Danaos Corporation Reports Third Quarter and Nine Months Results for the Period Ended September 30, 2022

Rhea-AI Summary

Danaos Corporation (NYSE: DAC) reported strong financial results for the third quarter and nine months ended September 30, 2022. Adjusted net income surged 61.6% to $176.9 million, or $8.71 per share, compared to the previous year. For nine months, adjusted net income rose 140.8% to $569.3 million. Operating revenue increased by 32.7% for Q3 and 56.1% year-to-date, reaching $260 million and $740.9 million respectively. Cash on hand was $556.3 million, and the company declared a dividend of $0.75 per share. Effective refinancing agreements extend debt maturity until 2027, enhancing financial flexibility.

Positive

• Adjusted net income increased by 61.6% to $176.9 million for Q3 2022.
• Operating revenues grew by 32.7% for Q3 and 56.1% year-to-date.
• Cash and cash equivalents stood at $556.3 million as of September 30, 2022.
• Company declared a dividend of $0.75 per share.
• Refinancing extends debt maturity until 2027, improving financial flexibility.

Negative

• Net income decreased to $66.8 million for Q3 2022, down from $217.2 million year-over-year.
• Loss on investments totaled $84 million due to reduced value of ZIM shares.
• Increased vessel operating expenses by $4.5 million due to crew remuneration and insurance costs.

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 September 30, 2022.

Highlights for the Third Quarter and Nine Months Ended September 30, 2022:

• Adjusted net income¹ of $176.9 million, or $8.71 per share, for the three months ended September 30, 2022 compared to $109.5 million, or $5.32 per share, for the three months ended September 30, 2021, an increase of 61.6%. Adjusted net income¹ of $569.3 million, or $27.67 per share, for the nine months ended September 30, 2022 compared to $236.4 million, or $11.49 per share, for the nine months ended September 30, 2021, an increase of 140.8%.
• In September 2022, we sold all of our remaining 5,686,950 ZIM ordinary shares resulting in proceeds to us of $161.3 million.
• Cash and cash equivalents amounted to $556.3 million as of September 30, 2022.
• Operating revenues of $260.0 million for the three months ended September 30, 2022 compared to $195.9 million for the three months ended September 30, 2021, an increase of 32.7%. Operating revenues of $740.9 million for the nine months ended September 30, 2022 compared to $474.5 million for the nine months ended September 30, 2021, an increase of 56.1%.
• Adjusted EBITDA¹ of $213.1 million for the three months ended September 30, 2022 compared to $149.6 million for the three months ended September 30, 2021, an increase of 42.4%. Adjusted EBITDA¹ of $674.7 million for the nine months ended September 30, 2022 compared to $349.6 million for the nine months ended September 30, 2021, an increase of 93.0%.
• Total contracted cash operating revenues were $2.3 billion as of September 30, 2022 and remaining average contracted charter duration was 3.5 years, weighted by aggregate contracted charter hire.
• Contracted operating days charter coverage currently stands at 100% for 2022 and 88.4% for 2023 while for the next 12 months, from September 30, 2022, charter coverage stands at 92.9%.
• As of September 30, 2022, Net Debt² was $398.9 million, Net Debt / LTM Adjusted EBITDA was 0.48x, while 15 of our vessels are debt-free currently.
• As of the date of this release, we have repurchased 466,955 shares of our common stock in the open market for $28.6 million, under our share repurchase program of up to $100 million announced in June 2022.
• The Company has reached an in-principle agreement with Citi and Alpha Bank to refinance the currently outstanding facility of $437.75 million and the transactions are expected to close within the 4^th quarter of 2022. This refinancing, which remains subject to definitive documentation, is summarized as follows:
  • a $382.5 million Revolving Credit Facility with Citi reducing and repayable over 5 years in 20 quarterly reductions of $11.25 million each together with a final reduction of $157.5 million at maturity, in the 4^th quarter of 2027.
  • a $55.25 million Term Loan with Alpha Bank repayable over 5 years with 20 consecutive quarterly installments of $1.875 million each together with a balloon payment of $17.75 million at maturity, in the 4^th quarter of 2027.
• Through this refinancing the Company will achieve the following:
  • Extension of maturity of the refinanced debt by 2.5 years and the creation of a 5-year runway without any of the Company’s bank debt maturing before 2027.
  • Given the Company’s strong liquidity position, the Revolving Credit Facility feature of Citi provides the Company with increased flexibility in managing debt capital and associated costs.
  • Improvement in pricing terms.
• Pro-forma for the refinancing, the Company will triple the unencumbered and debt-free fleet to 45 vessels versus 15 vessels currently out of a total existing fleet of 71 vessels.
• Danaos has declared a dividend of $0.75 per share of common stock for the third quarter of 2022, which is payable on November 30, 2022 to stockholders of record as of November 18, 2022.

Three and Nine Months Ended September 30, 2022
Financial Summary – Unaudited
(Expressed in thousands of United States dollars, except per share amounts)
	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Operating revenues	$260,037		$195,915		$740,861		$474,467
Net income	$66,800		$217,227		$406,489		$886,844
Adjusted net income1	$176,922		$109,547		$569,329		$236,418
Earnings per share, diluted	$3.29		$10.55		$19.75		$43.11
Adjusted earnings per share, diluted1	$8.71		$5.32		$27.67		$11.49
Diluted weighted average number of shares (in thousands)	20,318		20,598		20,579		20,571
Adjusted EBITDA1	$213,106		$149,621		$674,738		$349,639

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 provided below.

2 Net Debt is defined as total debt gross of the fair value of debt adjustment and deferred finance costs less cash and cash equivalents.

Danaos’ CEO Dr. John Coustas commented:

“This quarter marked the retreat of the container market from unsustainable stratospheric highs to more normalized levels, albeit still well above 2019 levels. The liner market has experienced a combination of supply chain normalization and demand destruction due to various factors. These include, but are not limited to, rampant inflation and declining GDP growth, the uncertainties created by the war in Ukraine and an energy crisis. This has been compounded by high inventories in warehouses and delayed collection of containers, both indirect impacts of easing of supply chain disruptions.

The drop in demand for containerized freight has also significantly reduced vessel demand from opportunistic market participants, who were aggressively contracting smaller vessels or extra loaders which were used during the peak of demand last year. This has led to a significant correction in the sub-3,000 TEU segment as charterers are on the sidelines waiting for the market to drop before they commit a vessel.

Charter periods have also been reduced to as little as six months for smaller vessels as charterers are waiting to see how the CII requirements will impact fleet scheduling and what additional slow steaming will be needed to meet the requirements.

Danaos is well-insulated from the current market environment and achieved record operating profit in the third quarter of 2022. Our commercial efforts earlier this year resulted in a number of new vessel fixtures for our vessels, and we ended the quarter with a multi-year backlog of $2.3 billion in contracted revenue. We have also continued to strengthen our balance sheet and we have now fully liquidated our shareholding in ZIM, as we stated we would. In addition, we have new commitments from our bank group to extend existing bank debt facilities until 2027. This means we have no significant capital requirements or refinancings until then, and we have the necessary flexibility to pursue our strategy of growth, share buybacks, and acquisitions. In fact, our net debt will be very close to zero by the end of this year, which protects Danaos from the recent dramatic increase in interest rates.

With a fortress balance sheet, we are looking at the future with great optimism and evaluating the steps that will keep Danaos at the forefront of the industry. Danaos’ management team is fully aligned with our shareholders, and we will continue working to enhance long term value of the company.”

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

During the three months ended September 30, 2022, Danaos had an average of 71.0 containerships compared to 65.7 containerships during the three months ended September 30, 2021. Our fleet utilization for the three months ended September 30, 2022 was 97.1% compared to 97.7% for the three months ended September 30, 2021.

Our adjusted net income amounted to $176.9 million, or $8.71 per share, for the three months ended September 30, 2022 compared to $109.5 million, or $5.32 per share, for the three months ended September 30, 2021. We have adjusted our net income in the three months ended September 30, 2022 for the change in fair value of our investment in ZIM Integrated Shipping Services Ltd. (“ZIM”) of $107.3 million and a non-cash fees amortization of $2.8 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The $67.4 million increase in adjusted net income for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 is attributable mainly to a $64.1 million increase in operating revenues, a $11.0 million increase in dividends from ZIM (net of withholding taxes) and a $2.5 million decrease in net finance expenses, which were partially offset by a $10.2 million increase in total operating expenses.

On a non-adjusted basis, our net income amounted to $66.8 million, or $3.29 earnings per diluted share, for the three months ended September 30, 2022 compared to net income of $217.2 million, or $10.55 earnings per diluted share, for the three months ended September 30, 2021. Our net income for the three months ended September 30, 2022 includes a loss on our investment in ZIM of $84.0 million (net of withholding taxes on dividend).

Operating Revenues

Operating revenues increased by 32.7%, or $64.1 million, to $260.0 million in the three months ended September 30, 2022 from $195.9 million in the three months ended September 30, 2021.

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

• a $76.9 million increase in revenues in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 mainly as a result of higher charter rates;
• a $11.1 million increase in revenues in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to the incremental revenue generated by newly acquired vessels;
• a $4.5 million increase in revenues in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to amortization of assumed time charters; and
• a $28.4 million decrease in revenue in the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to lower non-cash revenue recognition in accordance with US GAAP.

Vessel Operating Expenses

Vessel operating expenses increased by $4.5 million to $39.2 million in the three months ended September 30, 2022 from $34.7 million in the three months ended September 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 $6,173 per vessel per day for the three months ended September 30, 2022 compared to $5,918 per vessel per day for the three months ended September 30, 2021. The average daily operating cost increased mainly due to the COVID-19 and Ukraine war related increase in crew remuneration and increased insurance premiums in the three months ended September 30, 2022 compared to the three months ended September 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 10.0%, or $3.1 million, to $34.1 million in the three months ended September 30, 2022 from $31.0 million in the three months ended September 30, 2021 due to recent acquisitions of 6 vessels.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $0.5 million to $3.1 million in the three months ended September 30, 2022 from $2.6 million in the three months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses decreased by $0.2 million, to $7.1 million in the three months ended September 30, 2022 from $7.3 million in the three months ended September 30, 2021.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $2.3 million to $10.3 million in the three months ended September 30, 2022 from $8.0 million in the three months ended September 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 11.6%, or $2.1 million, to $16.0 million in the three months ended September 30, 2022 from $18.1 million in the three months ended September 30, 2021. The decrease in interest expense is a combined result of:

• a $1.5 million decrease in interest expense due to a decrease in our average indebtedness by $466.7 million between the two periods (average indebtedness of $971.3 million in the three months ended September 30, 2022 compared to average indebtedness of $1,438.0 million in the three months ended September 30, 2021), which was partially offset by an increase in our debt service cost by 1.46 percentage points, mainly as a result of increase in the reference rates;
• a $0.8 million decrease in the amortization of deferred finance costs and debt discount;
• a $1.3 million decrease in interest expense due to capitalized interest on our vessels under construction in the three months ended September 30, 2022 compared to none in the three months ended September 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 and subsequently fully repaid on May 15, 2022, at which point the remaining accumulated accrued interest of $26.9 million was recognized in gain on debt extinguishment.

As of September 30, 2022, our outstanding debt, gross of deferred finance costs, was $868.1 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $79.6 million. These balances compare to debt of $1,165.5 million and a leaseback obligation of $242.9 million, gross of deferred finance costs, as of September 30, 2021.

Interest income increased by $1.2 million to $1.3 million in the three months ended September 30, 2022 compared to $0.1 million in the three months ended September 30, 2021 mainly as a result of increased interest income earned on time deposits in the three months ended September 30, 2022.

Gain/(loss) on investments

A loss on investments of $80.3 million in the three months ended September 30, 2022 consists of the change in fair value of our shareholding interest in ZIM of $107.3 million, which was offset in part by the dividends recognized on ZIM ordinary shares of $27.0 million. In the three months ended September 30, 2022, we sold all of our remaining 5,686,950 ZIM ordinary shares resulting in proceeds to us of $161.3 million.

Equity income on investments

Equity income on investments in Gemini Shipholdings Corporation (“Gemini”) decreased to nil in the three months ended September 30, 2022 compared to the non-cash gain of $64.1 million recognized upon our acquisition of the remaining 51% equity interest in Gemini on July 1, 2021.

Other finance expenses

Other finance expenses increased by $0.1 million to $0.2 million in the three months ended September 30, 2022 compared to $0.1 million in the three months ended September 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 September 30, 2022 and September 30, 2021.

Other income, net

Other income, net was $0.4 million in the three months ended September 30, 2022 compared to $0.3 million in the three months ended September 30, 2021.

Income taxes

Income taxes were $3.8 million in the three months ended September 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares compared to $4.1 million taxes withheld on dividend income in the three months ended September 30, 2021.

Adjusted EBITDA

Adjusted EBITDA increased by 42.4%, or $63.5 million, to $213.1 million in the three months ended September 30, 2022 from $149.6 million in the three months ended September 30, 2021. As outlined above, the increase is mainly attributable to a $59.6 million increase in operating revenues (net of $4.5 million increase in amortization of assumed time charters) and a $11.0 million increase in dividends from ZIM (net of withholding taxes) in the three months ended September 30, 2022, which were partially offset by a $7.1 million increase in total operating expenses. Adjusted EBITDA for the three months ended September 30, 2022 is adjusted for a $103.5 million change in fair value of the investment in ZIM and dividend withholding taxes 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.

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

During the nine months ended September 30, 2022, Danaos had an average of 71.0 containerships compared to 61.9 containerships during the nine months ended September 30, 2021. Our fleet utilization for the nine months ended September 30, 2022 was 98.1% compared to 98.5% for the nine months ended September 30, 2021.

Our adjusted net income amounted to $569.3 million, or $27.67 per share, for the nine months ended September 30, 2022 compared to $236.4 million, or $11.49 per share, for the nine months ended September 30, 2021. We have adjusted our net income in the nine months ended September 30, 2022 for the change in fair value of our investment in ZIM of $176.4 million, gain on debt extinguishment of $22.9 million and a non-cash fees amortization of $9.4 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The $332.9 million increase in adjusted net income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 is attributable mainly to a $266.4 million increase in operating revenues and a $134.9 million increase in dividends from ZIM (net of withholding taxes), which were partially offset by a $49.4 million increase in total operating expenses, a $11.1 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 nine months ended September 30, 2021.

On a non-adjusted basis, our net income amounted to $406.5 million, or $19.75 earnings per diluted share, for the nine months ended September 30, 2022 compared to net income of $886.8 million, or $43.11 earnings per diluted share, for the nine months ended September 30, 2021. Our net income for the nine months ended September 30, 2022 includes a total loss on our investment in ZIM of $29.2 million (net of withholding taxes on dividend) and a gain on debt extinguishment of $22.9 million.

Operating Revenues

Operating revenues increased by 56.1%, or $266.4 million, to $740.9 million in the nine months ended September 30, 2022 from $474.5 million in the nine months ended September 30, 2021.

Operating revenues for the nine months ended September 30, 2022 reflect:

• a $187.8 million increase in revenues in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 mainly as a result of higher charter rates;
• a $55.8 million increase in revenues in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to the incremental revenue generated by newly acquired vessels;
• a $36.9 million increase in revenues in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to amortization of assumed time charters; and
• a $14.1 million decrease in revenue in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to lower non-cash revenue recognition in accordance with US GAAP.

Vessel Operating Expenses

Vessel operating expenses increased by $20.2 million to $118.9 million in the nine months ended September 30, 2022 from $98.7 million in the nine months ended September 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 $6,314 per vessel per day for the nine months ended September 30, 2022 compared to $6,034 per vessel per day for the nine months ended September 30, 2021. The average daily operating cost increased mainly due to the COVID-19 and Ukraine war related increase in crew remuneration and increased insurance premiums in the nine months ended September 30, 2022 compared to the nine months ended September 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 22.1%, or $18.3 million, to $101.2 million in the nine months ended September 30, 2022 from $82.9 million in the nine months ended September 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 $1.4 million to $9.0 million in the nine months ended September 30, 2022 from $7.6 million in the nine months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses decreased by $3.7 million to $21.7 million in the nine months ended September 30, 2022, from $25.4 million in the nine months ended September 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 $9.7 million to $26.9 million in the nine months ended September 30, 2022 from $17.2 million in the nine months ended September 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 4.3%, or $2.2 million, to $49.2 million in the nine months ended September 30, 2022 from $51.4 million in the nine months ended September 30, 2021. The decrease in interest expense is a combined result of:

• a $5.8 million decrease in interest expense due to a decrease in our average indebtedness by $346.0 million between the two periods (average indebtedness of $1,159.3 million in the nine months ended September 30, 2022 compared to average indebtedness of $1,505.3 million in the nine months ended September 30, 2021), which was partially offset by an increase in our debt service cost by 0.63 percentage points, mainly as a result of increase in the reference rates;
• a $3.0 million decrease in the amortization of deferred finance costs and debt discount;
• a $2.0 million decrease in interest expense due to capitalized interest on our vessels under construction in the nine months ended September 30, 2022 compared to none in the nine months ended September 30, 2021; and
• a $8.6 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 and subsequently fully repaid on May 15, 2022, at which point the remaining accumulated accrued interest of $26.9 million was recognized in gain on debt extinguishment.

During the nine months ended September 30, 2022, we reduced debt and lease indebtedness by $550.8 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 September 30, 2022, our outstanding bank debt, gross of deferred finance costs, was $868.1 million, which includes $300 million aggregate principal amount of our Senior Notes, and our leaseback obligation was $79.6 million. These balances compare to debt of $1,165.5 million and a leaseback obligation of $242.9 million, gross of deferred finance costs, as of September 30, 2021.

Interest income decreased by $10.3 million to $1.4 million in the nine months ended September 30, 2022 compared to $11.7 million in the nine months ended September 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

A loss on investments of $11.0 million in the nine months ended September 30, 2022 consists of the change in fair value of our shareholding interest in ZIM of $176.4 million and dividends recognized on ZIM ordinary shares of $165.4 million. In April 2022, we sold 1,500,000 of these ZIM ordinary shares resulting in proceeds to us of $85.3 million. In September 2022, we sold all of our remaining 5,686,950 ZIM ordinary shares resulting in proceeds to us of $161.3 million.

Gain on debt extinguishment

The gain on debt extinguishment of $22.9 million in the nine months ended September 30, 2022, which related to our early extinguishment of debt, decreased compared to $111.6 million in the nine months ended September 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 nine months ended September 30, 2022 compared to $68.0 million in the nine months ended September 30, 2021 following our acquisition and full consolidation of Gemini since July 1, 2021.

Other finance expenses

Other finance expenses remained stable at $1.1 million in each of the nine months ended September 30, 2022 and September 30, 2021.

Loss on derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $2.7 million in each of the nine months ended September 30, 2022 and September 30, 2021.

Other income, net

Other income, net was $1.3 million in the nine months ended September 30, 2022 compared to $4.5 million in the nine months ended September 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 nine months ended September 30, 2021.

Income taxes

Income taxes were $18.3 million in the nine months ended September 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares and compared to $4.1 million taxes withheld on dividend income in the nine months ended September 30, 2021.

Adjusted EBITDA

Adjusted EBITDA increased by 93.0%, or $325.1 million, to $674.7 million in the nine months ended September 30, 2022 from $349.6 million in the nine months ended September 30, 2021. As outlined above, the increase is mainly attributable to a $229.5 million increase in operating revenues (net of $36.9 million increase in amortization of assumed time charters) and a $134.9 million increase in dividends from ZIM (net of withholding taxes) in the nine months ended September 30, 2022, which were partially offset by a $31.4 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 nine months ended September 30, 2021. Adjusted EBITDA for the nine months ended September 30, 2022 is adjusted for a $158.1 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 $0.4 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 third quarter of 2022, which is payable on November 30, 2022 to stockholders of record as of November 18, 2022.

Recent Developments

In September 2022, we sold all of our remaining 5,686,950 ZIM ordinary shares resulting in proceeds to us of $161.3 million.

As of the date of this release, we have repurchased 466,955 shares of our common stock in the open market for $28.6 million, under our share repurchase program of up to $100 million announced in June 2022.

Conference Call and Webcast

On Tuesday, November 8, 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 November 15, 2022 by dialing 1 877 344 7529 (US Toll Free Dial In) or 1-412-317-0088 (Standard International Dial In) and using 3987980# 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 and to complete and achieve the expected benefits of refinancing our existing Citibank/Natwest credit facility with two new credit facilities as planned, 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 21 unscheduled off-hire days in the three months ended September 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		Third Quarter
	2022		2022		2022		Total
Ownership Days	6,390		6,461		6,532		19,383
Less Off-hire Days:
Scheduled Off-hire Days	(148)		-		(169)		(317)
Other Off-hire Days	(16)		(8)		(21)		(45)
Operating Days	6,226		6,453		6,342		19,021
Vessel Utilization	97.4%		99.9%		97.1%		98.1%
Operating Revenues (in '000s of US Dollars)	$229,901		$250,923		$260,037		$740,861
Average Gross Daily Charter Rate	$36,926		$38,885		$41,002		$38,950
Vessel Utilization (No. of Days)	First Quarter		Second Quarter		Third Quarter
	2021		2021		2021		Total
Ownership Days	5,400		5,460		6,043		16,903
Less Off-hire Days:
Scheduled Off-hire Days	(22)		(33)		-		(55)
Other Off-hire Days	(51)		(15)		(137)		(203)
Operating Days	5,327		5,412		5,906		16,645
Vessel Utilization	98.6%		99.1%		97.7%		98.5%
Operating Revenues (in '000s of US Dollars)	$132,118		$146,434		$195,915		$474,467
Average Gross Daily Charter Rate	$24,802		$27,057		$33,172		$28,505

Fleet List

The following table describes in detail our fleet deployment profile as of November 7, 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
Kota Santos (ex 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		November 2025
CMA CGM Rabelais	6,500		2010		January 2026
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 2024
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		November 2024
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		October 2024
Dalian	4,253		2009		April 2026
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		July 2023
Phoenix D (ex 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		Nine months ended		Nine months ended
		September 30,		September 30,		September 30,		September 30,
		2022		2021		2022		2021
OPERATING REVENUES		$260,037		$195,915		$740,861		$474,467
OPERATING EXPENSES
Vessel operating expenses		(39,186)		(34,674)		(118,929)		(98,692)
Depreciation & amortization		(37,225)		(33,584)		(110,259)		(90,536)
General & administrative		(7,157)		(7,342)		(21,684)		(25,367)
Other operating expenses		(10,320)		(8,055)		(26,952)		(17,249)
Income From Operations		166,149		112,260		463,037		242,623
OTHER INCOME/(EXPENSES)
Interest income		1,323		152		1,444		11,661
Interest expense		(15,968)		(18,093)		(49,161)		(51,408)
Gain/(loss) on investments		(80,277)		63,613		(10,987)		507,778
Gain on debt extinguishment		0		-		22,939		111,616
Other finance expenses		(155)		(99)		(1,096)		(1,133)
Equity income on investments		-		64,063		-		68,028
Other income, net		411		338		1,272		4,482
Realized loss on derivatives		(913)		(913)		(2,709)		(2,709)
Total Other Income/(Expenses), net		(95,579)		109,061		(38,298)		648,315
Income Before Income Taxes		70,570		221,321		424,739		890,938
Income taxes		(3,770)		(4,094)		(18,250)		(4,094)
Net Income		$66,800		$217,227		$406,489		$886,844
EARNINGS PER SHARE
Basic earnings per share		$3.29		$10.67		$19.77		$43.61
Diluted earnings per share		$3.29		$10.55		$19.75		$43.11
Basic weighted average number of common shares (in thousands of shares)		20,299		20,354		20,560		20,334
Diluted weighted average number of common shares (in thousands of shares)		20,318		20,598		20,579		20,571

Non-GAAP Measures1
Reconciliation of Net Income to Adjusted Net Income – Unaudited
	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Net income	$66,800		$217,227		$406,489		$886,844
Change in fair value of investments	107,290		(47,239)		176,386		(491,404)
Equity income on investments	-		(64,063)		-		(64,063)
Gain on debt extinguishment	-		-		(22,939)		(111,616)
Amortization of financing fees, debt discount & finance fees accrued	2,832		3,622		9,393		12,579
Stock based compensation	-		-		-		4,078
Adjusted Net Income	$176,922		$109,547		$569,329		$236,418
Adjusted Earnings Per Share, diluted	$8.71		$5.32		$27.67		$11.49
Diluted weighted average number of shares (in thousands of shares)	20,318		20,598		20,579		20,571

1The 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 nine months ended September 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
		September 30,		December 31,
		2022		2021
ASSETS
CURRENT ASSETS
Cash, cash equivalents and restricted cash		$569,343		$129,756
Accounts receivable, net		5,132		7,118
Other current assets		94,329		495,618
		668,804		632,492
NON-CURRENT ASSETS
Fixed assets, net		2,843,415		2,941,093
Advances for vessels under construction		89,747		-
Deferred charges, net		18,954		11,801
Other non-current assets		75,368		41,739
		3,027,484		2,994,633
TOTAL ASSETS		$3,696,288		$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		27,077		85,815
Accounts payable, accrued liabilities & other current liabilities		189,718		131,596
		288,295		319,307
LONG-TERM LIABILITIES
Long-term debt, net		774,972		1,017,916
Accumulated accrued interest, net of current portion		-		24,155
Long-term leaseback obligations, net		51,378		136,513
Other long-term liabilities		158,901		41,211
		985,251		1,219,795
STOCKHOLDERS’ EQUITY
Common stock		202		207
Additional paid-in capital		742,508		770,676
Accumulated other comprehensive loss		(68,746)		(71,455)
Retained earnings		1,748,778		1,388,595
		2,422,742		2,088,023
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$3,696,288		$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		Nine months ended		Nine months ended
		September 30,		September 30,		September 30,		September 30,
		2022		2021		2022		2021
Operating Activities:
Net income		$66,800		$217,227		$406,489		$886,844
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of right-of-use assets		34,141		31,011		101,253		82,909
Amortization of deferred drydocking & special survey costs, finance cost, debt discount and other finance fees accrued		5,916		6,195		18,399		20,206
Amortization of assumed time charters		(13,892)		(9,318)		(46,256)		(9,318)
PIK interest		-		-		-		726
Loss/(gain) on investments		107,290		(47,239)		176,386		(491,404)
Gain on debt extinguishment		-		-		(22,939)		(111,616)
Payments for drydocking/special survey		(6,433)		(460)		(16,159)		(1,615)
Amortization of deferred realized losses on cash flow interest rate swaps		913		913		2,709		2,709
Equity income on investments		-		(64,063)		-		(68,028)
Stock based compensation		125		576		373		6,055
Accounts receivable		408		435		1,986		879
Other assets, current and non-current		(10,123)		(22,739)		(53,553)		(21,093)
Accounts payable and accrued liabilities		(5,498)		(6,055)		(657)		4,291
Other liabilities, current and long-term		(10,881)		(3,086)		221,213		(5,405)
Net Cash provided by Operating Activities		168,766		103,397		789,244		296,140
Investing Activities:
Vessel additions and advances for vessels under construction		(11,087)		(262,267)		(95,134)		(264,078)
Advances for sale of vessels		-		-		13,000		-
Investments		161,305		14,388		246,638		160,265
Net Cash provided by/(used in) Investing Activities		150,218		(247,879)		164,504		(103,813)
Financing Activities:
Proceeds from long-term debt		-		-		127,725		1,105,311
Debt repayment		(17,875)		(24,400)		(401,000)		(1,319,425)
Proceeds from sale-leaseback of vessels		-		-		-		135,000
Payments of leaseback obligations		(26,179)		(16,202)		(146,866)		(37,377)
Dividends paid		(15,228)		(10,295)		(46,298)		(20,593)
Repurchase of common stock		(22,228)		-		(28,553)		-
Payments of accumulated accrued interest		-		(1,532)		(3,373)		(8,890)
Finance costs		(704)		(3,950)		(15,796)		(18,459)
Net Cash used in Financing Activities		(82,214)		(56,379)		(514,161)		(164,433)
Net increase/(decrease) in cash, cash equivalents and restricted cash		236,770		(200,861)		439,587		27,894
Cash, cash equivalents and restricted cash, beginning of period		332,573		294,418		129,756		65,663
Cash, cash equivalents and restricted cash, end of period		$569,343		$93,557		$569,343		$93,557

DANAOS CORPORATION
Reconciliation of Net Income to Adjusted EBITDA - Unaudited
(Expressed in thousands of United States dollars)
	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Net income	$66,800		$217,227		$406,489		$886,844
Depreciation and amortization of right-of-use assets	34,141		31,011		101,253		82,909
Amortization of deferred drydocking & special survey costs	3,084		2,573		9,006		7,627
Amortization of assumed time charters	(13,892)		(9,318)		(46,256)		(9,318)
Amortization of deferred finance costs, debt discount and other finance fees accrued	2,832		3,622		9,393		12,579
Amortization of deferred realized losses on interest rate swaps	913		913		2,709		2,709
Interest income	(1,323)		(152)		(1,444)		(11,661)
Interest expense	13,136		14,471		39,768		38,978
Income taxes	3,770		4,094		18,250		4,094
(Gain)/loss on investments and dividend withholding taxes	103,520		(51,333)		158,136		(495,498)
Equity income on investments	-		(64,063)		-		(64,063)
Gain on debt extinguishment	-		-		(22,939)		(111,616)
Stock based compensation	125		576		373		6,055
Adjusted EBITDA(1)	$213,106		$149,621		$674,738		$349,639

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 nine months ended September 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/20221107005726/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 Q3 2022 financial results?

Danaos reported an adjusted net income of $176.9 million, a 61.6% increase year-over-year, and operating revenues of $260 million, up 32.7%.

When is the dividend payment for Danaos Corporation?

The dividend of $0.75 per share is payable on November 30, 2022, to stockholders of record as of November 18, 2022.

What is the current cash position of Danaos Corporation?

As of September 30, 2022, Danaos had cash and cash equivalents amounting to $556.3 million.

How has Danaos Corporation's debt refinancing impacted its financial position?

Danaos' refinancing extends debt maturity until 2027, enhancing financial flexibility and stability.

What is the significance of Danaos' increase in operating revenues?

The operating revenues rose by 32.7% for Q3 2022 and 56.1% for the nine-month period, indicating strong demand and operational performance.