Danaos Corporation (DAC) Reports Q3 EPS of $0.23, Revenues Beat

Danaos Corporation (NYSE: DAC) reported Q3 EPS of $0.23, versus $0.27 reported last year. Revenue for the quarter came in at $117.78 million versus the consensus estimate of $107.19 million.

• On August 10, 2018, we consummated the agreement with certain of our lenders to refinance approximately $2.2 billion of our debt maturing on December 31, 2018, reducing our debt by approximately $551 million, resetting financial and other covenants, modifying interest rates and amortization profiles and extending debt maturities by approximately five years to December 31, 2023. In connection with this refinancing, we issued approximately 99.3 million shares of common stock to certain of our lenders. See \"Debt Refinancing\".
• Adjusted net income1 of $37.5 million, or $0.23 per share, for the three months ended September 30, 2018 compared to $30.1 million, or $0.27 per share, for the three months ended September 30, 2017, an increase of 24.6%. Adjusted net income1 of $94.6 million, or $0.74 per share, for the nine months ended September 30, 2018 compared to $83.7 million, or $0.76 per share, for the nine months ended September 30, 2017, an increase of 13.0%.
• Operating revenues of $117.8 million for the three months ended September 30, 2018 compared to $113.6 million for the three months ended September 30, 2017, an increase of 3.7%. Operating revenues of $343.1 million for the nine months ended September 30, 2018 compared to $337.6 million for the nine months ended September 30, 2017, an increase of 1.6%.
• Adjusted EBITDA1 of $82.7 million for the three months ended September 30, 2018 compared to $79.8 million for the three months ended September 30, 2017, an increase of 3.6%. Adjusted EBITDA1 of $237.7 million for the nine months ended September 30, 2018 compared to $230.4 million for the nine months ended September 30, 2017, an increase of 3.2%.
• Total contracted operating revenues were $1.7 billion as of September 30, 2018, with charters extending through 2028 and remaining average contracted charter duration of 5.1 years, weighted by aggregate contracted charter hire.

"Danaos completed a very significant refinancing transaction in the 3rd quarter of 2018 that reduced our debt by $551 million, reset financial covenants and extended debt maturities to the end of 2023 on the back of a sustainable new amortization profile. This transaction has strengthened the Company\'s growth prospects over the next five years by removing all balloon payments and maturities of existing debt during that period.

Adjusted net income for the 3rd quarter of 2018 was $37.5 million or 23 cents per share, $7.4 million or 24.6% higher when compared to the 3rd quarter of 2017. This improvement was primarily the result of a $4.2 million increase in operating revenues due to improved re-chartering rates. Adjusted EBITDA for the 3rd quarter of 2018 was $82.7 million, $2.9 million or 3.6% higher when compared to the 3rd quarter of 2017.

Since our last earnings report, the charter market has remained consistently soft. Uncertainty about the potential impact of ongoing trade tensions, combined with higher newbuilding prices due to increasing steel prices and wages in China have discouraged new ordering except some feeder projects by some Asian liners. This is positive for the medium term market outlook. Instead, market participants have been focusing on the 2020 regulations and in particular investments on scrubbers for vessels from 6,500 TEU upwards.

Danaos has been actively focused on positioning our fleet ahead of the implementation of the new regulations. Thus far, we have committed to install exhaust cleaning systems, or scrubbers, on six vessels, two of which are owned by our joint venture Gemini Shipholdings Corporation. These vessels have been chartered out for periods of at least three years in duration and since these are all vessels that are currently on short term charters, these transactions significantly improve income visibility. Additionally, the charter rate fixtures provide a full payback of the investment over three years, and we also benefit from the enhancement in the value of the upgraded underlying assets. We are also currently in discussions to install scrubbers on a further five vessels.

We maintain our high charter contract coverage of 90% in terms of operating revenues and 78% in terms of operating days over the next 12 months. This insulates us from the near-term soft charter market. Through the six charters described above on vessels with scrubbers and an additional two fixtures that have been secured for durations of three years, our charter coverage has improved, and our contracted revenue has increased by more than $160 million.

Danaos continues to be a leader in the container shipping industry on the back of a solid track record of operational excellence and technological innovation that allows us to continually deliver high quality service to our customers. At the same time, the recently concluded re-financing transaction further enhances our ability to pursue growth opportunities and deliver value to our shareholders."

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

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