ATHENS, Greece, Nov. 14, 2018 /PRNewswire/ -- Danaos Corporation ("Danaos") (NYSE: DAC), one of the world's largest independent owners of containerships, today reported unaudited results for the period ended September 30, 2018.

Highlights for the Third Quarter and Nine Months Ended September 30, 2018:

• 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.

• Charter coverage of 90% for the next 12 months based on current operating revenues and 78% in terms of contracted operating days.

Danaos' CEO Dr. John Coustas commented:

"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."

Three months ended September 30, 2018 compared to the three months ended September 30, 2017

During the three months ended September 30, 2018 and September 30, 2017, Danaos had an average of 55 containerships. Our fleet utilization for the three months ended September 30, 2018 was 97.4% compared to 97.0% for the three months ended September 30, 2017.

Our adjusted net income amounted to $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. We have adjusted our net income in the three months ended September 30, 2018 for the gain on debt extinguishment of $116.4 million, refinancing related professional fees of $21.8 million and a non-cash fees amortization charge and accrued finance fees of $4.8 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $7.4 million in adjusted net income for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 is attributable mainly to a $4.2 million increase in operating revenues, a $3.4 million decrease in net finance expenses and a $0.4 million operating performance improvement on equity investments, which were partially offset by $0.6 million increase in total operating expenses.

On a non-adjusted basis, our net income amounted to $127.2 million, or $0.77 per share, for the three months ended September 30, 2018 compared to net income of $22.4 million, or $0.20 per share, for the three months ended September 30, 2017.

Operating RevenuesOperating revenues increased by 3.7%, or $4.2 million, to $117.8 million in the three months ended September 30, 2018 from $113.6 million in the three months ended September 30, 2017.

Operating revenues for the three months ended September 30, 2018 reflect:

• $6.3 million increase in revenues in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 due to the re-chartering of certain of our vessels at higher rates.

• $2.1 million decrease in revenues due to lower fleet utilization of our vessels in the three months ended September 30, 2018 compared to the three months ended September 30, 2017.

Vessel Operating ExpensesVessel operating expenses decreased by 2.3%, or $0.6 million, to $25.5 million in the three months ended September 30, 2018 from $26.1 million in the three months ended September 30, 2017. The average daily operating cost per vessel for vessels on time charter was $5,427 per day for the three months ended September 30, 2018 compared to $5,569 per day for the three months ended September 30, 2017. Management believes that our daily operating cost ranks as one of the most competitive in the industry.

Depreciation & AmortizationDepreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs.

DepreciationDepreciation expense decreased by 7.5%, or $2.2 million, to $27.0 million in the three months ended September 30, 2018 from $29.2 million in the three months ended September 30, 2017.

Amortization of Deferred Dry-docking and Special Survey CostsAmortization of deferred dry-docking and special survey costs increased by $1.0 million, to $2.6 million in the three months ended September 30, 2018 from $1.6 million in the three months ended September 30, 2017. The increase was mainly due to the increased number of vessels dry-docked over the last nine months.

General and Administrative ExpensesGeneral and administrative expenses increased by $2.0 million to $7.4 million in the three months ended September 30, 2018, from $5.4 million in the three months ended September 30, 2017. The increase was mainly due to increased remuneration costs and professional fees.

Other Operating ExpensesOther Operating Expenses include Voyage Expenses.

Voyage ExpensesVoyage expenses increased by $0.3 million to $2.9 million in the three months ended September 30, 2018, from $2.6 million in the three months ended September 30, 2017.

Interest Expense and Interest IncomeInterest expense decreased by 6.8%, or $1.5 million, to $20.5 million in the three months ended September 30, 2018 from $22.0 million in the three months ended September 30, 2017. The decrease in interest expense is attributed to:

(i) a $6.4 million decrease in interest expense on two of our facilities for which we have recognized an interest expense accrual of approximately $250 million during the quarter ended September 30, 2018. This interest expense accrual has been classified in our income statement under "Gain on debt extinguishment" and on our balance sheet under "Accumulated accrued interest" and represents future interest expense for the relevant facilities that has been accrued in advance as a result of the application of Troubled Debt Restructuring ("TDR") accounting in connection with our debt refinancing.

(ii) a $3.2 million increase in interest expense due to an increase in debt service cost of approximately 1.35%, partially offset by a $435 million decrease in our average debt, to $1,950.1 million in the three months ended September 30, 2018, compared to $2,385.8 million in the three months ended September 30, 2017.

(iii) a $1.7 million increase in the amortization of deferred finance costs related to our debt refinancing.

As of September 30, 2018, the debt outstanding, gross of deferred finance costs, was $1,694.5 million compared to $2,381.7 million as of September 30, 2017.

Interest income increased by $0.1 million to $1.5 million in the three months ended September 30, 2018 compared to $1.4 million in the three months ended September 30, 2017.

Other finance costs, netOther finance costs, net decreased by $0.3 million to $0.7 million in the three months ended September 30, 2018 compared to $1.0 million in the three months ended September 30, 2017 mainly due to decreased exit fees expenses.

Equity income on investmentsEquity income on investments amounted to $0.7 million in the three months ended September 30, 2018 compared to $0.3 million in the three months ended September 30, 2017 and relates to the improved operating performance of Gemini Shipholdings Corporation ("Gemini"), in which the Company has a 49% shareholding interest.

Gain on debt extinguishmentThe gain on debt extinguishment of $116.4 million in the three months ended September 30, 2018 relates to our debt refinancing described below and consists of debt principal reduction net of refinancing related fees.

Loss on derivativesAmortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three months ended September 30, 2018 and 2017.

Other income/(expenses), netOther income/(expenses), net was $21.6 million in expenses in the three months ended September 30, 2018 compared to $3.9 million in expenses in the three months ended September 30, 2017 mainly due to the increase in refinancing-related professional fees.

Adjusted EBITDAAdjusted EBITDA increased by 3.6%, or $2.9 million, to $82.7 million in the three months ended September 30, 2018 from $79.8 million in the three months ended September 30, 2017. As outlined above, this increase is mainly attributable to a $4.2 million increase in operating revenues and a $0.4 million operating performance improvement on our equity investments, which were partially offset by a $1.7 million increase in total operating expenses. Adjusted EBITDA for the three months ended September 30, 2018 is adjusted for a gain on debt extinguishment of $116.4 million, refinancing-related professional fees of $21.8 million and stock based compensation of $0.2 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Nine months ended September 30, 2018 compared to the nine months ended September 30, 2017

During the nine months ended September 30, 2018 and September 30, 2017, Danaos had an average of 55 containerships. Our fleet utilization for the nine months ended September 30, 2018 was 96.4% compared to 95.9% for the nine months ended September 30, 2017. The fleet utilization excluding the off charter days of the vessels that were previously chartered to Hanjin was 98.0% in the nine months ended September 30, 2017.

Our adjusted net income amounted to $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. We have adjusted our net income in the nine months ended September 30, 2018 for the gain on debt extinguishment of $116.4 million, refinancing related professional fees of $51.5 million and a non-cash fees amortization charge and accrued finance fees of $11.4 million. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $10.9 million in adjusted net income for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 is attributable to a $5.5 million increase in operating revenues, a $5.3 million decrease in total operating expenses, a $0.7 million increase in other income and a $0.3 million increase in the operating performance of our equity investment in Gemini, which were partially offset by $0.9 million increase in net finance expenses.

On a non-adjusted basis, our net income amounted to $148.0 million, or $1.15 per share, for the nine months ended September 30, 2018 compared to net income of $61.1 million, or $0.56 per share, for the nine months ended September 30, 2017.

Operating RevenuesOperating revenues increased by 1.6%, or $5.5 million, to $343.1 million in the nine months ended September 30, 2018 from $337.6 million in the nine months ended September 30, 2017.

Operating revenues for the nine months ended September 30, 2018 reflect:

• $12.5 million increase in revenues in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 due to the re-chartering of certain of our vessels at higher rates.

• $7.0 million decrease in revenues due to lower fleet utilization of our vessels in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 (other than three vessels previously chartered to Hanjin which were less utilized in the nine months ended September 30, 2017).

Vessel Operating ExpensesVessel operating expenses decreased by 2.1%, or $1.7 million, to $79.1 million in the nine months ended September 30, 2018 from $80.8 million in the nine months ended September 30, 2017. The average daily operating cost per vessel for vessels on time charter was $5,678 per day for the nine months ended September 30, 2018 compared to $5,687 per day for the nine months ended September 30, 2017. Management believes that our daily operating cost ranks as one of the most competitive in the industry.

Depreciation & AmortizationDepreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs.

DepreciationDepreciation expense decreased by 7.4%, or $6.5 million, to $80.8 million in the nine months ended September 30, 2018 from $87.3 million in the nine months ended September 30, 2017.

Amortization of Deferred Dry-docking and Special Survey CostsAmortization of deferred dry-docking and special survey costs increased by $1.9 million, to $6.9 million in the nine months ended September 30, 2018 from $5.0 million in the nine months ended September 30, 2017. The increase was mainly due to the increased number of vessels dry-docked over the last nine months.

General and Administrative ExpensesGeneral and administrative expenses increased by $1.5 million, to $18.4 million in the nine months ended September 30, 2018, from $16.9 million in the nine months ended September 30, 2017. The increase was mainly due to increased remuneration costs and professional fees.

Other Operating ExpensesOther Operating Expenses include Voyage Expenses.

Voyage ExpensesVoyage expenses decreased by $0.4 million, to $9.2 million in the nine months ended September 30, 2018 from $9.6 million in the nine months ended September 30, 2017.

Interest Expense and Interest IncomeInterest expense increased by 3.3%, or $2.1 million, to $66.4 million in the nine months ended September 30, 2018 from $64.3 million in the nine months ended September 30, 2017. The decrease in interest expense is attributed to:

(i) a $6.4 million decrease in interest expense on two of our facilities for which we have recognized an interest expense accrual of approximately $250 million during the quarter ended September 30, 2018. This interest expense accrual has been classified in our income statement under "Gain on debt extinguishment" and on our balance sheet under "Accumulated accrued interest" and represents future interest expense for the relevant facilities that has been accrued in advance as a result of the application of TDR accounting in connection with our debt refinancing.

(ii) a $7.4 million increase in interest expense due to an increase in debt service cost of approximately 0.94%, partially offset by a $257.6 million decrease in our average debt, to $2,174.5 million in the three months ended September 30, 2018, compared to $2,432.1 million in the three months ended September 30, 2017.

(iii) a $1.1 million increase in the amortization of deferred finance costs related to our debt refinancing.

As of September 30, 2018, the debt outstanding, gross of deferred finance costs, was $1,694.5 million compared to $2,381.7 million as of September 30, 2017.

Interest income increased by $0.1 million to $4.3 million in the nine months ended September 30, 2018 compared to $4.2 million in the nine months ended September 30, 2017.

Other finance costs, netOther finance costs, net decreased by $0.5 million, to $2.6 million in the nine months ended September 30, 2018 from $3.1 million in the nine months ended September 30, 2017 mainly due to decreased exit fees expenses.

Equity income on investmentsEquity income on investments amounted to $0.9 million in the nine months ended September 30, 2018 compared to $0.6 million in the nine months ended September 30, 2017 and relates to the improved operating performance of Gemini, in which the Company has a 49% shareholding interest.

Gain on debt extinguishmentThe gain on debt extinguishment of $116.4 million in the nine months ended September 30, 2018 relates to our debt refinancing described below and consists of debt principal reduction net of refinancing related fees.

Loss on derivativesAmortization of deferred realized losses on interest rate swaps remained stable at $2.8 million in each of the nine months ended September 30, 2018 and 2017.

Other income/(expenses), netOther income/(expenses), net was $50.6 million in expenses in the nine months ended September 30, 2018 compared to $11.5 million in expenses in the nine months ended September 30, 2017 mainly due to a $42.2 million increase in refinancing-related professional fees, which were partially offset by a $0.7 million increase in other income and a $2.4 million realized loss on sale of HMM securities in the nine months ended September 30, 2017 that did not recur in the 2018 period.

Adjusted EBITDAAdjusted EBITDA increased by 3.2%, or $7.3 million, to $237.7 million in the nine months ended September 30, 2018 from $230.4 million in the nine months ended September 30, 2017. As outlined above, this increase is attributable to a $5.5 million increase in operating revenues, a $0.8 million decrease in total operating expenses, a $0.7 million increase in other income and a $0.3 million increase in operating performance on our equity investments in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Adjusted EBITDA for the nine months ended September 30, 2018 is adjusted for a gain on debt extinguishment of $116.4 million, refinancing-related professional fees of $51.5 million and stock based compensation of $0.2 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Debt RefinancingOn August 10, 2018, we consummated the agreement reached with certain of our lenders on June 19, 2018 for the refinancing of approximately $2.2 billion of our debt maturing on December 31, 2018, reducing our debt by approximately $551 million. This agreement significantly strengthened our capital structure and financial position through this significant debt reduction, resetting financial and certain other covenants in our credit facilities, modifying interest rates and amortization profiles and extending debt maturities by approximately five years to December 31, 2023. In connection with this debt refinancing, we issued 99,342,271 new shares of Danaos common stock to certain of our lenders, which represented 47.5% of our outstanding common stock after giving effect to this issuance and diluting existing shareholders ratably. For additional information regarding the debt refinancing, see the Company's Reports on Form 6-K filed with the SEC on June 25, 2018 and August 14, 2018.

Conference Call and WebcastOn Thursday, November 15, 2018 at 9:00 A.M. ET, the Company's management will host a conference call to discuss the results.

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 844 802 2437 (US Toll Free Dial In), 0800 279 9489 (UK Toll Free Dial In) or +44 (0) 2075 441 375 (Standard International Dial In). Please indicate to the operator that you wish to join the Danaos Corporation earnings call.

A telephonic replay of the conference call will be available until November 22, 2018 by dialing 1 877 344 7529 (US Toll Free Dial In) or +44 (0) 2036 088 021 (Standard International Dial In) and using 10126336# as the access code.

Audio WebcastThere will also be a live and then archived webcast of the conference call, including a slide presentation providing additional company information, through the Danaos website (www.danaos.com). Participants of the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About Danaos CorporationDanaos Corporation is one of the largest independent owners of modern, large-size containerships. Our current fleet of 59 containerships aggregating 351,614 TEUs, including four vessels owned by Gemini Shipholdings Corporation, a joint venture, ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. Our fleet is chartered to many of the world's largest liner companies on fixed-rate charters. Our long track record of success is predicated on our efficient and rigorous operational standards and environmental controls. Danaos Corporation's shares trade on the New York Stock Exchange under the symbol "DAC".

Forward-Looking Statements Matters discussed in this release may constitute forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements about the expected benefits of the refinancing and other statements that are forward looking. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions. Although Danaos Corporation believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, Danaos Corporation cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the effects of the refinancing transactions; Danaos' ability to achieve the expected benefits of the refinancing and comply with the terms of its new credit facilities and other agreements entered into in connection with the refinancing; the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, charter counterparty performance, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in Danaos Corporation's operating expenses, including bunker prices, dry-docking and insurance costs, ability to obtain financing and comply with covenants in our financing arrangements, actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.

Risks and uncertainties are further described in reports filed by Danaos Corporation with the U.S. Securities and Exchange Commission.

Visit our website at www.danaos.com

Appendix

Fleet Utilization

Danaos had 111 unscheduled off-hire days in the three months ended September 30, 2018. The following table summarizes vessel utilization and the impact of the off-hire days on the Company's revenue.

Fleet ListThe following table describes in detail our fleet deployment profile as of November 13, 2018:

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SOURCE Danaos Corporation