Danaos Corporation (DAC) Misses Q3 EPS by 26c

Danaos Corporation (NYSE: DAC) reported Q3 EPS of $0.21, $0.26 worse than the analyst estimate of $0.47. Revenue for the quarter came in at $111.8 million versus the consensus estimate of $130 million.

Danaos' CEO Dr. John Coustas commented: "We report our results for the third quarter of 2016 in the aftermath of the bankruptcy of Hanjin Shipping, one of Danaos' large customers. As a result of the bankruptcy, we did not recognize any operating revenues for the vessels that had been chartered to Hanjin during the quarter. This reduced our operating revenues by $24.8 million and was the main contributor to the $21 million reduction in our adjusted net income to $22.8 million compared to an adjusted net income of $43.8 million in the third quarter of 2015.

Setting aside the significant effect of the Hanjin bankruptcy on our operating revenues and our bottom line, we have otherwise managed to improve our adjusted net income by $3.8 million, mainly due to a $10.2 million improvement in our net finance costs resulting from the continued de-leveraging of our balance sheet, interest rate swap expirations and a $1.3 million reduction in total operating expenses, partially offset by a $8 million reduction in operating revenues attributed to lower fleet utilization, the sale of the Federal during the first quarter and lower re-chartering rates for certain of our vessels in a softer charter market.

As a result of the Hanjin bankruptcy we also recorded a write-off of $15.8 million, representing the outstanding charter hire owed to us by Hanjin as of June 30, 2016. Additionally, principally as a result of the effects of the cancellation of the Hanjin charters, the Company was in breach of certain financial covenants as at September 30, 2016 for which we have obtained waivers until April 1, 2017. Because the waivers are for a period of less than 12 months, all of the debt has been classified as current on the September 30, 2016 financial statements. Notwithstanding the negative consequences of the Hanjin bankruptcy, the Company is currently in a position to fully service all of its operational and contractual financial obligations.

All the Hanjin vessels have been discharged and re-delivered to us. We have already re-chartered 5 x 3,400 TEU vessels at market rates while we are still in negotiations to charter the remaining 3 x 10,100 TEU vessels, which we expect to be deployed after the end of the first quarter of 2017.

During the third quarter we sold all the shares that the Company had received as compensation pursuant to the HMM restructuring for a consideration of $38.1 million. This constitutes a 98% recovery of the $39 million charter hire concession for which we were compensated with HMM shares. Despite the effective recovery at par on a cash basis, we recorded a non-cash accounting loss of $12.9 million on the sale of these shares, reflecting the difference between the book value and the sale price of the shares, which has been included within our adjusted net income calculation.

Danaos continues to have low near term exposure to the weak spot market compared to current operating revenues with 95% of charter cover in terms of third quarter operating revenues and 79% in terms of contracted operating days for the next 12 months. Additionally, our continued focus on cost containment has reduced our daily operating costs to $5,462 per day for the third quarter, a decline of nearly 4% versus the same period in the prior year. This clearly positions us as one of the most efficient operators in the industry, which is particularly beneficial in today's environment.

Amidst this challenging economic environment we will remain singularly focused on preserving value, de-levering our balance sheet, managing our fleet efficiently and capitalizing on the resilience of our business model."

For earnings history and earnings-related data on Danaos Corporation (DAC) click here.

You May Also Be Interested In

• Amphenol (APH) Tops Q1 EPS by 7c, offers guidance
• Simmons First National Corp (SFNC) Misses Q1 EPS by 1c
• Blue Foundry Bancorp (BLFY) Tops Q1 EPS by 9c