Danaos (DAC) 6-KCurrent report (foreign)

EXHIBIT 99.1

DANAOS CORPORATION

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements (unaudited) and the notes thereto included elsewhere in this report.

Results of Operations

Three months ended March 31, 2024 compared to three months ended March 31, 2023

During the three months ended March 31, 2024, Danaos had an average of 68.0 container vessels and 7.0 Capesize drybulk vessels compared to 68.3 container vessels and no drybulk vessels during the three months ended March 31, 2023. Our container vessels utilization for the three months ended March 31, 2024 was 97.3% compared to 96.8% for the three months ended March 31, 2023. The increase in container vessels utilization was mainly due to the decreased days of scheduled dry-docking of our container vessels.

Operating Revenues

Operating revenues increased by 4.0%, or $9.8 million, to $253.4 million in the three months ended March 31, 2024 from $243.6 million in the three months ended March 31, 2023.

Operating revenues of our container vessels segment decreased by 4.2%, or $10.2 million, to $233.4 million in the three months ended March 31, 2024 from $243.6 million in the three months ended March 31, 2023, analyzed as follows:

Operating revenues of our drybulk vessels segment added an incremental $20.0 million of revenues in the three months ended March 31, 2024 compared to no such operating revenues in the three months ended March 31, 2023.

Voyage Expenses

Voyage expenses increased by $12.4 million to $20.3 million in the three months ended March 31, 2024 from $7.9 million in the three months ended March 31, 2023 primarily as a result of the $12.0 million in voyage expenses related to our recently acquired 7 Capesize drybulk vessels, which generated revenue mainly from voyage charter agreements compared to no such expenses in the three months ended March 31, 2023.

Voyage expenses of container vessels segment increased by $0.4 million to $8.3 million in the three months ended March 31, 2024 from $7.9 million in the three months ended March 31, 2023 mainly due to increased commissions. Total voyage expenses of container vessels comprised $7.8 million commissions and $0.5 million other voyage expenses in the three months ended March 31, 2024.

Voyage expenses of drybulk vessels segment were $12.0 million in the three months ended March 31, 2024 compared to no voyage expenses in the three months ended March 31, 2023. Total voyage expenses of drybulk vessels comprised $1.2 million commissions and $10.8 million other voyage expenses, mainly bunkers consumption and port expenses, in the three months ended March 31, 2024.

Vessel Operating Expenses

Vessel operating expenses increased by $2.5 million to $43.1 million in the three months ended March 31, 2024 from $40.6 million in the three months ended March 31, 2023, primarily as a result of the increase in the average number of vessels in our fleet due to recent dry bulk vessels acquisitions, which was partially offset by the decrease in the average daily operating cost of our vessels to $6,493 per vessel per day for the three months ended March 31, 2024 compared to $6,807 per vessel per day for the three months ended March 31, 2023. Management believes that our daily operating costs remain among the most competitive in the industry.

Depreciation

Depreciation expense increased by 7.6%, or $2.4 million, to $33.9 million in the three months ended March 31, 2024 from $31.5 million in the three months ended March 31, 2023 mainly due to depreciation expense related to 7 recently acquired Capesize drybulk vessels.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $1.7 million to $5.5 million in the three months ended March 31, 2024 from $3.8 million in the three months ended March 31, 2023.

General and Administrative Expenses

General and administrative expenses increased by $3.4 million, to $10.2 million in the three months ended March 31, 2024 from $6.8 million in the three months ended March 31, 2023. The increase was mainly attributable to increased stock-based compensation and management fees.

Gain on Sale of Vessels

In January 2023, we completed the sale of the container vessel Amalia C for net proceeds of $4.9 million resulting in a gain of $1.6 million compared to no gain on sale of vessels in the three months ended March 31, 2024.

Interest Expense and Interest Income

Interest expense decreased by 53.7%, or $3.6 million, to $3.1 million in the three months ended March 31, 2024 from $6.7 million in the three months ended March 31, 2023. The decrease in interest expense is a result of:

As of March 31, 2024, our outstanding debt, gross of deferred finance costs, was $458.6 million, which included $262.8 million principal amount of our Senior Notes. These balances compare to debt of $431.1 million, which included $262.8 million principal amount of our Senior Notes and our leaseback obligation of $66.3 million, gross of deferred finance costs, as of March 31, 2023.

Interest income increased by $0.2 million to $2.9 million in the three months ended March 31, 2024 compared to $2.7 million in the three months ended March 31, 2023.

Gain on Investments

The change in fair value of our shareholding interest in Eagle Bulk Shipping Inc. (“EGLE”) of $11.0 million was recognized in the three months ended March 31, 2024 as gain on investments compared to none in the three months ended March 31, 2023.

Dividend Income

Dividend income of $0.9 million was recognized on EGLE common shares in the three months ended March 31, 2024 compared to none in the three months ended March 31, 2023.

Equity Loss on Investments

Equity loss on investments amounting to $0.1 million and $2.6 million in the three months March 31, 2024 and March 31, 2023, respectively, relates to our share of initial expenses of a recently 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 decreased by $0.1 million to $0.9 million in the three months ended March 31, 2024 compared to $1.0 million in the three months ended March 31, 2023.

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 March 31, 2024 and March 31, 2023.

Other Income/(expenses), net

Other income, net remained stable at $0.2 million in each of the three months ended March 31, 2024 and March 31, 2023.

Liquidity and Capital Resources

Our principal source of funds has been operating cash flows, vessel sales, and long-term bank borrowings, as well as equity provided by our stockholders from our initial public offering in October 2006; common stock sales in August 2010 and the fourth quarter of 2019, the capital contribution of Danaos Investment Limited as Trustee of the 883 Trust (“DIL”) on August 10, 2018 and dividends and sales proceeds from our divested investment in ZIM ordinary shares in 2022. In February 2021, we sold $300 million of 8.500% senior unsecured notes due 2028 (the “Senior Notes”). In December 2022, we repurchased $37.2 million aggregate principal amount of our Senior Notes in a privately negotiated transaction. We may also at any time and from time to time, seek to retire or purchase our outstanding debt securities through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Our principal uses of funds have been capital expenditures to establish, grow and maintain our fleet, including our expansion into the drybulk shipping sector, comply with international shipping standards, environmental laws and regulations and to fund working capital requirements and repayment of debt.

Our short-term liquidity needs primarily relate to the funding of our vessel operating expenses, drydocking costs, installment payments for our contracted containership newbuildings, payments for the acquisition of drybulk vessels, debt interest payments, servicing our debt obligations, payment of dividends and repurchases of our common stock. Our long-term liquidity needs primarily relate to installment payments for our contracted newbuildings and any additional vessel acquisitions in the containership or drybulk sector and debt repayment. We anticipate that our primary sources of funds will be cash from operations and equity or debt financings. We currently expect that the sources of funds available to us will be sufficient to meet our short-term liquidity and long-term liquidity requirements.

Under our existing multi-year charters as of March 31, 2024, we had $2.1 billion of total contracted cash revenues, with $645.8 million for the remainder of 2024, $671.3 million for 2025 and $0.8 billion thereafter. Although these contracted cash revenues are based on contracted charter rates, we are dependent on the ability and willingness of our charterers to meet their obligations under these charters. In May 2022, we received a $238.9 million charter hire prepayment related to charter contracts for 15 of our vessels, representing partial prepayment of charter hire payable during the period from May 2022 through January 2027. This prepayment is recorded as unearned revenue on our balance sheet and recognized as revenue in our income statement over the term of the applicable charters.

As of March 31, 2024, we had cash and cash equivalents of $324.3 million. As of March 31, 2024, there was $326.25 million of remaining borrowing availability under our Citibank $382.5 mil. Revolving Credit Facility and $395.0 million under our Syndicated $450.0 million Facility. As of March 31, 2024, we had $458.6 million of outstanding indebtedness (gross of deferred finance costs), including $262.8 million relating to our Senior Notes. As of March 31, 2024, we were obligated to make quarterly fixed amortization payments, totaling $20.5 million to March 31, 2025, related to the long-term bank debt. We are also obligated to make certain payments to our Manager, Danaos Shipping, under our management agreement which has a term through December 31, 2025, as described below under “—Management Agreement”.

In March 2024, we entered into a syndicated loan facility agreement of up to $450 million (“Syndicated $450.0 million Facility”), which is secured by eight of our container vessels under construction. An amount of $55.0 million was drawn down as of March 31, 2024 and subsequent to March 31, 2024 we drew down an additional $63.0 million related to a delivery of a newbuilding vessel. This facility is repayable in quarterly instalments up to September 2030. The facility bears interest at SOFR plus a margin of 1.85%. In June 2022, we drew down $130.0 million under a new senior secured term loan facility from BNP Paribas and Credit Agricole, which is secured by six 5,466 TEU sister vessels acquired in 2021. This facility is repayable in 8 quarterly instalments of $5.0 million, followed by 12 quarterly instalments of $1.9 million together with a balloon payment of $67.2 million payable over five-year term. In December 2022, we early extinguished the remaining $437.75 million of the Citibank/Natwest $815 mil. Facility and replaced it with the $382.5 mil. Revolving Credit Facility with Citibank, out of which nil is drawn down as of March 31, 2024 and with the Alpha Bank $55.25 mil. Facility, which was drawn down in full and under which $45.9 million is outstanding as of March 31, 2024. The Citibank $382.5 mil. Revolving Credit Facility is reducing and repayable over 5 years in 20 quarterly reductions of $11.25 million each together with a final reduction of $157.5 million at maturity in December 2027. We pay a commitment fee at a rate of 0.8% per annum on the undrawn amount of this facility. The Alpha Bank $55.25 mil. Facility is repayable over 5 years with 20 consecutive quarterly instalments of $1.875 million each, together with a balloon payment of $17.75 million at maturity in December 2027.

In April 2022, we entered into contracts for the construction of four 8,000 TEU container vessels, out of which one was delivered to us from the shipyard in May 2024, one is expected to be delivered in the second quarter of 2024 and two are expected to be delivered in the third quarter of 2024. In March 2022, we entered into contracts for the construction of two 7,100 TEU container vessels, out of which one was delivered to us from the shipyard in April 2024 and one is expected to be delivered in the third quarter of 2024. In April 2023, we entered into contracts for the construction of two 6,000 TEU container vessels with expected vessels delivery in 2025. In June 2023, we entered into contracts for the construction of two 8,200 TEU container vessels with expected vessels delivery in 2026. In February and March 2024, we entered into contracts for the construction of four 8,200 TEU container vessels for an aggregate purchase price of $376.8 million. These container vessels are expected to be delivered to us in 2026 through 2027. The aggregate purchase price of the vessel construction contracts amounts to $1,211.7 million, out of which $95.5 million, $88.9 million and $184.9 million was paid in the three months ended March 31, 2024 and in the years ended December 31, 2023 and 2022, respectively.

The remaining contractual commitments under these 14 vessel construction contracts are analyzed as follows as of March 31, 2024 (in millions of U.S. dollars):

In February 2024, we entered into agreements to acquire three Capesize bulk carriers built in 2010 through 2011 that aggregate 529,704 DWT for a total purchase price of $79.9 million, out of which $14.6 million was advanced before March 31, 2024 and the remaining amount of $65.3 million is payable between June and July 2024, when these vessels are expected to be delivered to us.

Additionally, a supervision fee of $850 thousand per newbuilding vessel is payable to Danaos Shipping Company Limited (the “Manager”) over the construction period starting from steel cutting. Supervision fees totaling $0.4 million and $3.0 million were charged by the Manager and capitalized to the vessels under construction in the three months ended March 31, 2024 and in the year ended December 31, 2023, respectively. Interest expense amounting to $5.8 million, $17.4 million and $5.0 million was capitalized to the vessels under construction in the three months ended March 31, 2024 and in the years ended December 31, 2023 and 2022, respectively.

In March 2024, we sold for scrap the vessel Stride, which had been off-hire since January 8, 2024 due to damage from a fire in the engine room that was subsequently contained. The proceedings with the insurers are currently in progress.

On May 27, 2024, we declared a dividend of $0.80 per share of common stock payable on June 20, 2024 to holders of record on June 11, 2024. We intend to pay a regular quarterly dividend on our common stock, which will have an impact on our liquidity. Payments of dividends are subject to the discretion of our board of directors, provisions of Marshall Islands law affecting the payment of distributions to stockholders and the terms of our credit facilities, which permit the payment of dividends so long as there has been no event of default thereunder nor would occur as a result of such dividend payment, finance leases and Senior Notes, which include limitations on the amount of dividends and other restricted payments that we may make, and will be subject to conditions in the container and drybulk shipping industries, our financial performance and us having sufficient available excess cash and distributable reserves.

In June 2022, we announced a share repurchase program of up to $100 million of our common stock. A $100 million increase to the existing share repurchase program, for a total aggregate amount of $200 million, was approved by our Board of Directors on November 10, 2023. We repurchased 57,901 shares of our common stock in the open market for $4.1 million in the three months ended March 31, 2024; 1,131,040 shares for $70.6 million in the year ended December 31, 2023 and 466,955 shares for $28.6 million the period ended December 31, 2022. As of May 27, 2024, we repurchased a total of 1,671,059 shares of common stock for $104.4 million under our share purchase program. All purchases have been made on the open market within the safe harbor provisions of Regulation 10b-18 under the Exchange Act. Under the share repurchase program, shares of our common stock may be purchased in open market or privately negotiated transactions, at times and prices that are considered to be appropriate by the Company, and the program may be suspended or discontinued at any time.

Eagle Bulk Shipping Inc./Star Bulk Carriers Corp. Securities

In June 2023, we acquired marketable securities of Eagle Bulk Shipping Inc., which was an owner of bulk carriers listed on the New York Stock Exchange (Ticker: EGLE) consisting of 1,552,865 shares of common stock for $68.2 million (out of which $24.4 million from Virage International Ltd., our related company). As of March 31, 2024 and December 31, 2023, these marketable securities were fair valued at $97.0 million and $86.0 million, respectively and we recognized a $11.0 million gain and $17.9 million gain on these marketable securities reflected under “Gain on investments” in the condensed consolidated statement of income in the three months ended March 31, 2024 and the period ended December 31, 2023, respectively. Additionally, we recognized dividend income on these shares amounting to $0.9 million in the three months ended March 31, 2024 and $1.0 million in the period ended December 31, 2023. On December 11, 2023, Star Bulk Carriers Corp. (Ticker: SBLK) and EGLE announced that both companies had entered into a definitive agreement to combine in an all-stock merger, which was completed on April 9, 2024. Under the terms of the agreement, EGLE shareholders received 2.6211 shares of SBLK common stock in exchange for each share of EGLE common stock owned. As a result, as of May 27, 2024, we own 4,070,214 shares of common stock of Star Bulk Carriers Corp., a Nasdaq-listed owner and operator of drybulk vessels.

Carbon Termination Technologies Corporation

In March 2023, we invested $4.3 million in the common shares of a newly established company Carbon Termination Technologies Corporation (“CTTC”), incorporated in the Republic of the Marshall Islands, which represents our 49% ownership interest. CTTC currently engages in research and development of decarbonization technologies for the shipping industry. Equity method of accounting is used for this investment. Our share of CTTC’s initial expenses amounted to $0.1 million and $4.0 million and is presented under “Equity income/(loss) on investments” in the consolidated statements of income in the three months ended March 31, 2024 and in the period ended December 31, 2023, respectively.

Impact of the Wars in Ukraine and Gaza on the Company’s Business

The current conflict between Russia and Ukraine, and related sanctions imposed by the U.S., EU and others, adversely affect the crewing operations of our Manager, which has crewing offices in St. Petersburg, Odessa and Mariupol (damaged by the war), and trade patterns involving ports in the Black Sea or Russia, and as well as impacting world energy supply and creating uncertainties in the global economy, which in turn impact containership and drybulk demand. The extent of the impact will depend largely on future developments.

The war between Israel and Hamas in the Gaza Strip and potential disruption of shipping routes such as Houthi attacks in the Red Sea and the Gulf of Aden, has not affected the Company’s business to date; however, an escalation of these conflicts could have reverberations on the regional and global economies that could have the potential to adversely affect demand for cargoes and the Company’s business.

Impact of Inflation and Interest Rates Risk on our Business

We continue to see near-term impacts on our business due to elevated inflation in the United States of America, Eurozone and other countries, including ongoing global prices pressures in the wake of the war in Ukraine, driving up energy prices and commodity prices, which continue to affect our operating expenses. Interest rates have increased rapidly and substantially as central banks in developed countries raised interest rates in an effort to subdue inflation. The eventual long-term implications of tight monetary policy, and higher long-term interest rates may continue to drive a higher cost of capital for our business.

Segments

Until the acquisition of the drybulk vessels in 2023, we reported financial information and evaluated our operations by total charter revenues. Since 2023, for management purposes, we are organized based on operating revenues generated from container vessels and drybulk vessels and have two reporting segments: (1) a container vessels segment and (2) a drybulk vessels segment. The container vessels segment owns and operates container vessels which are primarily chartered on multi-year, fixed-rate time charter and bareboat charter agreements. The drybulk vessels segment owns and operates drybulk vessels to provide drybulk commodities transportation services.

Our chief operating decision maker monitors and assesses the performance of the container vessels segment and the drybulk vessels segment 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 our reportable segments and includes investments in an affiliate accounted for using the equity method accounting and investments in marketable securities.

The following table summarizes our selected financial information for the three months ended March 31, 2024, by segment (in thousands):

In the three months ended March 31, 2023, there was no drybulk vessel segment. Net income from container vessels segment was $148,789 thousand, which excludes equity loss on investments of $(2,588) thousand.

Cash Flows

Net Cash Provided by Operating Activities

Net cash flows provided by operating activities increased by $25.7 million, to $153.3 million provided by operating activities in the three months ended March 31, 2024 compared to $127.6 million provided by operating activities in the three months ended March 31, 2023. The increase was the result mainly of (i) a $20.3 million increase in operating revenues, (ii) a $5.6 million decrease in dry-docking expenses, (iii) a $4.6 million change in working capital, (iv) a $4.3 million decrease in net finance cost and (v) a $0.9 million increase in dividend income, which were partially offset by a $10.0 million increase in operating expenses.

Net Cash Used in Investing Activities

Net cash flows used in investing activities increased by $117.3 million, to $123.4 million used in investing activities in the three months ended March 31, 2024 compared to $6.1 million used in investing activities in the three months ended March 31, 2023. The increase was mainly due to (i) a $100.6 million increase in advance payments for vessels under construction, (ii) a $14.6 million increase in advances and payments for vessel acquisitions, (iii) a $3.2 million increase in additions to vessel cost and (iv) a $3.2 million decrease in proceeds received from sale of vessels, which were partially offset by a $4.3 million payment for investments in affiliates in the three months ended March 31, 2023 compared to none in the three months ended March 31, 2024.

Net Cash Provided by/(Used in) Financing Activities

Net cash flows provided by/(used in) financing activities increased by $52.2 million, to $22.6 million provided by financing activities in the three months ended March 31, 2024 compared to $29.6 million used in financing activities in the three months ended March 31, 2022 mainly due to (i) a $55.0 million loan drawdown and (ii) a $6.6 million decrease in payments of long-term debt and leaseback obligations, which were partially offset by (i) a $5.6 million increase in finance costs, (ii) a $3.5 million increase in repurchase of our common stock and (iii) a $0.3 million increase in dividend payments on our common stock.

Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes, however, 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 our performance. See the table below for supplemental financial data and corresponding reconciliation to GAAP financial measures. The non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. The non-GAAP financial measures as presented below may not be comparable to similarly titled measures of other companies in the shipping or other industries.

EBITDA and Adjusted EBITDA

EBITDA represents net income before interest income and expense, taxes, depreciation, as well as amortization of deferred drydocking & special survey costs, amortization of assumed time charters, amortization of deferred realized losses of cash flow interest rate swaps, amortization of finance costs, debt discount and commitment fees. Adjusted EBITDA represents net income before interest income and expense, taxes other than withholding taxes on dividends received, depreciation, amortization of deferred drydocking & special survey costs, amortization of assumed time charters, amortization of deferred realized losses of cash flow interest rate swaps, amortization of finance costs, debt discount and commitment fees, gain on investments, gain on sale of vessels and stock-based compensation. We believe that EBITDA and Adjusted EBITDA assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. EBITDA and Adjusted EBITDA are also used: (i) by prospective and current customers as well as potential lenders to evaluate potential transactions; and (ii) to evaluate and price potential acquisition candidates. Our EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies due to differences in methods of calculation.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA/Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA/Adjusted EBITDA do not reflect any cash requirements for such capital expenditures. 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. Because of these limitations, EBITDA/Adjusted EBITDA should not be considered as principal indicators of our performance.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

EBITDA increased by $7.5 million, to $188.2 million in the three months ended March 31, 2024 from $180.7 million in the three months ended March 31, 2023. This increase was mainly attributed to (i) a $11.9 million change in fair value of our investment and dividend income, (ii) a $12.9 million increase in operating revenues (excluding $3.0 million decrease in amortization of assumed time charters) and (iii) a $2.5 million decrease in equity loss on investments in the three months ended March 31, 2024, which were partially offset by (i) a $18.2 million increase in total operating expenses and (ii) a $1.6 million gain on sale of vessel in the three months ended March 31, 2023 compared to no such gain in the three months ended March 31, 2024.

Adjusted EBITDA decreased by $1.8 million, to $177.2 million in the three months ended March 31, 2024 from $179.0 million in the three months ended March 31, 2023. This decrease was mainly attributed to a $18.2 million increase in total operating expenses which were partially offset by (i) a $12.9 million increase in operating revenues (excluding $3.0 million decrease in amortization of assumed time charters), (ii) a $2.5 million decrease in equity loss on investments in the three months ended March 31, 2024 and (iii) a $0.9 million increase in dividend income. Adjusted EBITDA for the three months ended March 31, 2024 is adjusted for a $11.0 million change in fair value of our investment.

Net Income Reconciliation to Adjusted EBITDA per segment (in thousands):

Time Charter Equivalent Revenues and Time Charter Equivalent US$/day per segment

Time charter equivalent revenues represent operating revenues less voyage expenses excluding commissions presented per container vessels segment and drybulk vessels segment separately. Time charter equivalent US$/per day (“TCE rate”) represents the average daily TCE rate of our container vessels segment and drybulk vessels segment calculated dividing time charter equivalent revenues of each segment by operating days of each segment. Operating days of each segment is calculated by deducting vessels off-hire days of each segment from total ownership days of each segment. TCE rate is a measure of the average daily net revenue performance of our vessels in each segment. TCE rate is a standard shipping industry performance measure used primarily to compare period to period changes in a shipping company’s performance despite changes in the mix of charter types i.e., voyage charters, time charters, bareboat charters under which its vessels may be employed between the periods. Our method of computing TCE rate may not necessarily be comparable to TCE rates of other companies due to differences in methods of calculation. We include TCE rate, a non- GAAP measure, as it provides additional meaningful information in conjunction with operating revenues, the most directly comparable GAAP measure, and it assists our management in making decisions regarding the deployment and use of our operating vessels and assists investors and our management in evaluating our financial performance.

Container vessels fleet utilization  

Drybulk vessels fleet utilization

Credit Facilities

We, as borrower or guarantor, and certain of our subsidiaries, as borrowers or guarantors, have entered into a number of credit facilities in connection with financing the acquisition of certain vessels in our fleet. Our existing credit facilities are secured by, among other things, our vessels (as described below). The following summarizes certain terms of our credit facilities and our Senior Notes as of March 31, 2024:

As of March 31, 2024, there was $326.25 million of remaining borrowing availability under our Citibank $382.5 mil. Revolving Credit Facility and $395.0 million under our Syndicated $450.0 million Facility. As of March 31, 2024, 43 of our container vessels and 7 Capesize bulk carriers were unencumbered. See Note 8 “Long-term Debt, net” to our unaudited condensed consolidated financial statements included in this report for additional information regarding our outstanding debt and the related repayment schedule.

Senior Notes

On February 11, 2021, we consummated an offering of $300 million aggregate principal amount of 8.500% Senior Notes due 2028 of Danaos Corporation, which we refer to as the Senior Notes. The Senior Notes are general senior unsecured obligations of Danaos Corporation.

The Senior Notes were issued pursuant to an Indenture, dated as of February 11, 2021, between the Company and Citibank, N.A., London Branch, as trustee, paying agent, registrar and transfer agent. The Senior Notes bear interest at a rate of 8.500% per year, payable in cash on March 1 and September 1 of each year, commencing September 1, 2021. The Senior Notes will mature on March 1, 2028.

In December 2022, we repurchased $37.2 million aggregate principal amount of our Senior Notes in a privately negotiated transaction. For additional details regarding the Senior Notes please refer to Note 8, “Long-term Debt, net” in the unaudited condensed consolidated financial statements included elsewhere in this report and “Item 5. Operating and Financial Review and Prospects –Senior Notes” in our Annual Report on Form 20-F for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024.

Qualitative and Quantitative Disclosures about Market Risk

Interest Rate Swaps

In the past, we entered into interest rate swap agreements converting floating interest rate exposure into fixed interest rates in order to hedge our exposure to fluctuations in prevailing market interest rates, as well as interest rate swap agreements converting the fixed rate we paid in connection with certain of our credit facilities into floating interest rates in order to economically hedge the fair value of the fixed rate credit facilities against fluctuations in prevailing market interest rates. All of these interest rate swap agreements have expired and we do not currently have any outstanding interest rate swap agreements. Refer to Note 9, “Financial Instruments”, to our unaudited condensed consolidated financial statements included in this report.

Foreign Currency Exchange Risk

We did not enter into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions during the three months ended March 31, 2024 and 2023.

Impact of Inflation and Interest Rates Risk on our Business

We continue to see near-term impacts on our business due to elevated inflation in the United States of America, Eurozone and other countries, including ongoing global prices pressures in the wake of the war in Ukraine, driving up energy and commodity prices, which continue to affect our operating expenses. Interest rates have increased rapidly and substantially as central banks in developed countries raise interest rates in an effort to subdue inflation. The eventual implications of tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business.

Capitalization and Indebtedness

The table below sets forth our consolidated capitalization as of March 31, 2024.

Other than these adjustments, there have been no other material changes to our capitalization from debt or equity issuances, re-capitalizations, special dividends, or debt repayments as adjusted in the table below between April 1, 2024 and May 27, 2024.

Our Fleet

The following table describes in detail our container vessels deployment profile as of May 27, 2024:

The specifications of our 12 contracted container vessels under construction as of May 27, 2024 are as follows:

The following table describes the details of our Capesize drybulk vessels as of May 27, 2024:

Forward Looking Statements

Matters discussed in this report may constitute forward-looking statements within the meaning of the safe harbor 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 our operations, cash flows, financial position, including with respect to vessel and other asset values, plans, objectives, goals, strategies, future events, performance or business prospects, changes and trends in our business and the markets in which we operate, 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. 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 our operating expenses, including bunker prices, dry-docking and insurance costs, our ability to operate profitably in the drybulk sector, performance of shipyards constructing our contracted newbuilding vessels, 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, including the conflict in Ukraine and related sanctions, the conflict in Israel and the Gaza Strip, potential disruption of shipping routes such as Houthi attacks in the Red Sea and the Gulf of Aden, due to accidents and political events or acts by terrorists.

Risks and uncertainties are further described in reports filed by us with the U.S. Securities and Exchange Commission.

INDEX TO FINANCIAL STATEMENTS

DANAOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(Expressed in thousands of United States Dollars, except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DANAOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Expressed in thousands of United States Dollars, except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DANAOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(Expressed in thousands of United States Dollars)

The accompanying notes are an integral part of these condensed consolidated financial statements

DANAOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(Expressed in thousands of United States Dollars, except number of shares in thousands and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DANAOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Expressed in thousands of United States Dollars)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DANAOS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements (unaudited) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The reporting and functional currency of Danaos Corporation and its subsidiaries (“Danaos” or the “Company”), is the United States Dollar.

Danaos Corporation, formerly Danaos Holdings Limited, was formed on December 7, 1998 under the laws of Liberia and is presently the sole owner of all outstanding shares of the companies listed below. Danaos Holdings Limited was redomiciled in the Marshall Islands on October 7, 2005. In connection with the redomiciliation, the Company changed its name to Danaos Corporation. On October 14, 2005, the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. The authorized capital stock of Danaos Corporation is 750,000,000 shares of common stock with a par value of $0.01 and 100,000,000 shares of preferred stock with a par value of $0.01. Refer to Note 11, “Stockholders’ Equity”. The Company’s principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel owning companies whose principal activity is the ownership and operation of container vessels and drybulk vessels that are under the exclusive management of a related party of the Company.

In the opinion of management, the accompanying condensed consolidated financial statements (unaudited) of Danaos and subsidiaries contain all adjustments necessary to state fairly, in all material respects, the Company’s condensed consolidated financial position as of March 31, 2024, the condensed consolidated results of operations for the three months ended March 31, 2024 and 2023 and the condensed consolidated cash flows for the three months ended March 31, 2024 and 2023. All such adjustments are deemed to be of a normal, recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in Danaos’ Annual Report on Form 20-F for the year ended December 31, 2023. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full year. The year-end condensed consolidated balance sheet data was derived from annual financial statements. These condensed consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America.

The condensed consolidated financial statements (unaudited) have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the companies listed below have been reflected in the condensed consolidated balance sheets and condensed consolidated statements of income, comprehensive income, cash flows and stockholders’ equity at and for each period since their respective incorporation dates.

DANAOS CORPORATION

 NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, 2024, Danaos included the vessel owning companies (the “Danaos Subsidiaries”) of container vessels and drybulk vessels listed below:

Container vessels:

DANAOS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)