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Danaos Corporation Reports Second Quarter and Half Year Results for the Period Ended June 30, 2022

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, 2022.

Highlights for the Second Quarter and Half Year Ended June 30, 2022:

  • Adjusted net income1 of $157.1 million, or $7.59 per share, for the three months ended June 30, 2022 compared to $68.9 million, or $3.34 per share, for the three months ended June 30, 2021, an increase of 128.0%. Adjusted net income1 of $392.4 million, or $18.95 per share, for the six months ended June 30, 2022 compared to $126.9 million, or $6.17 per share, for the six months ended June 30, 2021, an increase of 209.2%.
  • Liquidity in cash and marketable securities was $588.2 million as of June 30, 2022.
  • Operating revenues of $250.9 million for the three months ended June 30, 2022 compared to $146.4 million for the three months ended June 30, 2021, an increase of 71.4%. Operating revenues of $480.8 million for the six months ended June 30, 2022 compared to $278.5 million for the six months ended June 30, 2021, an increase of 72.6%.
  • Adjusted EBITDA1 of $192.1 million for the three months ended June 30, 2022 compared to $103.7 million for the three months ended June 30, 2021, an increase of 85.2%. Adjusted EBITDA1 of $461.6 million for the six months ended June 30, 2022 compared to $200.0 million for the six months ended June 30, 2021, an increase of 130.8%.
  • Total contracted cash operating revenues were $2.3 billion as of June 30, 2022 and remaining average contracted charter duration was 3.6 years, weighted by aggregate contracted charter hire.
  • Contracted operating days charter coverage currently stands at 99.3% for 2022 and 79.6% for 2023 while for the next 12 months, charter coverage stands at 91.7%.
  • During the three months ended June 30, 2022, we made early prepayment of $434.1 million of debt and lease indebtedness and realized a $22.9 million gain associated with this debt extinguishment. As a result, as of June 30, 2022, Net Debt was $679.7 million, Net Debt / LTM Adjusted EBITDA was 0.9x, while 15 of the Company’s vessels are debt-free currently.
  • As of the end of July 2022, we had repurchased 409,200 shares of our common stock in the open market for $25.1 million, under our share repurchase program of up to $100 million announced in June 2022.
  • Danaos has declared a dividend of $0.75 per share of common stock for the second quarter of 2022, which is payable on August 29, 2022 to stockholders of record as of August 17, 2022.

Three and Six Months Ended June 30, 2022

Financial Summary – Unaudited

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

 

Three months

 

Three months

 

Six months

 

Six months

ended June 30,

 

ended June 30,

 

ended June 30,

 

ended June 30,

 

2022

 

2021

 

2022

 

2021

Operating revenues

$250,923

 

$146,434

 

$480,824

 

$278,552

Net income

$8,224

 

$372,837

 

$339,689

 

$669,617

Adjusted net income1

$157,110

 

$68,860

 

$392,407

 

$126,871

Earnings per share, diluted

$0.40

 

$18.10

 

$16.40

 

$32.57

Adjusted earnings per share, diluted1

$7.59

 

$3.34

 

$18.95

 

$6.17

Diluted weighted average number of shares (in thousands)

20,708

 

20,599

 

20,712

 

20,557

Adjusted EBITDA1

$192,148

 

$103,736

 

$461,632

 

$200,018

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 business model continued to generate strong results in the second quarter, more than doubling our adjusted net income compared with a year ago. Given our fixed charter coverage over the next 12 months, we expect these metrics to improve further. At the same time, however, we are closely following macroeconomic conditions and the potential impacts to our industry.

A confluence of factors, including high energy prices, inflation, and the effects of the war in Ukraine, will likely result in slowing economic growth and negatively impact trade volumes. On the other hand, persistent inefficiencies on the shore side of the supply chain and Covid resurgence in China are keeping the vessel utilization high with increased waiting times in port. Additionally, the increase in fuel cost will likely prompt liner companies to reduce vessel sailing speeds as soon as vessels are available, however we do not expect this to happen until the 2nd quarter of 2023 and onwards. Environmental regulations, particularly the CII compliance, is leading liner companies to redesign their operating loops with lower speeds to ensure that they do not breach requirements and to also assure their customers that they are actively reducing CO2 emissions. These mitigating factors point to a weakening, rather than a collapse, of the market that we expect will result in rates much higher than pre-pandemic levels. For the time being charter rates are holding firm as the available tonnage is very scarce.

The company is very well positioned with a strong liquidity position and a balance sheet that can sustain a severe deterioration of economic conditions. This is reflected in the upgrades by both S&P and Moody’s to the highest level among public shipping companies, validating our efforts to create a leader in our sector.

We are also insulated from rising interest rates as we have reduced our floating rate debt to a level nearly equal to our cash and marketable securities. We will continue to use our balance sheet opportunistically, with a continued focus on state-of-the-art newbuildings with environmental profiles desired by our liner customers which also gives us great confidence about the future of our already ordered six methanol-ready green newbuildings.

We are also continuing to return value to our shareholders through our dividend and our share buyback program, which we have used to reduce our number of outstanding shares by approximately two percent.”

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

During the three months ended June 30, 2022, Danaos had an average of 71.0 containerships compared to 60.0 containerships during the three months ended June 30, 2021. Our fleet utilization for the three months ended June 30, 2022 was 99.9% compared to 99.1% for the three months ended June 30, 2021.

Our adjusted net income amounted to $157.1 million, or $7.59 per share, for the three months ended June 30, 2022 compared to $68.9 million, or $3.34 per share, for the three months ended June 30, 2021. We have adjusted our net income in the three months ended June 30, 2022 for the change in fair value of our investment in ZIM Integrated Shipping Services Ltd. (“ZIM”) of $168.6 million, gain on debt extinguishment of $22.9 million and a non-cash fees amortization of $3.2 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The $88.2 million increase in adjusted net income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 is attributable mainly to a $104.5 million increase in operating revenues and recognition of $13.9 million in dividends from ZIM (net of withholding taxes), which were partially offset by a $20.2 million increase in total operating expenses, a $7.8 million increase in net finance expenses and a $2.2 million decrease in our equity income from our investment in Gemini Shipholdings Corporation (“Gemini”) following our acquisition and full consolidation of Gemini since July 1, 2021.

On a non-adjusted basis, our net income amounted to $8.2 million, or $0.40 earnings per diluted share, for the three months ended June 30, 2022 compared to net income of $372.8 million, or $18.10 earnings per diluted share, for the three months ended June 30, 2021. Our net income for the three months ended June 30, 2022 includes a total loss on our investment in ZIM of $154.7 million (net of withholding taxes on dividend) and a gain on debt extinguishment of $22.9 million.

Operating Revenues

Operating revenues increased by 71.4%, or $104.5 million, to $250.9 million in the three months ended June 30, 2022 from $146.4 million in the three months ended June 30, 2021.

Operating revenues for the three months ended June 30, 2022 reflect:

  • a $62.0 million increase in revenues in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 mainly as a result of higher charter rates;
  • a $23.9 million increase in revenues in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to the incremental revenue generated by newly acquired vessels;
  • a $2.9 million increase in revenue in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to higher non-cash revenue recognition in accordance with US GAAP; and
  • a $15.7 million increase in revenues in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to amortization of assumed time charters.

Vessel Operating Expenses

Vessel operating expenses increased by $7.7 million to $40.6 million in the three months ended June 30, 2022 from $32.9 million in the three months ended June 30, 2021, primarily as a result of the increase in the average number of vessels in our fleet and an increase in the average daily operating cost for vessels on time charter to $6,463 per vessel per day for the three months ended June 30, 2022 compared to $6,241 per vessel per day for the three months ended June 30, 2021. The average daily operating cost increased mainly due to the COVID-19 related increase in crew remuneration and increased insurance premiums between the three months ended June 30, 2022, compared to the three months ended June 30, 2021. Management believes that our daily operating costs remain 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 29.5%, or $7.7 million, to $33.8 million in the three months ended June 30, 2022 from $26.1 million in the three months ended June 30, 2021 due to recent acquisitions of 11 vessels.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $0.7 million to $3.2 million in the three months ended June 30, 2022 from $2.5 million in the three months ended June 30, 2021.

General and Administrative Expenses

General and administrative expenses remained stable at $7.1 million in each of the three months ended June 30, 2022 and June 30, 2021.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $4.4 million to $9.4 million in the three months ended June 30, 2022 from $5.0 million in the three months ended June 30, 2021 primarily as a result of the increase in commissions due to the increase in revenue per vessel and the increase in the average number of vessels in our fleet.

Interest Expense and Interest Income

Interest expense decreased by 11.5%, or $2.1 million, to $16.1 million in the three months ended June 30, 2022 from $18.2 million in the three months ended June 30, 2021. The decrease in interest expense is a combined result of:

  • a $2.2 million decrease in interest expense due to a decrease in our average indebtedness by $311.1 million between the two periods (average indebtedness of $1,154.2 million in the three months ended June 30, 2022, compared to average indebtedness of $1,465.3 million in the three months ended June 30, 2021), which was partially offset by an increase in our debt service cost by 0.44%, mainly as a result of increased Libor rates;
  • a $0.7 million decrease in the amortization of deferred finance costs and debt discount;
  • a $0.7 million decrease in interest expense due to capitalized interest on our vessels under construction in the three months ended June 30, 2022 compared to none in the three months ended June 30, 2021; and
  • a $1.5 million reduction in the 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 decreased. In May 2022, we fully repaid the facility related to the 2018 accumulated accrued interest. The remaining accumulated accrued interest of $26.9 million was recognized in gain on debt extinguishment on the repayment date.

During the three months ended June 30, 2022, we reduced debt and lease indebtedness by $467.8 million mainly as a result of $434.1 million of early debt and lease repayments and recognized a $22.9 million gain related to this early debt extinguishment. On the other hand, our indebtedness increased by $130 million following consummation of the loan agreement to finance our six 5,466 TEU vessels that were acquired in 2021.

As of June 30, 2022, our outstanding debt, gross of deferred finance costs, was $885.1 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $105.8 million. These balances compare to debt of $1,165.9 million and a leaseback obligation of $237.2 million, gross of deferred finance costs, as of June 30, 2021.

Interest income decreased by $9.4 million to $0.1 million in the three months ended June 30, 2022 compared to $9.5 million in the three months ended June 30, 2021 mainly as a result of full collection of accrued interest on ZIM and HMM bonds, which were redeemed by the issuers thereof, in the year 2021.

Gain/(loss) on investments

The loss on investments of $152.4 million in the three months ended June 30, 2022 consists of the loss in fair value of our shareholding interest in ZIM of $168.6 million, which was offset in part by the dividends recognized on ZIM ordinary shares of $16.2 million. In April 2022, we sold 1,500,000 of these ZIM ordinary shares resulting in proceeds to us of $85.3 million. Our remaining shareholding interest of 5,686,950 ordinary shares of ZIM has been fair valued at $268.6 million as of June 30, 2022, based on the closing price of ZIM’s ordinary shares on the NYSE on that date.

Gain on debt extinguishment

The gain on debt extinguishment of $22.9 million in the three months ended June 30, 2022, which related to our early extinguishment of debt, decreased compared to $111.6 million in the three months ended June 30, 2021, which resulted from our debt refinancing on April 12, 2021.

Equity income on investments

Equity income on investments in Gemini decreased to nil in the three months ended June 30, 2022 compared to $2.2 million in the three months ended June 30, 2021 following our acquisition and full consolidation of Gemini since July 1, 2021.

Other finance expenses

Other finance expenses decreased by $0.3 million to $0.3 million in the three months ended June 30, 2022 compared to $0.6 million in the three months ended June 30, 2021.

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, 2022 and June 30, 2021.

Other income, net

Other income, net was $0.4 million in the three months ended June 30, 2022 compared to $0.2 million in the three months ended June 30, 2021.

Income taxes

Income taxes were $2.3 million in the three months ended June 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares compared to no income tax in the three months ended June 30, 2021.

Adjusted EBITDA

Adjusted EBITDA increased by 85.2%, or $88.4 million, to $192.1 million in the three months ended June 30, 2022 from $103.7 million in the three months ended June 30, 2021. As outlined above, the increase is mainly attributable to a $88.8 million increase in operating revenues (net of $15.7 million amortization of assumed time charters) and recognition of a $13.9 million dividend from ZIM (net of withholding taxes) in the three months ended June 30, 2022, which were partially offset by a $12.1 million increase in total operating expenses and a $2.2 million decrease in our equity income from our investment in Gemini following our acquisition and full consolidation of Gemini since July 1, 2021. Adjusted EBITDA for the three months ended June 30, 2022 is adjusted for a $166.4 million change in fair value of the investment in ZIM and dividend withholding taxes, a gain on debt extinguishment of $22.9 million and stock-based compensation of $0.1 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

During the six months ended June 30, 2022, Danaos had an average of 71.0 containerships compared to 60.0 containerships during the six months ended June 30, 2021. Our fleet utilization for the six months ended June 30, 2022 was 98.7% compared to 98.9% for the six months ended June 30, 2021.

Our adjusted net income amounted to $392.4 million, or $18.95 per share, for the six months ended June 30, 2022 compared to $126.9 million, or $6.17 per share, for the six months ended June 30, 2021. We have adjusted our net income in the six months ended June 30, 2022 for the change in fair value of our investment in ZIM of $69.1 million, gain on debt extinguishment of $22.9 million and a non-cash fees amortization of $6.6 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The $265.5 million increase in adjusted net income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 is attributable mainly to a $202.3 million increase in operating revenues and recognition of $123.9 million in dividends from ZIM (net of withholding taxes), which were partially offset by a $39.2 million increase in total operating expenses, a $13.6 million increase in net finance expenses, a $4.0 million decrease in our equity income from our investment in Gemini following our acquisition and full consolidation of Gemini since July 1, 2021 and a partial collection of common benefit claim of $3.9 million from Hanjin Shipping in the six months ended June 30, 2021.

On a non-adjusted basis, our net income amounted to $339.7 million, or $16.40 earnings per diluted share, for the six months ended June 30, 2022 compared to net income of $669.6 million, or $32.57 earnings per diluted share, for the six months ended June 30, 2021. Our net income for the six months ended June 30, 2022 includes a total gain on our investment in ZIM of $54.8 million (net of withholding taxes on dividend) and a gain on debt extinguishment of $22.9 million.

Operating Revenues

Operating revenues increased by 72.6%, or $202.3 million, to $480.8 million in the six months ended June 30, 2022 from $278.5 million in the six months ended June 30, 2021.

Operating revenues for the six months ended June 30, 2022 reflect:

  • a $110.9 million increase in revenues in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 mainly as a result of higher charter rates;
  • a $44.7 million increase in revenues in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to the incremental revenue generated by newly acquired vessels;
  • a $14.3 million increase in revenue in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to higher non-cash revenue recognition in accordance with US GAAP; and
  • a $32.4 million increase in revenues in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to amortization of assumed time charters.

Vessel Operating Expenses

Vessel operating expenses increased by $15.7 million to $79.7 million in the six months ended June 30, 2022 from $64.0 million in the six months ended June 30, 2021, primarily as a result of the increase in the average number of vessels in our fleet and an increase in the average daily operating cost for vessels on time charter to $6,385 per vessel per day for the six months ended June 30, 2022 compared to $6,098 per vessel per day for the six months ended June 30, 2021. The average daily operating cost increased mainly due to the COVID-19 related increase in crew remuneration and increased insurance premiums between the six months ended June 30, 2022, compared to the six months ended June 30, 2021. Management believes that our daily operating costs remain 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 29.3%, or $15.2 million, to $67.1 million in the six months ended June 30, 2022 from $51.9 million in the six months ended June 30, 2021 due to recent acquisitions of 11 vessels.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $0.9 million to $5.9 million in the six months ended June 30, 2022 from $5.0 million in the six months ended June 30, 2021.

General and Administrative Expenses

General and administrative expenses decreased by $3.5 million to $14.5 million in the six months ended June 30, 2022, from $18.0 million in the six months ended June 30, 2021. The decrease was mainly attributable to decreased stock-based compensation.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $7.4 million to $16.6 million in the six months ended June 30, 2022 from $9.2 million in the six months ended June 30, 2021 primarily as a result of the increase in commissions due to the increase in revenue per vessel and the increase in the average number of vessels in our fleet.

Interest Expense and Interest Income

Interest expense decreased by 0.3%, or $0.1 million, to $33.2 million in the six months ended June 30, 2022 from $33.3 million in the six months ended June 30, 2021. The decrease in interest expense is a combined result of:

  • a $4.3 million decrease in interest expense due to a decrease in our average indebtedness by $284.6 million between the two periods (average indebtedness of $1,254.9 million in the six months ended June 30, 2022, compared to average indebtedness of $1,539.5 million in the six months ended June 30, 2021), which was partially offset by an increase in our debt service cost by 0.31%, mainly as a result of increased Libor rates;
  • a $2.3 million decrease in the amortization of deferred finance costs and debt discount;
  • a $0.7 million decrease in interest expense due to capitalized interest on our vessels under construction in the six months ended June 30, 2022 compared to none in the six months ended June 30, 2021; and
  • a $7.2 million reduction in the 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 decreased. In May 2022, we fully repaid the facility related to the 2018 accumulated accrued interest. The remaining accumulated accrued interest of $26.9 million was recognized in gain on debt extinguishment on the repayment date.

During the six months ended June 30, 2022, we reduced debt and lease indebtedness by $507.6 million mainly as a result of $434.1 million of early debt and lease repayments and recognized a $22.9 million gain related to this early debt extinguishment. On the other hand, our indebtedness increased by $130 million following consummation of the loan agreement to finance our six 5,466 TEU vessels that were acquired in 2021.

As of June 30, 2022, our outstanding bank debt, gross of deferred finance costs, was $885.1 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $105.8 million. These balances compare to bank debt of $1,165.9 million and a leaseback obligation of $237.2 million, gross of deferred finance costs, as of June 30, 2021.

Interest income decreased by $11.4 million to $0.1 million in the six months ended June 30, 2022 compared to $11.5 million in the six months ended June 30, 2021, mainly as a result of full collection of accrued interest on ZIM and HMM bonds, which were redeemed by the issuers thereof, in the year 2021.

Gain/(loss) on investments

The gain on investments of $69.3 million in the six months ended June 30, 2022 consists of the change in fair value of our shareholding interest in ZIM of $69.1 million and dividends recognized on ZIM ordinary shares of $138.4 million. In April 2022, we sold 1,500,000 of these ZIM ordinary shares resulting in proceeds to us of $85.3 million. Our remaining shareholding interest of 5,686,950 ordinary shares of ZIM has been fair valued at $268.6 million as of June 30, 2022, based on the closing price of ZIM’s ordinary shares on the NYSE on that date.

Gain on debt extinguishment

The gain on debt extinguishment of $22.9 million in the six months ended June 30, 2022, which related to our early extinguishment of debt, decreased compared to $111.6 million in the six months ended June 30, 2021, which resulted from our debt refinancing on April 12, 2021.

Equity income on investments

Equity income on investments in Gemini decreased to nil in the six months ended June 30, 2022 compared to $4.0 million in the six months ended June 30, 2021 following our acquisition and full consolidation of Gemini since July 1, 2021.

Other finance expenses

Other finance expenses decreased by $0.1 million to $0.9 million in the six months ended June 30, 2022 compared to $1.0 million in the six months ended June 30, 2021.

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, 2022 and June 30, 2021.

Other income, net

Other income, net was $0.9 million in the six months ended June 30, 2022 compared to $4.1 million in the six months ended June 30, 2021. The decrease was mainly due to the collection from Hanjin Shipping of $3.9 million as a partial payment of common benefit claim and interest in the six months ended June 30, 2021.

Income taxes

Income taxes were $14.5 million in the six months ended June 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares and compared to no income tax in the six months ended June 30, 2021.

Adjusted EBITDA

Adjusted EBITDA increased by 130.8%, or $261.6 million, to $461.6 million in the six months ended June 30, 2022 from $200.0 million in the six months ended June 30, 2021. As outlined above, the increase is mainly attributable to a $169.9 million increase in operating revenues (net of $32.4 million amortization of assumed time charters) and a recognition of a $123.9 million dividend from ZIM (net of withholding taxes) in the six months ended June 30, 2022, which were partially offset by a $24.3 million increase in total operating expenses, a $4.0 million decrease in our equity income from our investment in Gemini following our acquisition and full consolidation of Gemini since July 1, 2021 and a partial collection of common benefit claim of $3.9 million from Hanjin Shipping in the six months ended June 30, 2021. Adjusted EBITDA for the six months ended June 30, 2022 is adjusted for a $54.6 million change in fair value of the investment in ZIM and dividend withholding taxes, a gain on debt extinguishment of $22.9 million and stock based compensation of $0.2 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 $0.75 per share of common stock for the second quarter of 2022, which is payable on August 29, 2022 to stockholders of record as of August 17, 2022.

Recent Developments

As of the end of July 2022, we had repurchased 409,200 shares of our common stock in the open market for $25.1 million, under our share repurchase program of up to $100 million announced in June 2022.

Subsequent to June 30, 2022 we terminated, as planned, the finance lease liability related to our vessels Suez Canal and Kota Lima and assumed full ownership of these vessels. As a result, 15 of our vessels are currently debt-free.

Conference Call and Webcast

On Tuesday, August 2, 2022 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 9, 2022 by dialing 1 877 344 7529 (US Toll Free Dial In) or 1-412-317-0088 (Standard International Dial In) and using 2538355# 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 71 containerships aggregating 436,589 TEUs and 6 under construction containerships aggregating 46,200 TEUs ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. 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 constructing our contracted newbuilding vessels, 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, including the conflict in Ukraine and related sanctions, 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 8 unscheduled off-hire days in the three months ended June 30, 2022. 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

2022

2022

Total

Ownership Days

6,390

6,461

12,851

Less Off-hire Days:

Scheduled Off-hire Days

(148)

-

(148)

Other Off-hire Days

(16)

(8)

(24)

Operating Days

6,226

6,453

12,679

Vessel Utilization

97.4%

99.9%

98.7%

 

Operating Revenues (in '000s of US Dollars)

$229,901

$250,923

$480,824

Average Gross Daily Charter Rate

$36,926

$38,885

$37,923

 

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

Fleet List

The following table describes in detail our fleet deployment profile as of July 31, 2022:

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

 

March 2023

Express Berlin

10,100

 

2011

 

June 2023

Express Athens

10,100

 

2011

 

March 2023

Le Havre

9,580

 

2006

 

June 2028

Pusan C

9,580

 

2006

 

May 2028

Bremen

9,012

 

2009

 

January 2028

C Hamburg

9,012

 

2009

 

January 2028

Niledutch Lion

8,626

 

2008

 

May 2026

Kota Manzanillo (ex Charleston)

8,533

 

2005

 

February 2026

Belita

8,533

 

2006

 

July 2026

CMA CGM Melisande

8,530

 

2012

 

June 2024

CMA CGM Attila

8,530

 

2011

 

October 2023

CMA CGM Tancredi

8,530

 

2011

 

November 2023

CMA CGM Bianca

8,530

 

2011

 

January 2024

CMA CGM Samson

8,530

 

2011

 

March 2024

America

8,468

 

2004

 

April 2028

Europe

8,468

 

2004

 

May 2028

Phoebe

8,463

 

2005

 

August 2026

CMA CGM Moliere

6,500

 

2009

 

March 2027

CMA CGM Musset

6,500

 

2010

 

September 2025

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

Catherine C

6,422

 

2001

 

November 2022

Leo C

6,422

 

2002

 

November 2022

Zim Savannah

6,402

 

2002

 

May 2024

Dimitra C

6,402

 

2002

 

January 2023

Suez Canal

5,610

 

2002

 

March 2023

Kota Lima

5,544

 

2002

 

November 2024

Wide Alpha

5,466

 

2014

 

March 2024

Stephanie C (ex Wide Bravo)

5,466

 

2014

 

June 2025

Maersk Euphrates

5,466

 

2014

 

April 2024

Wide Hotel

5,466

 

2015

 

May 2024

Wide India

5,466

 

2015

 

September 2025

Wide Juliet

5,466

 

2015

 

June 2023

Seattle C

4,253

 

2007

 

October 2024

Vancouver

4,253

 

2007

 

November 2024

Derby D

4,253

 

2004

 

January 2027

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

 

February 2023

Dalian

4,253

 

2009

 

November 2022

ZIM Luanda

4,253

 

2009

 

August 2025

Dimitris C

3,430

 

2001

 

November 2025

Express Black Sea

3,400

 

2011

 

January 2025

Express Spain

3,400

 

2011

 

January 2025

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

 

January 2025

Zebra

2,602

 

2001

 

November 2024

Amalia C

2,452

 

1998

 

January 2023

Artotina

2,524

 

2001

 

May 2025

Advance

2,200

 

1997

 

January 2025

Future

2,200

 

1997

 

December 2024

Sprinter

2,200

 

1997

 

December 2024

Stride

2,200

 

1997

 

January 2025

Progress C

2,200

 

1998

 

November 2024

Bridge

2,200

 

1998

 

December 2024

Highway

2,200

 

1998

 

August 2022

Vladivostok

2,200

 

1997

 

March 2025

Vessels under construction

 

 

 

 

 

Hull No. C7100-7

7,100

 

2024

 

 

Hull No. C7100-8

7,100

 

2024

 

 

Hull No. HN4009

8,000

 

2024

 

 

Hull No. HN4010

8,000

 

2024

 

 

Hull No. HN4011

8,000

 

2024

 

 

Hull No. HN4012

8,000

 

2024

 

 

(1) Earliest date charters could expire. Some charters include options for the charterer to extend their terms.

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,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

OPERATING REVENUES

$250,923

 

$146,434

 

$480,824

 

$278,552

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Vessel operating expenses

(40,579)

 

(32,940)

 

(79,743)

 

(64,018)

Depreciation & amortization

(36,955)

 

(28,644)

 

(73,034)

 

(56,952)

General & administrative

(7,136)

 

(7,130)

 

(14,527)

 

(18,025)

Other operating expenses

(9,443)

 

(4,966)

 

(16,632)

 

(9,194)

Income From Operations

156,810

 

72,754

 

296,888

 

130,363

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSES)

 

 

 

 

 

 

 

Interest income

120

 

9,531

 

121

 

11,509

Interest expense

(16,079)

(18,204)

(33,193)

(33,315)

Gain/(loss) on investments

(152,427)

196,290

69,290

444,165

Gain on debt extinguishment

22,939

111,616

22,939

111,616

Other finance expenses

(336)

(582)

(941)

(1,034)

Equity income on investments

-

 

2,162

 

-

 

3,965

Other income, net

362

 

173

 

861

 

4,144

Realized loss on derivatives

(903)

 

(903)

 

(1,796)

 

(1,796)

Total Other Income/(Expenses), net

(146,324)

 

300,083

 

57,281

 

539,254

Income Before Income Taxes

10,486

 

372,837

 

354,169

 

669,617

Income taxes

(2,262)

 

-

 

(14,480)

 

-

Net Income

$8,224

 

$372,837

 

$339,689

 

$669,617

EARNINGS PER SHARE

 

 

 

 

 

 

 

Basic earnings per share

$0.40

 

$18.32

 

$16.42

 

$32.95

Diluted earnings per share

$0.40

 

$18.10

 

$16.40

 

$32.57

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

20,689

 

20,354

20,693

 

20,323

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

20,708

 

20,599

20,712

20,557

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,

 

2022

 

2021

2022

 

2021

Net income

$8,224

 

$372,837

$339,689

 

$669,617

Change in fair value of investments

168,635

 

(196,290)

69,096

 

(444,165)

Gain on debt extinguishment

(22,939)

 

(111,616)

(22,939)

 

(111,616)

Amortization of financing fees, debt discount & finance fees accrued

3,190

 

3,929

6,561

 

8,957

Stock based compensation

-

 

-

-

 

4,078

Adjusted Net Income

$157,110

 

$68,860

$392,407

 

$126,871

Adjusted Earnings Per Share, diluted

$7.59

 

$3.34

$18.95

 

$6.17

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

20,708

 

20,599

20,712

��

20,557

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, 2022 and 2021. 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,

 

 

2022

 

2021

ASSETS

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash, cash equivalents and restricted cash

 

$332,573

 

$129,756

Accounts receivable, net

 

5,540

 

7,118

Other current assets

 

363,680

 

495,618

 

 

701,793

 

632,492

NON-CURRENT ASSETS

 

 

 

 

Fixed assets, net

 

2,876,866

 

2,941,093

Advances for vessels under construction

 

81,162

 

-

Deferred charges, net

 

15,605

 

11,801

Other non-current assets

 

62,677

 

41,739

 

 

3,036,310

 

2,994,633

TOTAL ASSETS

 

$3,738,103

 

$3,627,125

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Long-term debt, current portion

 

$71,500

 

$95,750

Accumulated accrued interest, current portion

 

-

 

6,146

Long-term leaseback obligations, current portion

 

46,285

 

85,815

Accounts payable, accrued liabilities & other current liabilities

 

218,291

 

131,596

 

 

336,076

 

319,307

LONG-TERM LIABILITIES

 

 

 

 

Long-term debt, net

 

790,270

 

1,017,916

Accumulated accrued interest, net of current portion

 

-

 

24,155

Long-term leaseback obligations, net

 

58,093

 

136,513

Other long-term liabilities

 

166,186

 

41,211

 

 

1,014,549

 

1,219,795

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

Common stock

 

205

 

207

Additional paid-in capital

 

759,723

 

770,676

Accumulated other comprehensive loss

 

(69,659)

 

(71,455)

Retained earnings

 

1,697,209

 

1,388,595

 

 

2,387,478

 

2,088,023

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$3,738,103

 

$3,627,125

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,

 

2022

 

2021

 

2022

 

2021

Operating Activities:

 

 

 

 

 

 

 

Net income

$8,224

 

$372,837

 

$339,689

 

$669,617

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

 

 

 

 

 

 

 

Depreciation and amortization of right-of-use assets

33,753

 

26,099

 

67,112

 

51,898

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

6,392

 

6,474

 

12,483

 

14,011

Amortization of assumed time charters

(15,713)

 

-

 

(32,364)

 

-

PIK interest

-

 

84

 

-

 

726

Loss/(gain) on investments

168,635

 

(196,290)

 

69,096

 

(444,165)

Gain on debt extinguishment

(22,939)

 

(111,616)

 

(22,939)

 

(111,616)

Payments for drydocking/special survey

(471)

 

(248)

 

(9,726)

 

(1,155)

Amortization of deferred realized losses on cash flow interest rate swaps

903

 

903

 

1,796

 

1,796

Equity income on investments

-

 

(2,162)

 

-

 

(3,965)

Stock based compensation

124

 

570

 

248

 

5,479

Accounts receivable

1,593

 

231

 

1,578

 

444

Other assets, current and non-current

89,987

 

644

 

(43,430)

 

1,646

Accounts payable and accrued liabilities

(800)

 

7,068

 

4,841

 

10,346

Other liabilities, current and long-term

231,326

 

(109)

 

232,094

 

(2,319)

Net Cash provided by Operating Activities

501,014

 

104,485

 

620,478

 

192,743

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

Vessel additions and advances for vessels under construction

(82,004)

 

(575)

 

(84,047)

 

(1,811)

Advances for sale of vessels

-

 

-

 

13,000

 

-

Investments

85,333

 

143,485

 

85,333

 

145,877

Net Cash provided by Investing Activities

3,329

 

142,910

 

14,286

 

144,066

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

Proceeds from long-term debt

127,725

 

810,925

 

127,725

 

1,105,311

Debt repayment

(358,825)

 

(1,223,176)

 

(383,125)

 

(1,295,025)

Proceeds from sale-leaseback of vessels

-

 

135,000

 

-

 

135,000

Payments of leaseback obligations

(104,394)

 

(15,259)

 

(120,687)

 

(21,175)

Dividends paid

(15,535)

 

(10,298)

 

(31,070)

 

(10,298)

Repurchase of common stock

(6,325)

 

-

 

(6,325)

 

-

Payments of accumulated accrued interest

(1,938)

 

(2,656)

 

(3,373)

 

(7,358)

Finance costs

(11,142)

 

(10,021)

 

(15,092)

 

(14,509)

Net Cash used in Financing Activities

(370,434)

 

(315,485)

 

(431,947)

 

(108,054)

Net increase/(decrease) in cash, cash equivalents and restricted cash

133,909

 

(68,090)

 

202,817

 

228,755

Cash, cash equivalents and restricted cash, beginning of period

198,664

 

362,508

 

129,756

 

65,663

Cash, cash equivalents and restricted cash, end of period

$332,573

 

$294,418

 

$332,573

 

$294,418

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,

 

2022

 

2021

 

2022

 

2021

Net income

$8,224

 

$372,837

 

$339,689

 

$669,617

Depreciation and amortization of right-of-use assets

33,753

 

26,099

 

67,112

 

51,898

Amortization of deferred drydocking & special survey costs

3,202

 

2,545

 

5,922

 

5,054

Amortization of assumed time charters

(15,713)

 

-

 

(32,364)

 

-

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

3,190

 

3,929

 

6,561

 

8,957

Amortization of deferred realized losses on interest rate swaps

903

 

903

 

1,796

 

1,796

Interest income

(120)

 

(9,531)

 

(121)

 

(11,509)

Interest expense

12,889

 

14,290

 

26,632

 

24,507

Income taxes

2,262

 

-

 

14,480

 

-

(Gain)/loss on investments and dividend withholding taxes

166,373

(196,290)

54,616

(444,165)

Gain on debt extinguishment

(22,939)

(111,616)

(22,939)

(111,616)

Stock based compensation

124

 

570

 

248

 

5,479

Adjusted EBITDA(1)

$192,148

 

$103,736

 

$461,632

 

$200,018

1)

Adjusted EBITDA represents net income before interest income and expense, taxes other than withholding taxes on dividend, depreciation, amortization of deferred drydocking & special survey costs, amortization of assumed time charters, 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, 2022 and 2021. 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.

 

Contacts

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

Rose & Company

New York

Tel. 212-359-2228

E-Mail: danaos@rosecoglobal.com

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