Danaos Corporation (NYSE:DAC) Q4 2022 Earnings Conference Call February 15, 2023 9:00 AM ET Company Participants John Coustas - Chief Executive Officer Evangelos Chatzis - Chief Financial Officer Conference Call Participants Omar Nokta - Jefferies Operator Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the 3 months ended December 31, 2022. As a reminder, today’s call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer of ...

Danaos Corporation (NYSE:DAC) Q3 2022 Earnings Conference Call November 8, 2022 9:00 AM ET Company Participants John Coustas - Chairman, President and Chief Executive Officer Evangelos Chatzis - Chief Financial Officer Conference Call Participants Omar Nokta - Jefferies & Company, Inc. Christian Wetherbee - Citi Research Climent Molins - Value Investor's Edge Operator Good day, and welcome to the Danaos Corporation Conference Call to discuss the financial results for the three months ended September 30, 202 ...

[Operating and Financial Review and Prospects](index=1&type=section&id=Operating%20and%20Financial%20Review%20and%20Prospects) [Results of Operations](index=1&type=section&id=Results%20of%20Operations) The company's results of operations showed significant revenue growth for both the three and nine-month periods ending September 30, 2022, primarily driven by higher charter rates and fleet expansion. However, profitability was heavily influenced by the volatility of its investment in ZIM Integrated Shipping Services Ltd. ("ZIM"), with a substantial loss recognized in 2022 compared to a large gain in 2021. Operating expenses increased due to the larger fleet and inflationary pressures on crew and insurance costs. Interest expenses declined as the company actively reduced its overall indebtedness [Three months ended September 30, 2022 vs 2021](index=1&type=section&id=Three%20months%20ended%20September%2030%2C%202022%20compared%20to%20three%20months%20ended%20September%2030%2C%202021) In Q3 2022, operating revenues increased by **32.7% to $260.0 million**, driven by higher charter rates and newly acquired vessels. This was partially offset by increased vessel operating expenses, which rose due to a larger fleet and higher daily costs (**$6,173 vs $5,918**). A significant **$107.3 million loss** on the ZIM investment was recorded, a sharp reversal from the **$47.2 million gain** in Q3 2021, heavily impacting net income. Interest expense decreased by **11.6%** due to lower average indebtedness Q3 2022 vs Q3 2021 Key Financial Metrics | Metric | Q3 2022 (USD Million) | Q3 2021 (USD Million) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenues | 260.0 | 195.9 | +32.7% | | Vessel Operating Expenses | 39.2 | 34.7 | +13.0% | | Depreciation | 34.1 | 31.0 | +10.0% | | Interest Expense | 16.0 | 18.1 | -11.6% | | (Loss)/Gain on Investments | (107.3) | 47.2 | -327.3% | | Dividend Income | 27.0 | 16.4 | +64.6% | - The average number of containerships in the fleet increased to **71.0** from **65.7** year-over-year, while fleet utilization saw a slight decrease from **97.7%** to **97.1%**[4](index=4&type=chunk) - The increase in vessel operating expenses was primarily due to a larger fleet and a rise in average daily operating costs to **$6,173** per vessel, up from **$5,918**, driven by higher crew remuneration and insurance premiums related to COVID-19 and the Ukraine war[8](index=8&type=chunk) - The company sold all its remaining **5,686,950** ordinary shares of ZIM in Q3 2022, generating proceeds of **$161.3 million** but resulting in a recognized loss of **$107.3 million** for the quarter[16](index=16&type=chunk) [Nine months ended September 30, 2022 vs 2021](index=4&type=section&id=Nine%20months%20ended%20September%2030%2C%202022%20compared%20to%20nine%20months%20ended%20September%2030%2C%202021) For the first nine months of 2022, operating revenues surged **56.1% to $740.9 million**, reflecting higher charter rates and a larger fleet. A significant loss of **$176.4 million** on the ZIM investment was recorded, compared to a **$491.4 million gain** in the prior-year period. However, this was partially offset by a substantial increase in dividend income from ZIM to **$165.4 million**. The company also recognized a **$22.9 million gain** on debt extinguishment from early debt repayments Nine Months 2022 vs 2021 Key Financial Metrics | Metric | Nine Months 2022 (USD Million) | Nine Months 2021 (USD Million) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenues | 740.9 | 474.5 | +56.1% | | Vessel Operating Expenses | 118.9 | 98.7 | +20.5% | | Depreciation | 101.2 | 82.9 | +22.1% | | Gain on Debt Extinguishment | 22.9 | 111.6 | -79.5% | | (Loss)/Gain on Investments | (176.4) | 491.4 | -135.9% | | Dividend Income | 165.4 | 16.4 | +908.5% | - The average number of containerships increased to **71.0** from **61.9** in the prior-year period, with fleet utilization remaining high at **98.1%**[24](index=24&type=chunk) - Average daily operating costs rose to **$6,314** per vessel per day, compared to **$6,034** in the same period of 2021, due to increased crew remuneration and insurance premiums[28](index=28&type=chunk) - The company sold all its ZIM ordinary shares during 2022, generating total proceeds of **$246.6 million** but recognizing a loss of **$176.4 million** for the nine-month period[38](index=38&type=chunk) [Liquidity and Capital Resources](index=7&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with principal funding sources from operating cash flows, vessel sales, and proceeds from its divested ZIM investment. As of September 30, 2022, the company held **$556.3 million** in cash and had **$2.3 billion** in total contracted cash revenues. Key uses of funds include vessel operating expenses, newbuilding installments, debt service, dividends, and a **$100 million** share repurchase program. The company has been actively deleveraging, making significant early debt and lease repayments during the period Liquidity and Debt Position as of Sep 30, 2022 | Metric | Amount (USD Million) | | :--- | :--- | | Cash and cash equivalents | 556.3 | | Total contracted cash revenues | 2,300.0 | | Outstanding indebtedness (gross) | 868.1 | | Outstanding leaseback obligations (gross) | 79.6 | - The company has committed to aggregate purchase prices of **$156.0 million** for two **7,100 TEU** vessels and **$372.7 million** for four **8,000 TEU** vessels, with payments scheduled through 2024[52](index=52&type=chunk) - A quarterly dividend of **$0.75 per share** was declared, amounting to approximately **$15.2 million**, payable in November 2022[53](index=53&type=chunk) - Under a **$100 million** share repurchase program announced in June 2022, the company repurchased **466,955 shares** for **$28.6 million** by September 30, 2022[54](index=54&type=chunk) [External Factors Impacting Business](index=8&type=section&id=External%20Factors%20Impacting%20Business) The company's operations are affected by significant external factors. The war in Ukraine poses risks to crewing operations, trade patterns, and global economic stability. The COVID-19 pandemic continues to cause disruptions, although the container shipping market has been robust since mid-2020. Pandemic-related issues have led to increased crew remuneration and operational delays. China's Zero COVID-19 policy also presents risks of shipyard delays and increased expenses - The conflict between Russia and Ukraine could adversely affect crewing operations, as the company's Manager has offices in St. Petersburg, Odessa, and Mariupol[56](index=56&type=chunk) - While the COVID-19 pandemic initially caused a decline in global trade, the market rebounded sharply from H2 2020 through Q3 2022, driven by e-commerce growth and supply chain disruptions, leading to higher charter rates[59](index=59&type=chunk) - COVID-19 and the war in Ukraine have directly increased operating costs, with the average daily operating cost rising to **$6,314** per vessel in the first nine months of 2022 due to higher crew remuneration and insurance premiums[60](index=60&type=chunk) - China's Zero COVID-19 policy is a continuing risk, potentially causing delays at shipyards where two of the company's newbuilds are being constructed and affecting dry-docking and repairs[61](index=61&type=chunk) [Cash Flows](index=10&type=section&id=Cash%20Flows) For the nine months ended September 30, 2022, cash flow from operations increased significantly to **$789.2 million** from **$296.1 million** in the prior year, driven by higher revenues and dividend collections. Investing activities provided **$164.5 million** in cash, a reversal from a **$103.8 million** use of cash, mainly due to increased proceeds from the sale of ZIM shares. Financing activities used **$514.2 million**, a substantial increase from **$164.4 million**, reflecting significant early debt repayments, dividend payments, and share repurchases Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2022 (USD Million) | 2021 (USD Million) | | :--- | :--- | :--- | | Net cash provided by operating activities | 789.2 | 296.1 | | Net cash provided by/(used in) investing activities | 164.5 | (103.8) | | Net cash used in financing activities | (514.2) | (164.4) | - The increase in operating cash flow was primarily due to a **$243.5 million** increase in operating revenues and a **$137.5 million** increase in dividend collections from ZIM[65](index=65&type=chunk) - Investing cash flow was positively impacted by a **$170.2 million** year-over-year increase in proceeds from the sale of ZIM shares[66](index=66&type=chunk) - The higher use of cash in financing activities was driven by a **$431.4 million** increase in payments for long-term debt and leasebacks, **$25.7 million** more in dividend payments, and **$28.6 million** in share repurchases[67](index=67&type=chunk) [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) The company uses EBITDA and Adjusted EBITDA as non-GAAP measures to evaluate performance. For the nine months ended September 30, 2022, EBITDA decreased to **$539.2 million** from **$1,014.8 million** in the prior year, largely due to the negative swing in the fair value of the ZIM investment. In contrast, Adjusted EBITDA, which excludes the ZIM investment's fair value changes and other non-core items, increased significantly by **$325.1 million** to **$674.7 million**, reflecting strong core operating performance driven by higher revenues and ZIM dividends Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Nine Months Ended Sep 30) | Metric (USD thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | 406,489 | 886,844 | | EBITDA | 539,168 | 1,014,761 | | Adjusted EBITDA | 674,738 | 349,639 | - The decrease in EBITDA was mainly attributed to a **$518.8 million** negative change related to the ZIM investment's fair value and dividends, and an **$88.7 million** decrease in gain on debt extinguishment[75](index=75&type=chunk) - The increase in Adjusted EBITDA was driven by a **$229.5 million** increase in operating revenues (net of amortization) and a **$134.9 million** increase in dividends from ZIM (net of taxes)[76](index=76&type=chunk) [Capital Structure and Risk Management](index=12&type=section&id=Capital%20Structure%20and%20Risk%20Management) The company manages its capital structure through a mix of credit facilities, senior unsecured notes, and leaseback obligations. As of September 30, 2022, total debt was **$955.2 million**. The company has been actively managing its debt, including early extinguishments and refinancing activities to improve terms and reduce costs. Market risks include inflation, which affects operating expenses, and rising interest rates, which increase the cost of capital. The company currently has no outstanding interest rate swaps [Credit Facilities and Indebtedness](index=12&type=section&id=Credit%20Facilities%20and%20Indebtedness) As of September 30, 2022, the company had no remaining borrowing availability under its credit facilities and was in compliance with all financial covenants. Key debt instruments include the Citibank/Natwest **$815 million** Facility, a new BNP Paribas/Credit Agricole **$130 million** Facility, and **$300 million** in Senior Notes. The company made significant early debt repayments in Q2 2022 and has an agreement in principle to refinance the Citibank/Natwest facility to further improve its debt profile Outstanding Debt as of Sep 30, 2022 (USD Million) | Facility | Amount | | :--- | :--- | | Citibank/Natwest $815 mil. Facility | 450.6 | | BNP Paribas/Credit Agricole $130 mil. Facility | 125.0 | | Senior Notes | 300.0 | | **Total (Selected)** | **875.6** | - In May 2022, the company made an early extinguishment of **$270.0 million** on the Citibank/Natwest facility and fully repaid loans with Macquarie Bank, Eurobank, and SinoPac[81](index=81&type=chunk) - Subsequent to Q3 2022, an agreement in principle was reached to refinance the remaining **$437.75 million** of the Citibank/Natwest facility with a new **$382.5 million** Revolving Credit Facility and a **$55.25 million** Term Loan[82](index=82&type=chunk)[198](index=198&type=chunk) [Market Risk](index=14&type=section&id=Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks, primarily from inflation and interest rates. Elevated inflation is impacting operating expenses, particularly energy and commodity prices. Rapidly rising interest rates, driven by central bank policies to combat inflation, are increasing the company's cost of capital. The company currently has no interest rate swaps to hedge this exposure and does not use derivatives for foreign currency risk - The company has no outstanding interest rate swap agreements to hedge against fluctuations in interest rates[88](index=88&type=chunk) - Elevated inflation is affecting operating expenses through higher energy and commodity prices. Rising interest rates are expected to drive a higher cost of capital for the business[90](index=90&type=chunk) [Capitalization](index=14&type=section&id=Capitalization%20and%20Indebtedness) As of September 30, 2022, the company's total capitalization was approximately **$3.38 billion**, consisting of **$955.2 million** in total debt and **$2.42 billion** in total stockholders' equity. The debt is composed of secured credit facilities, unsecured senior notes, and leasing obligations Consolidated Capitalization as of Sep 30, 2022 (Actual) | Category | Amount (USD thousands) | | :--- | :--- | | Total Debt | 955,230 | | Total Stockholders' Equity | 2,422,742 | | **Total Capitalization** | **3,377,972** | [Fleet Information](index=16&type=section&id=Our%20Fleet) As of November 7, 2022, the company's fleet consists of **71** containerships with a diverse range of sizes and charter arrangements. The fleet has a strong contract backlog with major liner companies. Additionally, the company has **6** newbuild vessels under construction, with expected deliveries in 2024, which will add modern, larger-capacity ships to its fleet [Fleet Deployment](index=16&type=section&id=Fleet%20Deployment%20Profile) The fleet deployment table as of November 7, 2022, details **71** vessels with TEU capacity ranging from **2,200 to 13,100**. The vessels are on charter with major industry players like HMM, MSC, CMA CGM, and ZIM, with charter expirations extending out to 2028, providing significant revenue visibility - The fleet consists of **71** containerships as of November 7, 2022[96](index=96&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The company has agreed to sell two vessels, Catherine C and Leo C, for gross proceeds of **$130 million**, with delivery expected in November 2022[103](index=103&type=chunk) [Vessels Under Construction](index=20&type=section&id=Contracted%20Vessels%20Under%20Construction) The company has **six** newbuild vessels under construction, all scheduled for delivery in 2024. This includes two **7,100 TEU** vessels from Dalian Shipbuilding and four **8,000 TEU** vessels from Daehan Shipbuilding, signaling a strategic move towards larger and more modern assets Newbuild Vessel Specifications | Vessel Type | Quantity | Shipyard | Expected Delivery | | :--- | :--- | :--- | :--- | | 7,100 TEU | 2 | Dalian Shipbuilding | Q2-Q3 2024 | | 8,000 TEU | 4 | Daehan Shipbuilding | Q1-Q3 2024 | [Condensed Consolidated Financial Statements (Unaudited)](index=21&type=section&id=INDEX%20TO%20FINANCIAL%20STATEMENTS) [Condensed Consolidated Balance Sheets](index=22&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets were **$3.70 billion**, a slight increase from **$3.63 billion** at year-end 2021. The increase was primarily driven by a significant rise in cash and cash equivalents to **$556.3 million**. Total liabilities decreased to **$1.27 billion** from **$1.54 billion**, mainly due to reductions in long-term debt and leaseback obligations. Consequently, total stockholders' equity grew to **$2.42 billion** from **$2.09 billion** Balance Sheet Summary (USD thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | 556,343 | 129,410 | | Total Assets | 3,696,288 | 3,627,125 | | Total Liabilities | 1,273,546 | 1,539,102 | | Total Stockholders' Equity | 2,422,742 | 2,088,023 | [Condensed Consolidated Statements of Income](index=24&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the nine months ended September 30, 2022, the company reported net income of **$406.5 million**, or **$19.75 per diluted share**. This is a decrease from **$886.8 million**, or **$43.11 per diluted share**, in the same period of 2021. The decline was primarily due to a **$176.4 million loss** on investments in 2022 compared to a **$491.4 million gain** in 2021, despite a strong increase in operating revenues Income Statement Summary (Nine Months Ended Sep 30) | Account (USD thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Operating Revenues | 740,861 | 474,467 | | Income From Operations | 463,037 | 242,623 | | (Loss)/Gain on Investments | (176,386) | 491,404 | | Net Income | 406,489 | 886,844 | | Diluted EPS ($) | 19.75 | 43.11 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=28&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the financial statements. Key disclosures include the basis of presentation, significant accounting policies, details on fixed assets and newbuilding commitments, debt structure and covenants, financial instruments, stockholders' equity activities including dividends and share repurchases, lease arrangements, and subsequent events such as a major debt refinancing [Note 4: Fixed Assets & Right-of-use Assets](index=31&type=section&id=Note%204%3A%20Fixed%20Assets%20%26%20Right-of-use%20Assets) This note details commitments for new vessel constructions, including four **8,000 TEU** vessels for **$372.7 million** and two **7,100 TEU** vessels for **$156.0 million**. It also discloses an agreement to sell two vessels for **$130.0 million**. As of September 30, 2022, two vessels with a carrying value of **$251.1 million** were subject to leasing obligations - The company has entered into contracts for the construction of **six** new vessels with an aggregate purchase price of **$528.7 million**, with deliveries expected in 2024[143](index=143&type=chunk) [Note 8: Long-Term Debt, net](index=34&type=section&id=Note%208%3A%20Long-Term%20Debt%2C%20net) Total long-term debt was **$868.1 million** as of September 30, 2022. The company actively managed its debt profile in 2022, including an early extinguishment of **$270.0 million** on its main facility and full repayment of three other loans, resulting in a net gain of **$22.9 million**. A new **$130.0 million** facility was secured. The company was in compliance with all financial covenants, which include maintaining minimum liquidity and leverage ratios - In Q2 2022, the company made early repayments on four separate loan facilities, including a **$270.0 million** principal reduction on the Citibank/Natwest facility[158](index=158&type=chunk) - Financial covenants require maintaining minimum liquidity of **$30.0 million**, a maximum debt-to-EBITDA ratio of **6.5x**, and a minimum EBITDA-to-net interest expense ratio of **2.5x**[165](index=165&type=chunk) [Note 11: Stockholders' Equity](index=38&type=section&id=Note%2011%3A%20Stockholders%27%20Equity) During the first nine months of 2022, the company declared and paid dividends totaling **$46.3 million** (**$2.25 per share**). Under its **$100 million** share repurchase program announced in June 2022, the company repurchased **466,955 shares** for **$28.6 million** by September 30, 2022 - The company paid dividends of **$0.75 per share** in each of the first three quarters of 2022, totaling **$46.3 million**[180](index=180&type=chunk) - A **$100 million** share repurchase program was initiated in June 2022, with **$28.6 million** utilized to buy back **466,955 shares** by the end of Q3 2022[181](index=181&type=chunk) [Note 15: Subsequent Events](index=40&type=section&id=Note%2015%3A%20Subsequent%20Events) Subsequent to the reporting period, the company declared another quarterly dividend of **$0.75 per share**. More significantly, it reached an agreement in principle with Citibank and Alpha Bank to refinance the outstanding **$437.75 million** balance of its largest credit facility with two new facilities, expected to be finalized by year-end 2022 - A dividend of **$0.75 per share** was declared, payable on November 30, 2022[196](index=196&type=chunk) - An agreement in principle was reached to refinance the **$437.75 million** Citibank/Natwest facility into a new **$382.5 million** Revolving Credit Facility and a **$55.25 million** Term Loan, improving the debt structure[198](index=198&type=chunk)

Danaos Corporation (NYSE:DAC) Q2 2022 Earnings Conference Call August 2, 2022 9:00 AM ET Company Participants John Coustas - Chief Executive Officer Evangelos Chatzis - Chief Financial Officer Conference Call Participants Omar Nokta - Jefferies Chris Wetherbee - Citigroup Climent Molins - Value Investor's Edge Operator Good day, and welcome to the Danaos Corporation Conference Call to discuss the financial results for the three months ended June 30, 2022. As a reminder, today's call is being recorded. Hosti ...

Table of Contents EXHIBIT 99.1 DANAOS CORPORATION 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 June 30, 2022 compared to three months ended June 30, 2021 During the three months ended June 30, 2022, Danaos had an average of 71.0 containerships compared to 60.0 containershi ...

Investor Presentation 0 P May 2022 U Disclaimer This presentation contains certain statements that may be deemed to be "forward-looking statements" within the meaning of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, including, without limitation, the outlook for fleet utilization and shipping rates, general industry con ...

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $11.36 per share or adjusted net income of $235.3 million for Q1 2022, compared to adjusted EPS of $2.83 per share or $58 million for Q1 2021, reflecting a significant increase of $177.3 million in adjusted net income [13] - Operating revenues increased by $97.8 million to $229.9 million in Q1 2022 from $132.1 million in Q1 2021, driven by higher charter rates and vessel additions [14] - Adjusted EBITDA rose by almost 180% or $173.2 million to $269.5 million in Q1 2022 from $96.3 million in Q1 2021 [18] Business Line Data and Key Metrics Changes - The increase in operating revenues was attributed to a $48.9 million rise from higher charter rates and an additional $20.8 million from vessel additions [14] - Vessel operating expenses increased by $8.1 million to $39.2 million due to the larger fleet size, while average daily vessel operating costs rose to $6,300 from $5,954 [15] Market Data and Key Metrics Changes - The broader market has been impacted by geopolitical events, high energy prices, inflation, and China's zero COVID policy, leading to a more conservative short-term attitude among market participants [8] - Despite these challenges, box freight rates and charter rates have not significantly declined, although there is a noted reluctance from charterers to engage in long-term discussions [24] Company Strategy and Development Direction - The company is focused on fleet growth, returning value to shareholders, and enhancing its balance sheet, with a recent acceleration in deleveraging to mitigate rising interest rates [10] - The company has ordered six vessels to be delivered between March and September 2024, which will be converted to run on green methanol when available [7] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain inefficiencies are expected to persist, contributing to record profits for liner companies and higher contract levels [9] - The company is well-positioned to execute its strategy amid an uncertain backdrop, with a strong balance sheet and significant liquidity of $708 million in cash and marketable securities at the end of Q1 2022 [12] Other Important Information - The company has reduced leverage significantly, repaying $437 million in debt and lease obligations, resulting in 13 unencumbered vessels by the end of Q2 2022 [19] - The contracted revenue backlog stood at $2.7 billion, with nearly 100% contract coverage for 2022 and 78% for 2023 [21] Q&A Session Summary Question: What does the conservative short-term attitude mean for charter renewals? - Management indicated that charterers are hesitant to engage in long-term discussions due to current global uncertainties, with discussions expected to pick up in the next quarter [24][27] Question: What is the right leverage level going forward? - Management stated that leverage is context-dependent and typically aims for a ratio of 3 to 4 at the bottom of the cycle, with current leverage expected to be close to 1 [28][29] Question: What is the outlook for drydocking in Q3 and Q4? - Management mentioned that only three or four ships are scheduled for drydocking this year, with more significant capital expenditures related to new builds [31] Question: What are the current charter rates for upcoming contracts? - Management noted that while short-term extensions have high rates, liner companies generally prefer longer contracts at lower rates [35] Question: What is the strategy regarding share repurchases? - Management emphasized that the priority is on securing growth and deleveraging, with share buybacks remaining a consideration but not a current focus [41][42] Question: What is the strategy for ZIM shares? - Management indicated that while ZIM shares are not a long-term holding, there is no immediate intention to divest, as they expect strong results and dividends from ZIM in 2022 [45]

[Operating and Financial Review](index=1&type=section&id=Operating%20and%20Financial%20Review) This section reviews the company's financial performance, cash flow dynamics, and the impact of external market conditions for the period [Results of Operations (Three Months Ended March 31, 2022 vs 2021)](index=1&type=section&id=Results%20of%20Operations) Danaos Corporation experienced significant growth in operating revenues and net income for the three months ended March 31, 2022, compared to the same period in 2021. This was primarily driven by higher charter rates, newly acquired vessels, and substantial dividend income from ZIM ordinary shares, despite increased operating expenses and a decrease in gain on investments | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | Change (%) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------- | :--------- | | Operating Revenues | $229.9 million | $132.1 million | $97.8 | 74.0% | | Net Income | $331.5 million | $296.8 million | $34.7 | 11.7% | | Basic Earnings Per Share | $16.02 | $14.62 | $1.40 | 9.6% | | Diluted Earnings Per Share | $16.00 | $14.47 | $1.53 | 10.6% | - Average number of containerships increased to **71.0** in Q1 2022 from **60.0** in Q1 2021, while fleet utilization slightly decreased from **98.6%** to **97.4%**[4](index=4&type=chunk) [Operating Revenues](index=1&type=section&id=Operating%20Revenues) Operating revenues saw a significant increase driven by higher charter rates, newly acquired vessels, and non-cash revenue recognition | Factor | Increase in Revenue ($M) | | :--------------------------------- | :----------------------- | | Higher charter rates | $48.9 | | Newly acquired vessels | $20.8 | | Higher non-cash revenue recognition| $11.4 | | Amortization of assumed time charters| $16.7 | | **Total Increase** | **$97.8** | [Voyage Expenses](index=1&type=section&id=Voyage%20Expenses) Voyage expenses increased due to higher commissions and a larger average fleet size | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------- | :---------------------------- | :---------------------------- | :---------- | | Voyage Expenses| $7.2 million | $4.2 million | $3.0 | - Increase primarily due to higher commissions from increased revenue per vessel and a larger average fleet size[7](index=7&type=chunk) [Vessel Operating Expenses](index=1&type=section&id=Vessel%20Operating%20Expenses) Vessel operating expenses rose due to an expanded fleet and increased daily costs from COVID-19 related crew remuneration and insurance | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :---------------------- | :---------------------------- | :---------------------------- | :---------- | | Vessel Operating Expenses | $39.2 million | $31.1 million | $8.1 | | Average Daily Operating Cost | $6,307 per vessel per day | $5,954 per vessel per day | $353 | - Increase mainly due to the larger average fleet and higher average daily operating costs, driven by COVID-19 related crew remuneration and increased insurance expenses due to higher insured vessel values[8](index=8&type=chunk) [Depreciation](index=1&type=section&id=Depreciation) Depreciation increased significantly, primarily driven by the recent acquisition of eleven new vessels | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | Change (%) | | :------------- | :---------------------------- | :---------------------------- | :---------- | :--------- | | Depreciation | $33.4 million | $25.8 million | $7.6 | 29.5% | - Increase attributed to the recent acquisition of eleven vessels[9](index=9&type=chunk) [Amortization of Deferred Drydocking and Special Survey Costs](index=1&type=section&id=Amortization%20of%20Deferred%20Drydocking%20and%20Special%20Survey%20Costs) Amortization of deferred drydocking and special survey costs experienced a minor increase | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------------------------------------------ | :---------------------------- | :---------------------------- | :---------- | | Amortization of Deferred Drydocking and Special Survey Costs | $2.7 million | $2.5 million | $0.2 | [General and Administrative Expenses](index=1&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased, mainly attributed to reduced stock-based compensation | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------- | | General and Administrative Expenses | $7.4 million | $10.9 million | -$3.5 | - Decrease mainly due to reduced stock-based compensation expenses[11](index=11&type=chunk) [Interest Expense and Interest Income](index=3&type=section&id=Interest%20Expense%20and%20Interest%20Income) Interest expense increased while interest income decreased to nil, reflecting changes in debt recognition and full collection of prior year bond interest | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | Change (%) | | :------------- | :---------------------------- | :---------------------------- | :---------- | :--------- | | Interest Expense | $17.1 million | $15.1 million | $2.0 | 13.2% | | Interest Income | Nil | $2.0 million | -$2.0 | -100.0% | - Interest expense increased due to a reduction in the recognition of accumulated accrued interest from refinanced credit facilities, partially offset by a decrease in average indebtedness and amortization of deferred finance costs[13](index=13&type=chunk) - Interest income decreased to nil due to the full collection of accrued interest on ZIM and HMM bonds redeemed in 2021[15](index=15&type=chunk) [Gain on Investments](index=3&type=section&id=Gain%20on%20Investments) Gain on investments decreased substantially, with the remaining ZIM shareholding fair valued at $522.6 million | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :---------------- | :---------------------------- | :---------------------------- | :---------- | | Gain on Investments | $99.5 million | $247.9 million | -$148.4 | - The gain on investments decreased significantly, with the remaining ZIM shareholding interest fair valued at **$522.6 million** as of March 31, 2022[16](index=16&type=chunk) [Dividend Income](index=3&type=section&id=Dividend%20Income) Significant dividend income was recognized from ZIM ordinary shares in the current quarter, with no comparable income in the prior year | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------- | :---------------------------- | :---------------------------- | :---------- | | Dividend Income| $122.2 million | None | $122.2 | - Significant dividend income recognized on ZIM ordinary shares in Q1 2022, compared to none in the prior year[17](index=17&type=chunk) [Equity Income on Investments](index=3&type=section&id=Equity%20Income%20on%20Investments) Equity income from investments decreased to nil following the full consolidation of Gemini since July 2021 | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------------------ | :---------------------------- | :---------------------------- | :---------- | | Equity Income on Investments | Nil | $1.8 million | -$1.8 | - Equity income from Gemini decreased to nil following its full consolidation since July 1, 2021[18](index=18&type=chunk) [Other Finance Expenses](index=3&type=section&id=Other%20Finance%20Expenses) Other finance expenses, net, showed a slight increase for the period | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------------- | :---------------------------- | :---------------------------- | :---------- | | Other Finance Expenses, net | $0.6 million | $0.5 million | $0.1 | [Loss on Derivatives](index=3&type=section&id=Loss%20on%20Derivatives) Amortization of deferred realized losses on interest rate swaps remained stable across both periods | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :------------------------------------------------ | :---------------------------- | :---------------------------- | | Amortization of deferred realized losses on interest rate swaps | $0.9 million | $0.9 million | - Amortization of deferred realized losses on interest rate swaps remained stable[20](index=20&type=chunk) [Other Income, Net](index=3&type=section&id=Other%20Income,%20Net) Other income, net, decreased primarily due to a non-recurring payment received in the prior year | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------- | :---------------------------- | :---------------------------- | :---------- | | Other Income, net | $0.5 million | $4.0 million | -$3.5 | - Decrease mainly due to a **$3.9 million** payment from Hanjin Shipping in Q1 2021 that did not recur[21](index=21&type=chunk) [Income Taxes](index=3&type=section&id=Income%20Taxes) Income taxes were recognized in the current quarter, related to withholding taxes on ZIM dividend income | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :----------- | :---------------------------- | :---------------------------- | :---------- | | Income Taxes | $12.2 million | None | $12.2 | - Income taxes in Q1 2022 were related to taxes withheld on dividend income from ZIM ordinary shares[22](index=22&type=chunk) [Cash Flows](index=8&type=section&id=Cash%20Flows) The company experienced a significant increase in cash provided by operating activities, but a substantial shift from cash provided to cash used in financing activities, primarily due to debt refinancing and dividend payments. Investing activities also saw an increase in cash provided, mainly from vessel sale advances | Cash Flow Type | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :---------- | | Net cash provided by operating activities | $119.5 | $88.3 | $31.2 | | Net cash provided by investing activities | $11.0 | $1.2 | $9.8 | | Net cash provided by/(used in) financing activities | ($61.5) | $207.4 | -$268.9 | [Net Cash Provided by Operating Activities](index=8&type=section&id=Net%20Cash%20Provided%20by%20Operating%20Activities) Net cash provided by operating activities increased significantly, driven by higher operating revenues despite increased expenses - Increased by **$31.2 million** to **$119.5 million**, mainly due to an **$81.1 million** increase in operating revenues (net of amortization of assumed time charters), partially offset by higher operating expenses, dry-docking expenses, net finance costs, and a change in working capital[44](index=44&type=chunk) [Net Cash Provided by Investing Activities](index=9&type=section&id=Net%20Cash%20Provided%20by%20Investing%20Activities) Net cash provided by investing activities increased, mainly due to advance payments received for vessel sales - Increased by **$9.8 million** to **$11.0 million**, primarily due to a **$13.0 million** advance payment received for vessel sales, partially offset by increased cash outflow for vessel additions and decreased inflow from investments[46](index=46&type=chunk) [Net Cash Provided by Financing Activities](index=9&type=section&id=Net%20Cash%20Provided%20by%20Financing%20Activities) Financing activities shifted from providing to using cash, primarily due to increased debt and finance costs payments and dividend distributions - Shifted from **$207.4 million** provided in Q1 2021 to **$61.5 million** used in Q1 2022, a **$268.9 million** change[47](index=47&type=chunk) - This was mainly due to a **$253.4 million** increase in net debt and finance costs payments related to debt refinancing and a **$15.5 million** dividend payment[47](index=47&type=chunk) [Impact of External Factors](index=6&type=section&id=Impact%20of%20External%20Factors) The company acknowledges potential adverse impacts from the war in Ukraine on crewing operations and trade patterns. The COVID-19 pandemic, while initially disruptive, led to a strong rebound in the container shipping industry, increasing charter rates and operating revenues, but also caused higher operating costs due to crew remuneration and insurance - The conflict between Russia and Ukraine and related sanctions could adversely affect crewing operations (offices in St. Petersburg, Odessa, Mariupol) and trade patterns involving Black Sea or Russian ports[35](index=35&type=chunk)[118](index=118&type=chunk) - COVID-19 initially caused a decline in global seaborne container trade in H1 2020, but robust demand from H2 2020 through Q1 2022 led to sharply rebounding freight volumes and charter rates, increasing operating revenues to **$229.9 million** in Q1 2022 from **$132.1 million** in Q1 2021[37](index=37&type=chunk)[38](index=38&type=chunk) - COVID-19 related travel restrictions caused disruptions in crew changes, increased crew remuneration, and delays in hull repairs, leading to higher average daily operating costs (**$6,307** in Q1 2022 vs **$5,954** in Q1 2021)[40](index=40&type=chunk) [Liquidity and Capital Resources](index=5&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's financial resources, funding strategies, debt structure, and capital commitments for fleet expansion and shareholder returns [Overview and Needs](index=5&type=section&id=Overview%20and%20Needs) The company's primary funding sources include operating cash flows, vessel sales, long-term bank borrowings, and equity. Funds are primarily used for capital expenditures, fleet maintenance, working capital, and debt repayment. Short-term needs include vessel operating expenses, newbuilding installments, and debt servicing, while long-term needs focus on newbuilding payments and additional vessel acquisitions. The company anticipates sufficient funds to meet both short-term and long-term liquidity requirements - Principal sources of funds: operating cash flows, vessel sales, long-term bank borrowings, and equity (IPO 2006, common stock sales 2010/2019, DIL capital contribution 2018, Senior Notes 2021)[24](index=24&type=chunk) - Principal uses of funds: capital expenditures for fleet growth/maintenance, compliance with shipping standards, working capital, and debt repayment[24](index=24&type=chunk) - Short-term liquidity needs: vessel operating expenses, installment payments for six newbuildings, debt interest, and servicing debt obligations[25](index=25&type=chunk) - Long-term liquidity needs: newbuilding installments, additional vessel acquisitions, and debt repayment[25](index=25&type=chunk) [Contracted Cash Revenues](index=5&type=section&id=Contracted%20Cash%20Revenues) The company holds $2.7 billion in contracted cash revenues from multi-year charters, adjusted by a $238.9 million prepayment received in May 2022 | Period | Contracted Cash Revenues (as of March 31, 2022) ($M) | Contracted Cash Revenues (Pro-forma for May 2022 prepayment) ($M) | | :---------------- | :--------------------------------------------------- | :---------------------------------------------------------------- | | Remainder of 2022 | $677.8 | $608.0 | | 2023 | $754.4 | $685.9 | | Thereafter | $1,250.0 | $1,150.0 | | **Total** | **$2,682.2** | **$2,443.9** | - On May 5, 2022, the company received **$238.9 million** in charter hire prepayment for 15 vessels, covering May 2022 through January 2027[26](index=26&type=chunk) [ZIM Equity Securities](index=6&type=section&id=ZIM%20Equity%20Securities) Danaos held ZIM ordinary shares fair valued at $522.6 million as of March 31, 2022, and subsequently sold 1.5 million shares in April 2022 | Metric | Value as of March 31, 2022 | | :-------------------------------- | :------------------------- | | ZIM Ordinary Shares Held | 7,186,950 | | Fair Value of ZIM Shares | $522.6 million | | Gain on Investments (Q1 2022) | $99.5 million | | Dividend Income (Q1 2022) | $122.2 million | - In April 2022, **1,500,000** ZIM ordinary shares were sold for **$85.3 million**, leaving **5,686,950** shares[34](index=34&type=chunk) [Credit Facilities](index=11&type=section&id=Credit%20Facilities) The company had $1.1 billion in outstanding debt and $210.2 million in lease obligations, with significant early repayments and a new loan agreement post-quarter | Facility | Outstanding Balance as of March 31, 2022 ($M) | | :-------------------------- | :-------------------------------------------- | | Citibank/Natwest $815 mil. Facility | $753.9 | | Macquarie Bank $58 mil. Facility | $43.0 | | SinoPac $13.3 mil. Facility | $10.3 | | Eurobank $30.0 mil. Facility | $20.6 | | Senior Notes | $300.0 | | **Total Outstanding Debt** | **$1,127.8** | | Leaseback Obligations | $210.2 | - No remaining borrowing availability under credit facilities as of March 31, 2022[58](index=58&type=chunk)[142](index=142&type=chunk) - Company was in compliance with financial covenants[142](index=142&type=chunk) - Subsequent to March 31, 2022, the company early extinguished **$270.0 million** of the Citibank/Natwest loan principal, repaid **$94.2 million** in leaseback obligations, and initiated full repayment of Macquarie Bank (**$43M**), Eurobank (**$20.55M**), and SinoPac (**$9.8M**) loans[28](index=28&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk) - A preliminary term sheet for a new **$130.0 million** senior secured term loan facility, secured by six 5,466 TEU sister vessels, was entered into in April 2022, expected to be drawn in Q2 2022[30](index=30&type=chunk)[63](index=63&type=chunk)[184](index=184&type=chunk) [Senior Notes](index=12&type=section&id=Senior%20Notes) Danaos issued $300 million of 8.500% Senior Unsecured Notes due 2028, used for debt refinancing and bearing semi-annual interest - Issued **$300 million** of 8.500% Senior Unsecured Notes due 2028 on February 11, 2021[64](index=64&type=chunk) - Interest is payable semi-annually on March 1 and September 1, commencing September 1, 2021[65](index=65&type=chunk) - Notes mature on March 1, 2028[65](index=65&type=chunk) - The notes are general senior unsecured obligations of Danaos Corporation[65](index=65&type=chunk) [Newbuilding Contracts and Dividends](index=6&type=section&id=Newbuilding%20Contracts%20and%20Dividends) The company contracted for six new container vessels totaling $528.7 million for 2024 delivery and declared a quarterly dividend of $0.75 per share | Vessel Type | Quantity | Aggregate Purchase Price ($M) | Expected Delivery | | :---------------- | :------- | :---------------------------- | :---------------- | | 7,100 TEU Container Vessels | 2 | $156.0 | 2024 | | 8,000 TEU Container Vessels | 4 | $372.7 | 2024 | | **Total** | **6** | **$528.7** | | - Declared a dividend of **$0.75 per share** of common stock, totaling approximately **$15.5 million**, payable on June 8, 2022[33](index=33&type=chunk)[184](index=184&type=chunk) - Intends to pay a regular quarterly dividend, subject to board discretion, Marshall Islands law, and credit facility terms[33](index=33&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial metrics, EBITDA and Adjusted EBITDA, to provide insights into the company's core operating profitability [EBITDA and Adjusted EBITDA](index=9&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) EBITDA and Adjusted EBITDA are non-GAAP measures used by management and investors to assess core operating performance by excluding certain non-recurring or non-cash items. Both metrics showed significant increases in Q1 2022 compared to Q1 2021, primarily driven by higher operating revenues and ZIM dividend income | Metric | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | Change ($M) | | :-------------- | :--------------------------------- | :--------------------------------- | :---------- | | EBITDA | $381.1 | $339.2 | $41.9 | | Adjusted EBITDA | $269.5 | $96.3 | $173.2 | - EBITDA increased mainly due to an **$81.1 million** increase in operating revenues (net of amortization of assumed time charters), partially offset by changes in gain on investment and ZIM dividends, increased operating expenses, and decreased equity investment in Gemini[54](index=54&type=chunk) - Adjusted EBITDA increased significantly due to the **$81.1 million** increase in operating revenues and **$110.0 million** dividend from ZIM (net of withholding taxes), partially offset by increased operating expenses and decreased equity investment in Gemini[55](index=55&type=chunk) [Market Risk Disclosures](index=12&type=section&id=Market%20Risk%20Disclosures) This section discloses the company's exposure to market risks, specifically related to interest rates and foreign currency fluctuations [Interest Rate Swaps](index=12&type=section&id=Interest%20Rate%20Swaps) The company previously used interest rate swap agreements to hedge floating interest rate exposure but currently has no outstanding agreements. Amortization of deferred realized losses from past cash flow hedges continues to be reclassified into earnings - The company currently has no outstanding interest rate swap agreements[67](index=67&type=chunk)[152](index=152&type=chunk) - An amount of **$0.9 million** was reclassified into earnings for the three months ended March 31, 2022 and 2021, representing amortization of deferred realized losses on cash flow hedges[152](index=152&type=chunk) [Foreign Currency Exchange Risk](index=12&type=section&id=Foreign%20Currency%20Exchange%20Risk) Danaos Corporation did not use derivative instruments to hedge foreign currency translation or transactions during the three months ended March 31, 2022 and 2021 - No derivative instruments were used to hedge foreign currency exchange risk during Q1 2022 and Q1 2021[68](index=68&type=chunk) [Capitalization and Indebtedness](index=13&type=section&id=Capitalization%20and%20Indebtedness) This section outlines the company's capital structure, including debt and equity, and pro-forma adjustments for recent financial activities [Consolidated Capitalization](index=13&type=section&id=Consolidated%20Capitalization) As of March 31, 2022, Danaos Corporation's total debt was $1,337.9 million, with total stockholders' equity of $2,405.0 million, resulting in total capitalization of $3,742.9 million. Pro-forma adjustments for subsequent debt and lease repayments through July 1, 2022, significantly reduced total debt to $945.1 million and total capitalization to $3,350.0 million | Metric | As of March 31, 2022 (Actual) ($M) | As of March 31, 2022 (As Adjusted) ($M) | | :-------------------------------- | :--------------------------------- | :-------------------------------------- | | Citibank/Natwest $815 mil. facility | $753.9 | $463.5 | | Senior unsecured notes | $300.0 | $300.0 | | Other loan facilities | $73.9 | $73.4 | | Leasing obligations | $210.2 | $108.2 | | **Total Debt** | **$1,337.9** | **$945.1** | | Total Stockholders' Equity | $2,405.0 | $2,405.0 | | **Total Capitalization** | **$3,742.9** | **$3,350.0** | - Adjustments reflect scheduled debt repayment (**$20.4M**), unscheduled early extinguishment of Natwest portion (**$270M**), other secured loan repayments (**$0.5M**), full repayment of 2021 leasing obligation (**$97.4M**), and scheduled repayments of other leasing obligations (**$4.6M**) between April 1, 2022, and May 16, 2022[71](index=71&type=chunk) [Fleet Information](index=14&type=section&id=Fleet%20Information) This section provides an overview of the company's current fleet deployment and details on new vessels under construction [Fleet Deployment Profile](index=14&type=section&id=Fleet%20Deployment%20Profile) As of May 16, 2022, Danaos Corporation's fleet consists of various containerships with diverse sizes (TEU) and charter expiration dates ranging from 2022 to 2028. Many charters include extension options, and the company has agreed to sell two vessels (Catherine C and Leo C) by November 2022 - The fleet deployment profile details vessel names, year built, size (TEU), charter expiration, charterer, contracted employment period, charter rate, and extension options[75](index=75&type=chunk)[77](index=77&type=chunk) - Charters could expire as early as 2022, with some extending to 2028, and most include charterer options for extension[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) - The company has agreed to sell two vessels, Catherine C and Leo C, for **$130 million**, with delivery expected in November 2022[79](index=79&type=chunk) [Contracted Vessels Under Construction](index=16&type=section&id=Contracted%20Vessels%20Under%20Construction) Danaos Corporation has six container vessels under construction, including two 7,100 TEU vessels from Dalian Shipbuilding Industry and four 8,000 TEU vessels from Daehan Shipbuilding, all expected to be delivered in 2024 | Name | Year Built | Size (TEU) | Shipyard | Expected Delivery Period | | :---------------- | :--------- | :--------- | :------------------------- | :----------------------- | | Hull No. C7100-7 | 2024 | 7,100 | Dalian Shipbuilding Industry | 2nd Quarter 2024 | | Hull No. C7100-8 | 2024 | 7,100 | Dalian Shipbuilding Industry | 3rd Quarter 2024 | | Hull No. HN4009 | 2024 | 8,000 | Daehan Shipbuilding | 1st Quarter 2024 | | Hull No. HN4010 | 2024 | 8,000 | Daehan Shipbuilding | 2nd Quarter 2024 | | Hull No. HN4011 | 2024 | 8,000 | Daehan Shipbuilding | 2nd Quarter 2024 | | Hull No. HN4012 | 2024 | 8,000 | Daehan Shipbuilding | 3rd Quarter 2024 | [Forward-Looking Statements](index=16&type=section&id=Forward-Looking%20Statements) This section contains statements regarding future expectations, plans, and prospects that involve risks and uncertainties [Financial Statements and Notes](index=17&type=section&id=Financial%20Statements%20and%20Notes) This section presents the company's unaudited condensed consolidated financial statements and detailed explanatory notes [Index to Financial Statements](index=17&type=section&id=Index%20to%20Financial%20Statements) This section provides an index to the unaudited condensed consolidated financial statements, including the balance sheets, statements of income, comprehensive income, changes in stockholders' equity, cash flows, and accompanying notes - The index lists the Condensed Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Changes in Stockholders' Equity, Cash Flows, and Notes to the Unaudited Condensed Consolidated Financial Statements[85](index=85&type=chunk) [Condensed Consolidated Balance Sheets](index=18&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets increased to $3,904.2 million from $3,627.1 million at December 31, 2021, primarily driven by an increase in cash and cash equivalents and other current assets (including ZIM equity participation). Total liabilities slightly decreased, while total stockholders' equity significantly increased due to net income | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :------------------------ | :--------------------------- | :---------- | | Total Assets | $3,904.2 | $3,627.1 | $277.1 | | Total Liabilities | $1,499.3 | $1,539.1 | -$39.8 | | Total Stockholders' Equity | $2,405.0 | $2,088.0 | $317.0 | | Cash and cash equivalents | $185.3 | $129.4 | $55.9 | | Other current assets (incl. ZIM equity) | $679.8 | $459.1 | $220.7 | [Condensed Consolidated Statements of Income](index=20&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2022, Danaos Corporation reported a substantial increase in operating revenues and net income compared to the prior year. This was largely due to higher charter rates and significant dividend income from ZIM, despite a decrease in gain on investments | Metric | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :---------- | | Operating Revenues | $229.9 | $132.1 | $97.8 | | Income From Operations | $140.1 | $57.6 | $82.5 | | Net Income | $331.5 | $296.8 | $34.7 | | Gain on Investments | $99.5 | $247.9 | -$148.4 | | Dividend Income | $122.2 | $0.0 | $122.2 | | Income Taxes | $12.2 | $0.0 | $12.2 | [Condensed Consolidated Statements of Comprehensive Income](index=21&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended March 31, 2022, was $332.4 million, an increase from $317.3 million in the prior year. This increase was primarily driven by higher net income, while other comprehensive income saw a significant decrease due to the absence of unrealized gains on available-for-sale securities | Metric | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :---------- | | Net income for the period | $331.5 | $296.8 | $34.7 | | Unrealized gain on available for sale securities | $0.0 | $19.6 | -$19.6 | | Amortization of deferred realized losses on cash flow hedges | $0.9 | $0.9 | $0.0 | | **Total Other Comprehensive Income** | **$0.9** | **$20.5** | **-$19.6** | | **Comprehensive Income** | **$332.4** | **$317.3** | **$15.1** | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=22&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased significantly to $2,405.0 million as of March 31, 2022, from $2,088.0 million at December 31, 2021. This was primarily due to net income of $331.5 million, partially offset by $15.5 million in dividends paid | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :------------------------ | :--------------------------- | :---------- | | Total Stockholders' Equity | $2,405.0 | $2,088.0 | $317.0 | | Net Income | $331.5 | N/A | N/A | | Dividends | ($15.5) | N/A | N/A | [Condensed Consolidated Statements of Cash Flows](index=23&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased to $119.5 million in Q1 2022. Net cash from investing activities also increased to $11.0 million. However, financing activities shifted from providing $207.4 million in Q1 2021 to using $61.5 million in Q1 2022, leading to a lower net increase in cash, cash equivalents, and restricted cash | Cash Flow Type | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | Change ($M) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | :---------- | | Net Cash provided by Operating Activities | $119.5 | $88.3 | $31.2 | | Net Cash provided by Investing Activities | $11.0 | $1.2 | $9.8 | | Net Cash provided by/(used in) Financing Activities | ($61.5) | $207.4 | -$268.9 | | Net Increase in cash, cash equivalents and restricted cash | $68.9 | $296.8 | -$227.9 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=24&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's financial position, operations, and cash flows, including accounting policies, asset and liability breakdowns, debt structures, equity changes, and subsequent events. Key updates include new vessel construction contracts, significant debt and lease repayments post-quarter, and the sale of ZIM shares [Basis of Presentation and General Information](index=24&type=section&id=Basis%20of%20Presentation%20and%20General%20Information) The financial statements are prepared under U.S. GAAP, consolidating wholly-owned subsidiaries, with the U.S. Dollar as the reporting currency - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP and represent the consolidation of Danaos Corporation and its wholly-owned subsidiaries, primarily involved in containership ownership and operation[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - The company's reporting and functional currency is the United States Dollar[107](index=107&type=chunk) - The notes list all vessel-owning subsidiaries and their respective vessels, including new vessels under construction[113](index=113&type=chunk)[115](index=115&type=chunk) [Significant Accounting Policies](index=28&type=section&id=Significant%20Accounting%20Policies) No significant changes were made to the company's accounting policies during the three months ended March 31, 2022 - No significant changes were made to the company's accounting policies during the three months ended March 31, 2022[120](index=120&type=chunk) [Cash, Cash Equivalents and Restricted Cash](index=28&type=section&id=Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Cash, cash equivalents, and restricted cash increased, with restricted cash including collateral and an advance payment for vessel sales | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | | :------------------------ | :------------------------ | :--------------------------- | | Cash and cash equivalents | $185.3 | $129.4 | | Restricted cash | $13.3 | $0.3 | | **Total** | **$198.7** | **$129.8** | - Restricted cash includes collateral for upcoming debt payments and a **$13.0 million** advance payment for vessel sales held in escrow[121](index=121&type=chunk) [Fixed Assets, net & Right-of-use Assets](index=28&type=section&id=Fixed%20Assets,%20net%20%26%20Right-of-use%20Assets) This section details new vessel contracts, the agreement to sell two vessels, and the amortization of assumed time charters and leasing obligations - Contracts for two 7,100 TEU container vessels were entered into for **$156.0 million**, with deliveries expected in 2024[122](index=122&type=chunk) - Agreement to sell vessels Catherine C and Leo C for **$130.0 million**, with **$13.0 million** advance received and delivery expected in November 2022[123](index=123&type=chunk) - Amortization of assumed time charters amounted to **$16.7 million** in Q1 2022, with aggregate future amortization of **$65.8 million** as of March 31, 2022[124](index=124&type=chunk) - Total leasing obligation was **$210.2 million** as of March 31, 2022, with scheduled aggregate leasing installments of **$228.9 million**[130](index=130&type=chunk) [Deferred Charges, net](index=30&type=section&id=Deferred%20Charges,%20net) Deferred charges primarily consist of drydocking and special survey costs, amortized over two and a half years | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | | :-------------------------------- | :------------------------ | :--------------------------- | | Drydocking and Special Survey Costs | $18.3 | $11.8 | - Costs are deferred and amortized on a straight-line basis over the period until the next scheduled survey (two and a half years)[132](index=132&type=chunk) [Other Current and Non-current Assets](index=30&type=section&id=Other%20Current%20and%20Non-current%20Assets) Other current and non-current assets include ZIM equity participation, fair valued at $522.6 million, and related dividend receivables | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | | :-------------------------------- | :------------------------ | :--------------------------- | | Equity participation ZIM | $522.6 | $423.0 | | Dividends receivable from ZIM, net | $110.0 | $0.0 | | Total current assets | $679.8 | $459.1 | | Total non-current assets | $53.5 | $41.7 | - ZIM shareholding interest (**7,186,950 shares**) fair valued at **$522.6 million** as of March 31, 2022, with a **$99.5 million** gain and **$122.2 million** dividend income recognized in Q1 2022[133](index=133&type=chunk) [Accrued Liabilities](index=31&type=section&id=Accrued%20Liabilities) Accrued liabilities include payroll, interest, dry-docking expenses, and other accrued expenses, totaling $23.7 million | Metric | As of March 31, 2022 ($M) | As of December 31, 2021 ($M) | | :------------------------ | :------------------------ | :--------------------------- | | Accrued payroll | $7.5 | $1.0 | | Accrued interest | $5.5 | $11.9 | | Accrued dry-docking expenses | $1.8 | $0.3 | | Accrued expenses | $8.9 | $7.7 | | **Total** | **$23.7** | **$20.8** | [Long-Term Debt, net](index=31&type=section&id=Long-Term%20Debt,%20net) Long-term debt includes major credit facilities and senior unsecured notes, with scheduled maturities totaling $1,127.7 million | Credit Facility | Balance as of March 31, 2022 ($M) | Balance as of December 31, 2021 ($M) | | :-------------------------------- | :-------------------------------- | :----------------------------------- | | Citibank/Natwest $815 mil. Facility | $753.9 | $774.3 | | Senior unsecured notes | $300.0 | $300.0 | | Macquarie Bank $58 mil. Facility | $43.0 | $45.6 | | SinoPac $13.3 mil. Facility | $10.3 | $10.8 | | Eurobank $30.0 mil. Facility | $20.6 | $21.4 | | **Total long-term debt** | **$1,118.6** | **$1,142.0** | - The Citibank/Natwest **$815 million** facility is repayable in quarterly installments of **$20.4 million** with a **$489.0 million** balloon payment at maturity, bearing interest at LIBOR plus 2.50%[137](index=137&type=chunk) - Scheduled debt maturities total **$1,127.7 million**, with **$94.2 million** due by March 31, 2023[147](index=147&type=chunk) [Financial Instruments](index=33&type=section&id=Financial%20Instruments) The company manages interest rate risk on bank borrowings and credit risk through diversification among high-credit-rating counterparties and major liner companies - The company manages interest rate risk on bank borrowings and credit risk through diversification among high-credit-rating counterparties and major liner companies[149](index=149&type=chunk)[150](index=150&type=chunk) - Fair values of financial instruments are determined using a three-level hierarchy, with ZIM equity participation measured at Level I (quoted prices in active markets) and secured long-term debt at Level II (observable market data)[153](index=153&type=chunk)[154](index=154&type=chunk)[157](index=157&type=chunk) - No outstanding interest rate swap agreements, but **$0.9 million** in deferred realized losses from past hedges was reclassified into earnings in Q1 2022 and Q1 2021[152](index=152&type=chunk) [Commitments and Contingencies](index=36&type=section&id=Commitments%20and%20Contingencies) The company has no material legal proceedings but has outstanding commitments for vessel construction and buyback obligations - No material legal proceedings or other contingencies, other than routine litigation[162](index=162&type=chunk) - Outstanding commitments include vessel construction contracts and buyback obligations related to sale and leaseback arrangements[163](index=163&type=chunk) [Stockholders' Equity](index=36&type=section&id=Stockholders'%20Equity) Stockholders' equity reflects a declared dividend, reduced stock-based compensation, and outstanding restricted shares - A dividend of **$0.75 per share** (**$15.5 million** total) was declared and paid in Q1 2022[164](index=164&type=chunk) - Stock-based compensation expenses were **$0.1 million** in Q1 2022, significantly lower than **$4.9 million** in Q1 2021[167](index=167&type=chunk) - **19,200** restricted shares were outstanding as of March 31, 2022, scheduled to vest on December 31, 2022[167](index=167&type=chunk) [Lease Arrangements](index=37&type=section&id=Lease%20Arrangements) Operating revenues are derived from 71 vessels on time or bareboat charters, with future rentals totaling $2.68 billion - Operating revenues are generated from **71 vessels** on time charters or bareboat charter agreements, with remaining terms up to June 2028[171](index=171&type=chunk) | Period | Total Future Rentals ($M) | | :---------------- | :------------------------ | | Remainder of 2022 | $677.8 | | 2023 | $754.4 | | 2024 | $551.0 | | 2025 | $310.4 | | 2026 | $204.6 | | 2027 and thereafter | $182.3 | | **Total** | **$2,680.5** | [Earnings per Share](index=38&type=section&id=Earnings%20per%20Share) Basic and diluted earnings per share are presented, along with their respective weighted average common shares outstanding | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Basic earnings per share | $16.02 | $14.62 | | Diluted earnings per share | $16.00 | $14.47 | | Basic weighted average common shares outstanding (thousands) | 20,697 | 20,293 | | Diluted weighted average common shares outstanding (thousands) | 20,717 | 20,513 | [Related Party Transactions](index=38&type=section&id=Related%20Party%20Transactions) Related party transactions include management fees, commissions, and advances due from the Manager for operating expenses | Transaction Type | 3 Months Ended March 31, 2022 ($M) | 3 Months Ended March 31, 2021 ($M) | | :----------------- | :--------------------------------- | :--------------------------------- | | Management fees | $5.4 | $4.6 | | Commissions | $2.4 | $1.6 | - Balance 'Due from related parties' was **$22.9 million** as of March 31, 2022, representing advances to the Manager for vessel operating and other expenses[177](index=177&type=chunk) [Subsequent Events](index=38&type=section&id=Subsequent%20Events) Subsequent events include new vessel contracts, early debt and lease repayments, ZIM share sales, and a declared dividend - Entered into contracts for four 8,000 TEU container vessels for **$372.7 million**, with **$36.5 million** advanced in April 2022 and deliveries in 2024[178](index=178&type=chunk) - Exercised option to early repay **$97.4 million** leaseback obligation for five vessels by May 12, 2022, acquiring legal title[179](index=179&type=chunk) - Sold **1,500,000** ZIM ordinary shares in April 2022 for **$85.3 million**[180](index=180&type=chunk) - Early extinguished **$270.0 million** of the Citibank/Natwest loan principal and initiated full repayment of Macquarie Bank (**$43M**), Eurobank (**$20.55M**), and SinoPac (**$9.8M**) loans[181](index=181&type=chunk)[183](index=183&type=chunk) - Declared a dividend of **$0.75 per share** payable on June 8, 2022[184](index=184&type=chunk)

PART I [Key Information](index=5&type=section&id=Item%203.%20Key%20Information) This section details Danaos Corporation's consolidated capitalization as of December 31, 2021, and outlines various business, financing, environmental, management, and tax risks [Risk Factors](index=7&type=section&id=RISK%20FACTORS) This section identifies significant business, financing, environmental, management, and tax risks, including dependency on containership demand and substantial debt levels - Key business risks include dependency on containership demand and global economic conditions, the impact of the COVID-19 pandemic, counterparty default risk, reliance on a limited number of customers, and fluctuations in vessel values[24](index=24&type=chunk) - Financing risks are significant due to substantial debt levels, which could limit flexibility, and the need to comply with restrictive financial and collateral covenants in credit facilities[25](index=25&type=chunk) - The company is subject to extensive environmental regulations (such as MARPOL Annex VI sulfur cap and ballast water management rules) and other industry risks, including geopolitical instability, piracy, and potential for government requisition of vessels[28](index=28&type=chunk)[29](index=29&type=chunk)[143](index=143&type=chunk) - The business depends on its Manager, a privately held company, and key employees, including CEO Dr. John Coustas. The loss of these personnel or the Manager could adversely affect operations[31](index=31&type=chunk) - Tax risks include the potential to pay a **4%** U.S. federal income tax on U.S.-source shipping income if the company fails to qualify for the Section 883 exemption, and the risk of being classified as a Passive Foreign Investment Company (PFIC), which would result in adverse tax consequences for U.S. stockholders[34](index=34&type=chunk)[226](index=226&type=chunk)[231](index=231&type=chunk) Consolidated Capitalization as of December 31, 2021 | Category | Actual (in thousands USD) | As Adjusted (in thousands USD) | | :--- | :--- | :--- | | **Debt** | | | | Total debt | $1,378,496 | $1,346,133 | | **Stockholders' equity** | | | | Preferred stock | — | — | | Common stock | $207 | $207 | | Additional paid-in capital | $770,676 | $770,676 | | Accumulated other comprehensive loss | ($71,455) | ($71,455) | | Retained earnings | $1,388,595 | $1,388,595 | | **Total stockholders' equity** | **$2,088,023** | **$2,088,023** | | **Total capitalization** | **$3,466,519** | **$3,434,156** | [Information on the Company](index=32&type=section&id=Item%204.%20Information%20on%20the%20Company) Danaos Corporation, a leading containership owner, charters its 71-vessel fleet on multi-year, fixed-rate agreements, managed by Danaos Shipping Co. Ltd Fleet Overview as of February 28, 2022 | Metric | Value | | :--- | :--- | | Number of Containerships | 71 | | Aggregate Capacity (TEU) | 436,589 | | Average Fleet Age (weighted by TEU) | 13.4 years | | Average Remaining Charter Duration (as of Dec 31, 2021) | 4.0 years | - The company's strategy is to charter its vessels on multi-year, fixed-rate period charters to a diverse group of major liner companies, providing stable cash flows. As of December 31, 2021, contracted revenues totaled approximately **$2.85 billion** through 2028[239](index=239&type=chunk)[240](index=240&type=chunk) - Operations are managed by Danaos Shipping Co. Ltd., an entity affiliated with the CEO, under a management agreement that expires on December 31, 2024. The manager provides technical, administrative, and commercial services for fixed daily fees plus a percentage of charter hire[263](index=263&type=chunk)[269](index=269&type=chunk) - The company is subject to extensive environmental regulations from the IMO, EU, and U.S., including rules on air emissions (MARPOL Annex VI), ballast water management (BWM Convention), and oil spills (OPA). Compliance requires significant expenditure and affects vessel operations[295](index=295&type=chunk)[298](index=298&type=chunk)[303](index=303&type=chunk) [Operating and Financial Review and Prospects](index=48&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Operating revenues increased by **49.4%** to **$689.5 million** in 2021, with net income surging to **$1.05 billion** due to a **$578.0 million** gain on ZIM investment and fleet expansion Financial Performance Summary (2021 vs. 2020) | Metric | 2021 (in millions USD) | 2020 (in millions USD) | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $689.5 | $461.6 | +49.4% | | Net Income | $1,052.8 | $153.5 | +586% | | Adjusted EBITDA | $508.8 | $318.3 | +59.8% | | Net Cash from Operating Activities | $428.1 | $265.7 | +61.1% | - The significant increase in net income for 2021 was primarily due to a **$578.0 million** gain on the company's investment in ZIM, which included a **$543.7 million** change in fair value and **$34.3 million** in dividends[385](index=385&type=chunk)[409](index=409&type=chunk) - In April 2021, the company completed a **$1.25 billion** debt refinancing using proceeds from a new **$815 million** senior secured credit facility, a **$135 million** sale-leaseback arrangement, and **$300 million** in **8.50%** Senior Notes due 2028. This extended debt maturities and improved financial flexibility[348](index=348&type=chunk)[431](index=431&type=chunk) - The company's fleet grew to **71 vessels** by year-end 2021 from **60** in 2020, through the acquisition of **six secondhand vessels** and the consolidation of the **five-vessel Gemini fleet** after acquiring the remaining **51%** equity interest[346](index=346&type=chunk)[348](index=348&type=chunk) [Directors, Senior Management and Employees](index=75&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section outlines the company's leadership, including CEO Dr. John Coustas, executive compensation, board structure, and equity compensation plan - The company is led by President and CEO Dr. John Coustas, who has over **30 years** of experience in the shipping industry and has managed the company since 1987[556](index=556&type=chunk) - Executive officers received aggregate cash compensation of **€1.8 million** (**$2.1 million**) in 2021. Non-executive directors receive an annual fee of **$70,000**, with the audit committee chairman receiving an additional **$15,000**[567](index=567&type=chunk)[568](index=568&type=chunk) - The Board of Directors is classified with staggered three-year terms. As of February 28, 2022, the board consisted of **six members**, with **four** determined to be independent under NYSE rules[555](index=555&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk) - The company has an equity compensation plan allowing for the grant of stock awards. In 2021, the company granted a total of **270,000 shares** to executive officers, directors, and employees of the Manager, some of which were fully vested upon grant[586](index=586&type=chunk)[591](index=591&type=chunk)[593](index=593&type=chunk) [Major Shareholders and Related Party Transactions](index=81&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details major shareholders and related party transactions, highlighting DIL's **39.0%** ownership and the **$19.9 million** in 2021 management fees to Danaos Shipping Major Shareholders as of February 28, 2022 | Shareholder | Number of Shares | Percentage of Common Stock | | :--- | :--- | :--- | | Danaos Investment Limited as Trustee of the 883 Trust (DIL) | 8,081,651 | 39.0% | | RBF Capital LLC | 1,435,161 | 6.9% | | All executive officers and directors as a group (8 persons) | 8,497,565 | 41.0% | - The company's manager, Danaos Shipping Co. Ltd., is controlled by DIL, a trust for the benefit of CEO Dr. John Coustas and his family. This creates a significant related party relationship[595](index=595&type=chunk) Fees Paid to Manager (Danaos Shipping) | Year | Management Fees (in millions USD) | | :--- | :--- | | 2021 | $19.9 | | 2020 | $17.7 | | 2019 | $16.8 | - On July 1, 2021, the company exercised its option to acquire the remaining **51%** equity interest in Gemini Shipholdings Corporation from Virage International Ltd., a company controlled by DIL, for **$86.7 million** in cash[612](index=612&type=chunk) [Financial Information](index=87&type=section&id=Item%208.%20Financial%20Information) This section details legal proceedings, including a **$597.9 million** claim against Hanjin Shipping, and the reinstatement of the quarterly cash dividend policy - The company is involved in legal proceedings related to the 2016 bankruptcy of Hanjin Shipping. It has a total unsecured claim of **$597.9 million** and received a partial payment of **$3.9 million** in January 2021[633](index=633&type=chunk)[635](index=635&type=chunk)[636](index=636&type=chunk) - The company reinstated its quarterly cash dividend policy in 2021. It paid three dividends of **$0.50 per share** each during 2021, totaling **$30.9 million**. A dividend of **$0.75 per share** was declared on February 7, 2022, and paid on February 28, 2022[638](index=638&type=chunk) [Additional Information](index=90&type=section&id=Item%2010.%20Additional%20Information) This section covers corporate structure, anti-takeover provisions, and tax considerations, including the Section 883 exemption and PFIC status - As of December 31, 2021, the company had **20,716,738 shares** of common stock outstanding. A **1-for-14** reverse stock split was effected on May 2, 2019[641](index=641&type=chunk)[642](index=642&type=chunk) - The company's articles of incorporation include several anti-takeover provisions, such as a classified board of directors with staggered three-year terms, authorization to issue 'blank check' preferred stock, and prohibitions on certain business combinations with 'interested stockholders' who own **15%** or more of voting stock[652](index=652&type=chunk)[653](index=653&type=chunk)[660](index=660&type=chunk) - The company is a Marshall Islands corporation and is not subject to income or capital gains tax there. It believes it qualifies for the Section 883 exemption from U.S. federal income tax on its U.S.-source shipping income, but this is subject to satisfying either the **50%** Ownership Test or the Publicly-Traded Test, which includes avoiding the '5 Percent Override Rule'[671](index=671&type=chunk)[681](index=681&type=chunk)[687](index=687&type=chunk) - The company believes it should not be treated as a Passive Foreign Investment Company (PFIC) for the 2021 taxable year, but notes legal uncertainties exist, particularly regarding the characterization of time charter income as services versus rental income[709](index=709&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=104&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details market risks, including interest rate risk on floating-rate debt and foreign currency exposure, with **24.0%** of 2021 operating expenses in non-USD currencies - The company is exposed to interest rate risk from its floating-rate debt. A hypothetical **10 basis point** increase in interest rates would result in an estimated **$0.6 million** decrease in earnings for 2022[741](index=741&type=chunk) - The company has foreign currency exchange risk because it generates all revenues in U.S. dollars but incurs a portion of its operating expenses in other currencies. In 2021, approximately **24.0%** of operating expenses were denominated in non-U.S. dollar currencies, primarily the Euro[742](index=742&type=chunk) - As of the report date, the company had no outstanding interest rate swap agreements. Previously used swaps were de-designated from hedge accounting on July 1, 2012, but deferred losses from that period are still being amortized into earnings[732](index=732&type=chunk)[739](index=739&type=chunk) PART II [Controls and Procedures](index=106&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, confirmed by an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[749](index=749&type=chunk) - Based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[753](index=753&type=chunk)[754](index=754&type=chunk) - The independent auditor, PricewaterhouseCoopers S.A., provided an attestation report confirming the effectiveness of the company's internal control over financial reporting as of December 31, 2021[756](index=756&type=chunk) [Corporate Governance and Other Matters](index=107&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section details corporate governance, including the audit committee financial expert, accountant fees, and differences from NYSE standards as a foreign private issuer - The Board of Directors has identified Myles R. Itkin as the audit committee financial expert[758](index=758&type=chunk) Principal Accountant Fees (PricewaterhouseCoopers S.A.) | Service Category | 2021 (in thousands USD) | 2020 (in thousands USD) | | :--- | :--- | :--- | | Audit fees | $497.1 | $456.4 | | Audit-related fees | — | — | | **Total fees** | **$497.1** | **$456.4** | - As a foreign private issuer, the company's corporate governance practices differ from NYSE standards for U.S. domestic companies. Key differences include having a non-independent director on the Nominating and Corporate Governance Committee and not requiring shareholder approval for certain equity issuances, as permitted by Marshall Islands law[769](index=769&type=chunk)[770](index=770&type=chunk)[771](index=771&type=chunk) PART III [Financial Statements](index=109&type=section&id=Item%2018.%20Financial%20Statements) This section presents the audited consolidated financial statements for 2019-2021, prepared under U.S. GAAP, with an unqualified opinion from PricewaterhouseCoopers S.A - The report includes the audited consolidated financial statements for the three years ended December 31, 2021, prepared in conformity with U.S. GAAP[777](index=777&type=chunk)[784](index=784&type=chunk) - The independent registered public accounting firm, PricewaterhouseCoopers S.A., provided an unqualified opinion on both the consolidated financial statements and the company's internal control over financial reporting as of December 31, 2021[785](index=785&type=chunk)[786](index=786&type=chunk) - A critical audit matter identified was the valuation of time charters assumed on the acquisition of vessels, which involved significant management judgment regarding assumptions like prevailing market charter rates[793](index=793&type=chunk)[794](index=794&type=chunk) [Exhibits](index=109&type=section&id=Item%2019.%20Exhibits) This section lists all exhibits filed with the annual report, including corporate documents, major financing agreements, and management agreements - Key exhibits filed with the report include foundational corporate documents, major financing agreements, and related party agreements[778](index=778&type=chunk) - Significant contracts listed as exhibits are the Indenture for the Senior Notes, the Amended and Restated Management Agreement with Danaos Shipping, and the **$815 million** Senior Secured Credit Facility agreement[778](index=778&type=chunk)

Danaos Corporation (NYSE:DAC) Q4 2021 Earnings Conference Call February 8, 2022 9:00 AM ET Company Participants Evangelos Chatzis – Chief Financial Officer John Coustas – Chief Executive Officer Conference Call Participants Randy Giveans – Jefferies Omar Nokta – Clarksons Chris Wetherbee – Citigroup Jay Mintzmyer – Value Investor’s Edge Operator Good day, and welcome to the Danaos Corporation conference call to discuss the financial results for the three months ended December 31, 2021. As a remainder, toda ...