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Danaos Corporation Reports Fourth Quarter and Full Year Results for the Year Ended December 31, 2011

Wednesday, 22 February 2012 | 00:00
Danaos Corporation, a leading international owner of containerships, yesterday reported unaudited results for the quarter and full year ended December 31, 2011. Danaos' CEO Dr. John Coustas commented: This year was one of the most eventful ones in recent history. The year started with a strong container market but towards the end of the 2nd quarter we started to experience weakness in all segments and liner companies started to lose pricing power. This was due to the combined effect of a fight for market share from industry leaders, the slowdown in Europe Fareast trade due to the European debt crisis and the inflow of the substantial new capacity in this trade, the combined effect of which resulted in a new sharp deterioration of the box freight rates.
We are now entering 2012 with the liner companies in severe cash drain, which will hopefully be reversed by the rate hike announced for March. The charter market is also in breakeven mode with more than half a million TEU idle, which will delay any improvement in charter rates in the months ahead.
The only fortunate outcome is a complete standstill of new orders and even cancellation of some existing ones.
On the company front, in early 2011 we completed our restructuring, which gave us a solid capital structure to withstand market downturns.
We continued to execute our newbuilding program and during this last quarter we took delivery of two containerships of 8,530 TEU entering on 12 year time charters. The remaining newbuilding program is on track as we have already taken delivery of a 13,100 TEU containership in February 2012 and five more vessels of 60,930 TEU in aggregate will be delivered through the end of the 2nd quarter of 2012.
Our financial performance was strong as adjusted EBITDA was $88.8 million in the 4th quarter of 2011 compared to $65.0 million in the 4th quarter of 2010 and adjusted EBITDA for 2011 was $318.6 million compared to $243.8 for 2010.
Adjusted net income likewise was $16.1 million, or $0.15 per share and $61.2 million, or $0.56 per share for the quarter and the 12 months ending December 31st 2011, respectively.
Our charter coverage for 2012 currently stands at 94% in terms of operating revenues. We have at present three older vessels on cold lay up to minimize cash outflows. We are monitoring the development of the market in order to decide on their reactivation.
We are presently concentrating on the delivery of the remaining vessels to enhance cash flow generation and to commence the debt reduction process post 2012.
Three months ended December 31, 2011 compared to the three months ended December 31, 2010
During the quarter ended December 31, 2011, Danaos had an average of 57.9 containerships compared to 49.9 containerships for the same period in 2010. During the fourth quarter of 2011, we took delivery of two vessels, the CMA CGM Bianca, on October 26, 2011 and the CMA CGM Samson, on December 15, 2011. Our fleet utilization was reduced to 96.9% in the three months ended December 31, 2011 compared to 98.5% in the same period of 2010, mainly due to the 130 days for which two of our vessels were off-charter and laid-up by us in the fourth quarter of 2011.
Our adjusted net income was $16.1 million, or $0.15 per share, for the three months ended December 31, 2011 compared to $11.1 million, or $0.10 per share, for the three months ended December 31, 2010. We have adjusted our net income in the fourth quarter 2011 for a non-cash gain in fair value of derivatives of $7.1 million, realized losses on swaps of $8.7 million attributable to our over-hedging position (as described below), as well as a non-cash expense of $3.5 million for fees related to our comprehensive financing plan (related to non-cash, amortizing and accrued finance fees) and a non-cash stock based compensation expense of $2.0 million related to equity awards made to the Officers of the Company. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.
The increase of 45.0%, or $5.0 million, in the adjusted net income for the three months ended December 31, 2011 compared to the three months ended December 31, 2010, was mainly attributable to the increased Income from Operations, which was partially off-set by an increase in realized losses on our interest rate swap contracts (after the adjustment of the over-hedging portion), as well as increased interest expense (mainly due to the higher average indebtedness) during the three months ended December 31, 2011 compared to the same period in 2010.
On a non-adjusted basis our net income was $9.1 million, or $0.08 per share, for the fourth quarter of 2011, compared to net loss of $8.9 million, or $0.08 per share, for the fourth quarter of 2010.
As a result of our comprehensive financing plan, we are in an over-hedged position under our cash flow interest rate swaps, which is due to deferred progress payments to shipyards, cancellation of three newbuildings in 2010, the replacement of variable interest rate debt with fixed interest rate Vendor Financing and equity proceeds from our private placement in 2010, all of which reduced initially forecasted variable interest rate debt and resulted in notional cash flow interest rate swaps being above our variable interest rate debt eligible for hedging. The over-hedged position described above will be gradually reduced and ultimately eliminated during the second half of 2012, following the delivery of all of our remaining newbuildings and the full drawdown of our committed debt.
Twelve months ended December 31, 2011 compared to the twelve months ended December 31, 2010
During the twelve months ended December 31, 2011, Danaos had an average of 54.9 containerships compared to 45.7 containerships for 2010. Our fleet utilization declined to 97.6% in the twelve months ended December 31, 2011 compared to 98.3% in 2010, mainly due to the 144 days for which two of our vessels were off-charter and laid up in the third and fourth quarter of 2011.
Our adjusted net income was $61.2 million, or $0.56 per share, for the twelve months ended December 31, 2011 compared to $58.0 million, or $0.77 per share, for the twelve months ended December 31, 2010. We have adjusted our net income for the twelve months ended December 31, 2011 for a non-cash gain in fair value of derivatives of $9.0 million, a non-cash loss in fair value of warrants of $2.3 million, realized losses on swaps of $38.9 million attributable to our over-hedging position, an expense of $2.3 million for fees related to our comprehensive financing plan (related to legal and advisory fees), a non-cash expense of $11.3 million for amortizing and accrued finance fees and a non-cash stock-based compensation expense of $2.0 million related to equity awards made to the officers of the Company. Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.
The increase of 5.5%, or $3.2 million, in adjusted net income for the twelve months ended December 31, 2011 compared to the twelve months ended December 31, 2010 was mainly attributable to increased Income from Operations, which was partially offset by increased realized losses on our interest rate swap contracts (after the adjustment of the over-hedging portion) recorded in our Statement of Income during the twelve months ended December 31, 2011 compared to 2010, as well as increased interest expense due to higher average indebtedness in 2011 compared to 2010 (which was partially offset by a reduced margin over LIBOR applicable to borrowings following our Bank Agreement that resets the margin to 1.85% for all our credit facilities under our Bank Agreement).
On a non-adjusted basis, our net income was $13.4 million, or $0.12 per share, for the twelve months ended December 31, 2011, compared to net loss of $102.3 million, or $1.36 per share, for the twelve months ended December 31, 2010.
Operating Revenue
Operating revenue increased 30.1%, or $108.4 million, to $468.1 million in the twelve months ended December 31, 2011, from $359.7 million in the twelve months ended December 31, 2010.
Source: Danaos Corporation
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