Danaos Corporation Reports Second Quarter and Half Year Results for the Period Ended June 30, 2021

ATHENS, Greece–()–Danaos Corporation (“Danaos”) (NYSE: DAC), one of the world’s largest independent owners of containerships, today reported unaudited results for the period ended June 30, 2021.

Highlights for the Second Quarter and Half Year Ended June 30, 2021:

  • Adjusted net income1 of $68.9 million, or $3.34 per share, for the three months ended June 30, 2021 compared to $42.5 million, or $1.71 per share, for the three months ended June 30, 2020, an increase of 62.1%. Adjusted net income1 of $126.9 million, or $6.17 per share, for the six months ended June 30, 2021 compared to $75.8 million, or $3.06 per share, for the six months ended June 30, 2020, an increase of 67.4%.
  • Operating revenues of $146.4 million for the three months ended June 30, 2021 compared to $116.8 million for the three months ended June 30, 2020, an increase of 25.3%. Operating revenues of $278.5 million for the six months ended June 30, 2021 compared to $223.0 million for the six months ended June 30, 2020, an increase of 24.9%.
  • Adjusted EBITDA1 of $103.7 million for the three months ended June 30, 2021 compared to $80.1 million for the three months ended June 30, 2020, an increase of 29.5%. Adjusted EBITDA1 of $200.0 million for the six months ended June 30, 2021 compared to $152.0 million for the six months ended June 30, 2020, an increase of 31.6%.
  • Total contracted operating revenues were $1.75 billion as of June 30, 2021, including the Gemini vessels that were acquired in July 2021, with charters extending through 2028 and remaining average contracted charter duration of 3.4 years, weighted by aggregate contracted charter hire.
  • Charter coverage of 92% for the next 12 months based on current operating revenues and 90% in terms of contracted operating days.
  • We have collected an aggregate amount of $69.5 million of mandatory repayment of ZIM and HMM notes plus accrued interest of nearly $10 million in the six months ended June 30, 2021. Additionally, we have sold 2 million ZIM ordinary shares for net proceeds of $76.4 million in the six months ended June 30, 2021.
  • Danaos has declared a dividend of $0.50 per share of common stock for the second quarter of 2021, which is payable on August 30, 2021 to stockholders of record as of August 16, 2021.

Three and Six Months Ended June 30, 2021

Financial Summary – Unaudited

(Expressed in thousands of United States dollars, except per share amounts)

 

 

Three months

ended

 

Three months

ended

 

Six months

ended

 

Six months

ended

June 30,

June 30,

June 30,

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

Operating revenues

$146,434

 

$116,824

 

$278,552

 

$223,020

Net income

$372,837

 

$38,496

 

$669,617

 

$67,585

Adjusted net income1

$68,860

 

$42,494

 

$126,871

 

$75,775

Earnings per share, diluted

$18.10

 

$1.55

 

$32.57

 

$2.73

Adjusted earnings per share, diluted1

$3.34

 

$1.71

 

$6.17

 

$3.06

Diluted weighted average number of shares (in thousands)

20,599

 

24,789

 

20,557

 

24,789

Adjusted EBITDA1

$103,736

 

$80,073

 

$200,018

 

$151,991

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:

“The containership market has maintained its positive momentum, which is reflected in increasing rates for both containers and vessel charters. Danaos is continuing to secure charters for its vessels for periods of between three and five years. It is noteworthy that some of these charters do not even begin until the middle of 2022. The market appears to be in short supply until at least the end of next year, and we have strong leverage to this dynamic.

The pandemic is continuing to cause inefficiencies in the transportation chain, and there is no obvious indication that conditions will normalize in the near term. Travel bans or restrictions are continuing to impede our efforts to normalize crew changes. Despite considerable difficulty in joining and repatriation, our vessel schedules have not been affected.

Our liquidity was enhanced in the second quarter by a total of $152.6 million from the redemption of the Zim and HMM bonds and the disposition of 2 million shares of Zim stock. In the aggregate our cash balance at the end of the quarter was $294.4 million.

Financially, Danaos is in a very strong position, with cash and marketable securities totaling over $600 million, a $1.75 billion backlog of charters extended out over an average of 3.4 years and a very manageable debt repayment schedule. We are also generating significant free cash flow on the back of exceptionally strong market conditions. This gives us the capacity and the confidence to grow our core business when opportunities appear. To that end, we exercised our option to purchase 51% of Gemini, our joint venture, taking full ownership of the entity and its assets. This added approximately $160 million of contracted revenue and approximately $117 million of contracted EBITDA to our backlog, while these vessels are expected to contribute $31 million of EBITDA over the next 12 months. The effective date of the transaction was July 1, 2021, meaning it will be immediately accretive in the third quarter.

Further we sourced an opportunity to buy six modern eco-design 5,460 TEU vessels built in 2014 and 2015 at a significant discount to their charter free values. These vessels are tied to below market, though still profitable, charters expiring from mid-2022 to mid-2024. They are of similar specification to newbuilding designs offered today, and we expect to recharter them at levels significantly higher than their existing charters. We were able to fund these growth opportunities using cash on our balance sheet, and we will evaluate whether we will increase our leverage with respect to these acquisitions moving forward.

Once again, the market dynamics are in our favor, and we will continue to deliver the best results possible for our shareholders.”

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

During the three months ended June 30, 2021, Danaos had an average of 60.0 containerships compared to 57.1 containerships during the three months ended June 30, 2020. Our fleet utilization for the three months ended June 30, 2021 was 99.1% compared to 97.1% for the three months ended June 30, 2020.

Our adjusted net income amounted to $68.9 million, or $3.34 per share, for the three months ended June 30, 2021 compared to $42.5 million, or $1.71 per share, for the three months ended June 30, 2020. We have adjusted our net income in the three months ended June 30, 2021 for the gain on our investment in ZIM of $196.3 million, gain on debt extinguishment of $111.6 million and a non-cash fees amortization and accrued finance fees charge of $3.9 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $26.4 million in adjusted net income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 is attributable mainly to a $29.6 million increase in operating revenues, a $3.8 million decrease in net finance expenses, and a $0.5 million increase in the operating performance of our equity investment in Gemini Shipholdings Corporation (“Gemini”), which were partially offset by a $7.5 million increase in total operating expenses.

On a non-adjusted basis, our net income amounted to $372.8 million, or $18.10 earnings per diluted share, for the three months ended June 30, 2021 compared to net income of $38.5 million, or $1.55 earnings per diluted share, for the three months ended June 30, 2020. Our net income for the three months ended June 30, 2021 includes gain on our investment in ZIM of $196.3 million and gain on debt extinguishment of $111.6 million.

Operating Revenues

Operating revenues increased by 25.3%, or $29.6 million, to $146.4 million in the three months ended June 30, 2021 from $116.8 million in the three months ended June 30, 2020.

Operating revenues for the three months ended June 30, 2021 reflect:

  • a $23.6 million increase in revenues in the three months ended June 30, 2021 compared to the three months ended June 30, 2020 mainly as a result of higher charter rates and improved fleet utilization; and
  • a $6.0 million increase in revenues in the three months ended June 30, 2021 compared to the three months ended June 30, 2020 due to the incremental revenue generated by five vessels acquired in 2020.

Vessel Operating Expenses

Vessel operating expenses increased by $4.3 million to $32.9 million in the three months ended June 30, 2021 from $28.6 million in the three months ended June 30, 2020, primarily as a result of the increase in the average number of vessels in our fleet and by an increase in the average daily operating cost of $6,241 per vessel per day for vessels on time charter for the three months ended June 30, 2021 compared to $5,787 per vessel per day for the three months ended June 30, 2020. The average daily operating cost increased mainly due to the COVID-19 related increase in crew remuneration in the three months ended June 30, 2021. Management believes that our daily operating cost remains among the most competitive in the industry.

Depreciation & Amortization

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

Depreciation

Depreciation expense increased by 3.2%, or $0.8 million, to $26.1 million in the three months ended June 30, 2021 from $25.3 million in the three months ended June 30, 2020 mainly due to the acquisition of five vessels and installation of scrubbers on nine of our vessels in the year ended December 31, 2020.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs decreased by $0.4 million to $2.5 million in the three months ended June 30, 2021 from $2.9 million in the three months ended June 30, 2020.

General and Administrative Expenses

General and administrative expenses increased by $1.1 million to $7.1 million in the three months ended June 30, 2021, from $6.0 million in the three months ended June 30, 2020. The increase was mainly attributable to increased management fees due to the increased size of our fleet and other corporate administrative expenses.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $1.7 million to $5.0 million in the three months ended June 30, 2021 from $3.3 million in the three months ended June 30, 2020 primarily as a result of the increase in commissions due to the increase in revenue per vessel and the increase in average number of vessels in our fleet.

Interest Expense and Interest Income

Interest expense increased by 33.8%, or $4.6 million, to $18.2 million in the three months ended June 30, 2021 from $13.6 million in the three months ended June 30, 2020. The increase in interest expense is a combined result of:

  • a $2.2 million improvement in interest expense because of a decrease in our average indebtedness by $69.6 million between the two periods (average indebtedness of $1,465.3 million in the three months ended June 30, 2021, compared to average indebtedness of $1,534.9 million in the three months ended June 30, 2020) and a decrease in our debt service cost by approximately 0.36%;
  • a reduced by $6.7 million recognition through our income statement of accumulated accrued interest that had been accrued in 2018 in relation to two of our credit facilities that were refinanced on April 12, 2021. As a result of the refinancing, the recognition of such accumulated interest has been decreased; and
  • a $0.1 million increase in the amortization of deferred finance costs and debt discount related to our debt.

Net proceeds from issuance of our $300 million Senior Notes in February 2021 together with the net proceeds from a new $815 million senior secured credit facility and a new $135 million leaseback arrangement, each drawn down on April 12, 2021 were used to refinance a substantial majority of our indebtedness.

As of June 30, 2021, our outstanding bank debt, gross of deferred finance costs, was $1,165.9 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $237.2 million. These balances compare to bank debt of $1,392.6 million and a leaseback obligation of $135.2 million as of June 30, 2020.

Interest income increased by $7.9 million to $9.5 million in the three months ended June 30, 2021 compared to $1.6 million in the three months ended June 30, 2020 mainly as a result of collection of accrued interest on ZIM and HMM bonds, which were redeemed by the issuers thereof during the 2021 period.

Gain on investments

The gain on investments of $196.3 million relates to change in fair value of our shareholding interest in ZIM, which completed its initial public offering and listing on the New York Stock Exchange of its ordinary shares on January 27, 2021. In June 2021, we sold 2,000,000 ordinary shares of ZIM resulting in net proceeds of $76.4 million. The remaining shareholding interest of 8,186,950 ordinary shares has been fair valued at $367.8 million as of June 30, 2021, based on the closing price of ZIM ordinary shares on the NYSE on that date.

Gain on debt extinguishment

The gain on debt extinguishment of $111.6 million in the three months ended June 30, 2021 related to our debt refinancing on April 12, 2021, as described above.

Other finance costs, net

Other finance costs, net decreased by $0.4 million to $0.6 million in the three months ended June 30, 2021 compared to $1.0 million in the three months ended June 30, 2020 due to the decreased finance costs on the refinanced debt.

Equity income on investments

Equity income on investments increased by $0.5 million to $2.2 million of income on investments in the three months ended June 30, 2021 compared to $1.7 million in the three months ended June 30, 2020 due to the improved operating performance of Gemini, in which the Company had a 49% shareholding interest.

Loss on derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three months ended June 30, 2021 and June 30, 2020.

Other income, net

Other income, net was $0.2 million in the three months ended June 30, 2021 compared to nil in the three months ended June 30, 2020.

Adjusted EBITDA

Adjusted EBITDA increased by 29.5%, or $23.6 million, to $103.7 million in the three months ended June 30, 2021 from $80.1 million in the three months ended June 30, 2020. As outlined above, the increase is mainly attributable to a $29.6 million increase in operating revenues, a $0.5 million increase in the operating performance of our equity investees and a $0.3 million decrease in other finance expenses, which were partially offset by a $6.8 million increase in total operating expenses. Adjusted EBITDA for the three months ended June 30, 2021 is adjusted for the gain on investments of $196.3 million, gain on debt extinguishment of $111.6 million and stock based compensation of $0.6 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

During the six months ended June 30, 2021, Danaos had an average of 60.0 containerships compared to 56.4 containerships during the six months ended June 30, 2020. Our fleet utilization for the six months ended June 30, 2021 was 98.9% compared to 94.2% for the six months ended June 30, 2020. Adjusted fleet utilization, excluding the effect of 188 days of incremental off-hire due to shipyard delays related to the COVID-19 pandemic, was 96.1% in the six months ended June 30, 2020.

Our adjusted net income amounted to $126.9 million, or $6.17 per share, for the six months ended June 30, 2021 compared to $75.8 million, or $3.06 per share, for the six months ended June 30, 2020. We have adjusted our net income in the six months ended June 30, 2021 for the gain on our investment in ZIM of $444.2 million, gain on debt extinguishment of $111.6 million, a non-cash fees amortization and accrued finance fees charge of $9.0 million and stock-based compensation of $4.1 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $51.1 million in adjusted net income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 is attributable mainly to a $55.5 million increase in operating revenues, a partial collection of common benefit claim of $3.9 million from Hanjin Shipping, a $6.2 million decrease in net finance expenses and a $0.7 million increase in the operating performance of our equity investment in Gemini, which were partially offset by a $15.2 million increase in total operating expenses.

On a non-adjusted basis, our net income amounted to $669.6 million, or $32.57 earnings per diluted share, for the six months ended June 30, 2021 compared to net income of $67.6 million, or $2.73 earnings per diluted share, for the six months ended June 30, 2020. Our net income for the six months ended June 30, 2021 includes gain on our investment in ZIM of $444.2 million and gain on debt extinguishment of $111.6 million.

Operating Revenues

Operating revenues increased by 24.9%, or $55.5 million, to $278.5 million in the six months ended June 30, 2021 from $223.0 million in the six months ended June 30, 2020.

Operating revenues for the six months ended June 30, 2021 reflect:

  • a $40.9 million increase in revenues in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 mainly as a result of higher charter rates and improved fleet utilization; and
  • a $14.6 million increase in revenues in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to the incremental revenue generated by five vessels acquired in 2020.

Vessel Operating Expenses

Vessel operating expenses increased by $9.4 million to $64.0 million in the six months ended June 30, 2021 from $54.6 million in the six months ended June 30, 2020, primarily as a result of the increase in the average number of vessels in our fleet and by an increase in the average daily operating cost of $6,098 per vessel per day for vessels on time charter for the six months ended June 30, 2021 compared to $5,657 per vessel per day for the six months ended June 30, 2020. The average daily operating cost increased mainly due to the COVID-19 related increase in crew remuneration in the six months ended June 30, 2021. Management believes that our daily operating cost remains among the most competitive in the industry.

Depreciation & Amortization

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

Depreciation

Depreciation expense increased by 4.2%, or $2.1 million, to $51.9 million in the six months ended June 30, 2021 from $49.8 million in the six months ended June 30, 2020 mainly due to the acquisition of five vessels and installation of scrubbers on nine of our vessels in the year ended December 31, 2020.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs decreased by $0.2 million to $5.1 million in the six months ended June 30, 2021 from $5.3 million in the six months ended June 30, 2020.

General and Administrative Expenses

General and administrative expenses increased by $6.1 million to $18.0 million in the six months ended June 30, 2021, from $11.9 million in the six months ended June 30, 2020. The increase was mainly attributable to increased management fees due to the increased size of our fleet and increased stock-based compensation.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $1.9 million to $9.2 million in the six months ended June 30, 2021 from $7.3 million in the six months ended June 30, 2020 primarily as a result of the increase in commissions due to the increase in revenue per vessel and the increase in average number of vessels in our fleet.

Interest Expense and Interest Income

Interest expense increased by 11.4%, or $3.4 million, to $33.3 million in the six months ended June 30, 2021 from $29.9 million in the six months ended June 30, 2020. The increase in interest expense is a combined result of:

  • a $7.5 million improvement in interest expense because of a decrease in our debt service cost by approximately 0.94%, while our average indebtedness remained stable at $1,539.5 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020;
  • a reduced by $10.0 million recognition through our income statement of accumulated accrued interest that had been accrued in 2018 in relation to two of our credit facilities that were refinanced on April 12, 2021. As a result of the refinancing, the recognition of such accumulated interest has been decreased; and
  • a $0.9 million increase in the amortization of deferred finance costs and debt discount related to our debt.

Net proceeds from issuance of our $300 million Senior Notes in February 2021 together with the net proceeds from a new $815 million senior secured credit facility and a new $135 million leaseback arrangement, each drawn down on April 12, 2021 were used to refinance a substantial majority of our indebtedness.

As of June 30, 2021, our outstanding bank debt, gross of deferred finance costs, was $1,165.9 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $237.2 million. These balances compare to bank debt of $1,392.6 million and a leaseback obligation of $135.2 million as of June 30, 2020.

Interest income increased by $8.2 million to $11.5 million in the six months ended June 30, 2021 compared to $3.3 million in the six months ended June 30, 2020, mainly as a result of collection of accrued interest on ZIM and HMM bonds, which were redeemed by the issuers thereof during the 2021 period.

Gain on investments

The gain on investments of $444.2 million relates to change in fair value of our shareholding interest in ZIM, which completed its initial public offering and listing on the New York Stock Exchange of its ordinary shares on January 27, 2021. In June 2021, we sold 2,000,000 ordinary shares of ZIM resulting in net proceeds of $76.4 million. For the six months ended June 30, 2021, the unrealized gain related to the ZIM ordinary shares still held on June 30, 2021 amounted to $367.8 million. The remaining shareholding interest of 8,186,950 ordinary shares has been fair valued at $367.8 million as of June 30, 2021, based on the closing price of ZIM ordinary shares on the NYSE on that date compared to the book value of these shares of $75 thousand as of December 31, 2020.

Gain on debt extinguishment

The gain on debt extinguishment of $111.6 million in the six months ended June 30, 2021 related to our debt refinancing on April 12, 2021, as described above.

Other finance costs, net

Other finance costs, net decreased by $0.7 million to $1.0 million in the six months ended June 30, 2021 compared to $1.7 million in the six months ended June 30, 2020 due to the decreased finance costs on the refinanced debt.

Equity income on investments

Equity income on investments increased by $0.7 million to $4.0 million of income on investments in the six months ended June 30, 2021 compared to $3.3 million in the six months ended June 30, 2020 due to the improved operating performance of Gemini, in which the Company had a 49% shareholding interest.

Loss on derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $1.8 million in each of the six months ended June 30, 2021 and June 30, 2020.

Other income, net

Other income, net was $4.1 million in income in the six months ended June 30, 2021 compared to $0.3 million in income in the six months ended June 30, 2020. The increase was mainly due to the collection from Hanjin Shipping of $3.9 million as a partial payment of common benefit claim and interest.

Adjusted EBITDA

Adjusted EBITDA increased by 31.6%, or $48.0 million, to $200.0 million in the six months ended June 30, 2021 from $152.0 million in the six months ended June 30, 2020. As outlined above, the increase is mainly attributable to a $55.5 million increase in operating revenues, a partial collection of common benefit claim of $3.9 million from Hanjin Shipping, a $0.7 million increase in the operating performance of our equity investees and a $0.5 million decrease in net finance expenses, which were partially offset by a $12.6 million increase in total operating expenses. Adjusted EBITDA for the six months ended June 30, 2021 is adjusted for change in fair value of investments of $444.2 million, gain on debt extinguishment of $111.6 million and stock based compensation of $5.5 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Dividend Payment

Danaos has declared a dividend of $0.50 per share of common stock for the second quarter of 2021, which is payable on August 30, 2021 to stockholders of record as of August 16, 2021.

Recent Developments

As previously announced, on July 1, 2021, we exercised our option to acquire the remaining equity interest in Gemini. The purchase price for the 51% of Gemini was $86.7 million in cash.

As previously announced, we have entered into an agreement to acquire six 5,500 TEU vessels for a gross purchase price amounting to $260.0 million. These vessels are expected to be delivered to us from August to October 2021.

Conference Call and Webcast

On Tuesday, August 3, 2021 at 9:00 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: 1 844 802 2437 (US Toll Free Dial In), 0800 279 9489 (UK Toll Free Dial In) or +44 (0) 2075 441 375 (Standard International Dial In). Please indicate to the operator that you wish to join the Danaos Corporation earnings call.

A telephonic replay of the conference call will be available until August 10, 2021 by dialing 1 877 344 7529 (US Toll Free Dial In) or 1-412-317-0088 (Standard International Dial In) and using 10159187# as the access code.

Audio Webcast

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

Slide Presentation

A slide presentation regarding the Company and the containership industry will also be available on the Danaos website (www.danaos.com).

About Danaos Corporation

Danaos Corporation is one of the largest independent owners of modern, large-size containerships. Our current fleet of 65 containerships aggregating 403,793 TEUs ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. On July 7, 2021, Danaos entered into an agreement to acquire an additional 6 containerships aggregating 32,796 TEUs, which are expected to be delivered by October 15, 2021. Our fleet is chartered to many of the world’s largest liner companies on fixed-rate charters. Our long track record of success is predicated on our efficient and rigorous operational standards and environmental controls. Danaos Corporation’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 safe harbor 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. 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 impact of the COVID-19 pandemic and efforts throughout the world to contain its spread, including effects on global economic activity, demand for seaborne transportation of containerized cargo, the ability and willingness of charterers to perform their obligations to us, charter rates for containerships, shipyards performing scrubber installations, drydocking and repairs, changing vessel crews and availability of financing; Danaos’ ability to achieve the expected benefits of the 2021 debt refinancing and comply with the terms of its new credit facilities and other financing agreements; 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 dry-docking, 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 15 unscheduled off-hire days in the three months ended June 30, 2021. 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

 

Second

Quarter

 

 

2021

2021

 

Total

Ownership Days

5,400

5,460

10,860

Less Off-hire Days:

Scheduled Off-hire Days

(22)

(33)

(55)

Other Off-hire Days

(51)

(15)

(66)

Operating Days

5,327

5,412

10,739

Vessel Utilization

98.6%

99.1%

98.9%

 

Operating Revenues (in ‘000s of US Dollars)

$132,118

$146,434

$278,552

Average Gross Daily Charter Rate

$24,802

$27,057

$25,938

 

Vessel Utilization (No. of Days)

First

Quarter

 

Second

Quarter

 

 

2020

2020

 

Total

Ownership Days

5,073

5,193

10,266

Less Off-hire Days:

Scheduled Off-hire Days

(336)

(60)

(396)

Other Off-hire Days

(104)

(92)

(196)

Operating Days

4,633

5,041

9,674

Vessel Utilization

91.3%

97.1%

94.2%

 

Operating Revenues (in ‘000s of US Dollars)

$106,196

$116,824

$223,020

Average Gross Daily Charter Rate

$22,922

$23,175

$23,054

Fleet List

The following table describes in detail our fleet deployment profile as of July 31, 2021:

Vessel Name

 

Vessel Size

(TEU)

 

Year Built

 

Expiration of Charter(1)

Hyundai Ambition

13,100

 

2012

 

June 2024

Hyundai Speed

13,100

 

2012

 

June 2024

Hyundai Smart

13,100

 

2012

 

May 2024

Hyundai Respect

13,100

 

2012

 

March 2024

Hyundai Honour

13,100

 

2012

 

February 2024

Express Rome

10,100

 

2011

 

February 2022

Express Berlin

10,100

 

2011

 

April 2022

Express Athens

10,100

 

2011

 

February 2022

Le Havre

9,580

 

2006

 

April 2023

Pusan C

9,580

 

2006

 

March 2023

Bremen

9,012

 

2009

 

December 2022

C Hamburg

9,012

 

2009

 

January 2023

Niledutch Lion

8,626

 

2008

 

May 2026

Charleston

8,533

 

2005

 

February 2026

CMA CGM Melisande

8,530

 

2012

 

November 2024

CMA CGM Attila

8,530

 

2011

 

April 2024

CMA CGM Tancredi

8,530

 

2011

 

May 2024

CMA CGM Bianca

8,530

 

2011

 

July 2024

CMA CGM Samson

8,530

 

2011

 

September 2024

America

8,468

 

2004

 

February 2023

Europe

8,468

 

2004

 

March 2023

Phoebe

8,463

 

2005

 

April 2022

CMA CGM Moliere

6,500

 

2009

 

April 2022

CMA CGM Musset

6,500

 

2010

 

October 2022

CMA CGM Nerval

6,500

 

2010

 

December 2022

CMA CGM Rabelais

6,500

 

2010

 

February 2023

CMA CGM Racine

6,500

 

2010

 

March 2023

YM Mandate

6,500

 

2010

 

January 2028

YM Maturity

6,500

 

2010

 

April 2028

Zim Savannah (ex Performance)

6,402

 

2002

 

May 2024

Dimitra C

6,402

 

2002

 

January 2023

Seattle C

4,253

 

2007

 

October 2024

Vancouver

4,253

 

2007

 

November 2024

Derby D

4,253

 

2004

 

January 2027

Tongala (ex ANL Tongala)

4,253

 

2004

 

January 2023

Rio Grande

4,253

 

2008

 

November 2024

ZIM Sao Paolo

4,253

 

2008

 

February 2023

ZIM Kingston

4,253

 

2008

 

April 2023

ZIM Monaco

4,253

 

2009

 

July 2022

Dalian (ex ZIM Dalian)

4,253

 

2009

 

November 2022

ZIM Luanda

4,253

 

2009

 

August 2025

Dimitris C

3,430

 

2001

 

January 2022

Express Black Sea

3,400

 

2011

 

January 2022

Express Spain

3,400

 

2011

 

January 2022

Express Argentina

3,400

 

2010

 

May 2023

Express Brazil

3,400

 

2010

 

June 2025

Express France

3,400

 

2010

 

September 2025

Singapore

3,314

 

2004

 

May 2024

Colombo

3,314

 

2004

 

December 2021

Zebra

2,602

 

2001

 

November 2024

Amalia C

2,452

 

1998

 

January 2023

Artotina (ex Danae C)

2,524

 

2001

 

February 2022

Advance

2,200

 

1997

 

January 2022

Future

2,200

 

1997

 

November 2021

Sprinter

2,200

 

1997

 

December 2021

Stride

2,200

 

1997

 

February 2022

Progress C

2,200

 

1998

 

December 2021

Bridge

2,200

 

1998

 

December 2024

Highway

2,200

 

1998

 

August 2022

Vladivostok

2,200

 

1997

 

October 2021

 

 

 

 

 

 

Belita (2)

8,533

 

2006

 

July 2026

Catherine C (2)

6,422

 

2001

 

January 2023

Leo C (2)

6,422

 

2002

 

August 2022

Suez Canal(2)

5,610

 

2002

 

March 2023

Genoa(2)

5,544

 

2002

 

November 2024

 

 

 

 

 

 

Wide Alpha (3)

5,466

 

2014

 

March 2024

Wide Bravo(3)

5,466

 

2014

 

March 2022

Maersk Euphrates (3)

5,466

 

2014

 

April 2024

Wide Hotell(3)

5,466

 

2015

 

May 2024

Wide India (3)

5,466

 

2015

 

July 2022

Wide Juliet(3)

5,466

 

2015

 

June 2023

(1)

Earliest date charters could expire. Some charters include options to extend their terms.

(2)

Vessels acquired by Gemini Shipholdings Corporation, in which Danaos Corporation held a 49% equity interest through the end of the second quarter of 2021. On July 1, 2021, Danaos Corporation exercised its option to acquire the remaining 51% equity interests in Gemini Shipholdings Corporation and now holds 100%.

(3)

Vessels contracted by the Company to be delivered with the attached charters from August 10, 2021 to October 15, 2021.

 

DANAOS CORPORATION

Condensed Consolidated Statements of Income – Unaudited

(Expressed in thousands of United States dollars, except per share amounts)

 

 

Three months

ended

 

Three months

ended

 

Six months

ended

 

Six months

ended

June 30,

June 30,

June 30,

June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

OPERATING REVENUES

$146,434

 

$116,824

 

$278,552

 

$223,020

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Vessel operating expenses

(32,940)

 

(28,568)

 

(64,018)

 

(54,570)

Depreciation & amortization

(28,644)

 

(28,199)

 

(56,952)

 

(55,090)

General & administrative

(7,130)

 

(6,013)

 

(18,025)

 

(11,853)

Other operating expenses

(4,966)

 

(3,289)

 

(9,194)

 

(7,335)

Income From Operations

72,754

 

50,755

 

130,363

 

94,172

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSES)

 

 

 

 

 

 

 

Interest income

9,531

 

1,588

 

11,509

 

3,302

Interest expense

(18,204)

(13,645)

(33,315)

(29,958)

Gain on investments

196,290

444,165

Gain on debt extinguishment

111,616

111,616

Other finance expenses

(582)

(1,038)

(1,034)

(1,660)

Equity income/(loss) on investments

2,162

 

1,720

 

3,965

 

3,265

Other income, net

173

 

19

 

4,144

 

270

Realized loss on derivatives

(903)

 

(903)

 

(1,796)

 

(1,806)

Total Other Income/(Expenses), net

300,083

 

(12,259)

 

539,254

 

(26,587)

 

 

 

 

 

 

 

 

Net Income

$372,837

 

$38,496

 

$669,617

 

$67,585

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

Basic earnings per share

$18.32

 

$1.57

 

$32.95

 

$2.75

Diluted earnings per share

$18.10

 

$1.55

 

$32.57

 

$2.73

Basic weighted average number of common shares (in thousands of shares)

20,354

24,573

20,323

 

24,573

Diluted weighted average number of common shares (in thousands of shares)

20,599

24,789

20,557

 

24,789

Non-GAAP Measures1

Reconciliation of Net Income to Adjusted Net Income – Unaudited

   

 

 

Three months

ended

 

Three months

ended

 

Six months

ended

 

Six months

ended

 

June 30,

June 30,

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

Net income

 

$372,837

 

$38,496

$669,617

$67,585

Gain on investments

 

(196,290)

 

(444,165)

Gain on debt extinguishment

 

(111,616)

 

(111,616)

Amortization of financing fees, debt discount & finance fees accrued

 

3,929

 

3,998

8,957

8,190

Stock based compensation

 

 

4,078

Adjusted Net Income

 

$68,860

 

$42,494

$126,871

$75,775

Adjusted Earnings Per Share, diluted

 

$3.34

 

$1.71

$6.17

$3.06

Diluted weighted average number of shares (in thousands)

 

20,599

 

24,789

20,557

24,789

1 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, 2021 and 2020. 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 Consolidated Balance Sheets – Unaudited

(Expressed in thousands of United States dollars)

 

 

 

As of

 

As of

June 30,

December 31,

 

 

2021

 

2020

ASSETS

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

 

$294,418

 

$65,663

Accounts receivable, net

 

7,112

 

7,556

Other current assets

 

46,956

 

45,229

 

 

348,486

 

118,448

NON-CURRENT ASSETS

 

 

 

 

Fixed assets, net

 

2,429,647

 

2,479,937

Deferred charges, net

 

13,440

 

17,339

Investments in affiliates

 

19,238

 

15,273

Other non-current assets

 

389,319

 

83,383

 

 

2,851,644

 

2,595,932

TOTAL ASSETS

 

$3,200,130

 

$2,714,380

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Long-term debt, current portion

 

$93,450

 

$155,662

Accumulated accrued interest, current portion

 

5,854

 

18,036

Long-term leaseback obligations, current portion

 

63,316

 

24,515

Accounts payable, accrued liabilities & other current liabilities

 

66,204

 

41,472

 

 

228,824

 

239,685

LONG-TERM LIABILITIES

 

 

 

 

Long-term debt, net

 

1,039,900

 

1,187,345

Accumulated accrued interest, net of current portion

 

27,450

 

136,433

Long-term leaseback obligations, net

 

168,542

 

95,585

Other long-term liabilities

 

22,221

 

19,755

 

 

1,258,113

 

1,439,118

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

Common stock

 

206

 

204

Additional paid-in capital

 

760,869

 

755,390

Accumulated other comprehensive loss

 

(73,851)

 

(86,669)

Retained earnings

 

1,025,969

 

366,652

 

 

1,713,193

 

1,035,577

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$3,200,130

 

$2,714,380

DANAOS CORPORATION

Condensed Consolidated Statements of Cash Flows – Unaudited

(Expressed in thousands of United States dollars)

 

 

Three months

ended

 

Three months

ended

 

Six months

ended

 

Six months

ended

June 30,

June 30,

June 30,

June 30,

 

2021

 

2020

 

2021

 

2020

Operating Activities:

 

 

 

 

 

 

 

Net income

$372,837

 

$38,496

 

$669,617

 

$67,585

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

 

 

 

 

 

 

 

Depreciation

26,099

 

25,258

 

51,898

 

49,839

Amortization of deferred drydocking & special survey costs, finance cost, debt discount and other finance fees accrued

6,474

 

7,469

 

14,011

 

13,971

PIK interest

84

 

743

 

726

 

1,550

Gain on investments

(196,290)

 

 

(444,165)

 

Gain on debt extinguishment

(111,616)

 

 

(111,616)

 

Payments for drydocking/special survey

(248)

 

(8,530)

 

(1,155)

 

(13,380)

Amortization of deferred realized losses on cash flow interest rate swaps

903

 

903

 

1,796

 

1,806

Equity (income)/loss on investments

(2,162)

 

(1,720)

 

(3,965)

 

(3,265)

Stock based compensation

570

 

298

 

5,479

 

596

Accounts receivable

231

 

(4,631)

 

444

 

(5,407)

Other assets, current and non-current

644

 

1,200

 

1,646

 

(689)

Accounts payable and accrued liabilities

7,068

 

3,594

 

10,346

 

8,937

Other liabilities, current and long-term

(109)

 

(1,639)

 

(2,319)

 

(4,675)

Net Cash provided by Operating Activities

104,485

 

61,441

 

192,743

 

116,868

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

Vessel additions and advances

(575)

 

(56,500)

 

(1,811)

 

(98,746)

Investments

143,485

 

 

145,877

 

(75)

Net Cash provided by/(used in) Investing Activities

142,910

 

(56,500)

 

144,066

 

(98,821)

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

Proceeds from sale-leaseback of vessels

135,000

 

139,080

 

135,000

 

139,080

Proceeds from long-term debt

810,925

 

23,400

 

1,105,311

 

23,400

Payments of leaseback obligations

(15,259)

 

(138,189)

 

(21,175)

 

(142,065)

Debt repayment

(1,223,176)

 

(32,539)

 

(1,295,025)

 

(65,176)

Dividends paid

(10,298)

 

 

(10,298)

 

Payments of accumulated accrued interest

(2,656)

 

(7,173)

 

(7,358)

 

(15,502)

Finance costs

(10,021)

 

(1,584)

 

(14,509)

 

(11,999)

Net Cash used in Financing Activities

(315,485)

 

(17,005)

 

(108,054)

 

(72,262)

Net Increase/(Decrease) in cash and cash equivalents

(68,090)

 

(12,064)

 

228,755

 

(54,215)

Cash and cash equivalents, beginning of period

362,508

 

97,019

 

65,663

 

139,170

Cash and cash equivalents, end of period

$294,418

 

$84,955

 

$294,418

 

$84,955

DANAOS CORPORATION

Reconciliation of Net Income to Adjusted EBITDA – Unaudited

(Expressed in thousands of United States dollars)

 

 

Three months

ended

 

Three months

ended

 

Six months

ended

 

Six months

ended

June 30,

June 30,

June 30,

June 30,

 

2021

 

2020

 

2021

 

2020

Net income

$372,837

 

$38,496

 

$669,617

 

$67,585

Depreciation

26,099

 

25,258

 

51,898

 

49,839

Amortization of deferred drydocking & special survey costs

2,545

 

2,941

 

5,054

 

5,251

Amortization of deferred finance costs, debt discount and other finance fees accrued

3,929

 

3,998

 

8,957

 

8,190

Amortization of deferred realized losses on interest rate swaps

903

 

903

 

1,796

 

1,806

Interest income

(9,531)

 

(1,588)

 

(11,509)

 

(3,302)

Interest expense

14,290

 

9,767

 

24,507

 

22,026

Gain on investments

(196,290)

 

 

(444,165)

 

Gain on debt extinguishment

(111,616)

 

 

(111,616)

 

Stock based compensation

570

 

298

 

5,479

 

596

Adjusted EBITDA(1)

$103,736

 

$80,073

 

$200,018

 

$151,991

1)

Adjusted EBITDA represents net income before interest income and expense, depreciation, amortization of deferred drydocking & special survey costs, amortization of deferred finance costs, debt discount and other finance fees accrued, amortization of deferred realized losses on interest rate swaps, gain on investments, gain on debt extinguishment and stock based compensation. 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 operating performance 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. 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, 2021 and 2020. 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.

 

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