World-Class Shipping, Leading-Edge Expertise · 2020. 11. 5. · World-Class Shipping, Leading-Edge...
Transcript of World-Class Shipping, Leading-Edge Expertise · 2020. 11. 5. · World-Class Shipping, Leading-Edge...
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World-Class Shipping, Leading-Edge Expertise
Corporate Presentation | November 2020
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Danaos by the NumbersDisclaimer
This presentation contains certain statements that may be deemed to be “forward-looking statements” within the meaning of the Securities Exchange Act of
1934. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects, projects, believes or
anticipates will or may occur in the future, including, without limitation, the outlook for fleet utilization and shipping rates, general industry conditions including
bidding activity, future operating results of the Company’s vessels, future operating revenues and cash flows, capital expenditures, vessel market values,
asset sales, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the
Company believes that its expectations stated in this presentation are based on reasonable assumptions, actual results may differ from those projected in the
forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in the forward-looking statements
include the strength of world economies, general market conditions, including charter rates and vessel values, counterparty performance under existing
charters, changes in operating expenses, ability to obtain financing and comply with covenants in financing arrangements, including the terms of its new
credit facilities and agreements entered into in connection with the refinancing, the affects of the refinancing transactions and the Company’s ability to
achieve the benefits of the refinancing, actions taken by regulatory authorities, potential liability from litigation and international political conditions. Danaos
Corporation is listed in the New York Stock Exchange under the ticker symbol “DAC”. Before you invest, you should also read the documents Danaos
Corporation has filed with the SEC for more complete information about the company. You may get these documents for free by visiting EDGAR on the SEC
Website at www.sec.gov or via www.danaos.com
Readers of this presentation should review our Annual Report on Form 20-F filed with the SEC on February 27, 2020, including the section entitled “Key
Information – Risk Factors”, and our other filings with the SEC for a discussion of factors and circumstances that could affect our future financial results and
our ability to realize the expectations stated herein.
EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS may be included in our presentations. EBITDA, Adjusted EBITDA, Adjusted Net Income
and Adjusted EPS are presented because they are used by management and certain investors to measure a company’s financial performance and underlying
trends as they exclude certain items impacting overall comparability. EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are “non-GAAP
financial measures” and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement
data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. Reconciliations to
GAAP measures are included in the Appendix to this presentation.
Certain shipping industry information, statistics and charts contained herein have been derived from industry sources. You are hereby advised that such
information, statistics and charts have not been prepared specifically for inclusion in this presentation and the Company has not undertaken any independent
investigation to confirm the accuracy or completeness of such information.
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kBusiness Overview
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• One of the largest publicly-listed owners of modern containerships with long track record in the shipping market
• One of the most efficient operators in the industry with highly competitive breakeven levels
• Management is the largest shareholder (~46%)(1) and is aligned with public shareholders
✓
A LEADING CONTAINERSHIP OWNER AND OPERATOR
• Adjusted Net Debt / EBITDA ratio of 4.5x and consistent reduction in
leverage through amortization schedule
• Going forward financial covenants in line with conservative operating
expectations
• Repurchased 17.5% of outstanding shares in October 2020
✓
HEALTHY CAPITAL STRUCTURE
LIMIT RE-CHARTERING RISK AND POTENTIAL FOR UPSIDE
✓
• Charter backlog of $1.1 billion through 2028 with world’s leading liner
companies provides good cash flow visibility
• Large, modern 13,100 TEU vessels are all on long-term charters through
2024
• Strong contract coverage of 87% for the next 12 months limits downside
risk and provides potential for upside
(1) Inclusive of extended Coustas family interest. .
MARKET UPDATE
• The charter market has improved significantly
since the initial shock at the start of the COVID-19
pandemic, and volumes have recovered faster
than expected
• Consistent capacity management by liner
companies addressed the drop in volumes brought
on by the pandemic, alleviating pressure on our
customers’ cash flows and stabilizing freight rates
• Volumes has seen consistent improvements,
particularly in Transpacific eastbound, intra-Asia
and North-South trade lanes
• The portion of the global containership fleet that is
sitting idle (based on TEU) has declined from a
high of 11.4% at the end of May to 3.3% as of
October 23 (5-year average is 4.0%)
• SCFI comprehensive index reached its highest
level since 2012 in mid-October and is up more
than 80% from April lows
• Historically-low orderbook for containerships,
provides potential for a swift recovery when the
situation normalizes
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Danaos by the Numbers
$1.1bnContracted cash flow through 2028
4.5xNet debt to LTM Adjusted EBITDA
$313mnLTM Adjusted EBITDA 3Q 2020
46%Ownership through founder / management
$1.6bnEnterprise value
3.0xReduction in leverage over the last three years
4
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1,026
504 404
244 207 180
470 457 456 386 268 253 247 223 211 209 194 181
Sea
span
Cos
tam
are
Dan
aos
Glo
bal S
hip
Leas
e
Nav
ios
MP
C G
roup
Zod
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Mar
itim
e
Sho
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isen
Offe
n, C
laus
Pet
er
BoC
om L
easi
ng
Eas
tern
Pac
ific
Shp
g
Fre
drik
sen
Gro
up
Pet
er D
ohle
/H
amm
onia
Sch
ulte
Gro
up
Nis
sen
Kai
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Zea
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Nor
ddeu
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.H.
Sch
uldt
Min
shen
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inan
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Leas
ing
40+ Year Legacy of Leadership in Container Shipping
Source: Clarksons Research.
(1) Includes Gemini Shipholdings Vessels (TEU), a joint venture in which Danaos owns a 49% stake: Suez Canal (5,610), Genoa (5,544), Catherine C (6,422), Leo C (6,422) and Belita (8,533) and 2 new vessel acquisitions (2 x 9,012), expected
to be delivered to us between December 2020 and January 2021.
(2) Global Ship Lease includes Pro Forma TEU for Poseidon / Technomar Acquisition which closed November 15, 2018.
Publicly Traded Pure-Play Operators Financial / Independent Owners
Market Share1, 2 Among Top Public Containership Owners GloballyBy TEU, thousands
5
1972
Founded by Dimitris
Coustas
1987
Dr. John Coustas steps into
Chief Executive role
2005
Incorporation in Marshall
Islands
2006
NYSE IPO
Raised $200mm
2018 to present
Refinancing, share
offering and growth
2010
$200mm equity
raise
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38.5%
7.8%27.1%
23.2%
1.0%1.8% 0.7%
Diverse, High-Quality Fleet
2x5,500 TEU
2x 6,500 TEU
1x 8,500 TEU
9x 6,400 – 6,500 TEU
Average Age: 12.2 years
Remaining Charter Term: 3.0 years
10x4,300 – 5,500 TEU
Average Age: 13.0 years
Remaining Charter Term: 0.3 years
8x3,500 TEU
Average Age: 12.7 years
Remaining Charter Term: 0.5 years 11x 2,200 – 2,600 TEU
Average Age: 22.2 years
Remaining Charter Term: 0.2 years
Note: Figures as of September 30th 2020. Please refer to appendix for additional detail.
(1) Excludes Gemini Shipholdings Vessels (TEU), a joint venture in which Danaos owns a 49% stake: Suez Canal (5,610), Genoa (5,544), Catherine C (6,422), Leo C (6,422) and Belita (8,533).
(2) Includes 2 new vessel acquisitions (2 x 9,012), expected to be delivered to us between December 2020 and January 2021.
Fleet Overview(1)
5x 13,100 TEU
Average Age: 8.4 years
Remaining Charter Term: 3.6 years
12x(2)8,500 – 9,000 TEU
Average Age: 11.7 years
Remaining Charter Term: 2.6 years
5x9,600 - 10,100 TEU
Average Age: 11.2 years
Remaining Charter Term: 1.8 years
Gemini Vessels
Contracted
Revenue
Contribution(1)
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Danaos by the NumbersBalanced Counterparty Concentration
Note: Distributed by TEU.
30%
16%
16%
8%
7%
5%
18%
(20 years)
(25 years)
(37 years)
(15 years)
(34 years)
(40+ years)
Overview of Customer Base
• Long history chartering to most major global liner companies
• Engaged with container alliances on deployments across major and minor global
routes
• Have collaborated with customers in ordering 46 newbuildings in excess of 300,000 TEU over
our history at a cost in excess of $4 billion
Close Alignment Working with Customers
• Consistently developing operating expertise to obtain and retain customers
• Delivering on-time new ships to customers’ specifications
• Prioritizing reputation, customer service and safety
• Maintain a strategic focus on regular engagement with customers, particularly in
regards to new customer needs and
technological advancements
Length of Customer Relationships Noted in Italics
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ONE
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Strong Charter Coverage through 2024
Note: Charter Revenue assumes Gross Daily Charter Rate. Contracted Revenue and Charter Expiration Schedule exclude Gemini Shipholdings.
(1) Assumes non-contracted vessels employed at current contracted charter rates.
Shorter charter durations limited to vessels in more liquid chartering markets
Contracted Revenue by Year mm $ by Asset Class
Revenue-Weighted Charter Coverage(1)
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99% 81%
59% 41%
5%
2020 2021 2022 2023 2024+
$455 $393
$282
$189
$119
2020 2021 2022 2023 2024+
13,000 9,500-10,000 8,500 6,400-6,500 4,300-5,500 3,500 2,200-2,600
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$313
$209
$66
($62) ($6)
($12) ($9) ($15)
($143)
LTM Q3 2020EBITDA
Net Cash Interest JV Earnings Revenue Recognition(Non-Cash)
Other Dry Docking Operating Cash Flow Debt Amortization LTM Q3 2020 FCF
Good Free Cash Flow Visibility
Source: Company filings as of 09/30/2020.
Note: Recurring Free Cash Flow calculated excluding non-recurring items such as Vessels Addition Capital Expenditures and Financing Costs.
(1) Non-GAAP measure. See appendix for definitions and reconciliations to the nearest GAAP measure.
Illustrative Walk to LTM Q3 2020 Free Cash Flow(1)
LTM Q3 2020 FCF
excludes CapEx
and one-time /
extraordinary
items
(1)
(1)
Drivers of LTM Q3 2020 FCF
✓ Lower interest rates
✓ Contractual charter escalations
✓ Vessel acquisitions
Uses of FCF
✓ Further debt amortization
✓ Return of capital to shareholders
✓ Vessel acquisitions
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Focused on Maintaining Conservative Capital Structure
Net Adjusted Debt and Adjusted EBITDA Multiple(1)Capitalization
3,165 3,042
2,892
2,703
2,454
2,274
1,615
1,443 1,415
7.3x 7.0x
7.2x
6.5x
7.0x 7.3x
5.1x 4.6x
4.5x
0
500
1,000
1,500
2,000
2,500
3,000
$3,500
2012 2013 2014 2015 2016 2017 2018 2019 LTM 3Q'20
(1) Based on total adjusted debt, net of deferred finance costs and fair value adjustments, as of September 30th 2020.
(2) Non-GAAP measure. See appendix for definitions and reconciliations to the nearest GAAP measure.
Net Adjusted Debt
9/30/2020$ in millions
Cash $106
Bank Debt: 1,369
Long-term Leaseback Obligation 129
Exit Fee 23
Deferred Finance Costs (31)
Debt Fair Value Adjustment (16)
Total Debt $1,475
adjusted for
Deferred Finance Costs 31
Debt Fair Value Adjustment 16
Total Debt $1,521
Net Debt 1,415
Book Value of Equity 1000
Total Capitalization $2,521
Credit Statistics:
LTM Adj. EBITDA(2) $313
Debt / LTM Adj. EBITDA(2) 4.9x
Net Debt / LTM Adj. EBITDA(2) 4.5x
Net Debt / Book Equity(2) 1.4x
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Experienced Senior Management
Dr. John Coustas, President & CEO
Dimitris Vastarouchas, Technical Director & Deputy COO
• CEO since 1987
• Over 30 years of experience in the
shipping industry
• Vice Chairman of the board of directors of
The Swedish Club; member of the board
of directors of the Union of Greek
Shipowners and the DNV Council
Evangelos Chatzis, Chief Financial Officer
• Joined Danaos in 2005
• Over 25 years of experience in corporate
finance and the shipping industry
• Formerly CFO of Globe Group of
Companies
• Danaos Technical Manager since 2005
• Has over 20 years of experience in the
shipping industry
• Formerly New Buildings Projects and Site
Manager supervising the construction of
4,250, 5,500 and 8,500 TEU containerships
Iraklis Prokopakis, Senior Vice President, Treasurer & COO
• Joined Danaos in 1998
• Over 40 years of experience in the shipping
industry
• Member of the Board of the Hellenic Chamber
of Shipping and the Owners’ Committee of the
Korean Register of Shipping
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Governance
Independent Board
Clear reporting of
transactions with Danaos
Shipping (Manager)
− Amounts approved by
independent board
members
Arms length cost
arrangements, which
are amongst lowest
in industry and fixed
through 2024
✓
✓
✓
Social
Code of ethics and
compliance policies
published for Directors /
Officers
Accredited by Global
Reporting Initiative (GRI)
for sustainability best
practices and socially
responsible management
✓
✓
Environmental
Advanced solutions to
reduce emissions through
fuel efficiency optimization
Scrubber installation on
select vessels
Low-sulfur fuel oil
to be procured
Ballast water
system compliance
Partnership with founders
of Poseidon Principles
✓
✓
✓
✓
✓
Longstanding Champion of ESG Principles
Danaos Management is keenly focused on maintaining a strong ESG framework for company operations
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HINDSIGHT:
• ‘Reflect and learn from past data’ through statistical processing and trend analysis
• Detection of hidden correlations among seemingly un-related data
INSIGHT: ‘Interpret data and respond efficiently to the present’
• KPls real-time monitoring (operational efficiency, safety performance, etc.)
• Vessel’s benchmarking against: theoretical curves, specifications, tests and trials, sister and competitor vessel monitoring
• Timely anomaly detection and alerting for abnormal behavior or deviation from predefined thresholds
FORESIGHT: ‘Predict and get ready for the future’ through scenario testing, system risk assessments and observational
maintenance
As well as Routines System Data monitoring …
• BCS, pMatrix, Power Mgmt, Steam Mgmt, ODA …
• Tanks Mgmt. Bunker Analysis, Bunker Surveys, Bunkering Monitoring ...
• Performance, Propulsion, Emissions ...
Data Analytics/Algorithmic Analysis (Operator-defined) of Fused Data across Monitoring Systems
Workflow Management
Operator-defined workflows for timely and effective response to alarm events: what actions must take place, who from the
crew should be involved, and what actions must be logged / other systems triggered
Waves Fleet Performance
… Riding the Wave of Innovation!
Pioneers in Digitalization
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Industry Overview
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Seaborne Containerized Trade Forecast to Rebound Quickly
Global Seaborne Container Trade
Source: Clarksons Research
15
-15%
-10%
-5%
0%
5%
10%
15%
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
TE
U m
m
World Seaborne Container Trade Y-o-Y Growth
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Containership Trade Routes
Source: Clarksons Research
(1) Basis trades with Far East & Europe.
(2) Basis full year estimate / forecast.
• Units of 15,000+ TEU are almost exclusively deployed on the Far East-Europe trade
• Deployment of boxships sized 12-14,999 TEU continues to broaden notably onto the Transpacific route and also
onto some non-mainlane trades
• Boxships sized 6,000-11,999 TEU offer flexible deployment opportunities, with further reductions in
reliance on the mainlanes over the years, although
demand can be sensitive to short-term shifts
• Approximately 39% of capacity deployed on intra-regional trade routes is accounted for by units of 3,000+ TEU; this
share has been fairly steady for the last 18 months
• Intra-regional routes, and deployment of sub-3,000 TEU units thereon, appear ‘protected’ against significant vessel
upsizing to some degree, by infrastructure, volume and
other operational constraints
Mainlane, 28.7%
Non-Mainlane
East-West, 10.4%
North-South, 16.5%
Intra-Regional,
44.5%
201mm
TEU
Largest vessels primarily deployed on long trade routes
Container Trade by Trade Lane 2020f
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Geographic Deployment Favoring Certain Size Vessels
Largest vessels primarily deployed on long trade routes
Capacity Deployment By Routemm $ by Asset Class
Source: Clarksons Research
0%
20%
40%
60%
80%
100%
-
0.00
0.25
0.50
0.75
1.00
1.25
2020 2021 2022
12,000+ TEU 8,000–11,999 TEU 3,000–7,999 TEU 100–2,999 TEU
Supply Growth Primary in Largest Vessel Segments
Orderbook is concentrated in 8,000+ TEU vessels where Danaos has the greatest charter coverage
Containership Orderbook, as % of Fleet by SegmentTEU, mm
Source: Clarksons Research
Containership Orderbook, By Scheduled Delivery YearTEU, mm
18
8.0%
11.7%
0.5%
8.3%
0%
5%
10%
15%
Containership Orderbook %Fleet
Containership 8,000+ TEUOrderbook % Fleet
Containership 3-7,999 TEUOrderbook % Fleet
Containership
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Charter Rates Near Multi-Year Highs
4,400 TEU gls ‘Old Panamax’ Containership
6-12 Month TC Rate$/day, thousands
9,000 TEU gls Containership 3-yr TC Rate1$/day, thousands
Source: Clarksons Research
Note: Limited activity on longer TCs with wide spread on rate ideas.
(1) Based on ‘Neo-Panamax’ ships.
6,800 TEU Containership 3-yr TC Rate$/day, thousands
2,500 TEU grd Containership 6-12 month TC Rate$/day, thousands
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0
10
20
30
40
50
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
0
5
10
15
20
25
30
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
0
10
20
30
40
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
0
10
20
30
40
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
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Asset Values Steady, and Transactions have Increased
4,500 TEU ‘Old Panamax’ Containership 10 Year Old
Secondhand Pricemm $
8,800 TEU Containership 5 Year Old Secondhand Pricemm $
Source: Clarksons Research
Note: Limited activity on longer TCs with wide spread on rate ideas.
(1) Based on ‘Neo-Panamax’ ships.
6,600 TEU Containership 5 Year Old Secondhand Pricemm $
2,500 TEU grd Containership 10-Year-Old
Secondhand Pricemm $
20
0
20
40
60
80
100
120
140
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-200
20
40
60
80
100
120
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
0
10
20
30
40
50
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
0
10
20
Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20
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Financial Overview
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Historical Financials
Net Leverage Adjusted Net Income
mm $
Operating Revenuesmm $
Adjusted EBITDAmm $
$589 $588 $552 $568
$498 $452 $459 $447 $452
2012 2013 2014 2015 2016 2017 2018 2019 LTM3Q '20
$432 $434 $404 $418
$351 $310 $318 $311 $313
2012 2013 2014 2015 2016 2017 2018 2019 LTM3Q '20
Source: Company filings.
Note: Adjusted Net Income reflects add-backs of various income statement items, most notably impairment charges, amortization of deferred financing costs and other one-off extraordinary items.
Note: LTM reflects twelve months period ending September 30, 2020
$60 $54 $60
$159 $141
$115 $131
$149 $161
2012 2013 2014 2015 2016 2017 2018 2019 LTM3Q '20
22
Summary Results
7.3x 7.0x 7.2x 6.5x
7.0x 7.3x
5.1x 4.6x 4.5x
2012 2013 2014 2015 2016 2017 2018 2019 LTM3Q '20
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Third Quarter 2020 Earnings
Three Months ended Sept. 30 Nine Months ended Sept. 30
2020 2019 % yoy 2020 2019 % yoy
Operating Revenue $118,932 $111,830 6.4% $341,952 $337,040 1.5%
Adjusted EBITDA1 $83,331 $79,328 5.0% $235,322 $232,447 1.2%
Adjusted Net Income $47,303 $37,882 24.9% $123,078 $110,706 11.2%
Adjusted Earnings per Share, diluted2 $1.91 $2.46 -22.6% $4.97 $7.23 -31.3%
Summary of Resultsthousands $, expect per share figures
Third Quarter Highlights
• Adjusted EBITDA increased by 5.0% when compared to Q3 2019 as operating revenues improved by 6.4% compared to the same period due contractual increases in charter rates for vessels on long-term charters and revenues from newly-
acquired vessels
• Fleet utilization for the three months ended September 30, 2020 was 98.7% compared to 97.1% in the prior quarter
• Charter contract coverage of 87% in terms of operating revenues and 64% in terms of operating days over the next 12 months
(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, loss on sale of securities, gain on debt extinguishment, stock based compensation and refinancing professional fees.
(2) Based on weighted average diluted shares outstanding.23
Last Twelve
Months
$452,156
$313,440
$161,047
$6.91
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Charter-Adjusted Total AssetValue
Net Debt Net Working Capital & Other Net Asset Value Net Asset Value(Pro-forma)
Charter Adjusted Net Asset Value
Note: Asset value does not include vessels acquired after September 30, 2020. Refer to appendix for additional details regarding calculation of Net Asset Value.
(1) Net debt includes (1) $1,391.9 million of long-term debt, including current portion, which adds back deferred finance costs of $26.9 million and debt fair value adjustment of $15.7 million, and (2) $129.4 million of long-term leaseback obligations,
including current portion which adds back deferred finance costs of $3.7 million, less (3) cash and cash equivalents of $106.4 million. Please refer to Appendix. Does not include accumulated accrued interest of $162.0 million as of September 30, 2020.
(2) Includes carrying value of investments in Gemini JV of $13.7 million and ZIM and HMM notes of $39 million, as well as net working capital and other assets and liabilities. Excludes assets and liabilities relating to accruals for certain non-cash items
relating to straight-line revenue recognition, unearned revenue with respect to ZIM and HMM notes and deferred Handling Fees. Please refer to Appendix for further details.
(3) Based on 24.789 mm shares outstanding as of September 30, 2020.
(4) Based on the current NAV of $452.43 mil. reduced by $31.13 mil. (cash required for the share buy back) divided by the new number of shares which is 20,450,041
(in US$ millions)
(2)(1)
NAV / Share: $18.3(3)As of September 30, 2020
• As calculated in accordance with the financial covenants contained in the Company’s credit facilities as of September 30, 2020, market value of the Company’s existing fleet of 58 containerships on a charter-inclusive basis was approximately $1.8 billion.
− Broker appraisals for charter-free asset value and charter-adjustments are as of June 30, 2020• Adjustments to calculate net asset value include:
− Net debt, which is adjusted to include non-cash fair value adjustments and deferred finance costs − Net working capital & other, which includes DAC’s equity stake in the Gemini joint venture at carrying value
$1,795 ($1,415)
$72
$452
24
NAV / Share: $20.6(4)As of September 30, 2020
$421
(Pro-forma)
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Summary
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kFinancial Strategy Positioning Danaos for Success
Balanced chartering strategy to ensure cash flow visibility with 99% and 81% of 2020 and 2021 revenues contracted(3)
✓
Opportunistic vessel acquisition strategy
- Acquired three vessels in last nine months, two of which have been fixed on multi-year charters
- Two additional 9,000 TEU vessels acquired and expected to be delivered at the end of 2020
✓
Following consummation of recent equity offering the Company is permitted, under its loan agreements, to re-instate dividends
✓
(1) Calculated as the sum of contractual principal debt repayment and lease repayments under sale leaseback structure.
(2) Net leverage is a non-GAAP measure. Calculated as Net Adjusted Debt / Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure. See appendix for definitions and reconciliations to the nearest GAAP measure.
(3) Assumes contracted vessels operate on gross daily charter rate, accounts for revenue exclusively derived from long-term charter contracts. 26
Continued de-levering from strong contracted cash flows- Minimum debt amortization of $317mm(1) in 2020 and 2021
✓
38.4% reduction in leverage
between 2017 and today(2)
7.3x5.1x 4.6x 4.5x
2017 2018 2019 2020 Q3
The Company repurchased 17.5% of its outstanding shares in October 2020 for an aggregate purchase price of $31.1 million
✓
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Appendix
-
Substantial Fleet Employment and Coverage
(1) Age as of September 30, 2020
5x13,100 TEU
5x9,600 – 10,100 TEU
10x8,500 – 9,000 TEU
9x6,400 – 6,500 TEU
2018 2019 2020 2021 2022 2023 2024 2025
Hyundai Honour
Hyundai Respect
Hyundai Smart
Hyundai Speed
Hyundai Ambition
Pusan C
Le Havre
Express Berlin
Express Rome
Express Athens
Europe
America
Phoebe
SM Charleston
Niledutch Lion
CMA CGM Attila
CMA CGM Tancredi
CMA CGM Bianca
CMA CGM Samson
CMA CGM Melisande
Performance
Dimitra C
CMA CGM Moliere
CMA CGM Musset
CMA CGM Nerval
YM Mandate
CMA CGM Rabelais
CMA CGM Racine
YM Maturity
2028
Charterer Age1 Vessel
8.6
8.6
8.4
8.3
8.3
14.1
13.9
9.6
9.5
9.4
16.1
15.9
15.3
14.8
12.3
9.2
9.1
8.9
8.8
8.6
18.6
18.3
11.0
10.6
10.4
10.4
10.3
10.1
10.1
Total Charter
Revenue
Contribution
38.5%
7.8%
27.1%
23.2%
28
ONE
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Substantial Fleet Employment and Coverage
Charterer Age1 Vessel
Total Charter
Revenue
Contribution
10x4,300 – 5,500 TEU
8x3,500 TEU
11x2,200 – 2,600 TEU
2018 2019 2020 2021 2022 2023 2024
ANL Tongala
Derby D
Seattle C
YM Vancouver
Rio Grande
Zim Sao Paolo
Zim Kingston
Zim Monaco
Zim Dalian
Zim Luanda
Dimitris C
Colombo
Singapore
Express Argentina
Express Brazil
Express France
Express Spain
Express Black Sea
Future
Sprinter
Vladivostok
Advance
Stride
Progress C
Amalia C
Highway
Bridge
Danae C
Zebra
16.6
16.4
13.1
12.9
12.2
12.0
11.9
11.8
11.5
11.3
19.6
16.6
16.1
10.4
10.2
10.0
9.7
9.5
23.5
23.3
23.2
23.1
23.1
22.6
22.6
22.6
22.5
19.3
18.8
(1) Age as of September 30, 2020
1.0%
1.8%
0.7%
29
-
Adjusted EBITDA
Source: Company filings.
Three Months Three Months Nine Months Nine Months Twelve Months
ended ended ended ended ended
($ In thousands) Sept. 30, 2020 Sept. 30, 2019 Sept 30, 2020 Sept 30, 2019 Sept 30, 2020
Net income / (Loss) from Continuing Operations
(unadjusted)$42,786 $33,855 $110,371 $97,436 $144,188
Adjustments:
Depreciation 25,765 24,336 75,604 72,141 99,968
Amortization of deferred drydocking & special survey
costs3,174 2,271 8,425 6,525 10,633
Amortization of deferred realized losses of cash flow
interest rate swaps913 913 2,719 2,709 3,632
Amortization of deferred finance costs 4,517 4,027 12,707 13,270 16,859
Interest income (1,650) (1,586) (4,952) (4,751) (6,615)
Interest expense 7,525 14,317 29,551 42,057 42,697
EBITDA $83,030 $78,133 $234,425 $229,387 $311,362
Stock based compensation 301 1,195 897 3,060 2,078
ADJUSTED EBITDA $83,331 $79,328 $235,322 $232,447 $313,440
Reconciliation of Net Income / (Loss) to EBITDA and Adjusted EBITDA
September 30, 2020
30
-
Historical Adjusted EBITDA
Source: Company filings. 31
Historical Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Years ended 2012 – LTM 3Q 2020
Twelve months
ended
($ in thousands) 2012 2013 2014 2015 2016 2017 2018 2019 Sept. 30, 2020
Net Income $(105,204) $37,523 $(3,920) $117,016 $(366,195) $83,905 $(32,936) $131,252 $144,188
Adjustments
Depreciation 143,938 137,414 137,061 131,783 129,045 115,228 107,757 96,505 99,968
Amortization of deferred drydocking & special survey costs 6,070 5,482 4,387 3,845 5,528 6,748 9,237 8,733 10,633
Amortization of deferred realized losses on cash flow interest rate swaps 3,524 4,017 4,016 4,017 4,028 3,694 3,694 3,622 3,632
Amortization of finance costs and debt discount 14,314 15,431 15,070 14,038 12,652 11,153 14,957 16,866 16,336
Finance costs accrued (Exit Fees under our Bank Agreements) 2,762 3,763 3,745 3,639 3,447 3,169 2,059 556 523
Interest Income (1,642) (2,210) (1,703) (3,419) (4,682) (5,576) (5,781) (6,414) (6,615)
Interest Expense 87,340 91,185 79,980 70,397 70,314 75,403 70,749 55,203 42,697
EBITDA 151,102 292,605 238,636 341,316 (145,863) 293,724 169,736 306,323 311,362
Adjusted for:
Impairment loss 129,630 19,004 75,776 41,080 415,118 - 210,715 - -
Gain on debt extinguishment - - - - - - (116,365) - -
Re-financing professional fees - - - - - 14,297 51,314 - -
Accelerated amortization of accumulated other comprehensive loss - - - - 7,705 - 1,443 - -
Realized (Gain) / Loss on derivatives 150,910 144,254 119,612 52,125 5,397 - - - -
Unrealized (Gain) / Loss on fair value of derivatives 739 (22,121) (24,915) (16,285) (4,648) - - - -
Stock based compensation 139 75 638 88 76 - 1,005 4,241 2,078
Bad debt expense - - - - 15,834 - - - -
Impairment loss component of equity loss on investments - - - - 14,642 - - - -
Loss on sale of HMM securities - - - - 12,906 2,357 - - -
Impairment loss on securities - - - - 29,384 - - - -
(Gain) / Loss on sale of vessels (830) 449 (5,709) - 36 - - - -
Adjusted EBITDA 431,690 434,266 404,038 418,324 350,587 310,378 317,849 310,564 313,440
-
Three Months Three Months Nine Months Nine Months Twelve Months
ended ended ended ended ended
($ In thousands, except per share items) Sept. 30, 2020 Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019 Sept. 30, 2020
Net income / (Loss) from Continuing Operations $42,786 $33,855 $110,371 $97,436 $144,188
Adjustments:
Amortization of deferred finance costs 4,517 4,027 12,707 13,270 16,859
ADJUSTED NET INCOME $47,303 $37,882 $123,078 $110,706 $161,047
ADJUSTED EARNINGS PER SHARE
Diluted net income per share $1.91 $2.46 $4.97 $7.23 $6.91
Diluted weighted average number of shares 24,789 15,373 24,789 15,309 23,316
Adjusted Net Income
Source: Company filings.
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share
September 30, 2020
32
-
Historical Adjusted Net Income
Source: Company filings. 33
Reconciliation of Adjusted Net Income
Years ended December 2012 – LTM 3Q 2020
Twelve months
ended
2012 2013 2014 2015 2016 2017 2018 2019 Sept. 30, 2020
Net Income $(105,204) $37,523 $(3,920) $117,016 $(366,195) $83,905 $(32,936) $131,252 $144,188
Adjust for:
Impairment loss 129,630 19,004 75,776 41,080 415,118 - 210,715 - -
Gain on debt extinguishment - - - - - - (116,365) - -
Amortization of finance costs 14,314 15,431 15,070 14,038 12,652 11,153 11,771 10,795 10,591
Debt discount amortization - - - - - - 3,186 6,071 5,745
Finance costs accrued (Exit Fees under our Bank Agreements) 2,762 3,763 3,745 3,639 3,447 3,169 2,059 556 523
Re-financing professional fees - - - - - 14,297 51,314 - -
Accelerated amortization of accumulated other comprehensive loss - - - - 7,705 - 1,443 - -
Unrealized (Gain) / Loss on fair value of derivatives 739 (22,121) (24,915) (16,285) (4,648) - - - -
Realized loss on over-hedging portion of derivatives 19,042 - - - - - - - -
Bad debt expense - - - - 15,834 - - - -
Impairment loss component of equity loss on investments - - - - 14,642 - - - -
Loss on sale of HMM securities - - - - 12,906 2,357 - - -
Impairment loss on securities - - - - 29,384 - - - -
(Gain) / Loss on sale of vessels (830) 449 (5,709) - 36 - - - -
$60,453 $54,049 $60,047 $159,488 $140,881 $114,881 $131,188 $148,674 $161,047
-
Sept. 30, 2020 Free Cash Flow
Source: Company filings. 34
Reconciliation of Free Cash Flow
Twelve months ended Three months ended Twelve months ended
($ in thousands)Dec. 31, 2019 Sept. 30, 2020 Sept. 30, 2020
Net Income $131,252 $42,786 $144,188
Adjustments
Depreciation 96,505 25,765 99,968
Amortization of deferred drydocking & special survey costs 8,733 3,174 10,633
Amortization of deferred realized losses on cash flow interest rate swaps 3,622 913 3,632
Amortization of finance costs and debt discount 16,866 4,383 16,336
Finance costs accrued (Exit Fees under our Bank Agreements) 556 134 523
Interest Income (6,414) (1,650) (6,615)
Interest Expense 55,203 7,525 42,697
EBITDA 306,323 83,030 311,362
Stock based compensation 4,241 301 2,078
Adjusted EBITDA $310,564 $83,331 $313,440
Net cash interest (80,772) (10,472) (62,312)
Equity income / (loss) on investments (1,601) (1,464) (5,823)
Revenue recognition (non-cash) (27,682) (1,190) (11,883)
Other working capital (8,831) (6,307) (9,113)
Payments for dry-docking & special survey costs deferred (7,157) (17) (15,340)
Operating cash flow 184,520 63,881 208,969
Debt Amortization (124,358) (40,450) (142,954)
Free Cash Flow 60,162 23,431 66,015
Debt drawdowns - 13,300 36,700
Vessels additions & advances for vessels additions (18,853) (7,403) (35,267)
Vessel acquisitions & advances for vessel acquisitions (2,507) - (77,557)
Finance costs (30,474) (7,914) (19,913)
Share issuance costs (873) - (873)
Paid-in capital 54,440 - 54,440
Net Increase / (Decrease) in Cash and Cash Equivalents $61,895 $21,414 $23,545
-
Appendix: Danaos Net Asset Value(1)
(1) Net Asset Value (NAV) is used to assess compliance with our credit facility covenants, and management
believes that many investors use NAV as a reference point in assessing valuation of fleets of ships and
similar assets.
(2) As calculated in accordance with the financial covenants contained in the Company’s credit facilities as of
September 30, 2020, on a charter-inclusive basis, as follows (1) for any vessel having a charter with more
than 12 months remaining duration, the present value of the “bareboat-equivalent” time charter income from
such charter (contracted revenue thereunder less forecasted operating expenses, insurances and dry-
docking costs), plus (2) the present value of the residual charter-free value of any vessel (estimated based on
June 30, 2020 broker valuations using vessel age as of the end of applicable charter, if any), each discounted
to present value using a discount rate 7.0%. See “Item 5. Operating and Financial Review and Prospects” in
the Company’s Annual Report on Form 20-F filed with the SEC on February 27, 2020. These calculations of
vessel value may not be comparable to other methods of determining vessel values or reported book value
($2.4 billion as of September 30, 2020). Vessel values are highly volatile and contracted charter revenue is
subject to counterparty performance and may not be transferable upon sale of a vessel. As such, the
Company’s estimates of market value may not be indicative of the current or future value of its vessels, or
prices that the Company could achieve if it were to sell the vessels.
(3) Consists of (i) Current portion of long term debt, net of $126.326 million and (ii) Long-term debt, net of
current portion of $1,222.971 million plus deferred finance costs, net, of $26.93 million and debt fair value
adjustment of $15.694 million. Does not include accumulated accrued interest of $162.0 million.
(4) Consists of (i) Current portion of leaseback obligation, net of $24.166 million and (ii) Long-term leaseback
obligation, net of current portion of $101.522 million plus deferred finance costs of $3.664 million.
(5) Excludes the following non-cash items included on the Company’s balance sheet, as of September 30,
2020: (i) unearned revenue liabilities totaling $30.916 million relating to an accounting charge recognized
upon the Company’s receipt of the ZIM and HMM notes in respect of charter amendments ($20.934 million
Unearned revenue, net of current portion and $9.982 million included in Unearned revenue, current portion),
(ii) Other current assets ($9.472 million) and Other non-current assets ($22.344 million) related to straight-line
revenue recognition totaling $31.816 million, and (iii) liabilities related to straight-line revenue recognition
totaling $0.710 million (Other current liabilities of $0.423 million and $0.287 million included in Other long-term
liabilities).
(6) Represents investment in Gemini JV.
(7) Included in Other non-current assets on the Company’s balance sheet.
35
(in US$ thousands)
Charter Adjusted Asset Value
Charter Adjusted Fleet Value(2) $1,795,434
Total Charter Adjusted Asset Value $1,795,434
Less:
Net Debt
Bank debt(3) $1,391,921
Long-term leaseback obligation (including current portion)(4) 129,352
Less:
Cash and cash equivalents (106,368)
Total Net Debt $1,414,905
Plus:
Net Working Capital & Other(5)
Accounts receivable, net $10,846
Inventories 9,021
Prepaid Expenses 1,653
Due from related parties 20,851
Other current assets & non-current assets 4,485
Investments in affiliates(6) 13,694
Zim notes(7) 26,742
HMM notes(7) 12,304
Less:
Accounts payable (11,628)
Accrued liabilities (8,770)
Unearned revenue (7,301)
Total Net Working Capital & Other $71,896
Net Asset Value: $452,425