General_4530/Moment via Getty Images The shipping industry doesn't generate a lot of excitement for most investors. Even within the shipping sector, containerships are a particularly unfavored industry right now as the boom of 2021-2022 resulted in a too many additional ships being ordered, which are just beginning to hit the water now. But within this space, I believe Danaos Corporation (NYSE:DAC) has done just about everything right and will still perform very well over the next few years. Bear Case - ...

ATHENS, Greece, Feb. 08, 2024 (GLOBE NEWSWIRE) -- Danaos Corporation (NYSE: DAC), one of the world's largest independent owners of containerships, announced today that it will release its results for the fourth quarter ended December 31, 2023, after the close of the market in New York on Tuesday, February 13, 2024. The Company's management team will host a conference call to discuss the results on Wednesday, February 14, 2023 at 9:00 A.M. ET.  Conference Call Details:Participants should dial into the call 1 ...

November 2023 Readers of this presentation should review our Annual Report on Form 20-F filed with the SEC on March 9, 2023, including the section entitled "Key Information" and "Risk Factors", and our other filings with the SEC for a discussion of factors and circumstances that could affect our future financial results and our ability to realize the expectations stated herein. | --- | --- | |-------|---------------------| | | | | | | | | | | | | | | | | | Leading | | | | | ✓ | Containership Owner | Investo ...

Financial Data and Key Metrics - Cash position at the end of Q3 was $306 million, with total liquidity, including the revolving credit facility, standing at $655 million, providing significant flexibility for capital deployment [1] - Net debt decreased to $111 million as of September 30, 2023, with a net debt to adjusted EBITDA ratio of 0.16x, and 48 out of 72 vessels being unencumbered and debt-free [18] - Adjusted net income decreased by $33.9 million to $143 million in Q3 2023 compared to $176.9 million in Q3 2022, primarily due to the absence of a $23.2 million ZIM dividend recognized in the prior year [31] - Adjusted EBITDA decreased by 16.5% or $35.1 million to $178 million in Q3 2023, mainly due to the non-recurrence of the ZIM dividend [34] - Interest expense decreased by $9.3 million to $3.8 million in Q3 2023, driven by significant deleveraging and a $5.8 million reduction due to lower average indebtedness [21][33] Business Line Data and Key Metrics - The company secured $178 million in contracted revenue through new charters for six container ships, including $103 million for two 13,000 TEU vessels and $68 million for two 10,000 TEU vessels [17][35] - Charter coverage for 2024 increased to 90%, with a contracted revenue backlog of $2.5 billion and an average charter duration of 3.2 years [27][35] - Vessel operating expenses increased by $300,000 to $39.5 million in Q3 2023, driven by inflationary pressures on repairs, maintenance, and insurance premiums [32] - G&A expenses decreased slightly to $7.1 million in Q3 2023 compared to $7.2 million in Q3 2022 [21] Market Data and Key Metrics - The container transport market stagnated in Q3 2023 due to inventory destocking and weak retail sales, leading to a dramatic decrease in liner company profitability [25] - Charter rates for vessels smaller than 3,000 TEU returned to pre-pandemic levels, while rates for larger vessels remained stable due to scarcity of open tonnage for 2024 [26][27] - The dry bulk market showed resilience, with the company achieving rates well ahead of expectations for its newly delivered capesize bulk carriers [28] Company Strategy and Industry Competition - The company is pursuing opportunities in both the container and dry bulk sectors, with a focus on the Cape sector and investments in Eagle Bulk for dry bulk, and new building and modern eco vessels for containers [5][6] - The company’s strategy of deleveraging has been effective, shielding it from high interest costs and providing flexibility in capital allocation [18][29] - The company increased its quarterly dividend to $0.80 per share and authorized an additional $100 million in share buybacks, having returned over $200 million to shareholders in the last 18 months [30] Management Commentary on Operating Environment and Future Outlook - Management highlighted significant uncertainty in the market and emphasized the need to be near the bottom of the market before engaging in large-scale investments [6] - The company expects charter rates in the dry bulk market to remain under pressure in the near term but will monitor the market for opportunistic expansion [28] - Management noted that liner companies are still cash-rich, but the possibility of charter amendments and extensions could increase earnings visibility in the future [10] Other Important Information - The company capitalized $3.5 million in interest expense related to vessels under construction, with interest income of $3.1 million covering over 80% of interest expense for the quarter [16] - The company’s investor presentation and updated disclosures are available on its website for further details [34][35] Q&A Session Summary Question: Opportunities in Dry Bulk and Container Markets - The company is actively pursuing opportunities in both dry bulk and container markets, with a focus on the Cape sector and modern eco vessels [4][5] - Management noted that some companies are looking to disengage from the container market due to expiring charters and a challenging environment, creating potential opportunities [8] Question: Charter Amendments and Extensions - The company has not yet seen significant requests for charter amendments or extensions but noted that such deals could be beneficial for increasing earnings visibility [9][10] Question: Market Activity for Modern Eco Vessels - Management observed that some companies are looking to sell modern eco vessels as charters expire, indicating potential opportunities in the market [7][8]

OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements (unaudited) and the notes thereto included elsewhere in this report. Results of Operations Three months ended September 30, 2023 compared to three months ended September 30, 2022 During the three months ended September 30, 2023, Danaos had an average of 68.0 container vessels compared to 71.0 container vessels during the three months en ...

Financial Data and Key Metrics Changes - Adjusted net income for Q2 2023 was $143.4 million, or $7.14 per share, down from $157.1 million, or $7.59 per share, in Q2 2022, primarily due to the absence of a $13.9 million ZIM dividend recognized in the previous year [19][21] - Adjusted EBITDA decreased by 7.7% to $177.3 million from $192.1 million in the same quarter last year [21] - Interest expense decreased significantly to $5.3 million from $12.9 million in Q2 2022, attributed to a reduction in average indebtedness by nearly $700 million [20] - Net debt as of June 30, 2023, was reduced to $131 million, with a net debt to adjusted EBITDA ratio of 0.2 times [25] Business Line Data and Key Metrics Changes - Vessel operating expenses increased by $1.3 million to $41.9 million, with average daily vessel operating costs rising to $6,970 from $6,463 due to inflationary pressures [11] - The company secured $469 million in contracted revenue through new charters for 12 container ships, increasing the total charter backlog to $2.5 billion with a 3.3-year average charter duration [13][15] Market Data and Key Metrics Changes - The container market experienced a drop of over 50% compared to the previous year, yet the company managed to maintain operating revenues of $241 million, close to previous records [15] - The order book for vessels is at historically low levels, with fleet supply growth projected to decline significantly in the coming years against rebounding demand [8] Company Strategy and Development Direction - The company is committed to advancing its decarbonization strategy by retrofitting existing vessels and ordering new vessels that are methanol-ready [7] - The strategy includes opportunistic capital deployment in the dry bulk market, with a focus on acquiring assets at attractive prices [16][18] - The company aims to maintain its core business in container shipping while cautiously expanding into the dry bulk sector [34] Management's Comments on Operating Environment and Future Outlook - Management noted a stagnating world economy affecting the container market, but emphasized the resilience of the business model [6] - The company is focused on investing in green technologies and believes that those who do not adapt to the changing regulatory environment will face challenges [29] - Future capital deployment will prioritize modern tonnage and newbuildings, with dry bulk being a potential area for growth [44] Other Important Information - The company has spent $65.5 million of its $100 million buyback program, retiring over one million shares [4] - Cash as of the end of Q2 2023 was $293 million, with total liquidity of $653 million, providing flexibility for capital deployment [26] Q&A Session Summary Question: What has changed to give the company confidence to deploy capital aggressively? - Management indicated that they are deploying capital where they see interesting returns, particularly in green fuel-capable ships and the dry bulk market, which has favorable fundamentals [28][30] Question: Is the investment in dry bulk a long-term strategy or opportunistic? - Management clarified that while they see potential in dry bulk, it will not dominate the business, and they will be cautious in capital deployment [34][41] Question: What are the intentions regarding the Eagle investment? - The company expressed concerns about Eagle's corporate governance following recent board actions and is seeking clarification [17][38] Question: How will the company operate the newly acquired dry bulk vessels? - The company plans to operate the vessels in-house, potentially using hedging strategies if necessary, but will start by trading them in the spot market [40]

[Operating and Financial Review and Prospects](index=1&type=section&id=OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides a comprehensive overview of the company's financial performance, liquidity, capital structure, strategic investments, and fleet composition [Results of Operations](index=1&type=section&id=Results%20of%20Operations) Operational results show mixed performance with Q2 2023 revenue decline and H1 2023 marginal increase, impacted by investment swings and lower interest expense [Three months ended June 30, 2023 vs 2022](index=1&type=section&id=Three%20months%20ended%20June%2030%2C%202023%20compared%20to%20three%20months%20ended%20June%2030%2C%202022) Q2 2023 saw a 3.7% revenue decline, increased operating expenses, and a significant positive swing in investment gains offsetting prior-year losses Q2 2023 vs Q2 2022 Key Financial Metrics | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenues | $241.5M | $250.9M | -3.7% | | Vessel Operating Expenses | $41.9M | $40.6M | +3.2% | | Interest Expense | $5.9M | $16.1M | -63.4% | | Gain/(Loss) on Investments | $6.4M | ($168.6M) | N/A | | Dividend Income | $0 | $16.2M | -100% | - The decrease in operating revenue was a net result of a **$5.5 million** increase from higher charter rates, offset by a **$5.4 million** decrease from vessel disposals and a **$9.8 million** decrease from amortization of assumed time charters[7](index=7&type=chunk) - Fleet utilization was **98.7%** for an average of **68.0** containerships in Q2 2023, compared to **99.9%** for **71.0** ships in Q2 2022[3](index=3&type=chunk) - The average daily operating cost per vessel increased to **$6,970** from **$6,463** in the prior-year quarter, mainly due to higher repair and maintenance expenses[6](index=6&type=chunk) [Six months ended June 30, 2023 vs 2022](index=3&type=section&id=Six%20months%20ended%20June%2030%2C%202023%20compared%20to%20six%20months%20ended%20June%2030%2C%202022) H1 2023 operating revenues rose 0.9% due to higher charter rates, while net income was impacted by investment gains and the absence of ZIM dividends H1 2023 vs H1 2022 Key Financial Metrics | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenues | $485.0M | $480.8M | +0.9% | | Vessel Operating Expenses | $82.5M | $79.7M | +3.5% | | Interest Expense | $12.6M | $33.2M | -62.0% | | Gain/(Loss) on Investments | $6.4M | ($69.1M) | N/A | | Dividend Income | $0 | $138.4M | -100% | - The increase in operating revenue was primarily due to a **$35.9 million** gain from higher charter rates, which was partially offset by decreases of **$8.7 million** from vessel disposals and **$20.0 million** from amortization of assumed time charters[22](index=22&type=chunk) - Fleet utilization was **97.8%** for an average of **68.2** containerships in H1 2023, compared to **98.7%** for **71.0** ships in H1 2022[20](index=20&type=chunk) - The company recorded a **$1.6 million** gain on the sale of the vessel Amalia C in January 2023[27](index=27&type=chunk) [Liquidity and Capital Resources](index=6&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$293.3 million** cash and **$360.0 million** available credit, supported by **$2.5 billion** in contracted revenues Liquidity Position as of June 30, 2023 | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $293.3M | | Available borrowing capacity | $360.0M | | Total contracted cash revenues | $2.5B | | Outstanding indebtedness (gross) | $424.3M | - Principal sources of funds include operating cash flows, vessel sales, bank borrowings, and proceeds from the divested ZIM investment[37](index=37&type=chunk) - The company has significant contractual commitments for ten newbuilding vessels, with remaining payments totaling **$634.4 million** as of June 30, 2023[43](index=43&type=chunk) [Shareholder Returns and Capital Allocation](index=10&type=section&id=Shareholder%20Returns%20and%20Capital%20Allocation) The company actively returns capital through a **$0.75** per share quarterly dividend and a **$100 million** share repurchase program - A regular quarterly dividend of **$0.75** per share was declared, payable on September 1, 2023[45](index=45&type=chunk) - The company has a **$100 million** share repurchase program. In H1 2023, **597,697** shares were repurchased for **$36.0 million**. Subsequent to quarter-end, an additional **15,895** shares were bought back for **$1.0 million**[46](index=46&type=chunk) [Investments and Strategic Initiatives](index=10&type=section&id=Investments%20and%20Strategic%20Initiatives) The company diversified investments by acquiring a **$68.2 million** stake in Eagle Bulk, investing in decarbonization R&D, and agreeing to acquire five Capesize bulk carriers - Acquired **1,552,865** shares of Eagle Bulk Shipping Inc. (Ticker: EGLE) for **$68.2 million**, which were valued at **$74.6 million** as of June 30, 2023, resulting in a **$6.4 million** unrealized gain[47](index=47&type=chunk) - Invested **$4.3 million** for a **49%** ownership interest in Carbon Termination Technologies Corporation (CTTC), a new company focused on decarbonization R&D for the shipping industry[49](index=49&type=chunk) - In July 2023, reached an agreement in principle to acquire **5** Capesize bulk carriers for a total of **$103 million**, with expected delivery between September and October 2023[50](index=50&type=chunk) - The company fully divested its holdings in ZIM Integrated Shipping Services in 2022, selling the remaining shares for **$161.3 million** in September 2022[48](index=48&type=chunk) [Cash Flow Analysis](index=12&type=section&id=Cash%20Flow%20Analysis) H1 2023 operating cash flow significantly decreased to **$280.6 million** due to absent ZIM dividends and prior-year prepayments, while investing activities shifted to a net cash outflow Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2023 (In thousands) | 2022 (In thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $280,606 | $620,478 | | Net cash provided by/(used in) investing activities | $(100,277) | $14,286 | | Net cash used in financing activities | $(154,666) | $(431,947) | - The decrease in operating cash flow was mainly due to the absence of **$126.6 million** in ZIM dividends and a **$261.4 million** decrease in cash operating revenues related to a charter prepayment that occurred in 2022[53](index=53&type=chunk) - The shift to cash used in investing activities was driven by **$74.4 million** in net investments (including Eagle Bulk) and the absence of **$85.3 million** in proceeds from ZIM share sales that occurred in 2022[54](index=54&type=chunk) [Non-GAAP Financial Measures](index=14&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA decreased by **$105.3 million** to **$356.3 million** in H1 2023, primarily due to the non-recurrence of ZIM dividend income Reconciliation of Net Income to Adjusted EBITDA (Six Months Ended June 30) | Metric (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $293,222 | $339,689 | | EBITDA | $362,189 | $429,707 | | Adjusted EBITDA | $356,366 | $461,632 | - The decrease in Adjusted EBITDA was mainly due to the non-recurrence of the ZIM dividend, partially offset by a **$24.2 million** increase in operating revenues (excluding amortization of assumed time charters)[62](index=62&type=chunk) [Debt and Financing Structure](index=16&type=section&id=Debt%20and%20Financing%20Structure) As of June 30, 2023, total outstanding debt was **$424.3 million**, with **$360.0 million** available under a revolving credit facility and **44** unencumbered vessels Outstanding Principal Debt as of June 30, 2023 | Credit Facility | Outstanding Principal (in millions) | | :--- | :--- | | BNP Paribas/Credit Agricole Facility | $110.0 | | Alpha Bank Facility | $51.5 | | Citibank Revolving Credit Facility | $0 | | Senior Notes | $262.8 | - As of June 30, 2023, **44** of the company's vessels were unencumbered[64](index=64&type=chunk) - The **8.500%** Senior Notes mature on March 1, 2028. The company repurchased **$37.2 million** of these notes in December 2022[65](index=65&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [Market Risk and External Factors](index=12&type=section&id=Market%20Risk%20and%20External%20Factors) The company faces market risks from interest rate fluctuations, inflation, geopolitical conflicts, and the inherent volatility of its newly entered dry bulk shipping sector - Elevated inflation and rising interest rates may increase operating expenses and the cost of capital[71](index=71&type=chunk) - The conflict in Ukraine adversely affects crewing operations and global trade, creating economic uncertainty[51](index=51&type=chunk) - The company highlights the cyclical and volatile nature of the dry bulk shipping industry as a new risk factor following its recent acquisitions in the sector[86](index=86&type=chunk) - The company currently has no outstanding interest rate swap agreements to hedge against interest rate fluctuations[69](index=69&type=chunk) [Capitalization](index=18&type=section&id=Capitalization) As of June 30, 2023, total capitalization was **$3.21 billion**, comprising **$424.3 million** in debt and **$2.79 billion** in stockholders' equity Consolidated Capitalization as of June 30, 2023 (Actual) | Category | Amount (US Dollars in thousands) | | :--- | :--- | | Total debt | $424,266 | | Total stockholders' equity | $2,789,482 | | **Total capitalization** | **$3,213,748** | [Fleet Profile](index=20&type=section&id=Fleet%20Profile) As of August 3, 2023, the fleet comprises **68** containerships, with **10** newbuilds under construction and an agreement to acquire **5** Capesize dry bulk vessels - The fleet deployment profile as of August 3, 2023, details charter arrangements for **68** vessels with various charterers like HMM, Hapag Lloyd, MSC, and CMA CGM[78](index=78&type=chunk) - There are **10** containerships under construction, ranging in size from **6,014 TEU** to **8,258 TEU**, with deliveries scheduled from Q3 2024 to Q4 2026[84](index=84&type=chunk) - The company has agreed to acquire **5** Capesize dry bulk vessels, built between 2010 and 2012, with an aggregate capacity of **879,306 DWT**[82](index=82&type=chunk) [Financial Statements and Notes (Unaudited)](index=28&type=section&id=Financial%20Statements%20and%20Notes%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and detailed notes on key accounting policies, balances, and contractual commitments [Condensed Consolidated Financial Statements](index=29&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Unaudited H1 2023 financial statements show stable assets, decreased liabilities to **$695.0 million**, increased equity to **$2.79 billion**, and net income of **$293.2 million** Condensed Consolidated Balance Sheet Highlights | Metric (in thousands) | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $487,783 | $372,521 | | Total assets | $3,484,432 | $3,400,228 | | Total current liabilities | $185,072 | $228,407 | | Total liabilities | $694,950 | $839,814 | | Total stockholders' equity | $2,789,482 | $2,560,414 | Condensed Consolidated Statement of Income Highlights (Six Months Ended) | Metric (in thousands) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Operating Revenues | $485,053 | $480,824 | | Income From Operations | $302,097 | $296,888 | | Net Income | $293,222 | $339,689 | | Diluted EPS | $14.51 | $16.40 | [Key Notes to Financial Statements](index=34&type=section&id=Key%20Notes%20to%20Financial%20Statements) Key notes detail **$634.4 million** in new vessel commitments, **$2.55 billion** in future charter revenues, and **$36.0 million** in H1 2023 share repurchases - The company has remaining contractual commitments of **$634.4 million** for vessel construction as of June 30, 2023[118](index=118&type=chunk) - In January 2023, the company gave early termination notice and fully repaid its outstanding leaseback obligation on May 12, 2023, resulting in a **$2.3 million** loss[124](index=124&type=chunk) - Future minimum payments expected to be received on non-cancellable time charters totaled **$2.55 billion** as of June 30, 2023[152](index=152&type=chunk) - Under its share repurchase program, the company repurchased **597,697** shares for **$36.0 million** in the six months ended June 30, 2023[146](index=146&type=chunk)

Danaos Corporation (NYSE:DAC) Q1 2023 Earnings Conference Call May 16, 2023 9:00 AM ET Company Participants Evangelos Chatzis - Chief Financial Officer John Coustas - Chief Executive Officer Conference Call Participants Omar Nokta - Jefferies Climent Molins - Value Investor’s Edge Operator Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for Three Months Ended March 31st, 2023. As a reminder, today’s call is being recorded. Hosting the call today is; Dr. John C ...

Financial Position - As of March 31, 2023, total debt amounted to $497,437,000, with an adjusted total of $431,141,000 after accounting for recent repayments and share repurchases[60][61] - Stockholders' equity was reported at $2,690,237,000, with an adjusted figure of $2,680,441,000[60][61] - The total capitalization as of March 31, 2023, was $3,187,674,000, adjusted to $3,111,582,000[60][61] - Total current assets rose to $469,785,000 as of March 31, 2023, compared to $372,521,000 at the end of 2022, marking an increase of about 26.1%[74] - Total liabilities decreased to $791,085,000 as of March 31, 2023, down from $839,814,000 at the end of 2022, a reduction of approximately 5.8%[74] - Retained earnings increased to $2,017,250,000 as of March 31, 2023, compared to $1,886,311,000 at the end of 2022, reflecting a growth of about 6.9%[74] - Total stockholders' equity reached $2,690,237,000 as of March 31, 2023, up from $2,560,414,000 at the end of 2022, indicating an increase of approximately 5.1%[74] Revenue and Income - Operating revenues for Q1 2023 increased to $243,574,000, up from $229,901,000 in Q1 2022, representing a growth of approximately 5.8%[76] - Net income for Q1 2023 was $146,201,000, a decrease of 56% compared to $331,465,000 in Q1 2022[76] - Basic earnings per share for Q1 2023 were $7.18, down from $16.02 in Q1 2022, reflecting a decline of approximately 55.2%[76] - The company reported a gain on the sale of vessels amounting to $1,639,000 in Q1 2023[76] - Interest expense decreased significantly to $6,722,000 in Q1 2023 from $17,114,000 in Q1 2022, a reduction of approximately 60.8%[76] - Net income for the three months ended March 31, 2023, was $146.2 million, a decrease of 56% compared to $331.5 million in the same period of 2022[84] Cash Flow and Investments - Net cash provided by operating activities increased to $127.6 million, up 6% from $119.5 million year-over-year[84] - Cash and cash equivalents at the end of the period reached $359.6 million, compared to $198.7 million at the end of the same period last year, representing an increase of 81%[84] - Net cash used in investing activities was $(6.1) million, a decrease from $11.0 million in the prior year, indicating a shift in investment strategy[84] - Payments of long-term debt decreased significantly to $6.9 million from $24.3 million, reflecting improved debt management[84] - The company invested $4.3 million in Carbon Termination Technologies Corporation, representing a 49% ownership interest, focusing on decarbonization technologies for the shipping industry[98] Debt Management - The Company incurred interest expense of $9.5 million for the three months ended March 31, 2023, compared to $13.7 million for the same period in 2022, indicating a decrease of 30.2%[110] - As of March 31, 2023, total long-term debt was $431.141 million, down from $438.016 million as of December 31, 2022, reflecting a reduction of 1.99%[108] - The secured long-term debt, including current portion, had a book value of $168.375 million as of March 31, 2023, compared to $175.250 million as of December 31, 2022[122] - The fair value of unsecured long-term debt was estimated at $256.197 million as of March 31, 2023, slightly lower than its book value of $262.766 million[122] Fleet and Operations - The fleet deployment profile includes vessels with charter rates ranging from $18,500 to $64,918, with several contracts expiring between 2023 and 2028[63][64] - The company has contracted employment for multiple vessels with HMM, Hapag Lloyd, and MSC, indicating strong customer relationships[63] - The company has contracted 8 vessels under construction, with expected delivery in 2024, and charter rates ranging from $36,000 to $42,000 per day[67] - The charter rates for existing vessels include rates such as $25,500 for ZIM Kingston and $53,000 for ZIM Monaco, with various expiration dates extending to 2026[65] - The company has options for charter extensions, with some contracts allowing for extensions of up to 6 months at the same rate[65] - The company has a diverse fleet with vessels built between 2001 and 2024, ensuring operational flexibility[67] Market Conditions and Risks - The company continues to face near-term impacts from elevated inflation and rising interest rates, which may increase the cost of capital[57] - The company anticipates potential risks affecting future performance, including global economic conditions and demand for seaborne transportation[69] - The company is actively monitoring the impact of geopolitical events, such as the conflict in Ukraine, on shipping routes and operations[69] Shareholder Actions - The company declared dividends of $0.75 per share for Q1 2023, totaling $15,262,000[81] - The Company declared a dividend of $0.75 per share, amounting to $15.3 million, paid on March 14, 2023, compared to $15.5 million in the same period of 2022[126] - The Company repurchased 40,500 shares for $2.2 million in the three months ended March 31, 2023, bringing total repurchases to 466,955 shares for $28.6 million until December 31, 2022[127] Compliance and Commitments - The Company maintained compliance with financial covenants, including a minimum liquidity requirement of $30 million and a maximum consolidated debt to consolidated EBITDA ratio of 6.5x as of March 31, 2023[113] - The Company has outstanding commitments under vessel construction contracts and buyback obligations as of March 31, 2023[125]

[Forward-Looking Information](index=5&type=section&id=FORWARD-LOOKING%20INFORMATION) This section outlines forward-looking statements, their inherent risks, and key factors that could affect future financial results - This report contains forward-looking statements based on management's current expectations and projections. These statements are identified by words such as "anticipate," "believe," "expect," and are subject to various risks and uncertainties that could cause actual results to differ materially[14](index=14&type=chunk)[15](index=15&type=chunk) - Key factors that could affect future financial results include, but are not limited to: future operating results, the impact of the COVID-19 pandemic and the war in Ukraine, business strategies, market conditions, charter rates, financial condition and liquidity, performance of charterers, changes in regulations, and potential litigation[15](index=15&type=chunk) [PART I](index=6&type=section&id=PART%20I) [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section details the company's capitalization and outlines significant business, financial, and regulatory risks [Capitalization and Indebtedness](index=6&type=section&id=Capitalization%20and%20Indebtedness) As of December 31, 2022, Danaos Corporation reported total debt of **$510.9 million** and stockholders' equity of **$2.56 billion** Consolidated Capitalization as of December 31, 2022 | | Actual (in thousands) | As Adjusted (in thousands) | | :--- | :--- | :--- | | **Debt:** | | | | Senior unsecured notes | $262,766 | $262,766 | | BNP Paribas/Credit Agricole $130 mil. Facility | $120,000 | $115,000 | | Alpha Bank $55.25 mil. Facility | $55,250 | $53,375 | | Leasing obligations | $72,925 | $68,590 | | **Total debt** | **$510,941** | **$499,731** | | **Stockholders' equity:** | | | | Common stock | $203 | $203 | | Additional paid-in capital | $748,109 | $748,109 | | Accumulated other comprehensive loss | ($74,209) | ($74,209) | | Retained earnings | $1,886,311 | $1,886,311 | | **Total stockholders' equity** | **$2,560,414** | **$2,560,414** | | **Total capitalization** | **$3,071,355** | **$3,060,145** | [Risk Factors](index=8&type=section&id=RISK%20FACTORS) The company faces significant risks from market volatility, customer concentration, substantial debt, and regulations - The company's profitability is highly dependent on the cyclical and volatile containership market. Charter rates, which reached all-time highs in 2021, declined to pre-pandemic levels by the end of 2022. For example, the one-year daily rate for a 4,400 TEU Panamax containership fell from $100,000 at the end of 2021 to $24,300 at the end of December 2022[37](index=37&type=chunk) - A significant portion of revenue comes from a limited number of customers. In 2022, approximately **73%** of operating revenues were generated by six customers, with CMA CGM, MSC, and HMM accounting for **26%**, **13%**, and **12%**, respectively[50](index=50&type=chunk) - The company has substantial debt of **$510.9 million** as of December 31, 2022. Credit facilities contain financial covenants, including maintaining specified collateral coverage ratios, which could be breached if vessel values decline or charter rates fall, potentially leading to debt acceleration[98](index=98&type=chunk)[95](index=95&type=chunk) - The company is subject to increasing environmental regulations, such as the IMO's **0.5%** sulfur cap on marine fuel and new energy efficiency (EEXI) and carbon intensity (CII) standards, which could require significant capital expenditures and increase operating costs[109](index=109&type=chunk)[113](index=113&type=chunk) - As a foreign corporation, the company may be subject to a **4%** U.S. federal income tax on its U.S.-source shipping income if it does not qualify for an exemption under Section 883 of the U.S. Internal Revenue Code. There is also a risk of being classified as a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. tax consequences for U.S. stockholders[164](index=164&type=chunk)[167](index=167&type=chunk) [Item 4. Information on the Company](index=48&type=section&id=Item%204.%20Information%20on%20the%20Company) Danaos Corporation owns 68 containerships and 6 newbuildings, chartered long-term, managed by a related party, and subject to extensive regulations [Business Overview and Fleet](index=50&type=section&id=Business%20Overview%20and%20Fleet) Danaos owns 68 containerships and 6 newbuildings, with **$2.1 billion** in contracted revenues and **3.4 years** average charter duration Fleet and Contracted Revenue Status | Metric | Value | | :--- | :--- | | **Operating Fleet (as of Mar 7, 2023)** | 68 containerships | | Total TEU Capacity | 421,293 TEU | | **Newbuildings (as of Mar 7, 2023)** | 6 containerships | | Total Newbuild TEU Capacity | 46,200 TEU | | **Contracted Revenue (as of Dec 31, 2022)** | ~$2.1 billion | | Average Remaining Charter Duration | 3.4 years (weighted) | - The company has **6** containerships under construction, with expected delivery in 2024. These include two **7,100 TEU** vessels and four **8,000 TEU** vessels[184](index=184&type=chunk) - In 2022, the company sold two vessels, Catherine C and Leo C, for gross proceeds of **$130 million**. It also agreed to sell the Amalia C, which was delivered in January 2023[183](index=183&type=chunk) - The company sold its remaining **7,186,950** ordinary shares of ZIM for net proceeds of **$246.6 million** in 2022 and received **$147.1 million** in dividends from ZIM during the year[186](index=186&type=chunk) [Management and Competition](index=57&type=section&id=Management%20and%20Competition) The company's fleet is managed by a related party, competing in a highly competitive market where its large fleet and long-term contracts are key advantages - Operations are managed by Danaos Shipping Co. Ltd., an entity affiliated with CEO Dr. John Coustas, under a management agreement with a term expiring on December 31, 2024[190](index=190&type=chunk)[194](index=194&type=chunk) Management Fees for 2023 | Fee Type | Amount | | :--- | :--- | | Daily Management Fee | $850 | | Daily Vessel Fee (Time Charter) | $850 | | Daily Vessel Fee (Bareboat Charter) | $425 | | Commission on Freight/Charter Hire | 1.25% | | Fee on Vessel Sale/Purchase | 0.5% of contract price | | Newbuilding Supervision Fee | $725,000 per vessel | - The company faces substantial competition from experienced shipping companies, including state-sponsored entities and those financed by the German KG system, which may offer lower charter rates due to tax benefits[199](index=199&type=chunk)[76](index=76&type=chunk) [Regulation and Compliance](index=59&type=section&id=Regulation%20and%20Compliance) The company's operations are subject to extensive international and U.S. environmental, safety, and security regulations - All vessels must be certified as "in class" by a classification society, requiring annual, intermediate, and special surveys. For 2023, **24** vessels are scheduled for drydocking[203](index=203&type=chunk)[137](index=137&type=chunk)[209](index=209&type=chunk) - The company is subject to IMO regulations, including the global **0.5%** sulfur cap on marine fuel (effective Jan 2020) and new energy efficiency (EEXI) and carbon intensity (CII) rules aimed at reducing greenhouse gas emissions, which came into force in January 2023[226](index=226&type=chunk)[251](index=251&type=chunk) - Compliance with U.S. environmental laws is critical, including the Oil Pollution Act (OPA), which imposes strict liability for oil spills, and the Clean Water Act (CWA), which regulates ballast water discharges through the Vessel General Permit (VGP)[230](index=230&type=chunk)[241](index=241&type=chunk) - Vessel security is managed under the International Ship and Port Facilities Security (ISPS) Code and the U.S. Maritime Transportation Security Act (MTSA), requiring security plans and certifications. The company must also address maritime cyber risks in its Safety Management Systems as of January 2021[256](index=256&type=chunk)[259](index=259&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=76&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes financial performance, noting **44.1%** revenue growth to **$993.3 million**, decreased net income due to ZIM share losses, and significant debt reduction [Results of Operations](index=87&type=section&id=Results%20of%20Operations) Operating revenues rose **44.1%** to **$993.3 million** in 2022, but net income fell to **$559.2 million** due to ZIM investment losses Consolidated Financial Highlights (Years ended Dec 31) | (In thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Operating revenues** | **$993,344** | **$689,505** | **$461,594** | | Income from operations | $653,436 | $358,259 | $199,480 | | **Net income** | **$559,210** | **$1,052,841** | **$153,550** | | Diluted EPS | $27.28 | $51.15 | $6.45 | | **Adjusted EBITDA** | **$851,160** | **$508,803** | **$318,331** | - **2022 vs. 2021:** The **$303.8 million** (**44.1%**) increase in operating revenue was primarily driven by a **$260.6 million** increase from higher charter rates and a **$55.8 million** increase from newly acquired vessels. The significant drop in net income was mainly due to a loss on ZIM investments in 2022 compared to a large gain in 2021[312](index=312&type=chunk)[313](index=313&type=chunk)[323](index=323&type=chunk) - **2021 vs. 2020:** The **$227.9 million** (**49.4%**) increase in operating revenue was driven by a **$107.9 million** increase from higher charter rates and improved utilization, and a **$55.7 million** increase from new vessels. Net income surged due to these revenue gains and a **$543.7 million** gain on ZIM investments[333](index=333&type=chunk)[334](index=334&type=chunk)[344](index=344&type=chunk) [Liquidity and Capital Resources](index=96&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operating cash flows, with **$267.7 million** cash and **$382.5 million** credit available, and debt significantly reduced to **$510.9 million** Cash Flow Summary (Years ended Dec 31) | (In thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $934,741 | $428,111 | $265,679 | | Net cash from/(used in) investing activities | $176,572 | ($143,148) | ($170,736) | | Net cash used in financing activities | ($973,401) | ($220,870) | ($168,450) | - Total outstanding debt (including leaseback obligations) was reduced by **$857.6 million** during 2022, from **$1,368.5 million** at year-end 2021 to **$510.9 million** at year-end 2022[354](index=354&type=chunk)[321](index=321&type=chunk) - The company has a share repurchase program of up to **$100 million**, under which it repurchased **466,955** shares for **$28.6 million** as of December 31, 2022[359](index=359&type=chunk) Contractual Obligations as of December 31, 2022 | (In thousands) | Total | Less than 1 year | 2 – 3 years | 4 – 5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt obligations | $438,016 | $27,500 | $36,400 | $111,350 | $262,766 | | Long-term leaseback obligations | $72,925 | $27,469 | $45,456 | — | — | | Payments for newbuilding vessels | $343,839 | $31,200 | $312,639 | — | — | | Payments to our manager | $64,006 | $33,719 | $30,287 | — | — | [Critical Accounting Estimates](index=112&type=section&id=Critical%20Accounting%20Estimates) Vessel impairment is a critical accounting estimate, assessed by comparing carrying value to projected cash flows, with no impairment recorded in 2022 - The company evaluates vessels for impairment by comparing their carrying value to undiscounted projected net operating cash flows. This analysis is highly sensitive to assumptions about future charter rates for non-contracted periods[409](index=409&type=chunk) - For future charter rate estimates, management uses a benchmark of **5 to 15-year** historical averages to account for market volatility and cyclicality[412](index=412&type=chunk) - As of December 31, 2022, an impairment assessment was performed due to market volatility. The assessment concluded that no impairment was required for any vessel in the fleet[411](index=411&type=chunk)[415](index=415&type=chunk) [Item 6. Directors, Senior Management and Employees](index=118&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's leadership, board structure, and compensation, including **€2.0 million** in executive cash compensation for 2022 Directors and Executive Officers (as of March 7, 2023) | Name | Age | Position | | :--- | :--- | :--- | | Dr. John Coustas | 66 | President and CEO and Class I Director | | Iraklis Prokopakis | 72 | Senior Vice President, COO, Treasurer and Class II Director | | Evangelos Chatzis | 49 | Chief Financial Officer and Secretary | | Dimitris Vastarouchas | 55 | Deputy Chief Operating Officer | | Petros Christodoulou | 62 | Class I Director | | Myles R. Itkin | 75 | Class I Director | | William Repko | 73 | Class III Director | | Richard Sadler | 61 | Class III Director | - Aggregate cash compensation for executive officers was **€2.0 million** (**$2.1 million**) for the year ended December 31, 2022. Non-cash share-based compensation expense for executives was **$5.4 million**[441](index=441&type=chunk) - A defined benefit retirement plan for executive officers was established effective December 14, 2022, with a prior service cost of **$14.2 million** recognized in Other Comprehensive Income[442](index=442&type=chunk) - The company has an equity compensation plan allowing for awards of common stock. In 2022, **100,000** fully vested shares were granted to executive officers[459](index=459&type=chunk)[464](index=464&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=129&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section outlines related party transactions, primarily with Danaos Shipping Co. Ltd., the company's manager and largest shareholder - The company's manager, Danaos Shipping Co. Ltd., is ultimately owned by a trust for the benefit of CEO Dr. John Coustas and his family. This entity is also the company's largest stockholder[467](index=467&type=chunk) - Management fees paid to the Manager amounted to approximately **$21.9 million** in 2022, **$19.9 million** in 2021, and **$17.7 million** in 2020[469](index=469&type=chunk) - On July 1, 2021, the company acquired the remaining **51%** equity interest in Gemini Shipholdings Corporation from Virage International Ltd., a company controlled by its largest stockholder, for **$86.7 million** in cash[481](index=481&type=chunk) Major Shareholders (as of March 7, 2023) | Beneficial Owner | Number of Shares | Percentage of Common Stock | | :--- | :--- | :--- | | Danaos Investment Limited as Trustee of the 883 Trust | 9,048,502 | 44.5% | | RBF Capital LLC | 1,435,161 | 7.1% | | All executive officers and directors as a group (8 persons) | 9,315,502 | 45.8% | [Item 8. Financial Information](index=138&type=section&id=Item%208.%20Financial%20Information) This section refers to full financial statements, details legal proceedings including a **$597.9 million** claim against Hanjin Shipping, and outlines the company's dividend policy - The company has an unsecured claim of **$597.9 million** against the bankrupt Hanjin Shipping, which is not recognized on the balance sheet. A partial payment of **$3.9 million** on a separate common benefit claim was received in January 2021[497](index=497&type=chunk)[499](index=499&type=chunk)[500](index=500&type=chunk) - The company reinstated quarterly dividends in 2021. In 2022, it paid four quarterly dividends of **$0.75** per share. A dividend of **$0.75** per share was also declared for Q1 2023, payable in March 2023[502](index=502&type=chunk) [Item 10. Additional Information](index=140&type=section&id=Item%2010.%20Additional%20Information) This section details corporate structure, anti-takeover provisions, and tax implications as a Marshall Islands corporation, including potential U.S. federal income tax and PFIC risks - As of March 7, 2023, the company had **20,349,702** shares of common stock outstanding. Authorized capital consists of **750 million** common shares and **100 million** blank check preferred shares[507](index=507&type=chunk) - The company's articles of incorporation include several anti-takeover provisions, such as a classified board with staggered three-year terms, the ability to issue blank check preferred stock without shareholder approval, and prohibitions on certain business combinations with "interested stockholders" (owners of **15%** or more)[518](index=518&type=chunk)[519](index=519&type=chunk)[521](index=521&type=chunk)[526](index=526&type=chunk) - As a Marshall Islands corporation not conducting business there, the company is not subject to Marshall Islands income tax. However, its U.S.-source shipping income could be subject to a **4%** U.S. federal income tax unless it qualifies for an exemption under Section 883 of the U.S. tax code[534](index=534&type=chunk)[545](index=545&type=chunk) - There is a risk the company could be classified as a Passive Foreign Investment Company (PFIC), which would subject U.S. Holders to a disadvantageous tax regime unless they make a QEF or mark-to-market election. The company believes it was not a PFIC for the 2022 taxable year[567](index=567&type=chunk)[571](index=571&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=165&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations and unhedged foreign currency exchange rates, with a 10 basis point rate increase impacting 2023 interest expense by **$145,000** - The company currently has no outstanding interest rate swap agreements. It previously used swaps for hedging, and deferred realized losses from these past hedges are being amortized into earnings, with **$3.6 million** reclassified in 2022[590](index=590&type=chunk)[597](index=597&type=chunk) - A sensitivity analysis indicates that a **10 basis point** (**0.10%**) increase in interest rates would result in a **$145,000** increase in interest expense for 2023 based on floating rate debt outstanding at year-end 2022[598](index=598&type=chunk) - The company has foreign currency exchange risk as all revenues are in U.S. dollars, while approximately **22.4%** of operating expenses in 2022 were in other currencies, mainly Euros. This exposure is not hedged[599](index=599&type=chunk) [PART II](index=167&type=section&id=PART%20II) [Item 15. Controls and Procedures](index=167&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management and Deloitte concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[605](index=605&type=chunk) - Management's annual report on internal control over financial reporting concluded that, as of December 31, 2022, the company's internal control over financial reporting was effective based on the COSO framework[609](index=609&type=chunk)[610](index=610&type=chunk) - The independent auditor, Deloitte Certified Public Accountants S.A., provided an unqualified attestation report on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[612](index=612&type=chunk) [Item 16. Corporate Governance and Other Disclosures](index=169&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Disclosures) This section covers corporate governance, including the audit committee, auditor change to Deloitte in May 2022, share repurchase program, and differences from NYSE governance standards as a foreign private issuer - The Board of Directors has determined that Myles R. Itkin qualifies as an audit committee financial expert[614](index=614&type=chunk) - On May 11, 2022, the company dismissed PricewaterhouseCoopers S.A. ("PwC") and engaged Deloitte Certified Public Accountants S.A. as its new independent registered public accounting firm. There were no disagreements with PwC on any accounting principles or practices[627](index=627&type=chunk)[629](index=629&type=chunk) Principal Accountant Fees (in thousands) | Firm | Year | Audit Fees | Audit-related Fees | Total Fees | | :--- | :--- | :--- | :--- | :--- | | Deloitte | 2022 | $332.5 | $0 | $332.5 | | PwC | 2021 | $497.1 | $0 | $497.1 | - Under its **$100 million** share repurchase program announced in June 2022, the company repurchased **466,955** shares for **$28.6 million** through December 31, 2022[624](index=624&type=chunk)[625](index=625&type=chunk) - As a foreign private issuer, the company follows certain home country (Marshall Islands) governance practices instead of NYSE rules, notably regarding shareholder approval for equity compensation plans and certain share issuances, and the composition of its nominating committee[633](index=633&type=chunk)[634](index=634&type=chunk) [PART III](index=175&type=section&id=PART%20III) [Item 18. Financial Statements](index=175&type=section&id=Item%2018.%20Financial%20Statements) This section contains the audited consolidated financial statements for 2022 and Deloitte's unqualified auditor's reports, highlighting vessel impairment as a critical audit matter [Auditor's Report and Opinion](index=181&type=section&id=Auditor%27s%20Report%20and%20Opinion) Deloitte issued unqualified opinions on the 2022 financial statements and internal control over financial reporting, identifying vessel impairment as a critical audit matter - Deloitte issued an unqualified opinion on the Company's financial statements for the year ended December 31, 2022[649](index=649&type=chunk) - Deloitte also issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022[661](index=661&type=chunk) - The critical audit matter identified was the impairment of long-lived assets, specifically the significant and subjective assumptions related to estimating future charter rates for unfixed days used in the undiscounted cash flow analysis[654](index=654&type=chunk)[657](index=657&type=chunk)[658](index=658&type=chunk) [Consolidated Financial Statements](index=187&type=section&id=Consolidated%20Financial%20Statements) As of December 31, 2022, total assets were **$3.40 billion**, liabilities **$839.8 million**, and stockholders' equity **$2.56 billion**, with **$559.2 million** net income Consolidated Balance Sheet Highlights (as of Dec 31) | (In thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total current assets | $372,521 | $632,492 | | Total non-current assets | $3,027,707 | $2,994,633 | | **Total assets** | **$3,400,228** | **$3,627,125** | | Total current liabilities | $228,407 | $319,307 | | Total long-term liabilities | $611,407 | $1,219,795 | | **Total liabilities** | **$839,814** | **$1,539,102** | | **Total stockholders' equity** | **$2,560,414** | **$2,088,023** | Consolidated Income Statement Highlights (Year ended Dec 31, 2022) | (In thousands) | 2022 | | :--- | :--- | | Operating Revenues | $993,344 | | Income from Operations | $653,436 | | **Net Income** | **$559,210** | [Notes to the Consolidated Financial Statements](index=192&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail accounting policies, fleet assets, newbuilding commitments, debt restructuring, related party transactions, and executive compensation plans - On July 1, 2021, the company acquired the remaining **51%** of Gemini Shipholdings for **$86.7 million**, resulting in a **$64.1 million** gain on its previously held equity interest and full consolidation of Gemini's five vessels[771](index=771&type=chunk) - The company has commitments for six newbuilding vessels with remaining payments of **$31.2 million** in 2023 and **$312.6 million** in 2024[781](index=781&type=chunk) - In 2022, the company significantly restructured its debt, extinguishing the **$815 million** Citibank/Natwest facility and replacing it with a new **$382.5 million** revolving credit facility and a **$55.25 million** facility from Alpha Bank. It also repurchased **$37.2 million** of its senior notes[813](index=813&type=chunk)[818](index=818&type=chunk) - A defined benefit retirement plan for executive officers was established in December 2022, recognizing a prior service cost of **$14.2 million**[861](index=861&type=chunk)