet, manage our fleet efficiently and capitalize on the resilience of our business model towards creating value for our shareholders.

Three months ended June 30, 2014 compared to the three months ended June 30, 2013

During the three months ended June 30, 2014, Danaos had an average of 55.8 containerships compared to 60.9 containerships for the three months ended June 30, 2013. Our fleet utilization increased to 97.3% in the three months ended June 30, 2014 compared to 94.1% in the three months ended June 30, 2013. During the three months ended June 30, 2014, our fleet utilization for the fleet under employment was 98.2% (which excludes the vessels on lay up). During the three months ended June 30, 2014, we sold four vessels, the Commodore, the Duka, the Mytilini and the Messologi, for an aggregate amount of $44.1 million, which represents the gross sale proceeds less commissions.

Our adjusted net income was $11.6 million, or $0.11 per share, for the three months ended June 30, 2014 compared to $11.8 million, or $0.11 per share, for the three months ended June 30, 2013. We have adjusted our net income in the three months ended June 30, 2014 for unrealized gains on derivatives of $4.5 million, as well as a non-cash expense of $4.7 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees) and a gain on sale of vessels of $5.2 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The decrease of 1.7%, or $0.2 million, in adjusted net income for the three months ended June 30, 2014 compared to the three months ended June 30, 2013, was attributed to a $6.1 million decrease in operating revenues as a result of reduced rates for six 4,253 TEU vessels on charter to Zim following the Zim restructuring, as well as a $4.1 million net decrease in operating revenues mainly attributed to lower re-chartering rates for certain of our vessels as a result of the continuing soft charter market and vessels sold that were generating revenue in the three months ended June 30, 2013, partially offset by vessels acquired that were generating revenue in the three months ended June 30, 2014. This decrease in operating revenues was also partially offset by a $2.1 million reduction in total fleet operating costs and a $7.9 million reduction in net finance costs mainly due to lower debt balances and interest rate swap expirations.

On a non-adjusted basis our net income was $16.6 million, or $0.15 per share, for the three months ended June 30, 2014, compared to net income of $19.5 million, or $0.18 per share, for the three months ended June 30, 2013.

Operating Revenues
Operating revenues decreased 7.0%, or $10.2 million, to $136.4 million in the three months ended June 30, 2014, from $146.6 million in the three months ended June 30, 2013.

Operating revenues for the three months ended June 30, 2014 reflect:

  • $2.9 million of additional revenues in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, related to the Amalia C, the Niledutch Zebra, the Niledutch Palanca 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.
  • $6.1 million decrease in revenues in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, related to the agreement we entered into with ZIM for a reduction in the charter rates payable by ZIM under the time charters for six of our vessels.
  • $3.9 million decrease in revenues in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, related to the Hope, the Kalamata, the Elbe, the Komodo, the Lotus, the Commodore, the Messologi and the Mytilini, which were generating revenues in the three months ended June 30, 2013, but were sold within 2013 and 2014.
  • $3.1 million decrease in revenues in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, which was mainly attributable to the rechartering of certain vessels in the soft charter market.

Vessel Operating Expenses
Vessel operating expenses decreased 8.5%, or $2.7 million, to $28.9 million in the three months ended June 30, 2014, from $31.6 million in the three months ended June 30, 2013, reflecting lower average daily operating cost per vessel and lower average number of vessels in our fleet in the 2014 period.

The average daily operating cost per vessel decreased to $5,957 per day for the three months ended June 30, 2014, from $6,160 per day for the three months ended June 30, 2013 (excluding those vessels on lay-up), which is one of the most competitive daily operating expenses figures in the industry.

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

Depreciation
Depreciation expense decreased 0.3%, or $0.1 million, to $34.1 million in the three months ended June 30, 2014, from $34.2 million in the three months ended June 30, 2013. The decrease in depreciation expense was mainly due to the decreased average number of vessels in our fleet during the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased 14.3%, or $0.2 million, to $1.2 million in the three months ended June 30, 2014, from $1.4 million in the three months ended June 30, 2013. The decrease reflects decreased dry-docking and special survey costs incurred within the year and amortized during the three months ended June 30, 2014 compared to the three months ended June 30, 2013

General and Administrative Expenses
General and administrative expenses increased 12.8%, or $0.6 million, to $5.3 million in the three months ended June 30, 2014, from $4.7 million in the three months ended June 30, 2013. The increase was mainly due to increased fees of $0.3 million paid to our Manager in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, due to an increase in the per day fee payable to our Manager since January 1, 2014, which was partially offset by a decrease in the average number of vessels in our fleet in the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Furthermore, legal fees were increased by $0.2 million in the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Effective January 1, 2014, our management fees were adjusted to a fee of $800 per day for commercial, chartering and administrative services, a technical management fee of $400 per vessel per day for vessels on bareboat charter and $800 per vessel per day for vessels on time charter.

Other Operating Expenses
Other Operating Expenses includes Voyage Expenses

Voyage Expenses
Voyage expenses increased by $0.4 million, to $3.2 million in the three months ended June 30, 2014, from $2.8 million in the three months ended June 30, 2013. Effective January 1, 2014, the commission of 1.0% on gross freight, charter hire, ballast bonus and demurrage payable to our manager with respect to each vessel in the fleet was adjusted to a commission of 1.25%. This increase was partially offset by the decreased average number of vessels in our fleet during the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Gain on sale of vessels
Gain on sale of vessels, was $5.2 million in the three months ended June 30, 2014 compared to $0.2 million in the three months ended June 30, 2013. During the three months ended June 30, 2014, we sold the Commodore on April 25, 2014, the Duka on May 15, 2014, the Mytilini on May 15, 2014 and the Messologi on May 20, 2014 and we realized a net gain on these sales of $5.2 million. During the three months ended June 30, 2013, we sold and delivered the Honour and the Elbe (on May 14, 2013 and June 13, 2013, respectively) and we realized a net gain on these sales of $0.2 million in aggregate.

Interest Expense and Interest Income
Interest expense decreased by 12.9%, or $3.0 million, to $20.3 million in the three months ended June 30, 2014, from $23.3 million in the three months ended June 30, 2013. The change in interest expense was mainly due to the decrease in our average debt by $203.7 million, to $3,143.8 million in the three months ended June 30, 2014, from $3,347.5 million in the three months ended June 30, 2013, as well as the marginal decrease in the cost of debt servicing in the three months ended June 30, 2014 compared to the three months ended June 30, 2013, mainly driven by the accelerated amortization of our fixed rate debt, which bears a higher cost compared to our floating rate debt.

It has to be noted that we are in a rapid deleveraging mode. As of June 30, 2014, the debt outstanding was $3,129.1 million compared to $3,327.6 million as of June 30, 2013.

Interest income was less than $0.1 million in the three months ended June 30, 2014 compared to $0.5 million in the three months ended June 30, 2013.

Other finance costs, net
Other finance costs, net, decreased by $0.1 million, to $4.9 million in the three months ended June 30, 2014, from $5.0 million in the three months ended June 30, 2013. This decrease was due to the $0.1 million decrease in amortizing finance fees (which were deferred and are amortized over the term of the respective credit facilities) in the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Unrealized gain/(loss) on derivatives
Unrealized gain/(loss) on interest rate swap hedges was a gain of $4.5 million in the three months ended June 30, 2014 compared to a gain of $12.4 million in the three months ended June 30, 2013. The unrealized gains were 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 since July 1, 2012.

Realized (loss)/gain on derivatives
Realized loss on interest rate swap hedges, decreased by $5.4 million, to $31.8 million in the three months ended June 30, 2014, from $37.2 million in the three months ended June 30, 2013. This decrease is mainly attributable to the lower average notional amount of swaps during the three months ended June 30, 2014 compared to the three months ended June 30, 2013 as a result of $500 million in swaps expiration between the two quarters.

Adjusted EBITDA
Adjusted EBITDA decreased 7.8%, or $8.4 million, to $99.0 million in the three months ended June 30, 2014, from $107.4 million in the three months ended June 30, 2013. Adjusted EBITDA for the three months ended June 30, 2014, is adjusted for unrealized gain on derivatives of $4.5 million, realized losses on derivatives of $30.8 million and a gain on sale of vessels of $5.2 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013

During the six months ended June 30, 2014, Danaos had an average of 57.2 containerships compared to 62.0 containerships for the six months ended June 30, 2013. Our fleet utilization increased to 96.2% in the six months ended June 30, 2014 compared to 91.8% in the six months ended June 30, 2013, mainly due to the sale of our older vessels certain of which were off-charter and laid-up. During the six months ended June 30, 2014, our fleet utilization for the fleet under employment was 98.0% (which excludes the vessels on lay up). During the six months ended June 30, 2014, we sold five of our older vessels, the Marathonas, the Commodore, the Mytilini, the Duka and the Messologi, for an aggregate amount of $55.2 million (representing the gross sale proceeds less commissions).

Our adjusted net income was $18.6 million, or $0.17 per share, for the six months ended June 30, 2014 compared to $25.7 million, or $0.23 per share, for the six months ended June 30, 2013. We have adjusted our net income in the six months ended June 30, 2014 for unrealized gains on derivatives of $10.2 million, as well as a non-cash expense of $9.4 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees) and a gain on sale of vessels of $5.7 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The decrease of 27.6%, or $7.1 million, in adjusted net income for the six months ended June 30, 2014 compared to the six months ended June 30, 2013, was attributed to a $12.0 million decrease in operating revenues as a result of reduced rates for six 4,253 TEU vessels on charter to Zim following the Zim restructuring as well as a $8.8 million net decrease in operating revenues mainly attributed to lower re-chartering rates for certain of our vessels as a result of the continuing soft charter market and vessels sold that were generating revenue in the six months ended June 30, 2013, partially offset by vessels acquired that were generating revenue in the six months ended June 30, 2014. This decrease in operating revenues was also partially offset by a $1.3 million reduction in total fleet operating costs and a $12.4 million reduction in net finance costs mainly due to lower debt balances and interest rate swap expirations.

On a non-adjusted basis our net income was $25.1 million, or $0.23 per share, for the six months ended June 30, 2014, compared to net income of $33.0 million, or $0.30 per share, for the six months ended June 30, 2013.

Operating Revenues
Operating revenues decreased 7.1%, or $20.8 million, to $271.9 million in the six months ended June 30, 2014, from $292.7 million in the six months ended June 30, 2013.

Operating revenues for the six months ended June 30, 2014 reflect:

  • $5.6 million of additional revenues in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, related to the Amalia C, the Niledutch Zebra, the Niledutch Palanca 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.
  • $12.0 million decrease in revenues in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, related to the agreement we entered into with ZIM for a reduction in the charter rates payable by ZIM under the time charters for six of our vessels.
  • $6.9 million decrease in revenues in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, related to the Hope, the Kalamata, the Elbe, the Komodo, the Lotus, the Commodore, the Messologi and the Mytilini, which were generating revenues in the six months ended June 30, 2013, but were sold within 2013 and 2014.
  • $7.5 million decrease in revenues in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, which was mainly attributable to the rechartering of certain vessels in the soft charter market.

Vessel Operating Expenses
Vessel operating expenses decreased 3.0%, or $1.8 million, to $59.1 million in the six months ended June 30, 2014, from $60.9 million in the six months ended June 30, 2013. The reduction is mainly attributable to decreased average number of vessels in our fleet in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, as well as the marginal decrease in the average daily operating cost per vessel in the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

The average daily operating cost per vessel (excluding vessels on lay-up) marginally decreased to $6,034 for the six months ended June 30, 2014, from $6,039 for the six months ended June 30, 2013.

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

Depreciation
Depreciation expense was $68.1 million in each of the six months ended June 30, 2014 and 2013, respectively.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased 31.3%, or $1.0 million, to $2.2 million in the six months ended June 30, 2014, from $3.2 million in the six months ended June 30, 2013. The decrease reflects decreased dry-docking and special survey costs incurred within the year and amortized during the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

General and Administrative Expenses
General and administrative expenses increased 10.3%, or $1.0 million, to $10.7 million in the six months ended June 30, 2014, from $9.7 million in the six months ended June 30, 2013. The increase was due to increased fees of $0.7 million paid to our Manager in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, due to an increase in the per day fee payable to our Manager since January 1, 2014, which was partially offset by a decrease in the average number of vessels in our fleet in the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Furthermore, various general and administrative expenses increased by $0.3 million in the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Gain on sale of vessels
Gain on sale of vessels, was $5.7 million in the six months ended June 30, 2014 compared to a gain of $0.2 million in the six months ended June 30, 2013. During the six months ended June 30, 2014, we sold and delivered the Marathonas, the Commodore, the Mytilini, the Duka and the Messologi (on February 26, 2014, April 25, 2014, May 15, 2014, May 15, 2014 and May 20, 2014, respectively) and we realized a net gain on these sales of $5.7 million in aggregate. During the six months ended June 30, 2013, we sold and delivered the Independence, the Henry, the Pride, the Honour and the Elbe (on February 13, 2013, February 28, 2013, March 25, 2013, May 14, 2013 and June 13, 2013, respectively) and we realized a net gain on these sales of $0.2 million in aggregate.

Other Operating Expenses
Other Operating Expenses includes Voyage Expenses

Voyage Expenses
Voyage expenses increased by $0.6 million, to $6.5 million in the six months ended June 30, 2014, from $5.9 million in the six months ended June 30, 2013. Effective January 1, 2014, the commission of 1.0% on gross freight, charter hire, ballast bonus and demurrage payable to our manager with respect to each vessel in the fleet was adjusted to a commission of 1.25%. This increase was partially offset by the decreased average number of vessels in our fleet during the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Interest Expense and Interest Income
Interest expense decreased by 10.6%, or $4.9 million, to $41.3 million in the six months ended June 30, 2014, from $46.2 million in the six months ended June 30, 2013. The change in interest expense was due to the decrease in our average debt by $195.3 million, to $3,172.7 million in the six months ended June 30, 2014, from $3,368.0 million in the six months ended June 30, 2013, as well as the marginal decrease in the cost of debt servicing in the six months ended June 30, 2014 compared to the six months ended June 30, 2013, mainly driven by the accelerated amortization of our fixed rate debt, which bears a higher cost compared to our floating rate debt.

Interest income was less than $0.1 million in the six months ended June 30, 2014 compared to $1.0 million in the six months ended June 30, 2013.

Other finance costs, net
Other finance costs, net, decreased by $0.2 million, to $9.9 million in the six months ended June 30, 2014, from $10.1 million in the six months ended June 30, 2013. This decrease was due to the $0.2 million decrease in amortizing finance fees (which were deferred and are amortized over the term of the respective credit facilities) in the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Unrealized gain/(loss) on derivatives
Unrealized gain/(loss) on interest rate swap hedges was a gain of $10.2 million in the six months ended June 30, 2014 compared to a gain of $16.8 million in the six months ended June 30, 2013. The unrealized gains were 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 since July 1, 2012.

Realized (loss)/gain on derivatives
Realized loss on interest rate swap hedges, decreased by $8.5 million, to $65.3 million in the six months ended June 30, 2014, from $73.8 million in the six months ended June 30, 2013. This decrease is mainly attributable to the lower average notional amount of swaps during the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Adjusted EBITDA
Adjusted EBITDA decreased 9.5%, or $20.6 million, to $195.4 million in the six months ended June 30, 2014, from $216.0 million in the six months ended June 30, 2013. Adjusted EBITDA for the six months ended June 30, 2014, is adjusted for unrealized gain on derivatives of $10.2 million, realized losses on derivatives of $63.3 million and a gain on sale of vessels of $5.7 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Recent news
On July 25, 2014, at our annual meeting of stockholders, Mr. Iraklis Prokopakis was re-elected as Class II director, Mr. George Economou was re-elected as Class II director and Mr. William Repko was elected as Class II director, each for a three-year term expiring at the annual meeting of our stockholders in 2017. Our stockholders also ratified the appointment of PricewaterhouseCoopers S.A. as our independent auditors.

In July 2014, ZIM and its creditors entered into definitive documentation effecting ZIM's restructuring with its creditors on substantially the same terms as the agreement in principle previously announced by ZIM in January 2014. The terms of the restructuring include a reduction in the charter rates payable by ZIM under its time charters, expiring in 2020 or 2021, for six of our vessels, which had already been implemented beginning in January 2014. The terms also include our receipt of approximately $49.9 million aggregate principal amount of unsecured, interest bearing ZIM notes maturing in 2023 (consisting of $8.8 million of 3% Series 1 Notes due 2023 amortizing subject to available cash flow in accordance with a corporate cash sweep mechanism, and $41.1 million of 5% Series 2 Notes due 2023 non-amortizing (of the 5% interest rate, 3% is payable in cash and 2% is payable in kind, accrued quarterly with deferred cash payment on maturity)) and ZIM shares representing approximately 7.4% of the outstanding ZIM shares immediately after the restructuring, in exchange for such charter rate reductions and cancellation of ZIM's other obligations to us which relate to the outstanding long term receivable as of December 31, 2013. ZIM's charter-owner creditors have designated two of the nine members of ZIM's initial Board of Directors following the restructuring, including one director nominated by us, Dimitris Chatzis, the father of our Chief Financial Officer. In connection with ZIM's previous announcement of the agreement in principle with its creditors, we had recognized an impairment loss of $19.0 million as of December 31, 2013.

Conference Call and Webcast
On Tuesday, July 29, 2014 at 10:00 A.M. ET, 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 August 5, 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 54 containerships aggregating 321,435 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 122 unscheduled off-hire days in the three months ended June 30, 2014 (including 99 days related to the Duka, which had been laid up, as well as the Commodore, the Mytilini and the Messologi, which have been off-charter for certain days during the current quarter). 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
2014
    Second Quarter
2014
    Total  
Ownership Days     5,277       5,079       10,356  
Less Off-hire Days:                        
  Scheduled Off-hire Days     (30 )     (14 )     (44 )
  Other Off-hire Days     (225 )     (122 )     (346 )
Operating Days     5,022       4,943       9,966  
Vessel Utilization     95.2 %     97.3 %     96.2 %
                         
Operating Revenues (in '000s of US Dollars)   $ 135,486     $ 136,440     $ 271,926  
Average Gross Daily Charter Rate   $ 26,978     $ 27,603     $ 27,285  
                         
                         
Vessel Utilization
(No. of Days)
  First Quarter
2013
    Second Quarter
2013
    Total  
Ownership Days     5,677       5,541       11,218  
Less Off-hire Days:                        
  Scheduled Off-hire Days     --       (39 )     (39 )
  Other Off-hire Days     (593 )     (287 )     (880 )
Operating Days     5,084       5,215       10,299  
Vessel Utilization     89.6 %     94.1 %     91.8 %
                         
Operating Revenues (in '000s of US Dollars)   $ 146,088     $ 146,580     $ 292,668  
Average Gross Daily Charter Rate   $ 28,735     $ 28,107     $ 28,417  
                         
                         
                         

Fleet List

The following table describes in detail our fleet deployment profile as of July 28, 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
Federal   4,651   1994   March 2015
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   January 2015
Deva   4,253   2004   November 2014
ZIM Rio Grande   4,253   2008   May 2020
ZIM Sao Paolo   4,253   2008   August 2020
OOCL Istanbul   4,253   2008   September 2020
ZIM Monaco   4,253   2009   November 2020
OOCL Novorossiysk   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   September 2014
Amalia C   2,452   1998   March 2015
Niledutch Palanca (3)   2,524   2001   October 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 March 25, 2014, the Danae C was renamed to Niledutch Palanca 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
June 30,
    Three months ended
June 30,
    Six months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
                                 
OPERATING REVENUES   $ 136,440     $ 146,580     $ 271,926     $ 292,668  
                                 
OPERATING EXPENSES                                
  Vessel operating expenses     (28,903 )     (31,621 )     (59,149 )     (60,914 )
  Depreciation & amortization     (35,287 )     (35,613 )     (70,232 )     (71,326 )
  General & administrative     (5,309 )     (4,746 )     (10,702 )     (9,663 )
  Gain on sale of vessels     5,216       171       5,709       156  
  Other operating expenses     (3,245 )     (2,822 )     (6,520 )     (5,879 )
Income From Operations     68,912       71,949       131,032       145,042  
                                 
OTHER EARNINGS/(EXPENSES)                                
  Interest income     3       521       18       1,013  
  Interest expense     (20,260 )     (23,292 )     (41,259 )     (46,156 )
  Other finance cost, net     (4,922 )     (5,016 )     (9,913 )     (10,093 )
  Other income/(expenses), net     233       232       287       231  
  Realized (loss)/gain on derivatives     (31,846 )     (37,221 )     (65,322 )     (73,836 )
  Unrealized gain/(loss) on derivatives     4,523       12,366       10,207       16,770  
Total Other Income/(Expenses), net     (52,269 )     (52,410 )     (105,982 )     (112,071 )
                                 
Net Income   $ 16,643     $ 19,539     $ 25,050     $ 32,971  
                                 
EARNINGS PER SHARE                                
Basic & diluted net income per share   $ 0.15     $ 0.18     $ 0.23     $ 0.30  
Basic & diluted weighted average number of common shares (in thousands of shares)     109,669       109,653       109,669       109,653  
                                 
                                 
                                 
Non-GAAP Measures*  
Reconciliation of Net Income to Adjusted Net Income - Unaudited  
   
    Three months ended
June 30,
    Three months ended
June 30,
    Six months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
Net income   $ 16,643     $ 19,539     $ 25,050     $ 32,971  
Unrealized (gain)/loss on derivatives     (4,523 )     (12,366 )     (10,207 )     (16,770 )
Amortization of financing fees & finance fees accrued     4,692       4,795       9,438       9,636  
Gain on sale of vessels     (5,216 )     (171 )     (5,709 )     (156 )
Adjusted Net Income   $ 11,596     $ 11,797     $ 18,572     $ 25,681  
Adjusted Earnings Per Share   $ 0.11     $ 0.11     $ 0.17     $ 0.23  
Weighted average number of shares     109,669       109,653       109,669       109,653  
                                 

* 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 six months ended June 30, 2014 and 2013. 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
June 30,
    As of
December 31,
 
    2014     2013  
ASSETS                
CURRENT ASSETS                
  Cash and cash equivalents   $ 51,506     $ 68,153  
  Restricted cash     3,250       14,717  
  Accounts receivable, net     8,743       8,038  
  Other current assets     40,149       35,958  
      103,648       126,866  
NON-CURRENT ASSETS                
  Fixed assets, net     3,730,498       3,842,617  
  Restricted cash, net of current portion     55,151       --  
  Deferred charges, net     61,775       67,949  
  Fair value of financial instruments     1,098       2,472  
  Other non-current assets     26,502       26,648  
      3,875,024       3,939,686  
TOTAL ASSETS   $ 3,978,672     $ 4,066,552  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES                
  Long-term debt, current portion   $ 150,062     $ 146,462  
  Vendor Financing, current portion     57,388       57,388  
  Accounts payable, accrued liabilities & other current liabilities     56,468       56,607  
  Fair value of financial instruments, current portion     85,214       109,431  
      349,132       369,888  
LONG-TERM LIABILITIES                
  Long-term debt, net of current portion     2,886,006       2,965,641  
  Vendor financing, net of current portion     35,673       64,367  
  Fair value of financial instruments, net of current portion     23,790       59,077  
  Other long-term liabilities     10,346       9,103  
      2,955,815       3,098,188  
                 
STOCKHOLDERS' EQUITY                
  Common stock     1,097       1,097  
  Additional paid-in capital     546,097       546,097  
  Accumulated other comprehensive loss     (182,498 )     (232,697 )
  Retained earnings     309,029       283,979  
      673,725       598,476  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 3,978,672     $ 4,066,552  
                 
                 
                 
DANAOS CORPORATION  
Condensed Statements of Cash Flows - (Unaudited)  
(Expressed in thousands of United States dollars)  
   
    Three months ended
June 30,
    Three months ended
June 30,
    Six months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
Operating Activities:                                
  Net income   $ 16,643     $ 19,539     $ 25,050     $ 32,971  
  Adjustments to reconcile net income to net cash provided by operating activities:                                
  Depreciation     34,132       34,164       68,075       68,147  
  Amortization of deferred drydocking & special survey costs, finance cost and other finance fees accrued     5,847       6,244       11,595       12,815  
  Payments for drydocking/special survey     (1,750 )     (667 )     (3,789 )     (422 )
  Amortization of deferred realized losses on cash flow interest rate swaps     1,002       1,002       1,992       1,992  
  Unrealized (gain)/loss on derivatives     (4,523 )     (12,366 )     (10,207 )     (16,770 )
  Gain on sale of vessels     (5,216 )     (171 )     (5,709 )     (156 )
  Accounts receivable     (1,399 )     2,427       (705 )     (6,928 )
  Other assets, current and non-current     7,831       892       (4,045 )     5,640  
  Accounts payable and accrued liabilities     (10,086 )     (3,026 )     (1,112 )     (1,169 )
  Other liabilities, current and non-current     1,540       1,838       2,172       2,429  
Net Cash provided by Operating Activities     44,021       49,876       83,317       98,549  
                                 
Investing Activities:                                
  Vessel additions and vessel acquisitions     189       (16,776 )     (563 )     (17,757 )
  Net proceeds from sale of vessels     40,831       13,025       50,602       29,875  
Net Cash provided by/(used in) Investing Activities     41,020       (3,751 )     50,039       12,118  
                                 
Financing Activities:                                
  Debt repayment     (45,641 )     (53,303 )     (106,319 )     (75,671 )
  (Increase)/decrease in restricted cash     (46,920 )     408       (43,684 )     (15,590 )
Net Cash used in Financing Activities     (92,561 )     (52,895 )     (150,003 )     (91,261 )
Net (Decrease)/ Increase in cash and cash equivalents     (7,520 )     (6,770 )     (16,647 )     19,406  
Cash and cash equivalents, beginning of period     59,026       81,804       68,153       55,628  
Cash and cash equivalents, end of period   $ 51,506     $ 75,034     $ 51,506     $ 75,034  
                                 
                                 
                                 
Reconciliation of Net Income to Adjusted EBITDA  
(Expressed in thousands of United States dollars)  
   
    Three months ended
June 30,
    Three months ended
June 30,
    Six months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
Net income   $ 16,643     $ 19,539     $ 25,050     $ 32,971  
Depreciation     34,132       34,164       68,075       68,147  
Amortization of deferred drydocking & special survey costs     1,155       1,449       2,157       3,179  
Amortization of deferred finance costs and other finance fees accrued     4,692       4,795       9,438       9,636  
Amortization of deferred realized losses on interest rate swaps     1,002       1,002       1,992       1,992  
Interest income     (3 )     (521 )     (18 )     (1,013 )
Interest expense     20,260       23,292       41,259       46,156  
Gain on sale of vessels     (5,216 )     (171 )     (5,709 )     (156 )
Realized loss on derivatives     30,844       36,219       63,330       71,844  
Unrealized (gain)/loss on derivatives     (4,523 )     (12,366 )     (10,207 )     (16,770 )
Adjusted EBITDA(1)   $ 98,986     $ 107,402     $ 195,367     $ 215,986  
                                 
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 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 six months ended June 30, 2014 and 2013. 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