Danaos(US:DAC)2020-02-11 18:08Financial Data and Key Metrics Changes - The company's adjusted net income for 2019 was $148.7 million, an increase of $17.5 million or 13.3% compared to $131.2 million in 2018, primarily due to a $13.7 million decrease in total operating costs and a $15.1 million decrease in net finance expenses, partially offset by an $11.5 million decrease in operating revenues [5][12] - Adjusted EBITDA for 2019 was $310.6 million, slightly down from $317.8 million in 2018 [5] - For Q4 2019, adjusted net income was $38 million, up by $1.4 million from $36.6 million in Q4 2018, driven by a $5.2 million decrease in total operating expenses and a $1 million decrease in net finance costs, despite a $5.4 million decrease in operating revenues [12][13] Business Line Data and Key Metrics Changes - Operating revenues for Q4 2019 decreased by 4.7% or $5.4 million to $110 million compared to $115.6 million in Q4 2018, mainly due to a $5.3 million decrease from 4 Panamax vessels that concluded 12-year charters [13] - Vessel operating expenses decreased by 4.3% or $1.1 million to $24.5 million in Q4 2019, with an average daily vessel operating cost of $5,215, remaining competitive in the industry [14] - Adjusted EBITDA for Q4 2019 decreased by 26% or $2.1 million to $78.1 million from $80.2 million in Q4 2018 [16] Market Data and Key Metrics Changes - The container market for vessels larger than 5,500 TEU strengthened throughout 2019, with increased container volumes across main trade lanes [6] - The company has high charter coverage of 86% in terms of operating revenues and 68% in terms of operating days over the next 12 months, which protects strong cash flows [8] - The impact of the coronavirus on world GDP and trade growth is uncertain, but the company expects a short-term demand drop followed by a surge when supply chains resume [7] Company Strategy and Development Direction - The company is committed to investing in operational excellence and technological innovation to maintain its leadership position in the container shipping industry [10] - The successful equity offering in November 2019 has positioned the company to pursue growth initiatives, having already acquired two 8,500 TEU container vessels expected to contribute an incremental $12 million of EBITDA annually [9] - The company plans to benefit from the new IMO 2020 sulfur limits and has completed scrubber installations on 4 out of 11 vessels, enhancing cash flows and contract coverage [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledges near-term headwinds due to the coronavirus but believes long-term fundamentals remain intact, with expectations of a demand surge post-crisis [6][7] - The company is not concerned about the financial health of its largest counterparty, CMA CGM, and has not discussed any amendments to charters [24] - Management expects all scrubber installations to be completed by the second quarter, despite delays caused by the virus outbreak [25] Other Important Information - The company has a contractual minimum debt repayment of $300 million due by the end of 2021, with potential for more debt paydown from excess cash flows [31] - The company is considering reinstating dividends but has deferred decisions due to uncertainties created by the coronavirus [21][23] Q&A Session Summary Question: How much debt is being put against the $53 million in assets from recent acquisitions? - The company is using a 60% loan-to-value ratio for a 5-year loan [18] Question: What are the thoughts around the timing and amount of the first dividend payment? - The decision on dividends has been deferred due to uncertainty from the coronavirus, with the next Board meeting expected in approximately three months [21][22] Question: Are there any risks to contracts with CMA CGM? - Management stated there are no concerns regarding CMA CGM's balance sheet and payments have been timely [24] Question: What percentage of revenues are at risk from market volatility? - The company has 86% charter coverage for the next 12 months, meaning only 12% of revenue is from spot charters, limiting potential revenue impact [29] Question: How many days are expected for off hire due to scrubber installations? - The company expects around 130 to 140 days of off hire for three vessels undergoing scrubber installations [37]