-- Adjusted net income(1) of $7.6 million or $0.14 per share and $19.9
million or $0.36 per share for the quarter and the half year ended
June 30, 2010, respectively.
-- Operating revenues of $84.9 million and $164.6 million for the quarter
and the half year ended June 30, 2010, respectively.
-- Adjusted EBITDA(1) of $36.6 and $75.2 million for the quarter and the
half year ended June 30, 2010, respectively.
(1) Adjusted net income, adjusted earnings per share and adjusted EBITDA
are non-GAAP measures, adjusted for non-cash changes in fair value of
derivatives, impairment loss and gain on sale of vessels. Refer to the last
page of this earnings release for reconciliation of net (loss)/income to
adjusted net income and net (loss)/income to adjusted EBITDA.
Three and Six Months Ended June 30, 2010
Financial Summary
(Expressed in thousands of United States dollars, except per share
amounts):
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
---------- ----------- ---------- -----------
2010 2009 2010 2009
---------- ----------- ---------- -----------
(unaudited)
Net (loss)/income $ (14,665) $ 15,854 $ (94,430) $ 35,899
Adjusted net income $ 7,617 $ 15,351 $ 19,895 $ 34,815
(Losses)/earnings per share $ (0.27) $ 0.29 $ (1.73) $ 0.66
Adjusted earnings per share $ 0.14 $ 0.28 $ 0.36 $ 0.64
Danaos' CEO Dr. John Coustas commented:
During the second quarter of 2010, the recovery of the box trades continued
strongly. The continued increases in demand, leading to the summer peak
season, have created box and vessel shortages. All liner companies have
reported strong results. Increased demand, combined with continued slow
steaming, has brought idle tonnage to lower than 2% of the world fleet.
Our financial results for the period, adjusted for non-cash changes in fair
value of derivatives was of $7.6 million. Operating revenues were up by
7.3% compared to the same quarter of 2009. At the same time, our efforts
resulted in a reduction in daily operating costs for the vessels.
During the second quarter we took delivery of three newbuildings; the CMA
CGM Nerval and the YM Mandate, each a 6,500 TEU vessel, and the 3,400 TEU
Hanjin Buenos Aires. Since the beginning of the year, we have taken
delivery of 8 vessels which all have commenced their long term charters.
During the second quarter, we rechartered two of our older vessels and
since then we were also able to successfully recharter six more vessels for
approximately one year each.
The second quarter was particularly important for Danaos because it led to
the last step of a long process to receiving commitments from our existing
commercial lenders, which secured additional financing and achieved for
Danaos deferral in amortization on our existing indebtedness.
Further, during August we successfully raised $200 million through a
private placement of an additional 54 million shares of our common stock
issued at $3.70 per share, which represented a 5.9% discount to the 30-day
volume weighted average share price of $3.93 per share and a 6.6% discount
to the 60-day volume weighted average share price of $3.96 per share at the
time of the transaction. As we have already publicly announced, the
purchasers of the common stock include Danaos' largest stockholder, and
members of my immediate family which together invested over $100 million.
Additional investors include a private company affiliated with George
Economou, the chief executive officer of DryShips, members of the executive
management of Danaos, as well as other investors.
With the bank commitments and the additional equity in hand, as well as the
vendor financing for certain of our newbuilding vessels and the export
agency financing relative to some of our vessels on order in China, we will
have secured funding for all of our vessel orders both on a pre-delivery
and a post-delivery basis.
This process has led to lifting the uncertainties regarding our capital
expenditure funding and has set the ground for significantly growing our
company in a steadily improving industry environment. Under the
circumstances, during the next two years we are looking at a very strong
growth of our fleet when taking into consideration our order-book. We will
grow by 33% in number of large containerships and an impressive 68% in
carrying capacity all of which is already chartered. This growth in the
next 24 months will further secure our position as a market leader and
transform Danaos' cash flows by considerably increasing our cash generating
capacity.
Three months ended June 30, 2010 compared to the three months ended June
30, 2009
During the quarter ended June 30, 2010, Danaos had an average of 43.4
containerships compared to 40.1 containerships for the same period in 2009.
During the second quarter of 2010, we took delivery of three vessels, the
CMA CGM Nerval on May 17, 2010, the YM Mandate on May 19, 2010 and the
Hanjin Buenos Aires on May 27, 2010. Our fleet utilization was 98.4% in the
second quarter of 2010.
Our adjusted net income was $7.6 million, or $0.14 per share for the three
months ended June 30, 2010 compared to $15.4 million, or $0.28 per share,
for the three months ended June 30, 2009, adjusted for non-cash changes in
fair value of derivatives of a $22.3 million loss recorded in 2010 and $0.5
million gain recorded in 2009. Adjusted net income for the second quarter
of 2010 decreased by 50.6%, or $7.8 million, compared to the three months
ended June 30, 2009. This decrease is mainly attributable to increased
realized losses on our interest rate swap contracts recorded in our
Statement of Income during the three months ended June 30, 2010 compared to
the same period of 2009, which was partially offset by increased income
from operations. On a non-adjusted basis our net loss was $14.7 million, or
a loss of $0.27 per share, for the second quarter of 2010, compared to net
income of $15.9 million, or $0.29 per share, for the second quarter of
2009. Refer to Adjusted Net Income reconciliation table in the last page of
this earning release.
Operating Revenue
Operating revenue increased 7.3%, or $5.8 million, to $84.9 million in the
three months ended June 30, 2010, from $79.1 million in the three months
ended June 30, 2009. The increase was primarily attributable to the
addition of five vessels to our fleet, as follows:
Vessel Size
Vessel Name (TEU) Date Delivered
------------------- ------------------ -------------------
CMA CGM Moliere 6,500 September 28, 2009
CMA CGM Musset 6,500 March 12, 2010
CMA CGM Nerval 6,500 May 17, 2010
YM Mandate 6,500 May 19, 2010
Hanjin Buenos Aires 3,400 May 27, 2010
These additions to our fleet contributed revenues of $9.6 million during
the three months ended June 30, 2010. Moreover, one 4,253 TEU
containership, the Zim Luanda, which was added to our fleet on June 26,
2009, contributed incremental revenues of $2.0 million during the three
months ended June 30, 2010 compared to the same period in 2009. These
revenues were offset in part by the sale of one 1,704 TEU containership,
the MSC Eagle, on January 22, 2010, which contributed revenues of $1.0
million for the three months ended June 30, 2009 compared to nil revenues
in the three months ended June 30, 2010.
We also had a further decrease in revenues of $4.8 million during the three
months ended June 30, 2010, mainly attributable to reduced charter hire in
relation to vessels laid up by our charterers representing operating
expenses not being incurred during the lay-up period.
Vessel Operating Expenses
Vessel operating expenses decreased 21.0%, or $5.0 million, to $18.8
million in the three months ended June 30, 2010, from $23.8 million in the
three months ended June 30, 2009. The reduction is mainly attributed to
reduced costs of certain vessels which were on lay-up for 477 days in the
aggregate during the second quarter of 2010. Although the average number of
vessels in our fleet increased during the three months ended June 30, 2010
compared to the same period of 2009, the average daily operating cost per
vessel was reduced to $4,808 for the three months ended June 30, 2010, from
$6,533 for the three months ended June 30, 2009. Excluding those vessels on
lay-up, the average daily operating cost per vessel in our fleet was $5,477
for the three months ended June 30, 2010.
Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of
Deferred Dry-docking and Special Survey Costs.
Depreciation
Depreciation expense increased 18.8%, or $2.8 million, to $17.7 million in
the three months ended June 30, 2010, from $14.9 million in the three
months ended June 30, 2009. The increase in depreciation expense was due to
the increased average number of vessels in our fleet during the three
months ended June 30, 2010 compared to the same period of 2009.
Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased
22.7%, or $0.5 million, to $1.7 million in the three months ended June 30,
2010, from $2.2 million in the three months ended June 30, 2009. The
decrease reflects reduced drydocking costs incurred and amortized during
the three months ended June 30, 2010 compared to the same period of 2009.
General and Administrative Expenses
General and administrative expenses increased 62.9%, or $2.2 million, to
$5.7 million in the three months ended June 30, 2010, from $3.5 million in
the same period of 2009. The increase was mainly the result of increased
legal and advisory fees of $1.6 million and increased fees of $0.6 million
to our Manager in the three months ended June 30, 2010 compared to the same
period of 2009, due to the increase in the average number of our vessels in
our fleet and an increase in the per day fee payable to our Manager since
January 1, 2010.
Other Operating Expenses
Other Operating Expenses includes Voyage Expenses
Voyage Expenses
Voyage expenses decreased 5.6%, or $0.1 million, to $1.7 million in the
three months ended June 30, 2010, from $1.8 million in the three months
ended June 30, 2009.
Interest Expense and Interest Income
Interest expense increased by 4.3%, or $0.4 million, to $9.8 million in the
three months ended June 30, 2010, from $9.4 million in the three months
ended June 30, 2009. The change in interest expense was due to the increase
in our average debt by $84.4 million, to $2,297.1 million in the quarter
ended June 30, 2010, from $2,212.7 million in the quarter ended June 30,
2009, as well as increased margins over LIBOR following our agreements in
connection with covenant waivers obtained during 2009, which was partially
offset by the decrease of LIBOR payable under our credit facilities in the
three months ended June 30, 2010 compared to the three months ended June
30, 2009. The financing of our extensive newbuilding program resulted in
interest capitalization, rather than such interest being recognized as an
expense, of $6.7 million for the three months ended June 30, 2010 compared
to $9.4 million of capitalized interest for the three months ended June 30,
2009.
Interest income decreased by $0.5 million, to $0.2 million in the three
months ended June 30, 2010, from $0.7 million in the three months ended
June 30, 2009. The decrease in interest income is attributable to lower
average cash balances, as well as reduced interest rates to which our cash
balances were subject during the three months ended June 30, 2010 compared
to the three months ended June 30, 2009.
Other income/(expenses), net
Other income/(expenses), net, improved by $0.7 million, to a gain of $0.1
million in the three months ended June 30, 2010, from an expense of $0.6
million in the three months ended June 30, 2009. The improvement is mainly
attributable to foreign currency revaluation losses recorded during the
three months ended June 30, 2009.
Other finance costs, net
Other finance cost, net, decreased by $0.3 million, to $0.6 million in the
three months ended June 30, 2010, from $0.9 million in the three months
ended June 30, 2009.
Loss on fair value of derivatives
Loss on fair value of derivatives, increased by $37.0 million, to a loss of
$43.9 million in the three months ended June 30, 2010, from a loss of $6.9
million in the same period of 2009. The increase is mainly attributable to
non-cash changes in fair value of interest rate swaps losses of $22.3
million recorded in our Statement of Income in three months ended June 30,
2010, due to hedge accounting ineffectiveness, compared to a gain of $0.5
million in the three months ended June 30, 2009. Furthermore, realized
losses on interest rate swap hedges of $21.6 million recorded in our
Statement of Income during the three months ended June 30, 2010, which are
mainly attributed to reduced LIBOR payable on our credit facilities against
LIBOR fixed through our interest rate swaps, compared to $7.4 million
losses in the three months ended June 30, 2009. In addition, realized
losses on cash flow hedges of $10.1 million and $8.5 million in the three
months ended June 30, 2010 and 2009, respectively, were deferred in
"Accumulated Other Comprehensive Loss", rather than such realized losses
being recognized as an expense, and will be reclassified into earnings over
the depreciable life of these vessels under construction, which are
financed by loans for which their interest rate has been hedged by our
interest rate swap contracts.
Adjusted EBITDA
Adjusted EBITDA decreased by $4.5 million, or 10.9%, to $36.6 million in
the three months ended June 30, 2010, from $41.1 million in the three
months ended June 30, 2009, adjusted for non-cash changes in fair value of
derivatives of $22.3 million loss in the three months ended June 30, 2010
compared to $0.5 million gain in the three months ended June 30, 2009.
Tables reconciling Adjusted EBITDA to Net (Loss)/Income can be found at the
end of this earnings release.
Six months ended June 30, 2010 compared to the six months ended June 30,
2009
During the six months ended June 30, 2010, Danaos had an average of 42.4
containerships as compared to 39.5 containerships for the same period of
2009. During the first half of 2010, we took delivery of four vessels, the
CMA CGM Musset on March 12, 2010, the CMA CGM Nerval on May 17, 2010, the
YM Mandate on May 19, 2010 and the Hanjin Buenos Aires on May 27, 2010 and
we sold MSC Eagle on January 22, 2010, a vessel over 30 years old.
Our adjusted net income was $19.9 million, or $0.36 per share for the six
months ended June 30, 2010 compared to $34.8 million, or $0.64 per share
for the six months ended June 30, 2009, adjusted for non-cash changes in
fair value of derivatives of a $44.7 million loss recorded in the six
months ended June 30, 2010 compared to $1.1 million gain recorded in the
six months ended June 30, 2009, as well as impairment losses of $71.5
million in relation to the cancellation of three 6,500 TEU newbuilding
containerships and a gain on sale of vessels of $1.9 million recorded in
the six months ended June 30, 2010. Adjusted net income for the six months
ended June 30, 2010 decreased by 42.8%, or $14.9 million compared to the
six months ended June 30, 2009. This decrease is mainly attributable to
increased realized losses on our interest rate swap contracts recorded in
our Statement of Income during the six months ended June 30, 2010 compared
to the same period of 2009, which partially offset by increased income from
operations. On a non-adjusted basis our net loss was $94.4 million, or a
loss of $1.73 per share for the six months ended June 30, 2010, compared to
net income of $35.9 million, or $0.66 per share for the six months ended
June 30, 2009. Refer to Adjusted Net Income reconciliation table in the
last page of this earning release.
Operating Revenue
Operating revenue increased 6.6%, or $10.2 million, to $164.6 million in
the six months ended June 30, 2010 from $154.4 million in the six months
ended June 30, 2009. The increase was primarily attributed to the addition
to our fleet of five vessels, as follows:
Vessel Size
Vessel Name (TEU) Date Delivered
------------------- ------------------ -------------------
CMA CGM Moliere 6,500 September 28, 2009
CMA CGM Musset 6,500 March 12, 2010
CMA CGM Nerval 6,500 May 17, 2010
YM Mandate 6,500 May 19, 2010
Hanjin Buenos Aires 3,400 May 27, 2010
These additions to our fleet contributed revenues of $13.4 million during
the six months ended June 30, 2010. Moreover, two 4,253 TEU containerships,
the Zim Dalian and the Zim Luanda, which were added to our fleet on March
31, 2009 and June 26, 2009 contributed incremental revenues of $6.1 million
during the six months ended June 30, 2010 compared to the same period in
2009. These revenues were offset in part by the sale of one 1,704 TEU
containership, the MSC Eagle, on January 22, 2010, that contributed
revenues of $1.9 million for the six months ended June 30, 2009 compared to
revenues of $0.1 million in the six months ended June 30, 2010.
We also had a further decrease in revenues of $7.5 million during the six
months ended June 30, 2010, mainly attributable to rechartering of vessels
at reduced charter hire, as well as reduced charter hire in relation to
vessels laid up by our charterer representing operating expenses not being
incurred during the lay-up period.
Vessel Operating Expenses
Vessel operating expenses decreased 20.9% or $9.6 million, to $36.3 million
in the six months ended June 30, 2010, from $45.9 million in the six months
ended June 30, 2009. The reduction is mainly attributed to reduced costs of
certain vessels which were on lay-up for 1,091 days in the aggregate during
the first half of 2010. Although the average number of vessels in our fleet
increased during the six months ended June 30, 2010 compared to the same
period of 2009, the average daily operating cost per vessel was reduced to
$4,756 for the six months ended June 30, 2010, from $6,412 for the six
months ended June 30, 2009. Excluding those vessels on lay-up, the average
daily operating cost per vessel in our fleet was $5,549 for the six months
ended June 30, 2010.
Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of
Deferred Dry-docking and Special Survey Costs.
Depreciation
Depreciation expense increased 16.2%, or $4.7 million, to $33.8 million in
the six months ended June 30, 2010, from $29.1 million in the six months
ended June 30, 2009. The increase in depreciation expense was due to the
increased average number of vessels in our fleet during the six months
ended June 30, 2010, compared to the same period of 2009.
Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs decreased
14.6%, or $0.6 million, to $3.5 million in the six months ended June 30,
2010, from $4.1 million in the six months ended June 30, 2009. The decrease
reflects reduced drydocking costs incurred and amortized during the six
months ended June 30, 2010 compared to the same period of 2009.
Impairment Loss
On March 31, 2010, we expected to enter into an agreement with Hanjin Heavy
Industries & Construction Co. Ltd. to cancel three 6,500 TEU newbuilding
containerships, the HN N-216, the HN N-217 and the HN N-218, initially
expected to be delivered in the first half of 2012, and recorded impairment
loss of $71.5 million consisted of cash advances of $64.35 million paid to
the shipyard and $7.16 million of interest capitalized and other
predelivery capital expenditures paid in relation to the construction of
the respective newbuildings. On May 25, 2010, we signed the cancellation
agreement. No impairment loss was recorded in 2009.
General and Administrative Expenses
General and administrative expenses increased 68.2%, or $4.5 million, to
$11.1 million in the six months ended June 30, 2010, from $6.6 million in
the same period of 2009. The increase was the result of increased legal and
advisory fees of $3.4 million and increased fees of $1.1 million to our
Manager in the six months ended June 30, 2010 compared to the same period
of 2009, due to the increase in the average number of our vessels in our
fleet and an increase in the per day fee payable to our Manager since
January 1, 2010.
Sale of vessels
On January 22, 2010, we sold and delivered the MSC Eagle. The sale
consideration was $4.6 million. We realized a net gain on this sale of $1.9
million. The MSC Eagle was over 30-years old and was generating revenue
under its time charter, which expired in January 2010.
Other Operating Expenses
Other Operating Expenses includes Voyage Expenses.
Voyage Expenses
Voyage expenses decreased 15.4% or $0.6 million, to $3.3 million in the six
months ended June 30, 2010, from $3.9 million for the six months ended June
30, 2009. The decrease was mainly a result of bunker costs recorded in the
six months ended June 30, 2009, attributed to the repositioning of two of
our vessels in the first half of 2009. Our vessels are not otherwise
subject to fuel costs, which are paid by our charterers.
Interest Expense and Interest Income
Interest expense increased 5.1%, or $0.9 million, to $18.5 million in the
six months ended June 30, 2010, from $17.6 million in the six months ended
June 30, 2009. The change in interest expense was due to the increase in
our average debt by $162.1 million to $2,319.6 million in the six months
ended June 30, 2010, from $2,157.5 million in the six months ended June 30,
2009, as well as increased margins over LIBOR following our agreements in
connection with covenant waivers obtained during 2009, which was partially
offset by the decrease of LIBOR payable under our credit facilities in the
six months ended June 30, 2010 compared to the six months ended June 30,
2009. The financing of our extensive new-building program resulted in
interest capitalization, rather than such interest being recognized as an
expense, of $13.9 million for the six months ended June 30, 2010 compared
to $16.6 million of capitalized interest for the six months ended June 30,
2009.
Interest income decreased by $1.2 million, to $0.5 million in the six
months ended June 30, 2010, from $1.7 million in the six months ended June
30, 2009. The decrease in interest income is attributable to lower average
cash balances, as well as reduced interest rates to which our cash balances
were subject during the six months ended June 30, 2010 compared to the six
months ended June 30, 2009.
Other income/(expenses), net
Other income/(expenses), net, improved by $1.2 million, to a gain of $0.1
million in the six months ended June 30, 2010, from an expense of $1.1
million in the same period of 2009. The improvement in other
income/(expenses), net, is mainly attributable to foreign currency
revaluation losses recorded during the six months ended June 30, 2009.
Loss on fair value of derivatives
Loss on fair value of derivatives, increased by $71.6 million, to a loss of
$82.4 million in the six months ended June 30, 2010, from a loss of $10.8
million in the same period of 2009. The increase is mainly attributable to
non-cash changes in fair value of interest rate swaps losses of $40.5
million recorded in our Statement of Income in the six months ended June
30, 2010, due to hedge accounting ineffectiveness and changes in forecasted
debt, compared to a gain of $1.1 million in the six months ended June 30,
2009, as well as a loss of $4.2 million in relation to deferred realized
losses of cash flow hedges for the HN N-216, the HN N-217 and the HN N-218
following their cancellation reclassified from "Accumulated other
comprehensive loss" in the condensed consolidated balance sheet to
condensed consolidated statement of income in the six months ended June 30,
2010. Furthermore, realized losses on interest rate swap hedges of $37.6
million recorded in our Statement of Income during the six months ended
June 30, 2010, which are mainly attributed to reduced LIBOR payable on our
credit facilities against LIBOR fixed through our interest rate swaps,
compared to $11.9 million losses in the six months ended June 30, 2009. In
addition, realized losses on cash flow hedges of $21.8 million and $14.8
million in the six months ended June 30, 2010 and 2009, respectively, were
deferred in "Accumulated Other Comprehensive Loss", rather than such
realized losses being recognized as an expense, and will be reclassified
into earnings over the depreciable life of these vessels under
construction, which are financed by loans for which their interest rate has
been hedged by our interest rate swap contracts.
Adjusted EBITDA
Adjusted EBITDA decreased by $8.7 million, or 10.4%, to $75.2 million in
the six months ended June 30, 2010, from $83.9 million in the six months
ended June 30, 2009, adjusted for a gain on sale of vessel of $1.9 million
recorded in the six months ended June 30, 2010, impairment losses of $71.5
million recorded in the six months ended June 30, 2010 and non-cash changes
in fair value of derivatives of $44.7 million loss in the six months ended
June 30, 2010 compared to $1.1 million gain in the six months ended June
30, 2009. Table reconciling Adjusted EBITDA to Net (Loss)/Income can be
found at the end of this earnings release.
Recent News
On July 2, 2010, the Company took delivery of the newbuilding 6,500 TEU
vessel, the CMA CGM Rabelais. The vessel has been deployed on a 12-year
time charter with one of the world's major liner companies.
On July 6, 2010, the Company took delivery of the newbuilding 3,400 TEU
vessel, the Hanjin Santos. The vessel has been deployed on a 10-year time
charter with one of the world's major liner companies.
On August 6, 2010, the Company entered into a commitment letter with its
lenders for the restructuring of its existing debt obligations, and
approximately $426 million of new debt financing, on substantially the
terms described in the Company's Annual Report on Form 20-F filed with the
Securities and Exchange Commission on June 18, 2010. The agreed terms,
which are subject to final documentation and other conditions, contemplate
that, under the Company's existing bank debt facilities, the amortization
and maturities will be rescheduled, the interest rate margin will be
reduced, and the financial covenants, events of default, and guarantee and
security packages will be revised.
In connection with this arrangement, the Company agreed to issue to its
lenders warrants to purchase an aggregate of 15 million shares of its
common stock for an exercise price of $7.00 per share. The warrants will
expire on January 31, 2019. The Company has also reached agreements in
principle for $190.0 million of vendor financing from Hyundai Samho and a
$203.4 million credit facility with Citi and the Export-Import Bank of
China (or CEXIM). Entering into final documentation for each of these
arrangements is among the conditions to the arrangement with the Company's
lenders described above.
On August 6, 2010, the Company also entered into agreements with several
investors, including its largest stockholder, to sell to them 54,054,055
shares of its Common Stock for an aggregate purchase price of $200.0
million in cash. The shares were issued at $3.70 per share on August 12,
2010. Following completion of the equity transaction on August 12, 2010,
Mr. Economou was appointed to the Board of Directors of the Company as an
independent director.
On August 16, 2010, the Company took delivery of the newbuilding 6,500 TEU
vessel, the CMA CGM Racine. The vessel has been deployed on a 12-year time
charter with one of the world's major liner companies.
On August 18, 2010, the Company took delivery of the newbuilding 6,500 TEU
vessel, the YM Maturity. The vessel has been deployed on a 18-year time
charter with one of the world's major liner companies.
Our comprehensive financing plan, which includes the above described
arrangements with our existing lenders for which we have entered into a
commitment letter, as well as the Vendor financing and Citi-CEXIM credit
facility we have agreed in principle, provides a funding solution for all
of our currently unfinanced newbuildings and waive existing credit facility
breaches and amend covenant levels. During this transition period, prior to
entering into definitive documentation for these arrangements, we have
elected not to secure waivers from our banks, which would amend or waive
breaches of our financial covenants in our credit facilities covering a
prospective period of at least 12 months, and thus we are classifying all
of our long-term debt as current according to the US GAAP accounting
policies.
Conference Call and Webcast
On Thursday, September 2, 2010 at 10:00 A.M. EDT, the Company's management
will host a conference call to discuss the results. Participants should
dial into the call 10 minutes before the scheduled time using the following
numbers: 1 866 819 7111 (US Toll Free Dial In), 0800 953 0329 (UK Toll Free
Dial In) or +44 (0)1452 542 301 (Standard International Dial In). Please
quote "Danaos" to the operator.
A telephonic replay of the conference call will be available until
September 9, 2010 by dialing 1 866 247 4222 (US Toll Free Dial In), 0800
953 1533 (UK Toll Free Dial In) or +44 (0)1452 550 000 (Standard
International Dial In). Access Code: 1186615#
About Danaos Corporation
Danaos Corporation is an international owner of containerships, chartering
its vessels to many of the world's largest liner companies. Our current
fleet of 49 containerships aggregating 216,529 TEUs ranks Danaos among the
largest containership charter owners in the world based on total TEU
capacity. Danaos is one of the largest US listed containership companies
based on fleet size. Furthermore, the company has a contracted fleet of 16
additional containerships aggregating 146,150 TEU with scheduled deliveries
up to the second quarter of 2012. The company's shares trade on the New
York Stock Exchange under the symbol "DAC".
Forward-Looking Statements
Matters discussed in this release may constitute forward-looking statements
within the meaning of the safeharbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements reflect our current views with respect to
future events and financial performance and may include statements
concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements, which are
other than statements of historical facts. The forward-looking statements
in this release are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation,
management's examination of historical operating trends, data contained in
our records and other data available from third parties. Although Danaos
Corporation believes that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to
predict and are beyond our control, Danaos Corporation cannot assure you
that it will achieve or accomplish these expectations, beliefs or
projections. Important factors that, in our view, could cause actual
results to differ materially from those discussed in the forward-looking
statements include the strength of world economies and currencies, general
market conditions, including changes in charter hire rates and vessel
values, charter counterparty performance, shipyard performance, changes in
demand that may affect attitudes of time charterers to scheduled and
unscheduled drydocking, changes in Danaos Corporation's operating expenses,
including bunker prices, dry-docking and insurance costs, ability to obtain
financing and comply with covenants in our financing arrangements, actions
taken by regulatory authorities, potential liability from pending or future
litigation, domestic and international political conditions, potential
disruption of shipping routes due to accidents and political events or acts
by terrorists.
Risks and uncertainties are further described in reports filed by Danaos
Corporation with the U.S. Securities and Exchange Commission.
Visit our website at www.danaos.com
Appendix
Fleet Utilization
Danaos had 64 off-hire days in total in the second quarter of 2010. The
following table summarizes vessel utilization and the impact of the
off-hire days on the company's revenue relating to the last four quarters.
Third Fourth First Second
Vessel Utilization Quarter Quarter Quarter Quarter
(No. of Days) 2009 2009 2010 2010 Total
--------- --------- --------- --------- ---------
Ownership Days 3,775 3,864 3,732 3,945 15,316
Less Off-hire Days:
Scheduled Off-hire
Days (29) (1) (12) -- (42)
Other Off-hire Days (8) (7) (1) (64) (80)
--------- --------- --------- --------- ---------
Operating Days 3,738 3,856 3,719 3,881 15,194
========= ========= ========= ========= =========
Vessel Utilization 99.0% 99.8% 99.7% 98.4% 99.2%
Revenue - Impact of Third Fourth First Second
Off-hire (in '000s Quarter Quarter Quarter Quarter
of US Dollars) 2009 2009 2010 2010 Total
--------- --------- --------- --------- ---------
100% Fleet
Utilization $ 80,694 $ 85,532 $ 80,002 $ 86,009 $ 332,237
Less Off-hire Days:
Scheduled Off-hire
Days (721) (42) (328) -- (1,091)
Other Off-hire Days (181) (151) (15) (1,063) (1,410)
--------- --------- --------- --------- ---------
Actual Revenue
Earned $ 79,792 $ 85,339 $ 79,659 $ 84,946 $ 329,736
========= ========= ========= ========= =========
Fleet List
The following table describes in detail our fleet deployment profile as of
August 31, 2010.
Vessel Size Expiration of
Vessel Name (TEU) Year Built Charter(1)
-------------- -------------- ------------------
Containerships
CSCL Le Havre 9,580 2006 September 2018
CSCL Pusan 9,580 2006 July 2018
CSCL America(2) 8,468 2004 September 2016
CSCL Europe 8,468 2004 June 2016
CMA CGM Moliere(3) 6,500 2009 August 2021
CMA CGM Musset(3) 6,500 2010 February 2022
CMA CGM Nerval(3) 6,500 2010 April 2022
CMA CGM Rabelais(3) 6,500 2010 June 2022
YM Mandate 6,500 2010 January 2028
CMA CGM Racine(3) 6,500 2010 July 2022
YM Maturity 6,500 2010 April 2028
Marathonas (4) 4,814 1991 September 2011
Maersk Messologi 4,814 1991 September 2011
Maersk Mytilini 4,814 1991 September 2011
Hyundai Commodore (5) 4,651 1992 March 2011
Hyundai Duke 4,651 1992 February 2011
Hyundai Federal (6) 4,651 1994 September 2012
YM Colombo 4,300 2004 March 2019
YM Singapore 4,300 2004 October 2019
YM Seattle 4,253 2007 July 2019
YM Vancouver 4,253 2007 September 2019
Bunga Raya Tiga (7) 4,253 2004 March 2011
Bunga Raya Tujuh (8) 4,253 2004 February 2011
ZIM Rio Grande 4,253 2008 May 2020
ZIM Sao Paolo 4,253 2008 August 2020
ZIM Kingston 4,253 2008 September 2020
ZIM Monaco 4,253 2009 November 2020
ZIM Dalian 4,253 2009 February 2021
ZIM Luanda 4,253 2009 May 2021
Al Rayyan 3,908 1989 January 2011
YM Yantian 3,908 1989 July 2011
Hanjin Buenos Aires 3,400 2010 March 2020
Hanjin Santos 3,400 2010 May 2020
SCI Pride(9) 3,129 1988 May 2011
CMA CGM Lotus 3,098 1988 June 2011
CMA CGM Vanille 3,045 1986 September 2010
Henry(10) 3,039 1986 July 2010
Jiangsu Dragon (11) 2,917 1991 June 2011
California Dragon(12) 2,917 1991 June 2011
Shenzhen Dragon (13) 2,917 1991 June 2011
Hyundai Advance 2,200 1997 June 2017
Hyundai Future 2,200 1997 August 2017
Hyundai Sprinter 2,200 1997 August 2017
Hyundai Stride 2,200 1997 July 2017
Hyundai Progress 2,200 1998 December 2017
Hyundai Bridge 2,200 1998 January 2018
Hyundai Highway 2,200 1998 January 2018
Hyundai Vladivostok 2,200 1997 May 2017
Hanjin Montreal (14) 2,130 1984 November 2010
(1) Earliest date charters could expire. Some charters include options to
extend their term.
(2)On August 21, 2009, the MSC Baltic was renamed to CSCL America at the
request of the charterer of this vessel.
(3) Vessel subject to charterer's option to purchase vessel after first
eight years of time charter term for $78.0 million.
(4)On January 21, 2010, the MSC Marathon was renamed to Marathonas at the
request of the charterer of this vessel.
(5)On April 2, 2009, the MOL Affinity was renamed to Hyundai Commodore at
the request of the charterer of this vessel.
(6)On May 12, 2009, the APL Confidence was renamed to Hyundai Federal at
the request of the charterer of this vessel.
(7)On April 29, 2009, the Derby was renamed to Bunga Raya Tiga at the
request of the charterer of this vessel.
(8)On October 12, 2009, the Maersk Deva was renamed to Bunga Raya Tujuh at
the request of the charterer of this vessel.
(9)On August 18, 2010, the YM Milano was renamed to SCI Pride at the
request of the charterer of this vessel.
(10)On May 13, 2010, the CMA CGM Passiflore was renamed to Henry at the
request of the charterer of this vessel.
(11)On July 7, 2010, the CMA CGM Elbe was renamed to Jiangsu Dragon at the
request of the charterer of this vessel.
(12)On July 20, 2010, the CMA CGM Kalamata was renamed to California Dragon
at the request of the charterer of this vessel.
(13)On June 26, 2010, the CMA CGM Komodo was renamed to Shenzhen Dragon at
the request of the charterer of this vessel.
(14)On May 14, 2009, the Montreal Senator was renamed to Hanjin Montreal at
the request of the charterer of this vessel.
New Deliveries
The following table describes the expected additions to our fleet as a
result of our new building containership program.
Vessel Size Expected
Vessel Name (TEU) Delivery(*) Charter Term
---------------- ---------------- ----------------
HN N-221 3,400 3rd Quarter 2010 10 years
HN N-222 3,400 4th Quarter 2010 10 years
HN N-223 3,400 4th Quarter 2010 10 years
HN Z00001 8,530 1st Quarter 2011 12 years
Hull No S-461 10,100 1st Quarter 2011 12 years
Hull No S-462 10,100 1st Quarter 2011 12 years
HN Z00002 8,530 2nd Quarter 2011 12 years
HN Z00003 8,530 2nd Quarter 2011 12 years
HN Z00004 8,530 2nd Quarter 2011 12 years
Hull No S-463 10,100 2nd Quarter 2011 12 years
HN H 1022A 8,530 3rd Quarter 2011 12 years
Hull No S-456 12,600 1st Quarter 2012 12 years
Hull No S-457 12,600 1st Quarter 2012 12 years
Hull No S-458 12,600 2nd Quarter 2012 12 years
Hull No S-459 12,600 2nd Quarter 2012 12 years
Hull No S-460 12,600 2nd Quarter 2012 12 years
(*) Delivery date represents most recent update regarding respective event,
which in certain cases may change significantly as a result of further
negotiations with shipyards.
DANAOS CORPORATION
Statements of Income
(Unaudited)
(Expressed in thousands of United States dollars, except per share
amounts)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
--------- --------- --------- ---------
2010 2009 2010 2009
--------- --------- --------- ---------
OPERATING REVENUES $ 84,946 $ 79,128 $ 164,605 $ 154,380
OPERATING EXPENSES
Vessel operating expenses (18,759) (23,814) (36,305) (45,877)
Depreciation & amortization (19,455) (17,090) (37,256) (33,226)
General & administrative (5,727) (3,468) (11,099) (6,588)
Gain on sale of vessels -- -- 1,916 --
Impairment loss -- -- (71,509) --
Other operating expenses (1,721) (1,847) (3,307) (3,851)
--------- --------- --------- ---------
Income From Operations 39,284 32,909 7,045 64,838
--------- --------- --------- ---------
OTHER EARNINGS (EXPENSES)
Interest income 222 719 471 1,705
Interest expense (9,773) (9,402) (18,549) (17,564)
Other finance cost, net (603) (881) (1,093) (1,217)
Other income/(expenses), net 87 (640) 74 (1,059)
Loss on fair value of
derivatives (43,882) (6,851) (82,378) (10,804)
--------- --------- --------- ---------
Total Other Income (Expenses),
net (53,949) (17,055) (101,475) (28,939)
--------- --------- --------- ---------
Net (Loss)/Income $ (14,665) $ 15,854 $ (94,430) $ 35,899
========= ========= ========= =========
EARNINGS PER SHARE
Basic and diluted net (loss)/
income per share $ (0.27) $ 0.29 $ (1.73) $ 0.66
========= ========= ========= =========
Basic and diluted weighted
average number of common
shares (in thousands of
shares) 54,556 54,551 54,552 54,549
========= ========= ========= =========
DANAOS CORPORATION
Balance Sheets
(Expressed in thousands of United States dollars)
As of As of
June 30, December 31,
------------- -------------
2010 2009
------------- -------------
ASSETS (Unaudited) (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 82,614 $ 122,050
Restricted cash, current portion 24,094 154,078
Accounts receivable, net 4,322 3,732
Other current assets 20,003 20,644
------------- -------------
131,033 300,504
------------- -------------
NON-CURRENT ASSETS
Fixed assets, net 1,898,468 1,573,759
Advances for vessels under construction 1,062,140 1,194,088
Restricted cash, net of current portion -- 44,393
Deferred charges, net 16,641 20,583
Fair value of financial instruments 5,034 3,762
Other non-current assets 10,339 5,622
------------- -------------
2,992,622 2,842,207
------------- -------------
TOTAL ASSETS 3,123,655 3,142,711
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt, current portion 2,360,375 2,331,678
Accounts payable, accrued liabilities &
other current liabilities 109,491 86,264
Fair value of financial instruments,
current portion 110,840 100,065
------------- -------------
2,580,706 2,518,007
------------- -------------
LONG-TERM LIABILITIES
Fair value of financial instruments, net of
current portion 348,239 213,493
Other long-term liabilities 4,892 5,620
------------- -------------
353,131 219,113
------------- -------------
STOCKHOLDERS' EQUITY
Common stock 546 546
Additional paid-in capital 288,565 288,613
Treasury stock (6) (39)
Accumulated other comprehensive loss (445,421) (324,093)
Retained earnings 346,134 440,564
------------- -------------
189,818 405,591
------------- -------------
Total liabilities and stockholders' equity $ 3,123,655 $ 3,142,711
============= =============
DANAOS CORPORATION
Statements of Cash Flows
(Unaudited)
(Expressed in thousands of United States dollars)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
--------- --------- --------- ---------
2010 2009 2010 2009
--------- --------- --------- ---------
Operating Activities:
Net (loss)/ income $ (14,665) $ 15,854 $ (94,430) $ 35,899
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 17,744 14,911 33,805 29,132
Impairment loss -- -- 71,509 --
Amortization of deferred
charges 2,051 2,377 4,111 4,399
Written off amount of
deferred charges -- -- -- 412
Stock based compensation 8 16 35 32
Payments for
drydocking/special survey -- (1,033) (258) (5,753)
Change in fair value of
financial instruments 12,208 (8,995) 22,921 (15,848)
Gain on sale of vessels -- -- (1,916) --
Accounts receivable 224 (668) (590) (335)
Other assets, current and
non-current (1,911) 8,512 (4,076) 4,440
Accounts payable and accrued
liabilities 5,481 720 4,236 7,576
Other liabilities, current
and non-current (1,850) (1,420) (285) (328)
--------- --------- --------- ---------
Net Cash provided by Operating
Activities 19,290 30,274 35,062 59,626
--------- --------- --------- ---------
Investing Activities:
Vessel acquisitions including
advances -- (106) -- (237)
Vessels under construction (203,655) (73,888) (279,286) (206,770)
Proceeds from sale of vessels -- -- 1,764 --
--------- --------- --------- ---------
Net Cash used in Investing
Activities (203,655) (73,994) (277,522) (207,007)
--------- --------- --------- ---------
Financing Activities:
Debt draw downs 167,529 113,693 225,389 181,243
Debt repayment (176,800) (6,893) (196,692) (16,110)
Treasury stock -- -- (50) --
Deferred costs -- (2,322) -- (3,671)
Decrease/(Increase) in
restricted cash 171,565 (10,051) 174,377 21,920
--------- --------- --------- ---------
Net Cash provided by Financing
Activities 162,294 94,427 203,024 183,382
--------- --------- --------- ---------
Net Increase in cash and cash
equivalents (22,071) 50,707 (39,436) 36,001
Cash and cash equivalents,
beginning of period 104,685 106,014 122,050 120,720
--------- --------- --------- ---------
Cash and cash equivalents, end
of period $ 82,614 $ 156,721 $ 82,614 $ 156,721
========= ========= ========= =========
Reconciliation of Net (Loss)/Income to Adjusted EBITDA
(Expressed in thousands of United States dollars)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
--------- --------- --------- ---------
2010 2009 2010 2009
--------- --------- --------- ---------
(Unaudited)
Net (loss)/income $ (14,665) $ 15,854 $ (94,430) $ 35,899
Depreciation 17,744 14,911 33,805 29,132
Amortization of deferred
drydocking & special survey
costs 1,711 2,179 3,451 4,094
Interest income (222) (719) (471) (1,705)
Interest expense 9,773 9,402 18,549 17,564
Impairment loss -- -- 71,509 --
Gain on sale of vessels -- -- (1,916) --
Non-cash changes in fair
value of derivatives 22,282 (503) 44,732 (1,084)
--------- --------- --------- ---------
Adjusted EBITDA(2) $ 36,623 $ 41,124 $ 75,229 $ 83,900
========= ========= ========= =========
(2)Adjusted EBITDA represents net (loss)/income before interest income
and expense, depreciation, amortization, impairment losses, gain/(loss) on
sale of vessels and non-cash changes in fair value of derivatives. However,
Adjusted EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or "GAAP." We believe that the presentation
of Adjusted EBITDA is useful to investors because it is frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in our industry. We also believe that Adjusted
EBITDA is useful in evaluating our ability to service additional debt and
make capital expenditures. In addition, we believe that Adjusted EBITDA is
useful in evaluating our operating performance and liquidity position
compared to that of other companies in our industry because the calculation
of Adjusted EBITDA generally eliminates the effects of financings, income
taxes and the accounting effects of capital expenditures and acquisitions,
items which may vary for different companies for reasons unrelated to
overall operating performance and liquidity.
Reconciliation of Net (Loss)/Income to Adjusted Net Income
(Expressed in thousands of United States dollars, except per share amounts)
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30
--------- --------- --------- ---------
2010 2009 2010 2009
--------- --------- --------- ---------
(Unaudited)
Net (Loss)/Income $ (14,665) $ 15,854 $ (94,430) $ 35,899
Loss in fair value of
derivatives 43,882 6,851 82,378 10,804
Realized losses on derivatives (21,600) (7,354) (37,646) (11,888)
Impairment losses -- -- 71,509 --
Gain on sale of vessels -- -- (1,916) --
--------- --------- --------- ---------
Adjusted Net Income $ 7,617 $ 15,351 $ 19,895 $ 34,815
========= ========= ========= =========
Adjusted Earnings Per Share $ 0.14 $ 0.28 $ 0.36 $ 0.64
========= ========= ========= =========
Weighted average number of
shares 54,556 54,551 54,552 54,549
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 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
Tables above for supplemental financial data and corresponding
reconciliations to GAAP financial measures for the three and six months
ended June 30, 2010 and 2009. Non-GAAP financial measures should be viewed
in addition to, and not as an alternative for, the Company's reported
results prepared in accordance with GAAP.
Contact Information: For further information please contact: Company Contact Dimitri J. Andritsoyiannis Chief Financial Officer Danaos Corporation Athens, Greece Tel.: +30 210 419 6481 E-Mail: cfo@danaos.com Iraklis Prokopakis Chief Operating Officer Danaos Corporation Athens, Greece Tel.: +30 210 419 6400 E-Mail: coo@danaos.com Investor Relations and Financial Media Nicolas Bornozis President Capital Link, Inc. New York Tel. 212-661-7566 E-Mail: danaos@capitallink.com