Danaos Corporation Reports Results for the Fourth Quarter and Year Ended December 31, 2023

ATHENS, Greece–(BUSINESS WIRE)–Danaos Corporation (“Danaos”) (NYSE: DAC), one of the world’s largest independent owners of containerships, today reported unaudited results for the fourth quarter and the year ended December 31, 2023.

Highlights for the Fourth Quarter and Year Ended December 31, 2023:

For management purposes, the Company is organized based on operating revenues generated from containership vessels and dry bulk vessels and has two reporting segments: (1) a container vessels segment and (2) a dry bulk vessels segment. The Company measures segment performance based on net income. Items included in the applicable segment’s net income are directly allocated to the extent that the items are directly or indirectly attributable to the segments. With regards to the items that are allocated by indirect calculations, their allocation is commensurate to the utilization of key resources. The Other segment includes components that are not allocated to any of the Company’s reportable segments and includes investments in an affiliate accounted for using the equity method accounting and investments in marketable securities.

• In December 2023, we completed the acquisition of our 7^th Capesize bulk carrier. This brings the total aggregate capacity of our Capesize bulk carriers fleet to 1,231,157 DWT as of December 31, 2023. Additionally, in February 2024, we entered into agreements to acquire 2 Capesize bulk carriers that aggregate 354,579 DWT.
• In February 2024 we added two additional 8,258 TEU newbuildings to our orderbook with expected deliveries during the fourth quarter of 2026 and first quarter of 2027, respectively. As a result, we now have 12 container vessels under construction with an aggregate capacity of 91,430 TEU, with expected deliveries of six vessels in 2024, two vessels in 2025, three vessels in 2026 and one vessel in 2027. All our newbuildings are designed with the latest eco characteristics, will be methanol fuel ready, fitted with Alternative Maritime Power Units and will all be built in accordance with the latest requirements of the International Maritime Organization in relation to Tier III emission standards and Energy Efficiency Design Index (EEDI) Phase III.
• As of the date of this release, Danaos has repurchased a total of 1,597,995 shares of its common stock in the open market for $99.2 million, under its share repurchase program of up to $100 million announced in June 2022. A $100 million increase to this program, for a total aggregate amount of $200 million, was approved by our Board on November 10, 2023.
• During the last three months we added approximately $43 million to our contracted revenue backlog through the arrangement of new charters for five container vessels in our fleet.
• As a result, total contracted cash operating revenues, on the basis of concluded charter contracts through the date of this release, are $2.3 billion. The remaining average contracted charter duration is 3.0 years, weighted by aggregate contracted charter hire.
• Contracted operating days charter coverage for our containership fleet is currently 95.8% for 2024 and 62.0% for 2025.
• Danaos has declared a dividend of $0.80 per share of common stock for the fourth quarter of 2023, which is payable on March 14, 2024, to stockholders of record as of February 28, 2024.

Danaos’ CEO Dr. John Coustas commented:

“Danaos continued to deliver strong results in the fourth quarter of 2023, as geopolitical events continued to impact global shipping markets. Mostly recently, the conflict in the Middle East expanded to the seas with attacks on vessels in the Red Sea area. This dramatically altered trade routes and the performance of liner companies as most major companies decided to reroute their vessels away from the Suez Canal, sailing longer distances around the Cape of Good Hope to reach Europe. This in turn increased ton mile demand, leading to a capacity shortage that drove box rates significantly higher by up to 300%, while it is expected that box rates will remain elevated as long as the disruption continues. Against this backdrop, we have some secured additional charters for our vessels at very healthy levels.

In the fourth quarter of 2023, Danaos completed delivery of all seven Capesize vessels that we had agreed to acquire earlier in 2023. Subsequent to the end of the year, we entered into agreements to acquire two additional Capesize vessels as we continue to diversify our revenues and look to capture upside from a healthy dry bulk market. The market for Capesize vessels is showing unusual seasonal strength as Brazilian iron ore exports increase, the coal trade remains elevated, and demand for minor bulks like bauxite and agricultural commodities is following a global recovery. Recent stimulus measures in China aimed at supporting construction, infrastructure projects, and consumer demand is expected to keep demand steady as fleet growth begins to slow over the next two years. We continue to explore interesting opportunities in the dry bulk sector.

Danaos has also recently ordered two more 8,258 TEU vessels at Yangzijiang shipyard and we now have a total of four vessels under construction at that shipyard with deliveries scheduled for the second half of 2026 and the first quarter of 2027. All twelve vessels in our newbuilding program are methanol ready and are designed with the latest eco characteristics. Demand for shipyard delivery slots is very high as the industry is quickly moving to reduce carbon emissions by operating green vessels.

As we continue to execute our strategy, we remain focused on taking actions that will ultimately benefit our shareholders. Danaos is well positioned with a very strong balance sheet and significant revenue visibility into 2025. This provides us with the flexibility to return value to our shareholders through dividends and share repurchases and also pursue opportunities to ensure the long-term resilience of the company.”

Three months ended December 31, 2023 compared to the three months ended December 31, 2022

During the three months ended December 31, 2023, Danaos had an average of 68.0 container vessels and 4.5 Capesize bulk carriers compared to 69.8 container vessels during the three months ended December 31, 2022. Our container vessels utilization for the three months ended December 31, 2023 was 97.7% compared to 94.8% for the three months ended December 31, 2022. The increase in container vessels utilization was mainly due to the decreased days of scheduled dry-docking of our vessels.

Our adjusted net income amounted to $136.0 million, or $6.99 per share, for the three months ended December 31, 2023 compared to $141.7 million, or $6.99 per share, for the three months ended December 31, 2022. We have adjusted our net income in the three months ended December 31, 2023 for a $20.8 million change in fair value of investments, $6.3 million of stock based compensation and a $0.5 million non-cash fees amortization.

Adjusted net income of our container vessels segment amounted to $137.6 million for the three months ended December 31, 2023 compared to $141.7 million for the three months ended December 31, 2022. We adjusted net income of container vessels segment in the three months ended December 31, 2023 for $6.1 million of stock based compensation and a $0.5 million non-cash fees amortization.

Adjusted net loss of our drybulk vessels segment amounted to $1.6 million for the three months ended December 31, 2023 compared to none for the three months ended December 31, 2022, as we were not engaged in the drybulk vessels segment during that period. We adjusted net loss of our drybulk vessels segment in the three months ended December 31, 2023 for $0.2 million of stock based compensation.

Please refer to the Adjusted Net Income reconciliation tables, which appear later in this earnings release.

The $5.7 million decrease in adjusted net income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 is primarily attributable to a $17.0 million increase in total operating expenses, a $3.2 million decrease in operating revenues and a $0.1 million equity loss on investments, which were partially offset by a $7.5 million decrease in prior service cost of our defined benefit retirement plan, a $6.9 million decrease in net finance expenses and a $0.2 million increase in dividends received.

On a non-adjusted basis, our net income amounted to $149.9 million, or $7.70 earnings per diluted share, for the three months ended December 31, 2023 compared to net income of $152.7 million, or $7.54 earnings per diluted share, for the three months ended December 31, 2022. On a non-adjusted basis, the net income of our container vessels segment amounted to $131.0 million for the three months ended December 31, 2023. On a non-adjusted basis, the net loss of our drybulk vessels segment amounted to $1.9 million for the three months ended December 31, 2023.

Operating Revenues

Operating revenues decreased by 1.3%, or $3.2 million, to $249.3 million in the three months ended December 31, 2023 from $252.5 million in the three months ended December 31, 2022.

Operating revenues of our container vessels segment decreased by 5.4%, or $13.6 million, to $238.9 million in the three months ended December 31, 2023 from $252.5 million in the three months ended December 31, 2022.

Recently acquired drybulk vessels generated $10.4 million of operating revenues in the three months ended December 31, 2023 compared to no operating revenues in the three months ended December 31, 2022.

Operating revenues of container vessels for the three months ended December 31, 2023 reflect:

• a $3.6 million decrease in revenues in the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to vessel disposals;
• a $6.0 million decrease in revenues in the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to decreased amortization of assumed time charters;
• a $6.1 million decrease in revenues in the three months ended December 31, 2023 compared to the three months ended December 31, 2022 mainly as a result of lower charter rates; which were partially offset by
• a $2.1 million increase in revenue in the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to lower non-cash revenue recognition in accordance with US GAAP.

Vessel Operating Expenses

Vessel operating expenses increased by $0.1 million to $40.1 million in the three months ended December 31, 2023 from $40.0 million in the three months ended December 31, 2022, primarily as a result of the increase in the average number of vessels in our fleet, which was partially offset by the decrease in the average daily operating cost for vessels on time charters and voyage charters to $6,188 per vessel per day for the three months ended December 31, 2023 compared to $6,417 per vessel per day for the three months ended December 31, 2022. The average daily operating cost decreased mainly due to decreased insurance premiums. Management believes that our daily operating costs remain among the most competitive in the industry.

Depreciation & Amortization

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

Depreciation

Depreciation expense increased by 1.5%, or $0.5 million, to $33.5 million in the three months ended December 31, 2023 from $33.0 million in the three months ended December 31, 2022 mainly due to increased depreciation of 7 recently acquired Capesize bulk carriers, which was partially offset by a decreased depreciation due to the sale of 3 container vessels in November 2022 through January 2023.

Amortization of Deferred Dry-docking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $2.4 million to $5.6 million in the three months ended December 31, 2023 from $3.2 million in the three months ended December 31, 2022.

General and Administrative Expenses

General and administrative expenses increased by $7.5 million, to $22.4 million in the three months ended December 31, 2023 from $14.9 million in the three months ended December 31, 2022. The increase was mainly attributable to increased stock-based compensation.

Other Operating Expenses

Other Operating Expenses include Voyage Expenses.

Voyage Expenses

Voyage expenses increased by $7.6 million to $15.8 million in the three months ended December 31, 2023 from $8.2 million in the three months ended December 31, 2022 primarily as a result of the $7.1 million increase in voyage expenses of our recently acquired 7 Capesize bulk carriers, which generated revenue from voyage charter agreements compared to no such expenses in the three months ended December 31, 2022. Total voyage expenses comprised $8.9 million commissions and $6.9 million other voyage expenses in the three months ended December 31, 2023.

Voyage expenses of container vessels segment increased by $0.5 million to $8.7 million in the three months ended December 31, 2023 from $8.2 million in the three months ended December 31, 2022 mainly due to increased commissions. Total voyage expenses of container vessels comprised $8.2 million commissions and $0.5 million other voyage expenses in the three months ended December 31, 2023.

Voyage expenses of dry bulk vessels segment were $7.1 million in the three months ended December 31, 2023 compared to no voyage expenses in the three months ended December 31, 2022. Total voyage expenses of dry bulk vessels comprised $0.7 million commissions and $6.4 million other voyage expenses in the three months ended December 31, 2023.

Gain on sale of vessels

In November 2022, we completed the sale of the container vessels Catherine C and Leo C for net proceeds of $128.0 million resulting in a gain of $37.2 million compared to no gain on sale of vessels in the three months ended December 31, 2023.

Interest Expense and Interest Income

Interest expense decreased by 72.3%, or $9.4 million, to $3.6 million in the three months ended December 31, 2023 from $13.0 million in the three months ended December 31, 2022. The decrease in interest expense is a result of:

• a $5.3 million decrease in interest expense due to a decrease in our average indebtedness by $392.8 million between the two periods. Average indebtedness was $415.1 million in the three months ended December 31, 2023, compared to average indebtedness of $807.9 million in the three months ended December 31, 2022. This decrease was partially offset by an increase in our debt service cost by approximately 1.3% as a result of higher interest rates;
• a $2.4 million decrease in interest expense due to an increase in capitalized interest expense on our vessels under construction in the three months ended December 31, 2023; and
• a $1.7 million decrease in the amortization of deferred finance costs and debt discount.

As of December 31, 2023, our outstanding debt, gross of deferred finance costs, was $410.5 million, which included $262.8 million principal amount of our Senior Notes. These balances compare to debt of $438.0 million, which included $262.8 million principal amount of our Senior Notes and our leaseback obligation was $72.9 million, gross of deferred finance costs, as of December 31, 2022.

Interest income decreased by $0.4 million to $2.7 million in the three months ended December 31, 2023 compared to $3.1 million in the three months ended December 31, 2022 mainly as a result of a decrease in average amount of time deposits between the two periods.

Gain on investments

The gain on investments of $20.9 million in the three months ended December 31, 2023 consisted of the change in fair value of our shareholding interest in Eagle Bulk (“EGLE”) of $20.8 million and dividends recognized on these shares of $0.1 million. This compares to no gain in the three months ended December 31, 2022 due to the sale of all our remaining ZIM ordinary shares in September 2022.

Loss on debt extinguishment

The loss on debt extinguishment of $18.6 million in the three months ended December 31, 2022 related to our early extinguishment of debt compared to none in the three months ended December 31, 2023.

Equity loss on investments

Equity loss on investments amounting to $0.1 million in the three months December 31, 2023 relates to our share of initial expenses of a newly established company, Carbon Termination Technologies Corporation (“CTTC”), currently engaged in the research and development of decarbonization technologies for the shipping industry.

Other finance expenses

Other finance expenses increased by $0.4 million to $0.9 million in the three months ended December 31, 2023 compared to $0.5 million in the three months ended December 31, 2022 mainly due to commitment fees for our recently established revolving credit facility.

Loss on derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three months ended December 31, 2023 and December 31, 2022.

Other income/(expenses), net

Other expenses, net were $0.2 million in the three months ended December 31, 2023 compared to other expenses, net of $7.9 million in the three months ended December 31, 2022. The decrease in expenses was mainly due to reclassification of prior service cost of a defined benefit obligation of $7.8 million in the three months ended December 31, 2022.

Adjusted EBITDA

Adjusted EBITDA decreased by 2.2%, or $3.8 million, to $172.6 million in the three months ended December 31, 2023 from $176.4 million in the three months ended December 31, 2022. As outlined above, the decrease is mainly attributable to a $14.2 million increase in total operating expenses and a $0.1 million equity loss on investments, which were partially offset by a $7.5 million decrease in prior service cost of our defined benefit retirement plan, a $2.9 million increase in operating revenues and a $0.1 million increase in dividends received. Adjusted EBITDA for the three months ended December 31, 2023 is adjusted for a $20.8 million change in fair value of investments and stock-based compensation of $6.3 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Adjusted EBITDA of container vessels segment decreased by 1.9%, or $3.3 million, to $173.1 million in the three months ended December 31, 2023 from $176.4 million in the three months ended December 31, 2022.

Adjusted EBITDA of dry bulk vessels segment was ($0.5) million in the three months ended December 31, 2023. We did not have drybulk vessel operations in 2022.

Year ended December 31, 2023 compared to the year ended December 31, 2022

During the year ended December 31, 2023, Danaos had an average of 68.1 container vessels and 1.1 Capesize bulk carriers compared to 70.7 container vessels during the year ended December 31, 2022. Our container vessels utilization for the year ended December 31, 2023 was 97.7% compared to 97.3% for the year ended December 31, 2022. The increase in container vessels utilization was mainly due to the decreased days of scheduled dry-docking of our vessels.

Our adjusted net income amounted to $567.6 million, or $28.52 per share, for the year ended December 31, 2023 compared to $711.0 million, or $34.68 per share, for the year ended December 31, 2022. We have adjusted our net income in the year ended December 31, 2023 for a $17.

Contacts

Company Contact:

Evangelos Chatzis

Chief Financial Officer

Danaos Corporation

Athens, Greece

Tel.: +30 210 419 6480

E-Mail: [email protected]

Investor Relations and Financial Media

Rose & Company

New York

Tel. 212-359-2228

E-Mail: [email protected]

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