Danaos Corporation Reports Second Quarter and Half Year Results for the Period Ended June 30, 2016

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Aug 01, 2016, 04:30 ET

ATHENS, Greece, Aug. 1, 2016 /PRNewswire/ -- Danaos Corporation ("Danaos") (NYSE: DAC), one of the world's largest independent owners of containerships, today reported unaudited results for the period ended June 30, 2016.

Highlights for the Second Quarter and Half Year Ended June 30, 2016:

Adjusted net income¹of $47.7 million, or $0.43 per share, for the three months ended June 30, 2016 compared to $38.0 million, or $0.35 per share, for the three months ended June 30, 2015, an increase of 25.5%. Adjusted net income¹ of $94.9 million, or $0.86 per share, for the six months ended June 30, 2016 compared to $68.6 million, or $0.62 per share, for the six months ended June 30, 2015, an increase of 38.3%.
Operating revenues of $137.0 million for the three months ended June 30, 2016 compared to $141.5 million for the three months ended June 30, 2015, a decrease of 3.2%. Operating revenues of $274.5 million for the six months ended June 30, 2016 compared to $280.1 million for the six months ended June 30, 2015, a decrease of 2.0%.
Adjusted EBITDA¹ of $99.9 million for the three months ended June 30, 2016 compared to $103.1 million for the three months ended June 30, 2015, a decrease of 3.1%. Adjusted EBITDA¹ of $199.2 million for the six months ended June 30, 2016 compared to $205.9 million for the six months ended June 30, 2015, a decrease of 3.3%.
Total contracted operating revenues were $2.8 billion² as of June 30, 2016, with charters extending through 2028 and remaining average contracted charter duration of 6.8 years, weighted by aggregate contracted charter hire.
Charter coverage of 94.8%² for the next 12 months in terms of operating revenues and 84.7% in terms of contracted operating days.

Three and Six Months Ended June 30, 2016
Financial Summary
(Expressed in thousands of United States dollars, except per share amounts)

	Three months ended	Three months ended	Six months ended	Six months ended
	June 30,	June 30,	June 30,	June 30,
	2016	2015	2016	2015

Operating revenues	$136,999	$141,469	$274,473	$280,074
Net income	$44,648	$38,072	$88,769	$68,414
Adjusted net income¹	$47,714	$37,984	$94,942	$68,553
Earnings per share	$0.41	$0.35	$0.81	$0.62
Adjusted earnings per share¹	$0.43	$0.35	$0.86	$0.62
Weighted average number of shares (in thousands)	109,800	109,785	109,800	109,785
Adjusted EBITDA¹	$99,858	$103,132	$199,209	$205,854





1Adjusted net income, adjusted earnings per share and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of net income to adjusted net income and net income to adjusted EBITDA. ²Assumes continued performance by our charterers on existing contracted terms and reflects HMM charter rate adjustments discussed under "Recent news".

Danaos' CEO Dr. John Coustas commented:

We are pleased to report yet another strong quarter with adjusted net income of $47.7 million, or $0.43 per share, an increase of $9.7 million, or 25.5%, from the adjusted net income of $38.0 million, or $0.35 per share, reported for the second quarter of 2015. This increase is mainly attributable to a reduction in net finance costs of $12.7 million resulting from the expiration of interest rate swaps and lower debt balances and is partially offset by a $3.2 million reduction of our EBITDA for reasons described in the discussion of our financial results. The continued de-leveraging of our balance sheet combined with the expiration of all the expensive legacy interest rate swaps, particularly given the current low interest rate environment, will result in continuously improving financing costs throughout 2016 and beyond.

The containership market continues to be extremely challenging but is now moving sideways, an indication that we have likely reached the bottom. The idle fleet now stands at approximately 6%, while global fleet utilization is hovering at around 75%. The charter market as well as asset values have fallen to historical lows as liner companies, in an effort to contain costs, are releasing surplus chartered-in capacity and seeking charter concessions and flexible hire periods from the vessel owners. We anticipate the market environment to remain unchanged for the remainder of the year, over which we will also start to experience the effect of the expanded Panama Canal which will shift demand from panamax to post-panamax vessels. We are cautiously optimistic that market fundamentals will gradually begin to improve by the spring of 2017. A combination of anticipated improving world GDP growth ad declining growth in the containership fleet will naturally begin to balance the market. Additionally, there is an expectation that consolidation in the liner industry – through alliances or otherwise – will create stability and encourage freight rate discipline which will hopefully put an end to the losses the liner companies have been reporting over the last quarters.

On July 15, 2016, in a transaction through which existing shareholders of Hyundai Merchant Marine ("HMM") were effectively wiped out, we entered into an agreement with HMM to reduce its charter rates by 20% for the next 3.5 years, in exchange for $39 million in debt notes maturing up to 2024 and 4.6 million common shares in HMM that are expected to be freely tradable on the Stock Market Division of the Korean Exchange. After the agreed 3.5 year period, the original contracted rates will be restored. We believe that this agreement has been structured in a manner that preserves the value of our charters, and we are pleased to have reached an outcome that will strengthen the financial profile of one of our important counterparts. Separately, Hanjin Shipping has publicly announced its intention to restructure its balance sheet and seek concessions from charter owners. Discussions are ongoing, and we cannot speculate on the timing or the nature of the resolution.

Danaos continues to have minimal near term exposure to the weak spot market, with 95% of charter cover in terms of operating revenues for the next 12 months. Additionally, our continued focus on cost containment has reduced our daily operating costs to $5,800 per day for the second quarter. 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.

Three months ended June 30, 2016 compared to the three months ended June 30, 2015

During the three months ended June 30, 2016, Danaos had an average of 55 containerships compared to 56 containerships for the three months ended June 30, 2015. Our fleet utilization decreased to 96.9% in the three months ended June 30, 2016 compared to 99.4% in the three months ended June 30, 2015.

Our adjusted net income amounted to $47.7 million, or $0.43 per share, for the three months ended June 30, 2016 compared to $38.0 million, or $0.35 per share, for the three months ended June 30, 2015. We have adjusted our net income in the three months ended June 30, 2016 mainly for unrealized gains on derivatives of $1.0 million, as well as a non-cash amortization charge of $4.1 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees). Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $9.7 million in adjusted net income for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 is attributable to a reduction of $12.7 million in net finance costs mainly due to lower debt balances and interest rate swap expirations, a $1.4 million decrease in total operating expenses and a decrease in depreciation and amortization of $0.3 million, which were partially offset by a decrease of $4.5 million in operating revenues and a $0.2 million loss on equity investments.

On a non-adjusted basis, our net income amounted to $44.6 million, or $0.41 per share, for the three months ended June 30, 2016 compared to net income of $38.1 million, or $0.35 per share, for the three months ended June 30, 2015.

Operating Revenues
Operating revenues decreased by 3.2%, or $4.5 million, to $137.0 million in the three months ended June 30, 2016 from $141.5 million in the three months ended June 30, 2015.

Operating revenues for the three months ended June 30, 2016 reflect:

$0.6 million decrease in revenues in the three months ended June 30, 2016 compared to the three months ended June 30, 2015 due to the sale of the Federal on January 8, 2016.
$2.6 million decrease in revenues in the three months ended June 30, 2016 compared to the three months ended June 30, 2015 due to the re-chartering of certain of our vessels at lower rates.
$1.3 million decrease in revenues due to lower fleet utilization in the three months ended June 30, 2016 compared to the three months ended June 30, 2015.

Vessel Operating Expenses
Vessel operating expenses decreased by 5.4%, or $1.6 million, to $28.0 million in the three months ended June 30, 2016 from $29.6 million in the three months ended June 30, 2015. The decrease is attributable to a 3.6% decrease in the average daily operating cost per vessel while the average number of vessels in our fleet during the three months ended June 30, 2016 decreased by 1.8% compared to the three months ended June 30, 2015.

The average daily operating cost per vessel decreased to $5,802 per day for the three months ended June 30, 2016 from $6,018 per day for the three months ended June 30, 2015. Management believes that our daily operating cost ranks as one of 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 decreased by 2.4%, or $0.8 million, to $32.1 million in the three months ended June 30, 2016 from $32.9 million in the three months ended June 30, 2015, mainly due to decreased depreciation expense for twelve vessels for which we recorded an impairment charge on December 31, 2015 and due to the decreased average number of vessels in our fleet in the three months ended June 30, 2016 following the sale of the Federal on January 8, 2016.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs increased by $0.5 million, to $1.4 million in the three months ended June 30, 2016 from $0.9 million in the three months ended June 30, 2015. The increase is mainly due to the increased payments for dry-docking and special survey costs related to certain vessels over the last six months.

General and Administrative Expenses
General and administrative expenses remained stable, amounting to $5.4 million both in the three months ended June 30, 2016, and in three months ended June 30, 2015.

Other Operating Expenses
Other Operating Expenses include Voyage Expenses.

Voyage Expenses
Voyage expenses remained stable, amounting to $3.2 million both in the three months ended June 30, 2016 and in the three months ended June 30, 2015.

Interest Expense and Interest Income
Interest expense decreased by 2.8%, or $0.6 million, to $20.6 million in the three months ended June 30, 2016 from $21.2 million in the three months ended June 30, 2015 including the amortization of deferred finance costs reclassified from other finance expenses to interest expense of $3.2 million and $3.5 million, respectively. The change in interest expense was mainly due to the decrease in our average debt by $234.0 million, to $2,686.8 million in the three months ended June 30, 2016, from $2,920.8 million in the three months ended June 30, 2015 and due to a $0.3 million decrease in the amortization of deferred finance costs.

The Company continues to rapidly deleverage its balance sheet. As of June 30, 2016, the debt outstanding gross of deferred finance costs was $2,676.9 million compared to $2,910.1 million as of June 30, 2015.

Interest income amounted to $0.9 million in the three months ended June 30, 2016 compared to $0.8 million in the three months ended June 30, 2015.

Other finance costs, net
Other finance costs, net decreased by $0.1 million, to $1.1 million in the three months ended June 30, 2016 from $1.2 million in the three months ended June 30, 2015, following the reclassification of the amortization of deferred finance costs from other finance expenses to interest expense of $3.2 million and $3.5 million, respectively.

Equity loss on investments
Equity loss on investments of $0.2 million in the three months ended June 30, 2016 relates to the investment in Gemini Shipholdings Corporation ("Gemini"), in which the Company has a 49% shareholding interest. This loss is attributed to operating losses of two out of the four vessels that have been acquired by Gemini, one of which had not yet entered into charter arrangements as of June 30, 2016.

Unrealized gain on derivatives
Unrealized gains on interest rate swaps amounted to $1.0 million in the three months ended June 30, 2016 compared to an unrealized gains of $4.5 million in the three months ended June 30, 2015. The unrealized gains were attributable to mark to market valuation of our swaps, as well as reclassification of unrealized losses from Accumulated Other Comprehensive Loss to our earnings due to the discontinuation of hedge accounting since July 1, 2012.

Realized loss on derivatives
Realized loss on interest rate swaps decreased by $12.4 million, to $2.1 million in the three months ended June 30, 2016 from $14.5 million in the three months ended June 30, 2015. This decrease is attributable to a $586.0 million decrease in the average notional amount of swaps during the three months ended June 30, 2016 compared to the three months ended June 30, 2015 as a result of swap expirations.

Adjusted EBITDA
Adjusted EBITDA decreased by 3.1%, or $3.2 million, to $99.9 million in the three months ended June 30, 2016 from $103.1 million in the three months ended June 30, 2015. As outlined earlier, this decrease is mainly attributed to a $4.5 million decrease in operating revenues and a $0.2 million loss on equity investments, partially offset by a $1.6 million decrease in total operating expenses. Adjusted EBITDA for the three months ended June 30, 2016 is adjusted mainly for unrealized gain on derivatives of $1.0 million and realized losses on derivatives of $1.1 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Six months ended June 30, 2016 compared to the six months ended June 30, 2015

During the six months ended June 30, 2016, Danaos had an average of 55 containerships compared to 56 containerships for the six months ended June 30, 2015. Our fleet utilization decreased to 95.7% in the six months ended June 30, 2016 compared to 98.9% in the six months ended June 30, 2015.

Our adjusted net income amounted to $94.9 million, or $0.86 per share, for the six months ended June 30, 2016 compared to $68.6 million, or $0.62 per share, for the six months ended June 30, 2015. We have adjusted our net income in the six months ended June 30, 2016 mainly for unrealized gains on derivatives of $2.1 million, as well as a non-cash amortization charge of $8.3 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees). Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.

The increase of $26.3 million in adjusted net income for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 is mainly attributable to a reduction of $32.1 million in net finance costs mainly due to lower debt balances and interest rate swap expirations, a decrease in depreciation and amortization of $0.8 million and an increase in other income of $0.4 million, which were partially offset by a decrease of $5.6 million in operating revenues, a $0.5 million increase in total operating expenses and a $0.9 million loss on equity investments.

On a non-adjusted basis, our net income amounted to $88.8 million, or $0.81 per share, for the six months ended June 30, 2016 compared to net income of $68.4 million, or $0.62 per share, for the six months ended June 30, 2015.

Operating Revenues
Operating revenues decreased by 2.0%, or $5.6 million, to $274.5 million in the six months ended June 30, 2016 from $280.1 million in the six months ended June 30, 2015.

Operating revenues for the six months ended June 30, 2016 reflect:

$1.2 million decrease in revenues in the six months ended June 30, 2016 compared to the six months ended June 30, 2015 due to the sale of the Federal on January 8, 2016.
$2.6 million decrease in revenues in the six months ended June 30, 2016 compared to the six months ended June 30, 2015 due to the re-chartering of certain of our vessels at lower rates.
$1.8 million decrease in revenues due to lower fleet utilization in the six months ended June 30, 2016 compared to the six months ended June 30, 2015.

Vessel Operating Expenses
Vessel operating expenses remained stable, amounting to $56.9 million both in the six months ended June 30, 2016 and in the six months ended June 30, 2015. The decrease in the average number of vessels in our fleet by 1.8%, was offset by an 1.2% increase in the average daily operating cost per vessel during the six months ended June 30, 2016 compared to the six months ended June 30, 2015.

The average daily operating cost per vessel increased to $5,893 per day for the six months ended June 30, 2016 from $5,821 per day for the six months ended June 30, 2015. Management believes that our daily operating cost ranks as one of 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 decreased by 1.8%, or $1.2 million, to $64.1 million in the six months ended June 30, 2016 from $65.3 million in the six months ended June 30, 2015, mainly due to decreased depreciation expense for twelve vessels for which we recorded an impairment charge on December 31, 2015 and due to the decreased average number of vessels in our fleet in the six months ended June 30, 2016 following the sale of the Federal on January 8, 2016.

Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs increased by $0.3 million, to $2.4 million in the six months ended June 30, 2016 from $2.1 million in the six months ended June 30, 2015. The increase is mainly due to the increased payments for dry-docking and special survey costs related to certain vessels over the last six months.

General and Administrative Expenses
General and administrative expenses remained stable, amounting to $10.7 million both in the six months ended June 30, 2016 and in six months ended June 30, 2015.

Other Operating Expenses
Other Operating Expenses include Voyage Expenses.

Voyage Expenses
Voyage expenses increased by $0.5 million, to $6.7 million in the six months ended June 30, 2016 from $6.2 million in the six months ended June 30, 2015. The increase is mainly due to increased bunkering expenses.

Interest Expense and Interest Income
Interest expense decreased by 5.3%, or $2.3 million, to $40.8 million in the six months ended June 30, 2016 from $43.1 million in the six months ended June 30, 2015 including the amortization of deferred finance costs reclassified from other finance expenses to interest expense of $6.5 million and $7.2 million, respectively. The change in interest expense was mainly due to the decrease in our average debt by $239.3 million, to $2,712.6 million in the six months ended June 30, 2016, from $2,951.9 million in the six months ended June 30, 2015 and due to a $0.7 million decrease in the amortization of deferred finance costs.

Interest income amounted to $1.8 million in the six months ended June 30, 2016 compared to $1.7 million in the six months ended June 30, 2015.

Other finance costs, net
Other finance costs, net decreased by $0.1 million, to $2.2 million in the six months ended June 30, 2016 from $2.3 million in the six months ended June 30, 2015, following the reclassification of the amortization of deferred finance costs from other finance expenses to interest expense of $6.5 million and $7.2 million, respectively.

Equity loss on investments
Equity loss on investments of $0.9 million in the six months ended June 30, 2016 relates to the investment in Gemini Shipholdings Corporation ("Gemini"), in which the Company has a 49% shareholding interest. This loss is attributed to operating losses of two out of the four vessels that have been acquired by Gemini, one of which had not yet entered into charter arrangements as of June 30, 2016.

Unrealized gain on derivatives
Unrealized gains on interest rate swaps amounted to $2.1 million in the six months ended June 30, 2016 compared to an unrealized gains of $8.9 million in the six months ended June 30, 2015. The unrealized gains were attributable to mark to market valuation of our swaps, as well as reclassification of unrealized losses from Accumulated Other Comprehensive Loss to our earnings due to the discontinuation of hedge accounting since July 1, 2012.

Realized loss on derivatives
Realized loss on interest rate swaps decreased by $30.4 million, to $5.3 million in the six months ended June 30, 2016 from $35.7 million in the six months ended June 30, 2015. This decrease is attributable to a $828.8 million decrease in the average notional amount of swaps during the six months ended June 30, 2016 compared to the six months ended June 30, 2015 as a result of swap expirations.

Adjusted EBITDA
Adjusted EBITDA decreased by 3.3%, or $6.7 million, to $199.2 million in the six months ended June 30, 2016 from $205.9 million in the six months ended June 30, 2015. As outlined earlier, this decrease is mainly attributed to a $5.6 million decrease in operating revenues, a $0.5 million increase in total operating expenses and a $0.9 million loss on equity investments. Adjusted EBITDA for the six months ended June 30, 2016 is adjusted mainly for unrealized gain on derivatives of $2.1 million and realized losses on derivatives of $3.3 million. Tables reconciling Adjusted EBITDA to Net Income can be found at the end of this earnings release.

Recent news

HMM
On July 15, 2016, we entered into a charter restructuring agreement with HMM as part of the agreements it reached with its creditors and owners of its chartered-in fleet in connection with the restructuring of its obligations. The charter restructuring agreement provides for a 20% reduction, for the period until December 31, 2019 (or earlier charter expiration in the case of eight vessels), in the charter hire rates payable for thirteen of our vessels currently employed with HMM. In exchange, under the charter restructuring agreement we received (i) $6.2 million principal amount of senior, unsecured, non-amortizing loan notes, which accrue interest at 3% per annum payable on maturity in December 2022, (ii) $32.8 million principal amount of senior, unsecured loan notes, amortizing subject to available cash flows, which accrue interest at 3% per annum payable on maturity in July 2024 and (iii) 4,637,558 HMM shares issued on July 23, 2016, which will be freely tradable on the Stock Market Division of the Korean Exchange from August 5, 2016 onwards.

AGM Results
On July 29, 2016, at our annual meeting of stockholders, Mr. William Repko and Mr. Miklόs Konkoly-Thege were re-elected as Class III directors, each for a three-year term expiring at the annual meeting of our stockholders in 2019. Our stockholders also ratified the appointment of PricewaterhouseCoopers S.A. as our independent auditors.

Conference Call and Webcast
On Tuesday, August 2, 2016 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 August 9, 2016 by dialing 1 877 344 7529 (US Toll Free Dial In) or +44 (0) 2036 088 021 (Standard International Dial In) and using 10090137# as the access code.

Audio Webcast
There will also be a live and then archived webcast of the conference call 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 Corporation
Danaos Corporation is one of the largest independent owners of modern, large-size containerships. Our current fleet of 59 containerships aggregating 353,586 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 predominantly chartered to many of the world's largest liner companies on fixed-rate, long-term 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 safeharbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. 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 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 drydocking, 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 110 unscheduled off-hire days in the three months ended June 30, 2016. The following table summarizes vessel utilization and the impact of the off-hire days on the Company's revenue.

Vessel Utilization (No. of Days)	First Quarter	Second Quarter
Vessel Utilization (No. of Days)	2016	2016	Total
Ownership Days	5,013	5,005	10,018
Less Off-hire Days:
Scheduled Off-hire Days	(31)	(45)	(76)
Other Off-hire Days	(242)	(110)	(352)
Operating Days	4,740	4,850	9,590
Vessel Utilization	94.6%	96.9%	95.7%

Operating Revenues (in '000s of US Dollars)	$137,474	$136,999	$274,473
Average Gross Daily Charter Rate	$29,003	$28,248	$28,621


Vessel Utilization (No. of Days)	First Quarter	Second Quarter
Vessel Utilization (No. of Days)	2015	2015	Total
Ownership Days	5,040	5,096	10,136
Less Off-hire Days:
Scheduled Off-hire Days	(16)	(16)	(32)
Other Off-hire Days	(64)	(17)	(81)
Operating Days	4,960	5,063	10,023
Vessel Utilization	98.4%	99.4%	98.9%

Operating Revenues (in '000s of US Dollars)	$138,605	$141,469	$280,074
Average Gross Daily Charter Rate	$27,945	$27,942	$27,943

Fleet List

The following table describes in detail our fleet deployment profile as of August 1, 2016:

Vessel Name	Vessel Size (TEU)	Year Built	Expiration of Charter⁽¹⁾
Containerships

Hyundai Ambition	13,100	2012	June 2024
Hyundai Speed	13,100	2012	June 2024
Hyundai Smart	13,100	2012	May 2024
Hyundai Tenacity	13,100	2012	March 2024
Hyundai Together	13,100	2012	February 2024
Hanjin Italy	10,100	2011	April 2023
Hanjin Germany	10,100	2011	March 2023
Hanjin Greece	10,100	2011	May 2023
CSCL Le Havre	9,580	2006	September 2018
CSCL Pusan	9,580	2006	July 2018
CMA CGM Melisande	8,530	2012	November 2023
CMA CGM Attila	8,530	2011	April 2023
CMA CGM Tancredi	8,530	2011	May 2023
CMA CGM Bianca	8,530	2011	July 2023
CMA CGM Samson	8,530	2011	September 2023
CSCL America	8,468	2004	September 2016
CSCL Europe	8,468	2004	August 2016
CMA CGM Moliere ⁽²⁾	6,500	2009	August 2021
CMA CGM Musset ⁽²⁾	6,500	2010	February 2022
CMA CGM Nerval ⁽²⁾	6,500	2010	April 2022
CMA CGM Rabelais ⁽²⁾	6,500	2010	June 2022
CMA CGM Racine ⁽²⁾	6,500	2010	July 2022
YM Mandate	6,500	2010	January 2028
YM Maturity	6,500	2010	April 2028
Performance	6,402	2002	January 2017
Priority	6,402	2002	October 2016
SNL Colombo	4,300	2004	March 2019
YM Singapore	4,300	2004	October 2019
YM Seattle	4,253	2007	July 2019
YM Vancouver	4,253	2007	September 2019
Derby D	4,253	2004	September 2016
Deva	4,253	2004	September 2016
ZIM Rio Grande	4,253	2008	May 2020
ZIM Sao Paolo	4,253	2008	August 2020
OOCL Istanbul	4,253	2008	September 2020
ZIM Monaco	4,253	2009	November 2020
OOCL Novorossiysk	4,253	2009	February 2021
ZIM Luanda	4,253	2009	May 2021
Dimitris C	3,430	2001	September 2016
Hanjin Constantza	3,400	2011	February 2021
Hanjin Algeciras	3,400	2011	November 2020
Hanjin Buenos Aires	3,400	2010	March 2020
Hanjin Santos	3,400	2010	May 2020
Hanjin Versailles	3,400	2010	August 2020
MSC Zebra	2,602	2001	October 2017
Amalia C	2,452	1998	October 2016
Danae C	2,524	2001	August 2016
Hyundai Advance	2,200	1997	June 2017
Hyundai Future	2,200	1997	August 2017
Hyundai Sprinter	2,200	1997	August 2017
Hyundai Stride	2,200	1997	July 2017
Hyundai Progress	2,200	1998	December 2017
Hyundai Bridge	2,200	1998	January 2018
Hyundai Highway	2,200	1998	January 2018
Hyundai Vladivostok	2,200	1997	May 2017

NYK Lodestar⁽³⁾	6,422	2001	September 2017
NYK Leo⁽³⁾	6,422	2002	February 2019
Suez Canal⁽³⁾	5,610	2002	October 2016
Genoa⁽³⁾	5,544	2002	—


(1) Earliest date charters could expire. Some charters include options to extend their terms.
(2) The charters with respect to the CMA CGM Moliere, the CMA CGM Musset, the CMA CGM Nerval, the CMA CGM Rabelais and the CMA CGM Racine include an option for the charterer, CMA-CGM, to purchase the vessels eight years after the commencement of the respective charters, which will fall in September 2017, March 2018, May 2018, July 2018 and August 2018, respectively, each for $78.0 million.
(3) Vessels acquired by Gemini Shipholdings Corporation, in which Danaos holds a 49% equity interest.

DANAOS CORPORATION
Condensed Statements of Income - Unaudited
(Expressed in thousands of United States dollars, except per share amounts)

		Three months ended	Three months ended	Six months ended	Six months ended
		June 30,	June 30,	June 30,	June 30,
		2016	2015	2016	2015

OPERATING REVENUES		$136,999	$141,469	$274,473	$280,074

OPERATING EXPENSES
	Vessel operating expenses	(27,983)	(29,570)	(56,895)	(56,893)
	Depreciation & amortization	(33,470)	(33,735)	(66,552)	(67,397)
	General & administrative	(5,446)	(5,381)	(10,662)	(10,651)
	Loss on sale of vessels	-	-	(36)	-
	Other operating expenses	(3,240)	(3,161)	(6,690)	(6,218)
Income From Operations		66,860	69,622	133,638	138,915

OTHER INCOME/(EXPENSES)
	Interest income	890	850	1,840	1,690
	Interest expense	(20,616)	(21,230)	(40,774)	(43,116)
	Other finance expenses	(1,111)	(1,162)	(2,238)	(2,335)
	Equity loss on investments	(211)	-	(934)	-
	Other income/(expenses), net	(23)	28	400	35
	Realized loss on derivatives	(2,161)	(14,545)	(5,301)	(35,678)
	Unrealized gain on derivatives	1,020	4,509	2,138	8,903
Total Other Expenses, net		(22,212)	(31,550)	(44,869)	(70,501)

Net Income		$44,648	$38,072	$88,769	$68,414

EARNINGS PER SHARE
Basic & diluted earnings per share		$0.41	$0.35	$0.81	$0.62
Basic & diluted weighted average number of common shares (in thousands of shares)		109,800	109,785	109,800	109,785

Non-GAAP Measures*
Reconciliation of Net Income to Adjusted Net Income – Unaudited

		Three months ended	Three months ended	Six months ended	Six months ended
		June 30,	June 30,	June 30,	June 30,
		2016	2015	2016	2015
	Net income	$44,648	$38,072	$88,769	$68,414
	Unrealized gain on derivatives	(1,020)	(4,509)	(2,138)	(8,903)
	Amortization of financing fees & finance fees accrued	4,086	4,421	8,275	9,042
	Loss on sale of vessels	-	-	36	-
	Adjusted Net Income	$47,714	$37,984	$94,942	$68,553
	Adjusted Earnings Per Share	$0.43	$0.35	$0.86	$0.62
	Weighted average number of shares (in thousands of shares)	109,800	109,785	109,800	109,785
* The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. See the Table above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2016 and 2015. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

DANAOS CORPORATION
Condensed Balance Sheets - Unaudited
(Expressed in thousands of United States dollars)

		As of	As of
		June 30,	December 31,
		2016	2015
ASSETS
CURRENT ASSETS
	Cash and cash equivalents	$101,060	$72,253
	Restricted cash	5,880	2,818
	Accounts receivable, net	21,359	10,652
	Fair value of financial instruments	24	138
	Other current assets	47,323	41,709
		175,646	127,570
NON-CURRENT ASSETS
	Fixed assets, net	3,384,191	3,446,323
	Deferred charges, net	8,715	4,751
	Investments in affiliates	15,500	11,289
	Other non-current assets	74,242	72,188
		3,482,648	3,534,551
TOTAL ASSETS		$3,658,294	$3,662,121

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Long-term debt, current portion	$272,408	$269,979
	Accounts payable, accrued liabilities & other current liabilities	38,978	37,628
	Fair value of financial instruments	2,395	4,538
		313,781	312,145
LONG-TERM LIABILITIES
	Long-term debt, net	2,376,004	2,470,417
	Other long-term liabilities	35,639	37,645
		2,411,643	2,508,062

STOCKHOLDERS' EQUITY
	Common stock	1,098	1,098
	Additional paid-in capital	546,822	546,822
	Accumulated other comprehensive loss	(100,894)	(103,081)
	Retained earnings	485,844	397,075
		932,870	841,914
Total liabilities and stockholders' equity		$3,658,294	$3,662,121

DANAOS CORPORATION
Condensed Statements of Cash Flows - Unaudited
(Expressed in thousands of United States dollars)

		Three months ended	Three months ended	Six months ended	Six months ended
		June 30,	June 30,	June 30,	June 30,
		2016	2015	2016	2015
Operating Activities:
	Net income	$44,648	$38,072	$88,769	$68,414
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation	32,075	32,853	64,122	65,341
	Amortization of deferred drydocking & special survey costs, finance cost and other finance fees accrued	5,481	5,303	10,705	11,098
	Payments for drydocking/special survey	(3,276)	(828)	(6,394)	(1,217)
	Amortization of deferred realized losses on cash flow interest rate swaps	1,001	1,001	2,003	1,992
	Equity loss on investments	211	-	934	-
	Unrealized gain on derivatives	(1,020)	(4,509)	(2,138)	(8,903)
	Loss on sale of vessels	-	-	36	-
	Accounts receivable	(6,081)	1,396	(10,707)	2,721
	Other assets, current and non-current	94	(4,510)	(14,314)	(6,896)
	Accounts payable and accrued liabilities	(1,388)	(4,169)	1,012	(6,739)
	Other liabilities, current and non-current	643	351	(236)	(1,191)
Net Cash provided by Operating Activities		72,388	64,960	133,792	124,620

Investing Activities:
	Vessel additions and vessel acquisitions	(1,613)	(377)	(1,990)	(538)
	Investments in affiliates	(3,675)	-	(5,145)	-
	Net proceeds from sale of vessels	-	-	5,178	-
Net Cash used in Investing Activities		(5,288)	(377)	(1,957)	(538)

Financing Activities:
	Debt repayment	(50,808)	(53,383)	(99,966)	(106,985)
	Deferred finance costs	-	-	-	(692)
	Increase in restricted cash	(5,873)	(2,815)	(3,062)	-
Net Cash used in Financing Activities		(56,681)	(56,198)	(103,028)	(107,677)
Net Increase in cash and cash equivalents		10,419	8,385	28,807	16,405
Cash and cash equivalents, beginning of period		90,641	65,750	72,253	57,730
Cash and cash equivalents, end of period		$101,060	$74,135	$101,060	$74,135

DANAOS CORPORATION
Reconciliation of Net Income to Adjusted EBITDA
(Expressed in thousands of United States dollars)

		Three months ended	Three months ended	Six months ended	Six months ended
		June 30,	June 30,	June 30,	June 30,
		2016	2015	2016	2015
	Net income	$44,648	$38,072	$88,769	$68,414
	Depreciation	32,075	32,853	64,122	65,341
	Amortization of deferred drydocking & special survey costs	1,395	882	2,430	2,056
	Amortization of deferred finance costs and write-offs and other finance fees accrued	4,086	4,421	8,275	9,042
	Amortization of deferred realized losses on interest rate swaps	1,001	1,001	2,003	1,992
	Interest income	(890)	(850)	(1,840)	(1,690)
	Interest expense	17,403	17,718	34,254	35,916
	Loss on sale of vessels	-	-	36	-
	Realized loss on derivatives	1,160	13,544	3,298	33,686
	Unrealized gain on derivatives	(1,020)	(4,509)	(2,138)	(8,903)
	Adjusted EBITDA⁽¹⁾	$99,858	$103,132	$199,209	$205,854


1) Adjusted EBITDA represents net income before interest income and expense, depreciation, amortization of deferred drydocking & special survey costs and deferred finance costs, amortization of deferred realized losses on interest rate swaps, unrealized gain on derivatives, realized loss on derivatives and gain/(loss) on sale of vessels. However, Adjusted EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Note: Items to consider for comparability include gains and charges. Gains positively impacting net income are reflected as deductions to net income. Charges negatively impacting net income are reflected as increases to net income.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures used in managing the business may provide users of these financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. See the Tables above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2016 and 2015. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

SOURCE Danaos Corporation