Danaos(DAC) - 2022 Q1 - Quarterly Report

Operating and Financial Review 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) 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 | $1.53 | 10.6% | - Average number of containerships increased to 71.0 in Q1 2022 from 60.0 in Q1 2021, while fleet utilization slightly decreased from 98.6% to 97.4%[4] Operating Revenues Operating revenues saw a significant increase driven by higher charter rates, newly acquired vessels, and non-cash revenue recognition | Factor | Increase in Revenue ($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 | $97.8 | Voyage Expenses Voyage expenses increased due to higher commissions and a larger average fleet size | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------- | :---------------------------- | :---------------------------- | :---------- | | Voyage Expenses| $7.2 million | $4.2 million | $3.0 | - Increase primarily due to higher commissions from increased revenue per vessel and a larger average fleet size[7] Vessel Operating Expenses Vessel operating expenses rose due to an expanded fleet and increased daily costs from COVID-19 related crew remuneration and insurance | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($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 | $353 | - Increase mainly due to the larger average fleet and higher average daily operating costs, driven by COVID-19 related crew remuneration and increased insurance expenses due to higher insured vessel values[8] Depreciation Depreciation increased significantly, primarily driven by the recent acquisition of eleven new vessels | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | Change (%) | | :------------- | :---------------------------- | :---------------------------- | :---------- | :--------- | | Depreciation | $33.4 million | $25.8 million | $7.6 | 29.5% | - Increase attributed to the recent acquisition of eleven vessels[9] Amortization of Deferred Drydocking and Special Survey Costs Amortization of deferred drydocking and special survey costs experienced a minor increase | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------------------------------------------ | :---------------------------- | :---------------------------- | :---------- | | Amortization of Deferred Drydocking and Special Survey Costs | $2.7 million | $2.5 million | $0.2 | General and Administrative Expenses General and administrative expenses decreased, mainly attributed to reduced stock-based compensation | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------- | | General and Administrative Expenses | $7.4 million | $10.9 million | -$3.5 | - Decrease mainly due to reduced stock-based compensation expenses[11] Interest Expense and Interest Income Interest expense increased while interest income decreased to nil, reflecting changes in debt recognition and full collection of prior year bond interest | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($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] - Interest income decreased to nil due to the full collection of accrued interest on ZIM and HMM bonds redeemed in 2021[15] Gain on Investments 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 $522.6 million as of March 31, 2022[16] Dividend Income Significant dividend income was recognized from ZIM ordinary shares in the current quarter, with no comparable income in the prior year | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------- | :---------------------------- | :---------------------------- | :---------- | | Dividend Income| $122.2 million | None | $122.2 | - Significant dividend income recognized on ZIM ordinary shares in Q1 2022, compared to none in the prior year[17] Equity Income on Investments Equity income from investments decreased to nil following the full consolidation of Gemini since July 2021 | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :------------------------ | :---------------------------- | :---------------------------- | :---------- | | Equity Income on Investments | Nil | $1.8 million | -$1.8 | - Equity income from Gemini decreased to nil following its full consolidation since July 1, 2021[18] Other Finance Expenses Other finance expenses, net, showed a slight increase for the period | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------------- | :---------------------------- | :---------------------------- | :---------- | | Other Finance Expenses, net | $0.6 million | $0.5 million | $0.1 | Loss on Derivatives 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 | $0.9 million | - Amortization of deferred realized losses on interest rate swaps remained stable[20] Other Income, Net Other income, net, decreased primarily due to a non-recurring payment received in the prior year | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :-------------- | :---------------------------- | :---------------------------- | :---------- | | Other Income, net | $0.5 million | $4.0 million | -$3.5 | - Decrease mainly due to a $3.9 million payment from Hanjin Shipping in Q1 2021 that did not recur[21] Income Taxes Income taxes were recognized in the current quarter, related to withholding taxes on ZIM dividend income | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | Change ($M) | | :----------- | :---------------------------- | :---------------------------- | :---------- | | Income Taxes | $12.2 million | None | $12.2 | - Income taxes in Q1 2022 were related to taxes withheld on dividend income from ZIM ordinary shares[22] Cash Flows The company experienced a significant increase in cash provided by operating activities, but a substantial shift from cash provided to cash used in financing activities, primarily due to debt refinancing and dividend payments. Investing activities also saw an increase in cash provided, mainly from vessel sale advances | Cash Flow Type | 3 Months Ended March 31, 2022 ($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 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] Net Cash Provided by Investing Activities 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] Net Cash Provided by Financing Activities 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] - 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] Impact of External Factors 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][118] - 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][38] - 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] Liquidity and Capital Resources This section details the company's financial resources, funding strategies, debt structure, and capital commitments for fleet expansion and shareholder returns Overview and Needs 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] - Principal uses of funds: capital expenditures for fleet growth/maintenance, compliance with shipping standards, working capital, and debt repayment[24] - Short-term liquidity needs: vessel operating expenses, installment payments for six newbuildings, debt interest, and servicing debt obligations[25] - Long-term liquidity needs: newbuilding installments, additional vessel acquisitions, and debt repayment[25] Contracted Cash Revenues 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] ZIM Equity Securities 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] Credit Facilities 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][142] - Company was in compliance with financial covenants[142] - 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][61][62][181][183] - 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][63][184] Senior Notes 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] - Interest is payable semi-annually on March 1 and September 1, commencing September 1, 2021[65] - Notes mature on March 1, 2028[65] - The notes are general senior unsecured obligations of Danaos Corporation[65] Newbuilding Contracts and Dividends 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 $15.5 million, payable on June 8, 2022[33][184] - Intends to pay a regular quarterly dividend, subject to board discretion, Marshall Islands law, and credit facility terms[33] Non-GAAP Financial Measures This section presents non-GAAP financial metrics, EBITDA and Adjusted EBITDA, to provide insights into the company's core operating profitability EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are non-GAAP measures used by management and investors to assess core operating performance by excluding certain non-recurring or non-cash items. Both metrics showed significant increases in Q1 2022 compared to Q1 2021, primarily driven by higher operating revenues and ZIM dividend income | Metric | 3 Months Ended March 31, 2022 ($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] - 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] Market Risk Disclosures This section discloses the company's exposure to market risks, specifically related to interest rates and foreign currency fluctuations Interest Rate Swaps 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][152] - 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] Foreign Currency Exchange Risk 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] Capitalization and Indebtedness This section outlines the company's capital structure, including debt and equity, and pro-forma adjustments for recent financial activities Consolidated Capitalization 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] Fleet Information This section provides an overview of the company's current fleet deployment and details on new vessels under construction Fleet Deployment Profile 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][77] - Charters could expire as early as 2022, with some extending to 2028, and most include charterer options for extension[75][77][79] - The company has agreed to sell two vessels, Catherine C and Leo C, for $130 million, with delivery expected in November 2022[79] Contracted Vessels Under Construction 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 This section contains statements regarding future expectations, plans, and prospects that involve risks and uncertainties Financial Statements and Notes This section presents the company's unaudited condensed consolidated financial statements and detailed explanatory notes Index to Financial Statements 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] Condensed Consolidated Balance Sheets 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 | $220.7 | Condensed Consolidated Statements of Income For the three months ended March 31, 2022, Danaos Corporation reported a substantial increase in operating revenues and net income compared to the prior year. This was largely due to higher charter rates and significant dividend income from ZIM, despite a decrease in gain on investments | Metric | 3 Months Ended March 31, 2022 ($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 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 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 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 | -$227.9 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's financial position, operations, and cash flows, including accounting policies, asset and liability breakdowns, debt structures, equity changes, and subsequent events. Key updates include new vessel construction contracts, significant debt and lease repayments post-quarter, and the sale of ZIM shares Basis of Presentation and General Information The financial statements are prepared under U.S. GAAP, consolidating wholly-owned subsidiaries, with the U.S. Dollar as the reporting currency - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP and represent the consolidation of Danaos Corporation and its wholly-owned subsidiaries, primarily involved in containership ownership and operation[107][108][110] - The company's reporting and functional currency is the United States Dollar[107] - The notes list all vessel-owning subsidiaries and their respective vessels, including new vessels under construction[113][115] Significant Accounting Policies No significant changes were made to the company's accounting policies during the three months ended March 31, 2022 - No significant changes were made to the company's accounting policies during the three months ended March 31, 2022[120] Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents, and restricted cash increased, with restricted cash including collateral and an advance payment for vessel sales | Metric | As of March 31, 2022 ($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] Fixed Assets, net & Right-of-use Assets 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] - 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] - 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] - Total leasing obligation was $210.2 million as of March 31, 2022, with scheduled aggregate leasing installments of $228.9 million[130] Deferred Charges, net Deferred charges primarily consist of drydocking and special survey costs, amortized over two and a half years | Metric | As of March 31, 2022 ($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] Other Current and Non-current Assets 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] Accrued Liabilities 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 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] - Scheduled debt maturities total $1,127.7 million, with $94.2 million due by March 31, 2023[147] Financial Instruments 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][150] - 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][154][157] - 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] Commitments and Contingencies 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] - Outstanding commitments include vessel construction contracts and buyback obligations related to sale and leaseback arrangements[163] Stockholders' Equity 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] - Stock-based compensation expenses were $0.1 million in Q1 2022, significantly lower than $4.9 million in Q1 2021[167] - 19,200 restricted shares were outstanding as of March 31, 2022, scheduled to vest on December 31, 2022[167] Lease Arrangements Operating revenues are derived from 71 vessels on time or bareboat charters, with future rentals totaling $2.68 billion - Operating revenues are generated from 71 vessels on time charters or bareboat charter agreements, with remaining terms up to June 2028[171] | Period | Total Future Rentals ($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 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 | $14.47 | | Basic weighted average common shares outstanding (thousands) | 20,697 | 20,293 | | Diluted weighted average common shares outstanding (thousands) | 20,717 | 20,513 | Related Party Transactions Related party transactions include management fees, commissions, and advances due from the Manager for operating expenses | Transaction Type | 3 Months Ended March 31, 2022 ($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] Subsequent Events 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] - Exercised option to early repay $97.4 million leaseback obligation for five vessels by May 12, 2022, acquiring legal title[179] - Sold 1,500,000 ZIM ordinary shares in April 2022 for $85.3 million[180] - 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][183] - Declared a dividend of $0.75 per share payable on June 8, 2022[184]