Danaos, Q2 and H1 results

Danaos Corporation (“Danaos”), one of the world’s largest independent owners of containerships, today reported unaudited results for the period ended June 30, 2018.

Highlights for the Second Quarter and Half Year Ended June 30, 2018:

• On August 10, 2018, we consummated the agreement reached with certain of our lenders on June 19, 2018 for the refinancing of approximately $2.2 billion of our debt maturing on December 31, 2018, reducing our debt by approximately $551 million, resetting financial and other covenants, modifying interest rates and amortization profiles and extending debt maturities by approximately five years to December 31, 2023. In connection with this refinancing, we issued approximately 99.3 million shares of common stock to certain of our lenders. See “Debt Refinancing”.
• Adjusted net income[1] of $29.2 million, or $0.27 per share, for the three months ended June 30, 2018 compared to $29.0 million, or $0.26 per share, for the three months ended June 30, 2017, an increase of 0.7%. Adjusted net income¹ of $57.1 million, or $0.52 per share, for the six months ended June 30, 2018 compared to $53.6 million, or $0.49 per share, for the six months ended June 30, 2017, an increase of 6.5%.
• Operating revenues of $113.5 million for the three months ended June 30, 2018 compared to $113.9 million for the three months ended June 30, 2017, a decrease of 0.4%. Operating revenues of $225.3 million for the six months ended June 30, 2018 compared to $224.0 million for the six months ended June 30, 2017, an increase of 0.6%.
• Adjusted EBITDA ¹ of $78.3 million for the three months ended June 30, 2018 compared to $78.1 million for the three months ended June 30, 2017, an increase of 0.3%. Adjusted EBITDA¹ of $154.9 million for the six months ended June 30, 2018 compared to $150.6 million for the six months ended June 30, 2017, an increase of 2.9%.
• Total contracted operating revenues were $1.6 billion as of June 30, 2018, with charters extending through 2028 and remaining average contracted charter duration of 5.3 years, weighted by aggregate contracted charter hire.
• Charter coverage of 87% for the next 12 months based on current operating revenues and 77% in terms of contracted operating days.

Danaos’ CEO Dr. John Coustas commented:

“Following the successful completion of our debt re-financing, the Company’s capital structure has been strengthened by a significant debt reduction of approximately $551 million, while financial covenants have been amended and the maturities have been extended by more than 5 years until the end of 2023. We are currently fully compliant with all terms of our debt agreements and the Company is now free to resume its pursuit of growth opportunities with the goal of creating value for its shareholders.

The Company continued to achieve strong financial results in the second quarter of 2018. Adjusted net income of $29.2 million for the quarter was slightly higher when compared to $29 million for the second quarter of 2017.

The charter market, showed signs of improvement in the second quarter, but has softened by about 10 – 15% on average across all segments since June.  Larger vessels have recorded slightly higher percentage reductions as they had outpaced the market average. The market is very skeptical of trade developments and the recently announced new tariffs on Chinese imports. At the same time uncertainty discourages new ordering, which is positive for the medium to long-term health of the charter market as liner companies are refraining from making substantial commitments until the outlook becomes clearer. There is interest on the new regulations and the question of scrubbers and we expect this to play out over the next few months.

We are of course largely insulated from the softening charter market since we maintain high charter contract coverage of 87% for the next 12 months based on current operating revenues and 77% in terms of contracted operating days.

Danaos continues to be a leader in the container shipping industry as a result of our intense focus on continuously enhancing our operations and leveraging technical innovation to provide the highest quality service to our customers. Our industry has undergone significant changes during the past few years, and with the improved capital structure contemplated by our comprehensive re-financing agreement, we are well positioned to take advantage of the growth opportunities in the container sector and create value for our shareholders.”

Three months ended June 30, 2018 compared to the three months ended June 30, 2017

During the three months ended June 30, 2018 and June 30, 2017, Danaos had an average of 55 containerships. Our fleet utilization for the three months ended June 30, 2018 was 96.1% compared to 97.9% for the three months ended June 30, 2017. The fleet utilization excluding the off charter days of the vessels that were previously chartered to Hanjin Shipping (“Hanjin”) was 98.8% in the three months ended June 30, 2017.

Our adjusted net income amounted to $29.2 million, or $0.27 per share, for the three months ended June 30, 2018 compared to $29.0 million, or $0.26 per share, for the three months ended June 30, 2017. We have adjusted our net income in the three months ended June 30, 2018 for refinancing related professional fees of $20.1 million and a non-cash amortization charge of $3.2 million for fees related to our 2011 comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees). Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $0.2 million in adjusted net income for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 is attributable to a $1.8 million decrease in total operating expenses, a $0.5 million increase in other income and a $0.1 million operating performance improvement on equity investments, which were partially offset by a $0.4 million decrease in operating revenues and a $1.8 million increase in net finance expenses.

On a non-adjusted basis, our net income amounted to $5.8 million, or $0.05 per share, for the three months ended June 30, 2018 compared to net income of $20.2 million, or $0.18 per share, for the three months ended June 30, 2017.

Read the full report here.

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