Danaos Corp. 3Q & 9M Results

Danaos Corporation, a leading international owner of containerships, today reported unaudited results for the period ended September 30, 2014.

Highlights for the Third Quarter and Nine Months Ended September 30, 2014:

* Operating revenues of $139.5 million for the three months ended September 30, 2014 compared to $148.4 million for the three months ended September 30, 2013, a decrease of 6.0%. Operating revenues of $411.4 million for the nine months ended September 30, 2014 compared to $441.1 million for the nine months ended September 30, 2013, a decrease of 6.7%.
* Adjusted EBITDA1 of $104.1 million for the three months ended September 30, 2014 compared to $109.5 million for the three months ended September 30, 2013, a decrease of 4.9%. Adjusted EBITDA1 of $299.5 million for the nine months ended September 30, 2014 compared to $325.5 million for the nine months ended September 30, 2013, a decrease of 8.0%.
* Adjusted net income of $18.0 million, or $0.16 per share, for the three months ended September 30, 2014 compared to $13.4 million, or $0.12 per share, for the three months ended September 30, 2013. Adjusted net income1 of $36.6 million, or $0.33 per share, for the nine months ended September 30, 2014 compared to $39.1 million, or $0.36 per share, for the nine months ended September 30, 2013.
* The remaining average charter duration of our fleet was 8.2 years as of September 30, 2014 (weighted by aggregate contracted charter hire).
* Total contracted operating revenues were $3.8 billion as of September 30, 2014, through 2028.
* Charter coverage of 93% for the next 12 months in terms of contracted operating days and 98% in terms of operating revenues.

Danaos' CEO Dr. John Coustas commented, "Danaos is reporting a solid third quarter with adjusted net income of $18 million, or 16 cents per share, which is higher by $4.6 million or 34% when compared to the $13.4 million, or 12 cents per share of adjusted net income for the 3rd quarter of 2013. The Company's profitability improved between the 2 quarters through a $9.4 million improvement in financing costs together with a $4.1 million improvement in operating costs, despite a decrease in operating revenues. The decline in operating revenues between the 2 quarters mainly reflects $4.7 million related to softer charter market conditions and $4.2 million attributable to the reduced charter hire on six of our vessels following the previously announced restructuring of Zim."

The reduction in finance costs is expected to continue in the coming quarters as the company has reduce leverage and benefit from the expiration of expensive interest rate swaps. Total debt repayments in 2014 will reach $221.5 million and swap expirations will exceed $1 billion in notional terms.

Executing the fleet renewal program, during the first half of the year the company sold three 4,814 TEU vessels and two 4,651 TEU vessels with an average age of 23 years, while on October 14, 2014 they entered into an agreement for the purchase of two 6,402 TEU containerships built in 2002.

"The container market demand / supply fundamentals have remained weak and all metrics inevitably lead to the conclusion that 2014 will be a sluggish year," Dr. Coustas added. "As the super post panamaxes continue to be delivered and deployed in the Europe - Far East route, the capacity being cascaded inevitably creates over-capacity in the remaining routes, adversely affecting box freight rates and charter rates. Demand is not helping either as world GDP growth recent downward revisions will further delay recovery in the container trade. On the other hand, the Panamax sector which has suffered the most in this prolonged soft market, has seen signs of recovery during the 3rd quarter mainly as a result of the increased scrapping of vessels between 3,000 to 5,000 TEU that has been taking place over the last 18-24 months."

Despite the soft charter market, with 98% charter coverage for the next 12 months in terms of operating revenues he finds they are substantially insulated from market volatility and the timing of any recovery. Additionally, our $5,611 daily operating cost for the 3rd quarter clearly positions us as one of the most efficient operators in the industry.

Dr. John Coustas asserted that they will continue their efforts to de-lever the balance sheet, manage their fleet efficiently and capitalize on the resilience of the business model towards creating value for their shareholders.