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

Rhea-AI Summary

Danaos Corporation (NYSE: DAC) reported robust financial results for Q2 and the first half of 2022. Adjusted net income surged by 128% to $157.1 million, equating to $7.59 per share, while the six-month figure reached $392.4 million, reflecting a 209% increase. Operating revenues rose 71.4% to $250.9 million for Q2 and 72.6% to $480.8 million for six months. The company maintained a strong liquidity position with $588.2 million in cash and securities. A $0.75 dividend per share was declared, payable on August 29, 2022. Challenges remain due to macroeconomic factors, high energy prices, and inflation.

Positive

• Q2 adjusted net income increased by 128% to $157.1 million ($7.59 per share).
• Six-month adjusted net income rose by 209% to $392.4 million ($18.95 per share).
• Operating revenues grew 71.4% to $250.9 million in Q2, and 72.6% to $480.8 million for the first half.
• Strong liquidity with cash and marketable securities totaling $588.2 million.
• 99.3% charter coverage for 2022 and 79.6% for 2023.
• Declared a dividend of $0.75 per share for Q2 2022.

Negative

• Total operating expenses increased by $20.2 million in Q2, partially offsetting revenue gains.
• Net income decreased to $8.2 million in Q2, down from $372.8 million in the same period last year.

ATHENS, Greece--(BUSINESS WIRE)-- 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 2^nd 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220801005720/en/

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

Source: Danaos Corporation

FAQ

What were Danaos Corporation's Q2 2022 financial results?

Danaos reported an adjusted net income of $157.1 million for Q2 2022, an increase of 128% compared to Q2 2021.

How much did Danaos Corporation's operating revenues increase in the first half of 2022?

Operating revenues for the first half of 2022 increased by 72.6% to $480.8 million.

What dividend was declared by Danaos Corporation for Q2 2022?

A dividend of $0.75 per share was declared, payable on August 29, 2022.

What is Danaos Corporation's cash position as of June 30, 2022?

Danaos Corporation has $588.2 million in cash and marketable securities as of June 30, 2022.

What challenges did Danaos Corporation mention in their press release?

Danaos noted macroeconomic factors such as high energy prices, inflation, and potential impacts from the war in Ukraine as challenges.