UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of November 2019
 
Commission File Number 001-33060
 
DANAOS CORPORATION
(Translation of registrant’s name into English)
 
Danaos Corporation
c/o Danaos Shipping Co. Ltd.
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Secretary
011 030 210 419 6480
(Address of principal executive office)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F   x        Form 40-F  o
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
 
This report on Form 6-K is hereby incorporated by reference into the Company’s (i) Registration Statements on Form F-3 (Reg. No. 333-230106) and (Reg. No. 333-226096) filed with the SEC on March 6, 2019, (ii) Registration Statement on Form F-3 (Reg. No. 333-174494) filed with the SEC on May 25, 2011, (iii) Registration Statement on Form F-3 (Reg. No. 333-147099), the related prospectus supplements filed with the SEC on December 17, 2007, January 16, 2009 and March 27, 2009, (iv) Registration Statement on Form S-8 (Reg. No. 333-138449) filed with the SEC on November 6, 2006 and the reoffer prospectus, dated November 6, 2006, contained therein and (v) Registration Statement on Form F-3 (Reg. No. 333-169101).

 

 
EXHIBIT INDEX

99.1	Operating and Financial Review and Prospects and Condensed Consolidated Financial Statements (Unaudited) for the Three and Nine Months Ended September 30, 2019.	
 
2

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 6, 2019

 	DANAOS CORPORATION	

 	By:	/s/ Evangelos Chatzis	
 	Name:	Evangelos Chatzis	
 	Title:	Chief Financial Officer	
 
3

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 September 30, 2019 compared to three months ended September 30, 2018
 
During the three months ended September 30, 2019 and September 30, 2018, Danaos had an average of 55 containerships. Our fleet utilization for the three months ended September 30, 2019 was 98.7% compared to 97.4% for the three months ended September 30, 2018.
 
Operating Revenues
 
Operating revenues decreased by 5.1%, or $6.0 million, to $111.8 million in the three months ended September 30, 2019 from $117.8 million in the three months ended September 30, 2018.
 
Operating revenues for the three months ended September 30, 2019 reflects a $6.0 million decrease in revenues due to the re-chartering of certain of our vessels that concluded long-term charters over the last twelve months and were re-deployed at lower spot rates in the three months ended September 30, 2019.
 
Voyage Expenses
 
Voyage expenses decreased by $0.1 million, to $2.8 million in the three months ended September 30, 2019 from $2.9 million in the three months ended September 30, 2018.
 
Vessel Operating Expenses
 
Vessel operating expenses decreased by 2.4%, or $0.6 million, to $24.9 million in the three months ended September 30, 2019 from $25.5 million in the three months ended September 30, 2018. The average daily operating cost per vessel for vessels on time charter was $5,298 per day for the three months ended September 30, 2019 compared to $5,427 per day for the three months ended September 30, 2018. Management believes that our daily operating cost ranks as one of the most competitive in the industry.
 
Depreciation
 
Depreciation expense decreased by 10.0%, or $2.7 million, to $24.3 million in the three months ended September 30, 2019 from $27.0 million in the three months ended September 30, 2018 mainly due to decreased depreciation expense for ten vessels for which we recorded an impairment charge on December 31, 2018.
 
Amortization of Deferred Drydocking and Special Survey Costs
 
Amortization of deferred dry-docking and special survey costs decreased by $0.3 million, to $2.3 million in the three months ended September 30, 2019 from $2.6 million in the three months ended September 30, 2018. The decrease was mainly due to a decreased number of vessels dry-docked.
 
1

 
General and Administrative Expenses
 
General and administrative expenses decreased by $1.0 million, to $6.4 million in the three months ended September 30, 2019, from $7.4 million in the three months ended September 30, 2018. The decrease was mainly due to decreased remuneration expenses.
 
Interest Expense and Interest Income
 
Interest expense decreased by 11.2%, or $2.3 million, to $18.2 million in the three months ended September 30, 2019 from $20.5 million in the three months ended September 30, 2018. The decrease in interest expense is attributable to:
 
·   a $4.9 million decrease in interest expense on two of our credit facilities for which we recognized an interest expense accrual in the third quarter of 2018, which has been classified on our balance sheet under “Accumulated accrued interest” and represents future interest expense for the relevant facilities that has been recognized in advance as a result of the application of Troubled Debt Restructuring (“TDR”) accounting in connection with our 2018 debt refinancing;
 
·   a $3.1 million increase in interest expense due to an increase in debt service cost by approximately 1.7%, partially offset by a $347.7 million decrease in our average debt (including leaseback obligations), to $1,603.1 million in the three months ended September 30, 2019, compared to $1,950.8 million in the three months ended September 30, 2018; and
 
·   a $0.5 million decrease in the amortization of deferred finance costs and debt discount related to our 2018 debt refinancing.
 
As of September 30, 2019, our bank debt outstanding, gross of deferred finance costs, was $1,450.0 million and leaseback obligation was $141.4 million compared to bank debt of $1,694.5 million outstanding as of September 30, 2018.
 
Interest income increased by $0.1 million to $1.6 million in the three months ended September 30, 2019 compared to $1.5 million in the three months ended September 30, 2018.
 
Other Finance Costs, net
 
Other finance costs, net decreased by $0.4 million to $0.3 million in the three months ended September 30, 2019 compared to $0.7 million in the three months ended September 30, 2018 mainly due to decreased exit fees expenses.
 
Equity income on investments
 
Equity income on investments decreased by $0.1 million to $0.6 million in the three months ended September 30, 2019 compared to $0.7 million in the three months ended September 30, 2018 and relates to the operating performance of Gemini Shipholdings Corporation (“Gemini”), in which the Company has a 49% shareholding interest.
 
Gain on debt extinguishment
 
The gain on debt extinguishment of $116.4 million in the three months ended September 30, 2018 related to our 2018 debt refinancing and consisted of debt principal reduction net of refinancing related fees.
 
Loss on derivatives
 
Amortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three month periods ended September 30, 2019 and 2018.
 
Other income/(expenses), net
 
Other income/(expenses), net was nil in the three months ended September 30, 2019 compared to $21.6 million in expenses in the three months ended September 30, 2018 mainly due to $21.8 million of refinancing-related professional fees in the prior period.
 
2

 
Nine months ended September 30, 2019 compared to nine months ended September 30, 2018
 
During the nine months ended September 30, 2019 and September 30, 2018, Danaos had an average of 55 containerships. Our fleet utilization for the nine months ended September 30, 2019 was 98.8% compared to 96.4% for the nine months ended September 30, 2018.
 
Operating Revenues
 
Operating revenues decreased by $6.1 million, to $337.0 million in the nine months ended September 30, 2019 from $343.1 million in the nine months ended September 30, 2018.
 
Operating revenues for the nine months ended September 30, 2019 reflect:
 
·   a $10.0 million decrease in revenues in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, mainly due to the re-chartering of certain of our vessels that concluded long-term charters over the last twelve months and were re-deployed at lower spot rates in the nine months ended September 30, 2019; and
 
·   a $3.9 million increase in revenues due to higher fleet utilization of our vessels in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.
 
Voyage Expenses
 
Voyage expenses decreased by $0.4 million, to $8.8 million in the nine months ended September 30, 2019 from $9.2 million in the nine months ended September 30, 2018.
 
Vessel Operating Expenses
 
Vessel operating expenses decreased by 1.4%, or $1.1 million, to $78.0 million in the nine months ended September 30, 2019 from $79.1 million in the nine months ended September 30, 2018. The average daily operating cost per vessel for vessels on time charter was $5,605 per day for the nine months ended September 30, 2019 compared to $5,678 per day for the nine months ended September 30, 2018. Management believes that our daily operating cost ranks as one of the most competitive in the industry.
 
Depreciation
 
Depreciation expense decreased by 10.7%, or $8.6 million, to $72.1 million in the nine months ended September 30, 2019 from $80.7 million in the nine months ended September 30, 2018 mainly due to decreased depreciation expense for ten vessels for which we recorded an impairment charge on December 31, 2018.
 
Amortization of Deferred Drydocking and Special Survey Costs
 
Amortization of deferred dry-docking and special survey costs decreased by $0.4 million, to $6.5 million in the nine months ended September 30, 2019 compared to $6.9 million in the nine months ended September 30, 2018. The decrease was mainly due to a decreased number of vessels dry-docked.
 
General and Administrative Expenses
 
General and administrative expenses increased by $1.4 million, to $19.8 million in the nine months ended September 30, 2019, from $18.4 million in the nine months ended September 30, 2018. The increase was mainly due to increased share based compensation costs.
 
3

 
Interest Expense and Interest Income
 
Interest expense decreased by 17.3%, or $11.5 million, to $54.9 million in the nine months ended September 30, 2019 from $66.4 million in the nine months ended September 30, 2018. The decrease in interest expense is attributable to:
 
·   a $27.8 million decrease in interest expense on two of our credit facilities for which we recognized an interest expense accrual in the third quarter of 2018, which has been classified on our balance sheet under “Accumulated accrued interest” and represents future interest expense for the relevant facilities that has been recognized in advance as a result of the application of TDR accounting in connection with our 2018 debt refinancing;
 
·   a $12.9 million increase in interest expense due to an increase in debt service cost of approximately 2.3%, partially offset by a $544.7 million decrease in our average debt (including leaseback obligations), to $1,629.8 million in the nine months ended September 30, 2019, compared to $2,174.5 million in the nine months ended September 30, 2018; and
 
·   a $3.4 million increase in the amortization of deferred finance costs and debt discount related to our 2018 debt refinancing.
 
As of September 30, 2019, our bank debt outstanding, gross of deferred finance costs, was $1,450.0 million and leaseback obligation was $141.4 million compared to bank debt of $1,694.5 million outstanding as of September 30, 2018.
 
Interest income increased by $0.5 million to $4.8 million in the nine months ended September 30, 2019 compared to $4.3 million in the nine months ended September 30, 2018.
 
Other Finance Costs, net
 
Other finance costs, net decreased by $0.2 million, to $2.4 million in the nine months ended September 30, 2019 from $2.6 million in the nine months ended September 30, 2018.
 
Equity income on investments
 
Equity income on investments decreased by $0.4 million to $0.5 million in the nine months ended September 30, 2019 compared to $0.9 million in the nine months ended September 30, 2018 and relates to the operating performance of Gemini, in which the Company has a 49% shareholding interest.
 
Gain on debt extinguishment
 
The gain on debt extinguishment of $116.4 million in the nine months ended September 30, 2018 related to our 2018 debt refinancing and consisted of debt principal reduction net of refinancing related fees.
 
Loss on derivatives
 
Amortization of deferred realized losses on interest rate swaps remained stable at $2.7 million in each of the nine months ended September 30, 2019 and 2018.
 
Other income/(expenses), net
 
Other income/(expenses), net was $0.4 million in income in the nine months ended September 30, 2019 compared to $50.6 million in expenses in the nine months ended September 30, 2018 mainly due to $51.5 million of refinancing-related professional fees in the prior period.
 
4

 
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 sale in August 2010 and the capital contribution of Danaos Investment Limited as Trustee of the 883 Trust (“DIL”) on August 10, 2018. Our principal uses of funds have been capital expenditures to establish, grow and maintain our fleet, 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, debt interest payments and servicing the current portion of our debt obligations. Our long-term liquidity needs primarily relate to any additional vessel acquisitions in the containership sector and debt repayment. We anticipate that our primary sources of funds will be cash from operations and equity or debt financings.
 
Under our existing multi-year charters as of September 30, 2019, we had contracted revenues of $96.5 million for the remainder of 2019, $371.0 million for 2020 and, thereafter, approximately $0.9 billion. Although these contracted revenues are based on contracted charter rates, we are dependent on the ability and willingness of our charterers, some of which are facing substantial financial pressure, to meet their obligations under these charters.
 
As of September 30, 2019, we had cash and cash equivalents of $82.8 million. As of September 30, 2019, we had no remaining borrowing availability under our credit facilities. As of September 30, 2019, we had $1,450.0 million of outstanding bank debt gross of deferred finance costs. We are obligated to make quarterly fixed amortization payments, totaling $115.6 million to September 30, 2020, and quarterly variable amortization payments on this outstanding indebtedness. Additionally, in connection with the 2018 Refinancing, we undertook to refinance two of our 13,100 TEU vessels, the Hyundai Honour and Hyundai Respect, which was completed on April 12, 2019 through a sale and leaseback arrangement with a term of five years, at the end of which we will reacquire the vessels for $52.6 million or earlier, at our option, for a purchase price specified in the agreement. The net proceeds from the sale-leaseback arrangement amounting to $144.8 million were applied pro rata to partially repay the existing credit facilities (Club Facility, Credit Suisse Facility, Citibank $114 mil. Facility and Citibank $123.9 mil. Facility) secured by mortgages on such vessels. As of September 30, 2019, we had $141.4 million of outstanding leaseback obligations, with aggregate payments of $32.0 million (including imputed interest) due in monthly installments by September 30, 2020. See Note 4 “Fixed Assets, Net” to our unaudited condensed consolidated financial statements included in this report. We may consider opportunities to renew, replace or refinance our existing senior secured credit facilities, however, there is no assurance that any such transaction will be completed or on what terms.
 
In 2018, we entered into an agreement with certain of our lenders holding approximately $2.2 billion of debt maturing on December 31, 2018 for a debt refinancing transaction (the “2018 Refinancing”) which was consummated on August 10, 2018. The debt refinancing involved our entry into new credit facilities, which we refer to as the 2018 Credit Facilities, including the amendment and restatement of certain previous credit facilities, resulting in a $551 million reduction in our debt, reset financial and certain other covenants, modified interest rates and amortization profiles and the extension of debt maturities by approximately five years to December 31, 2023 (or, in some cases, June 30, 2024). In the 2018 Refinancing, we issued to certain of our lenders an aggregate of 7,095,877 shares (99,342,271 shares before the 1-for-14 reverse stock split effected on May 2, 2019) of our common stock on the closing date of the 2018 Refinancing, representing 47.5% of our issued and outstanding common stock immediately after giving effect to such issuance. The issuance ratably diluted existing holders of the Common Stock. In connection with the 2018 Refinancing, DIL, our largest stockholder, contributed $10 million to us on the closing date of the 2018 Refinancing, for which DIL did not receive any shares of common stock or other interests in us. See the Note 10, “Long-term Debt, net” to our consolidated financial statements in our Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 5, 2019.
 
Under the 2018 Credit Facilities, we are required to apply a substantial portion of our cash from operations to the repayment of principal under such facilities. See Note 9 “Long-Term Debt, net” to our unaudited condensed consolidated financial statements included in this report. We currently expect that the remaining portion of our cash from operations will be sufficient to fund all of our other obligations.
 
5

 
We have not paid a dividend since 2008, when our board of directors determined to suspend the payment of cash dividends as a result of market conditions in the international shipping industry. In addition, under the 2018 Credit Facilities we are not permitted to pay dividends, until (1) we receive in excess of $50 million in net cash proceeds from offerings of common stock and (2) the payment in full of the first installment of amortization payable following the consummation of the debt refinancing under each new credit facility. After these conditions are satisfied, under the 2018 Credit Facilities we will be permitted to pay dividends if an event of default has not occurred and is continuing or would occur as a result of the payment of such dividend, and we remain in compliance with the financial and other covenants thereunder. To the extent our credit facilities permit us to pay dividends, any dividend payments will be subject to us having sufficient available excess cash and distributable reserves, the provisions of Marshall Islands law affecting the payment of distributions to stockholders and the discretion of our board of directors.
 
In July 2014, ZIM and its creditors entered into definitive documentation effecting ZIM’s restructuring with its creditors. The terms of the restructuring included a reduction in the charter rates payable by ZIM under its time charters, expiring in 2020 or 2021, for six of our vessels. The terms also included our receipt of approximately $49.9 million aggregate principal amount of unsecured, interest bearing ZIM notes maturing in 2023 (consisting of $8.8 million of 3% Series 1 Notes due 2023 amortizing subject to available cash flow in accordance with a corporate cash sweep mechanism, and $41.1 million of 5% Series 2 Notes due 2023 non-amortizing (of the 5% interest rate, 3% is payable quarterly in cash and 2% is payable in kind, accrued quarterly with deferred cash payment on maturity)) and ZIM shares representing approximately 7.4% of the outstanding ZIM shares immediately after the restructuring, in exchange for such charter rate reductions and cancellation of ZIM’s other obligations to us which relate to the outstanding long term receivable as of December 31, 2013. See Note 7, “Other Non-current Assets” to our unaudited condensed consolidated financial statements included in this report.
 
In July 2016, we entered into a charter restructuring agreement with Hyundai Merchant Marine (“HMM”), which 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) $32.8 million principal amount of senior, unsecured Loan Notes 1, amortizing subject to available cash flows, which accrue interest at 3% per annum payable on maturity in July 2024, (ii) $6.2 million principal amount of senior, unsecured, non-amortizing Loan Notes 2, which accrue interest at 3% per annum payable on maturity in December 2022 and (iii) 4,637,558 HMM shares, which were sold on September 1, 2016 for cash proceeds of $38.1 million. On March 28, 2017, the Company sold $13.0 million principal amount carried at amortized costs of $8.6 million of HMM Loan Notes 1 for gross cash proceeds on sale of $6.2 million resulting in a loss on sale of $2.4 million. The sale of these notes resulted in the transfer of all held to maturity securities into the available for sale securities and recognizing unrealized holding losses of $38.7 million for all remaining HMM and ZIM notes in accumulated other comprehensive income/(loss) as of September 30, 2019. See Note 7, “Other Non-current Assets” to our unaudited condensed consolidated financial statements included in this report.
 
We have agreed to install scrubbers on nine of our vessels with contracted obligations therefore, together with estimated costs related to their installation, expected to amount to approximately $37.2 million as of September 30, 2019, of which $15.5 million was paid as advances before September 30, 2019 and the remaining amount is expected to be paid in the next twelve months.
 
On October 2, 2019, we entered into an agreement to acquire an 8,500 TEU container vessel built in 2005 for a gross purchase price of $25.0 million. This vessel is expected to be delivered to us prior to the end of May 2020.
 
6

 
Cash Flows

 	 	Nine Months	 	Nine Months	 	
 	 	ended	 	ended	 	
 	 	September 30, 2019	 	September 30, 2018	 	
 	 	(In thousands)	 	
Net cash provided by operating activities	 	$	167,645	 	$	110,900	 	
Net cash used in investing activities	 	$	(14,762	)	$	(2,083	)	
Net cash used in financing activities	 	$	(147,335	)	$	(98,391	)	
 
Net Cash Provided by Operating Activities
 
Net cash flows provided by operating activities increased by $56.7 million, to $167.6 million provided by operating activities in the nine months ended September 30, 2019 compared to $110.9 million provided by operating activities in the nine months ended September 30, 2018. The increase was the result mainly of a $51.0 million decrease in refinancing professional fees, a $16.1 million decrease in net finance costs, lower payments for dry-docking and special survey costs by $6.7 million and a $3.0 million decrease in total operating expenses, which were partially offset by a $14.0 million change in working capital and a $6.1 million decrease in operating revenues in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.
 
Net Cash Used in Investing Activities
 
Net cash flows used in investing activities increased by $12.7 million, to $14.8 million used in investing activities in the nine months ended September 30, 2019 compared to $2.1 million used in investing activities in the nine months ended September 30, 2018 mainly due to the increase in advances for vessel additions mainly related to scrubbers.
 
Net Cash Used in Financing Activities
 
Net cash flows used in financing activities decreased by $48.9 million, to $147.3 million used in financing activities in the nine months ended September 30, 2019 compared to $98.4 million used in financing activities in the nine months ended September 30, 2018 due to a $26.8 million increase in payments of accumulated accrued interest related to carrying amount of debt, a $9.8 million decrease in net paid-in capital, a $8.8 million net increase in loan repayments and a $3.5 million increase in finance costs related to loan arrangement fees.
 
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. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.
 
7

 
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 deferred realized losses of cash flow interest rate swaps, amortization of finance costs and finance costs accrued. Adjusted EBITDA represents net income before interest income and expense, taxes, depreciation, amortization of deferred drydocking & special survey costs, amortization of deferred realized losses of cash flow interest rate swaps, amortization of finance costs and finance costs accrued, refinancing professional fees 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

 	 	Nine Months	 	Nine Months	 	
 	 	ended	 	ended	 	
 	 	September 30,
2019	 	September 30,
2018	 	
 	 	(In thousands)	 	
Net income	 	$	97,436	 	$	148,047	 	
Depreciation	 	72,141	 	80,752	 	
Amortization of deferred drydocking & special survey costs	 	6,525	 	6,888	 	
Amortization of deferred realized losses of cash flow interest rate swaps	 	2,709	 	2,763	 	
Amortization of finance costs and debt discount	 	12,846	 	9,544	 	
Finance costs accrued (Exit Fees under our Bank Agreements)	 	424	 	1,888	 	
Interest income	 	(4,751	)	(4,298	)	
Interest expense	 	42,057	 	56,834	 	
EBITDA	 	229,387	 	302,418	 	
Gain on debt extinguishment	 	—	 	(116,365	)	
Refinancing professional fees	 	—	 	51,467	 	
Stock based compensation	 	3,060	 	157	 	
Adjusted EBITDA	 	$	232,447	 	$	237,677	 	
 
8

 
EBITDA decreased by $73.0 million, to $229.4 million in the nine months ended September 30, 2019 from $302.4 million in the nine months ended September 30, 2018. This decrease was mainly attributed to a $116.4 million gain on debt extinguishment partially offset by $51.2 of million refinancing professional fees, in the nine months ended September 30, 2018 that did not recur in the 2019 period; and a $6.1 million decrease in operating revenues, a $1.3 million increase in other finance costs and a $0.4 million decrease in operating performance on our equity investments in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.
 
Adjusted EBITDA decreased by $5.3 million, to $232.4 million in the nine months ended September 30, 2019 from $237.7 million in the nine months ended September 30, 2018. This decrease was mainly attributed to a $6.1 million decrease in operating revenues, a $1.3 million increase in other finance costs and a $0.4 million decrease in operating performance on our equity investments, which were partially offset by a $2.5 million decrease in total operating expenses, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Adjusted EBITDA for the nine months ended September 30, 2019 is adjusted for $3.1 million of stock based compensation.
 
Credit Facilities
 
We, as guarantor, and certain of our subsidiaries, as borrowers, have entered into a number of credit facilities in connection with financing the acquisition of certain vessels in our fleet and the 2018 Refinancing, which are described in Note 10, “Long-term Debt, net” to our consolidated financial statements in our Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 5, 2019. The following summarizes certain terms of our credit facilities:

Credit Facility	 	Outstanding
Principal
Amount
(in millions)(1)	 	Collateral Vessels	 	
The Royal Bank of Scotland $475.5 mil. Facility (2)	 	$	462.5	 	The Progress C, the Highway, the Bridge, the Zim Monaco, the Express Argentina, the Express France, the Express Spain, the CMA CGM Racine, the America, the CMA CGM Melisande, the Maersk Enping, the Express Berlin, the Le Havre and the Derby D	 	
HSH Nordbank—Aegean Baltic Bank—Piraeus Bank $382.5 mil. Facility (2)	 	$	375.8	 	The Vladivostok, the Advance, the Stride, the Future, the Sprinter, the Amalia C, the MSC Zebra, the Danae C, the Dimitris C, the Performance, the Europe, the Dimitra C, the Maersk Exeter, the Express Rome, the CMA CGM Rabelais, the Pusan C and the ANL Tongala	 	
Citibank $114 mil. Facility	 	$	76.6	 	The CMA CGM Moliere and the CMA CGM Musset	 	
Citibank $123.9 mil. Facility	 	$	89.6	 	The Zim Rio Grande, the Zim Sao Paolo and the Zim Kingston	 	
Citibank $120 mil. Facility (2)	 	$	103.5	 	The Colombo, the YM Seattle, the YM Vancouver, the Singapore and the Express Athens	 	
Citibank—Eurobank $37.6 mil. Facility	 	$	29.5	 	The MSC Ambition	 	
Club Facility $206.2 mil.	 	$	145.8	 	The Zim Dalian, the Express Brazil, the YM Maturity, the Express Black Sea and the CMA CGM Attila	 	
Credit Suisse $171.8 mil. Facility	 	$	118.7	 	The Zim Luanda, the CMA CGM Nerval and the YM Mandate	 	
Sinosure–Cexim–Citibank–ABN Amro $203.4 mil. Facility	 	$	47.5	 	The CMA CGM Tancredi, the CMA CGM Bianca and the CMA CGM Samson	 	

(1)         As of September 30, 2019.
(2)         These credit facilities are also secured by a second priority lien on the CMA CGM Tancredi, the CMA CGM Bianca, the CMA CGM Samson and the MSC Ambition.
 
9

 
As of September 30, 2019, there was no remaining borrowing availability under our credit facilities. We were in compliance with the financial covenants of the credit facilities as of September 30, 2019 and December 31, 2018.
 
For additional details regarding the 2018 Refinancing and 2018 Credit Facilities and the Sinosure-CEXIM Credit Facility, please refer to Note 10, “Long-term Debt, net” to our consolidated financial statements in our Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 5, 2019.
 
Additionally, in connection with the 2018 Refinancing, we undertook to refinance two of our 13,100 TEU vessels, the Hyundai Honour and Hyundai Respect, which was completed on April 12, 2019 through a sale and leaseback arrangement with a term of five years at the end of which we will reacquire the vessels. The net proceeds amounting to $144.8 million were applied pro rata to repay the existing credit facilities secured by mortgages on such vessels. As of September 30, 2019, we had $141.4 million in outstanding leaseback obligations. See Note 4 “Fixed Assets, Net” to our unaudited condensed consolidated financial statements included in this report.
 
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 10, “Financial Instruments”, to our unaudited condensed consolidated financial statements included in this report.
 
Foreign Currency Exchange Risk
 
We did not have any derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions during the nine months ended September 30, 2019 and 2018.
 
Off-Balance Sheet Arrangements
 
We do not have any transactions, obligations or relationships that could be considered material off-balance sheet arrangements.
 
10

 
Capitalization and Indebtedness
 
The table below sets forth our consolidated capitalization as of September 30, 2019.
 
·          on an actual basis; and
·        on an as adjusted basis to reflect in the period from October 1, 2019 to November 5, 2019 debt repayments of $3.4 million related to our Sinosure-CEXIM-Citibank-ABN Amro credit facility and of $1.1 million related to our leaseback obligations.

 	 	As of September 30, 2019	 	
 	 	Actual	 	As adjusted	 	
 	 	(US Dollars in thousands)	 	
Debt:	 	 	 	 	 	
Total debt (1)	 	$	1,555,296	 	$	1,550,852	 	
Stockholders’ equity:	 	 	 	 	 	
Preferred stock, par value $0.01 per share; 100,000,000 preferred shares authorized and none issued; actual and as adjusted	 	—	 	—	 	
Common stock, par value $0.01 per share; 750,000,000 shares authorized; 15,371,470 shares issued and outstanding actual and as adjusted (2)	 	154	 	154	 	
Additional paid-in capital	 	730,620	 	730,620	 	
Accumulated other comprehensive loss	 	(118,303	)	(118,303	)	
Retained earnings	 	179,285	 	179,285	 	
Total stockholders’ equity	 	791,756	 	791,756	 	
Total capitalization	 	$	2,347,052	 	$	2,342,608	 	

(1)                                 Total debt includes $1,413.9 million of long-term debt ($1,410.5 million, as adjusted) and $141.4 million ($140.3 million, as adjusted) of long-term leaseback obligations. Long-term debt is net of deferred finance costs of $36.1 million and excluding accumulated accrued interest of $201.8 million outstanding as of September 30, 2019. All of our indebtedness is secured and guaranteed by the Company.
(2)                                 Actual and as adjusted issued and outstanding common stock includes 432,788 shares of restricted stock, 50% of which are scheduled to vest on December 31, 2019 and 50% of which are scheduled to vest on December 31, 2021, subject to satisfaction of the vesting terms.
 
11

 
Our Fleet
 
The following table describes in detail our fleet deployment profile as of November 5, 2019:

Vessel Name	 	Year
Built	 	Vessel
size
(TEU)	 	Expiration of
charter(1)	 	Charterer	 	Charter
Type(2)	 	Through	 	Charter
rate (3)	 	Extension Options(4)	 	
MSC Ambition	 	2012	 	13,100	 	June 2024	 	HMM	 	T/C	 	December 2019	 	$	49,563	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	April 2020 (6)	 	$	59,418	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	June 2024	 	$	64,918	 	+ 3 years	 	at	 	$	60,418	 	
Maersk Exeter	 	2012	 	13,100	 	June 2024	 	HMM	 	T/C	 	December 2019	 	$	49,563	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	May 2020 (6)	 	$	59,418	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	June 2024	 	$	64,918	 	+ 3 years	 	at	 	$	60,418	 	
Maersk Enping	 	2012	 	13,100	 	May 2024	 	HMM	 	T/C	 	December 2019	 	$	49,563	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	May 2020 (6)	 	$	59,418	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	May 2024	 	$	64,918	 	+ 3 years	 	at	 	$	60,418	 	
Hyundai Respect(11)	 	2012	 	13,100	 	March 2024	 	HMM	 	B/B	 	December 2019	 	$	42,594	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	B/B	 	March 2020 (6)	 	$	52,449	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	B/B(5)	 	May 2020	 	$	57,949	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	March 2024	 	$	64,918	 	+ 3 years	 	at	 	$	60,418	 	
Hyundai Honour(11)	 	2012	 	13,100	 	February 2024	 	HMM	 	B/B	 	December 2019	 	$	42,594	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	B/B	 	January 2020 (6)	 	$	52,449	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	B/B(5)	 	May 2020	 	$	57,949	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2024	 	$	64,918	 	+ 3 years	 	at	 	$	60,418	 	
Express Rome	 	2011	 	10,100	 	February 2022	 	Hapag Lloyd	 	T/C	 	May 2021	 	$	27,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2022	 	$	28,000	 	+ 3 months	 	at	 	$	28,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	+ 10 up to 14 months	 	at	 	$	29,000	 	
Express Berlin	 	2011	 	10,100	 	April 2022	 	Yang Ming	 	T/C	 	December 2019	 	$	25,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	April 2022	 	$	27,750	 	+ 4 months	 	at	 	$	27,750	 	
Express Athens	 	2011	 	10,100	 	February 2022	 	Hapag Lloyd	 	T/C	 	May 2021	 	$	27,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2022	 	$	28,000	 	+ 3 months	 	at	 	$	28,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	+ 10 up to 14 months	 	at	 	$	29,000	 	
Le Havre	 	2006	 	9,580	 	February 2023	 	MSC	 	T/C	 	February 2020 (6)	 	$	13,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2023 (8)	 	$	23,000	 	+ 4 months	 	at	 	$	23,000	 	
Pusan C	 	2006	 	9,580	 	February 2023	 	MSC	 	T/C	 	February 2020 (6)	 	$	13,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2023 (8)	 	$	23,000	 	+ 4 months	 	at	 	$	23,000	 	
CMA CGM Melisande	 	2012	 	8,530	 	May 2024	 	CMA CGM	 	T/C	 	November 2023	 	$	43,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	May 2024	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Attila	 	2011	 	8,530	 	October 2023	 	CMA CGM	 	T/C	 	April 2023	 	$	43,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	October 2023	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Tancredi	 	2011	 	8,530	 	November 2023	 	CMA CGM	 	T/C	 	May 2023	 	$	43,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	November 2023	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Bianca	 	2011	 	8,530	 	January 2024	 	CMA CGM	 	T/C	 	July 2023	 	$	43,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	January 2024	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Samson	 	2011	 	8,530	 	March 2024	 	CMA CGM	 	T/C	 	September 2023	 	$	43,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	March 2024	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
America	 	2004	 	8,468	 	January 2023	 	MSC	 	T/C	 	January 2020 (6)	 	$	13,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	January 2023 (8)	 	$	22,000	 	+ 4 months	 	at	 	$	22,000	 	
Europe	 	2004	 	8,468	 	March 2023	 	MSC	 	T/C	 	March 2020 (6)	 	$	13,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	March 2023 (8)	 	$	22,000	 	+ 4 months	 	at	 	$	22,000	 	
CMA CGM Moliere	 	2009	 	6,500	 	August 2021	 	CMA CGM	 	T/C	 	August 2021	 	$	34,350	 	+ 2 months	 	at	 	$	34,350	 	
CMA CGM Musset	 	2010	 	6,500	 	August 2022	 	CMA CGM	 	T/C	 	February 2022	 	$	34,350	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	August 2022	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Nerval	 	2010	 	6,500	 	October 2022	 	CMA CGM	 	T/C	 	April 2022	 	$	34,350	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	October 2022	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Rabelais	 	2010	 	6,500	 	December 2022	 	CMA CGM	 	T/C	 	June 2022	 	$	34,350	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	December 2022	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
CMA CGM Racine	 	2010	 	6,500	 	January 2023	 	CMA CGM	 	T/C	 	July 2022	 	$	34,350	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	January 2023	 	at market (7)	 	+ 6 months	 	at	 	market (7)	 	
YM Mandate	 	2010	 	6,500	 	January 2028	 	Yang Ming	 	B/B	 	January 2028	 	$	26,890	 	+ 8 months	 	at	 	$	26,890	 	
YM Maturity	 	2010	 	6,500	 	April 2028	 	Yang Ming	 	B/B	 	April 2028	 	$	26,890	 	+ 8 months	 	at	 	$	26,890	 	
Dimitra C	 	2002	 	6,402	 	January 2020	 	ONE	 	T/C	 	January 2020	 	$	18,000	 	up to February 2020	 	at	 	$	18,000	 	
Performance	 	2002	 	6,402	 	May 2020	 	OOCL	 	T/C	 	May 2020	 	$	22,000	 	up to July 2020	 	at	 	$	22,000	 	
ZIM Rio Grande	 	2008	 	4,253	 	May 2020	 	ZIM	 	T/C	 	May 2020	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
ZIM Sao Paolo	 	2008	 	4,253	 	August 2020	 	ZIM	 	T/C	 	August 2020	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
ZIM Kingston	 	2008	 	4,253	 	September 2020	 	ZIM	 	T/C	 	September 2020	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
ZIM Monaco	 	2009	 	4,253	 	November 2020	 	ZIM	 	T/C	 	November 2020	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
ZIM Dalian	 	2009	 	4,253	 	February 2021	 	ZIM	 	T/C	 	February 2021	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
ZIM Luanda	 	2009	 	4,253	 	May 2021	 	ZIM	 	T/C	 	May 2021	 	$	13,700	 	+ 3 months	 	at	 	$	13,700	 	
YM Seattle	 	2007	 	4,253	 	November 2019	 	Yang Ming	 	T/C	 	November 2019	 	$	9,000	 	 	 	 	 	 	 	
YM Vancouver	 	2007	 	4,253	 	April 2020	 	Yang Ming	 	T/C	 	April 2020	 	$	14,600	 	+ 3 months	 	at	 	$	14,600	 	
Derby D	 	2004	 	4,253	 	May 2020	 	CMA CGM	 	T/C	 	May 2020	 	$	9,200	 	+ 2 months	 	at	 	$	9,200	 	
ANL Tongala	 	2004	 	4,253	 	May 2020	 	CMA CGM	 	T/C	 	May 2020	 	$	9,200	 	+ 2 months	 	at	 	$	9,200	 	
Dimitris C	 	2001	 	3,430	 	June 2020	 	CMA CGM	 	T/C	 	June 2020	 	$	9,500	 	+ 3 months	 	at	 	$	9,500	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	+ 4.5 up to 6 months	 	at	 	$	10,500	 	
Express Argentina	 	2010	 	3,400	 	May 2020	 	Maersk	 	T/C	 	May 2020	 	$	9,000	 	+ 4 months	 	at	 	$	9,000	 	
Express Brazil	 	2010	 	3,400	 	September 2020	 	CMA CGM	 	T/C	 	September 2020	 	$	10,600	 	+ 3 months	 	at	 	$	10,600	 	
 
12

 

Vessel Name	 	Year
Built	 	Vessel
size
(TEU)	 	Expiration of
charter(1)	 	Charterer	 	Charter
Type(2)	 	Through	 	Charter
rate (3)	 	Extension Options(4)	 	
Express France	 	2010	 	3,400	 	October 2020	 	CMA CGM	 	T/C	 	November 2019	 	$	9,500	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	October 2020	 	$	10,600	 	+ 3 months	 	at	 	$	10,600	 	
Express Spain	 	2011	 	3,400	 	March 2020	 	Cosco	 	T/C	 	March 2020	 	$	10,500	 	+ 2 months	 	at	 	$	10,500	 	
Express Black Sea	 	2011	 	3,400	 	December 2019	 	CMA CGM	 	T/C	 	December 2019	 	$	9,750	 	up to February 2020	 	at	 	$	9,750	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	+ 10.5 up to 13.5 months	 	at	 	$	11,000	 	
Singapore	 	2004	 	3,314	 	March 2020	 	OOCL	 	T/C	 	March 2020	 	$	11,000	 	+ 2 months	 	at	 	$	11,000	 	
Colombo	 	2004	 	3,314	 	February 2020	 	MSC	 	T/C	 	February 2020	 	$	8,250	 	+ 2 months	 	at	 	$	8,250	 	
MSC Zebra	 	2001	 	2,602	 	September 2020	 	MSC	 	T/C	 	September 2020	 	$	9,500	 	 	 	 	 	 	 	
Danae C	 	2001	 	2,524	 	January 2020	 	Hapag Lloyd	 	T/C	 	January 2020	 	$	9,000	 	+ 13 months	 	at	 	$	9,000	 	
Amalia C	 	1998	 	2,452	 	March 2020	 	Yang Ming	 	T/C	 	November 2019	 	$	8,750	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	March 2020	 	$	10,100	 	+ 2 months	 	at	 	$	10,100	 	
Vladivostok	 	1997	 	2,200	 	November 2019	 	Evergreen	 	T/C	 	November 2019	 	$	8,000	 	up to February 2020	 	at	 	$	8,000	 	
Stride	 	1997	 	2,200	 	April 2020	 	Evergreen	 	T/C	 	April 2020	 	$	10,000	 	+ 3 months	 	at	 	$	10,000	 	
Sprinter	 	1997	 	2,200	 	March 2020	 	Evergreen	 	T/C	 	March 2020	 	$	9,100	 	+ 3 months	 	at	 	$	9,100	 	
Future	 	1997	 	2,200	 	November 2019	 	MCC	 	T/C	 	November 2019	 	$	7,650	 	 	 	 	 	 	 	
Advance	 	1997	 	2,200	 	April 2020	 	Evergreen	 	T/C	 	April 2020	 	$	10,000	 	+ 3 months	 	at	 	$	10,000	 	
Bridge	 	1998	 	2,200	 	September 2020	 	Samudera	 	T/C	 	November 2019	 	$	7,500	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	September 2020	 	$	9,150	 	+ 2 months	 	at	 	$	9,150	 	
Highway	 	1998	 	2,200	 	February 2020	 	Cosco	 	T/C	 	November 2019	 	$	8,475	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	T/C	 	February 2020	 	$	10,000	 	+ 2 months	 	at	 	$	10,000	 	
Progress C	 	1998	 	2,200	 	March 2020	 	Evergreen	 	T/C	 	March 2020	 	$	9,100	 	+ 3 months	 	at	 	$	9,100	 	

Gemini Vessels	 	Year
Built	 	Vessel
size
(TEU)	 	Expiration of
charter(1)	 	Charterer	 	Charter
Type(2)	 	Through	 	Charter
rate (3)	 	Extension Options(4)	 	
Belita (9)	 	2006	 	8,533	 	September 2021	 	ZIM	 	T/C	 	November 2019	 	$	25,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	CMA CGM	 	T/C	 	September 2021	 	$	25,000	 	+ 4 months	 	at	 	$	25,000	 	
Catherine C (9)	 	2001	 	6,422	 	February 2023	 	MSC	 	T/C	 	February 2020 (6)	 	$	10,000	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	February 2023 (8)	 	$	18,000	 	+ 4 months	 	at	 	$	18,000	 	
Leo C (9)	 	2002	 	6,422	 	September 2022	 	MSC	 	T/C	 	September 2022	 	$	18,000	 	+ 4 months	 	at	 	$	18,000	 	
Suez Canal (9) (10)	 	2002	 	5,610	 	April 2020	 	TS Lines	 	T/C	 	April 2020	 	$	16,250	 	up to August 2020	 	at	 	$	16,250	 	
Genoa (9) (10)	 	2002	 	5,544	 	August 2020	 	Hapag Lloyd	 	T/C	 	August 2020	 	$	17,000	 	+ 3 months	 	at	 	$	17,000	 	

(1)                  Earliest date charters could expire. Most charters include options for the charterers to extend their terms as described in the “Extension Options” column.
(2)                  “T/C” stands for “Time Charter” and “B/B” stands for “Bareboat Charter”.
(3)                  Gross daily charter rate, does not include charter commissions.
(4)                  At the option of the charterer.
(5)                  Bareboat charter arrangement for vessels “Hyundai Honour” and “Hyundai Respect” through May 2020 after which the charters revert back to time charters. Charterers have the option to revert to time charter status earlier than these dates.
(6)                  Increased charter rate applies from date of scrubber installation, which is currently expected to be from the date indicated in the table and onwards; however, final scrubber installation date may vary.
(7)                  Daily charter rate for last six months of the charter term will be equal to the prevailing market rate at that time.
(8)                  Charter period post scrubber installation to be 3 years, which is currently expected to be from the date indicated in the table and onwards; however, final scrubber installation date may vary.
(9)                  Vessels acquired by Gemini, in which Danaos holds a 49% equity interest
(10)             A subsidiary of Gemini holds a leasehold bareboat charter interest in such vessel, which was financed by and is subject to a capital lease pursuant to which such subsidiary will acquire all rights to such vessel at the end of such lease.
(11)             A subsidiary of Danaos holds a leasehold bareboat charter interest in such vessel, which was financed by and is subject to a capital lease pursuant to which such subsidiary will acquire all rights to such vessel at the end of such lease.
 
13

 
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 effects of the refinancing transactions; Danaos’ ability to achieve the expected benefits of the 2018 Refinancing and comply with the terms of its new credit facilities and other agreements entered into in connection with the 2018 Refinancing; 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, 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 us with the U.S. Securities and Exchange Commission.
 
14

 
INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018	 	F-2	
 	 	 	
Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	 	F-3	
 	 	 	
Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	 	F-4	
 	 	 	
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2019 and 2018 (unaudited)	 	F-5	
 	 	 	
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)	 	F-6	
 	 	 	
Notes to the Unaudited Condensed Consolidated Financial Statements	 	F-7	
 
F-1

 
DANAOS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except share and per share amounts)

 	 	 	 	As of	 	
 	 	 	 	September 30,	 	December 31,	 	
 	 	Notes	 	2019	 	2018	 	
 	 	 	 	(unaudited)	 	 	 	
ASSETS	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	
Cash and cash equivalents	 	3	 	$	82,823	 	$	77,275	 	
Accounts receivable, net	 	 	 	7,637	 	9,225	 	
Inventories	 	 	 	8,966	 	8,884	 	
Prepaid expenses	 	 	 	899	 	1,214	 	
Due from related parties	 	15	 	20,409	 	17,970	 	
Other current assets	 	 	 	6,854	 	5,182	 	
Total current assets	 	 	 	127,588	 	119,750	 	
NON-CURRENT ASSETS	 	 	 	 	 	 	 	
Fixed assets at cost, net of accumulated depreciation of $816,065 (2018: $743,924)	 	4	 	2,412,274	 	2,480,329	 	
Deferred charges, net	 	5	 	11,720	 	13,031	 	
Investments in affiliates	 	6	 	7,871	 	7,363	 	
Other non-current assets	 	7	 	78,231	 	59,369	 	
Total non-current assets	 	 	 	2,510,096	 	2,560,092	 	
Total assets	 	 	 	$	2,637,684	 	$	2,679,842	 	
 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	
Accounts payable	 	 	 	$	12,414	 	$	10,477	 	
Accrued liabilities	 	8	 	9,692	 	11,770	 	
Current portion of long-term debt, net	 	9	 	115,551	 	113,777	 	
Current portion of long-term leaseback obligation	 	4	 	15,202	 	—	 	
Accumulated accrued interest, current portion	 	 	 	34,610	 	35,782	 	
Unearned revenue	 	 	 	19,417	 	19,753	 	
Other current liabilities	 	9	 	15,317	 	31,142	 	
Total current liabilities	 	 	 	222,203	 	222,701	 	
 	 	 	 	 	 	 	 	
LONG-TERM LIABILITIES	 	 	 	 	 	 	 	
Long-term debt, net	 	9	 	1,298,371	 	1,508,108	 	
Long-term leaseback obligation, net of current portion	 	4	 	126,172	 	—	 	
Accumulated accrued interest, net of current portion	 	 	 	167,237	 	200,574	 	
Unearned revenue, net of current portion	 	 	 	31,235	 	41,730	 	
Other long-term liabilities	 	9	 	710	 	15,876	 	
Total long-term liabilities	 	 	 	1,623,725	 	1,766,288	 	
Total liabilities	 	 	 	1,845,928	 	1,988,989	 	
Commitments and Contingencies	 	11	 	—	 	—	 	
 	 	 	 	 	 	 	 	
STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	
Preferred stock (par value $0.01, 100,000,000 preferred shares authorized and not issued as of September 30, 2019 and December 31, 2018)	 	12	 	—	 	—	 	
Common stock (par value $0.01, 750,000,000 common shares authorized as of September 30, 2019 and December 31, 2018. 15,371,470 and 15,237,456 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively (213,324,455 shares before 1-for-14 reverse stock split as of December 31, 2018))	 	12	 	154	 	152	 	
Additional paid-in capital	 	 	 	730,620	 	727,562	 	
Accumulated other comprehensive loss	 	7, 10	 	(118,303	)	(118,710	)	
Retained earnings	 	 	 	179,285	 	81,849	 	
Total stockholders’ equity	 	 	 	791,756	 	690,853	 	
Total liabilities and stockholders’ equity	 	 	 	$	2,637,684	 	$	2,679,842	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
F-2

 
DANAOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Expressed in thousands of United States Dollars, except share and per share amounts)

 	 	 	 	Three months ended	 	Nine months ended	 	
 	 	 	 	September 30,	 	September 30,	 	
 	 	Notes	 	2019	 	2018	 	2019	 	2018	 	
 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING REVENUES	 	13	 	$	111,830	 	$	117,781	 	$	337,040	 	$	343,101	 	
 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	 	
Voyage expenses	 	15	 	(2,792	)	(2,883	)	(8,794	)	(9,230	)	
Vessel operating expenses	 	 	 	(24,858	)	(25,461	)	(78,035	)	(79,052	)	
Depreciation	 	 	 	(24,336	)	(26,995	)	(72,141	)	(80,752	)	
Amortization of deferred drydocking and special survey costs	 	5	 	(2,271	)	(2,636	)	(6,525	)	(6,888	)	
General and administrative expenses	 	15	 	(6,422	)	(7,431	)	(19,783	)	(18,390	)	
Income From Operations	 	 	 	51,151	 	52,375	 	151,762	 	148,789	 	
 	 	 	 	 	 	 	 	 	 	 	 	
OTHER INCOME (EXPENSES):	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	 	 	1,586	 	1,505	 	4,751	 	4,298	 	
Interest expense	 	 	 	(18,216	)	(20,509	)	(54,903	)	(66,378	)	
Other finance expenses	 	 	 	(308	)	(679	)	(2,402	)	(2,611	)	
Equity income on investments	 	6	 	560	 	728	 	508	 	912	 	
Gain on debt extinguishment	 	9	 	—	 	116,365	 	—	 	116,365	 	
Other income/(expense), net	 	9	 	(5	)	(21,637	)	429	 	(50,565	)	
Loss on derivatives	 	10	 	(913	)	(931	)	(2,709	)	(2,763	)	
Total Other Income/(Expenses), net	 	 	 	(17,296	)	74,842	 	(54,326	)	(742	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	 	$	33,855	 	$	127,217	 	$	97,436	 	$	148,047	 	
 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS PER SHARE	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	 	$	2.27	 	$	10.80	 	$	6.52	 	$	16.15	 	
Diluted earnings per share	 	 	 	$	2.20	 	$	10.76	 	$	6.36	 	$	16.12	 	
Basic weighted average number of common shares (in thousands)	 	1, 14	 	14,939	 	11,776	 	14,939	 	9,168	 	
Diluted weighted average number of common shares (in thousands)	 	1, 14	 	15,373	 	11,828	 	15,309	 	9,186	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
F-3

 
DANAOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (unaudited)
(Expressed in thousands of United States Dollars)

 	 	 	 	Three months ended	 	Nine months ended	 	
 	 	 	 	September 30,	 	September 30,	 	
 	 	Notes	 	2019	 	2018	 	2019	 	2018	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net income for the period	 	 	 	$	33,855	 	$	127,217	 	$	97,436	 	$	148,047	 	
Other comprehensive income/(loss):	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gain/(loss) on available for sale securities	 	7	 	324	 	952	 	(2,302	)	3,461	 	
Amortization of deferred realized losses on cash flow hedges	 	10	 	913	 	931	 	2,709	 	2,763	 	
Total Other Comprehensive Income	 	 	 	1,237	 	1,883	 	407	 	6,224	 	
Comprehensive Income	 	 	 	$	35,092	 	$	129,100	 	$	97,843	 	$	154,271	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
F-4

 
DANAOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)
(Expressed in thousands of United States Dollars)

 	 	Common Stock	 	 	 	Accumulated	 	 	 	 	 	
 	 	Number
of
shares	 	Par
value	 	Additional
paid-in
capital	 	other
comprehensive
loss	 	Retained
earnings	 	Total	 	
As of December 31, 2017	 	7,843	 	$	78	 	$	547,918	 	$	(114,076	)	$	114,785	 	$	548,705	 	
Net Income	 	—	 	—	 	—	 	—	 	14,992	 	14,992	 	
Net movement in other comprehensive income	 	—	 	—	 	—	 	2,363	 	—	 	2,363	 	
As of March 31, 2018	 	7,843	 	$	78	 	$	547,918	 	$	(111,713	)	$	129,777	 	$	566,060	 	
Net Income	 	—	 	—	 	—	 	—	 	5,838	 	5,838	 	
Net movement in other comprehensive income	 	—	 	—	 	—	 	1,978	 	—	 	1,978	 	
As of June 30, 2018	 	7,843	 	$	78	 	$	547,918	 	$	(109,735	)	$	135,615	 	$	573,876	 	
Net Income	 	—	 	—	 	—	 	—	 	127,217	 	127,217	 	
Net movement in other comprehensive income	 	—	 	—	 	—	 	1,883	 	—	 	1,883	 	
Paid-in capital	 	—	 	—	 	10,000	 	—	 	—	 	10,000	 	
Issuance of common stock	 	7,096	 	71	 	168,641	 	—	 	—	 	168,712	 	
Stock compensation	 	298	 	3	 	154	 	—	 	—	 	157	 	
As of September 30, 2018	 	15,237	 	$	152	 	$	726,713	 	$	(107,852	)	$	262,832	 	$	881,845	 	

 	 	Common Stock	 	 	 	Accumulated	 	 	 	 	 	
 	 	Number
of
shares	 	Par
value	 	Additional
paid-in
capital	 	other
comprehensive
loss	 	Retained
earnings	 	Total	 	
As of December 31, 2018	 	15,237	 	$	152	 	$	727,562	 	$	(118,710	)	$	81,849	 	$	690,853	 	
Net Income	 	—	 	—	 	—	 	—	 	33,443	 	33,443	 	
Stock compensation	 	—	 	—	 	830	 	—	 	—	 	830	 	
Net movement in other comprehensive income	 	—	 	—	 	—	 	288	 	—	 	288	 	
As of March 31, 2019	 	15,237	 	$	152	 	$	728,392	 	$	(118,422	)	$	115,292	 	$	725,414	 	
Net Income	 	—	 	—	 	—	 	—	 	30,138	 	30,138	 	
Stock compensation	 	136	 	2	 	1,033	 	—	 	—	 	1,035	 	
Net movement in other comprehensive income/(loss)	 	—	 	—	 	—	 	(1,118	)	—	 	(1,118	)	
As of June 30, 2019	 	15,373	 	$	154	 	$	729,425	 	$	(119,540	)	$	145,430	 	$	755,469	 	
Net Income	 	—	 	—	 	—	 	—	 	33,855	 	33,855	 	
Stock compensation	 	(2	)	—	 	1,195	 	—	 	—	 	1,195	 	
Net movement in other comprehensive income	 	—	 	—	 	—	 	1,237	 	—	 	1,237	 	
As of September 30, 2019	 	15,371	 	$	154	 	$	730,620	 	$	(118,303	)	$	179,285	 	$	791,756	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
F-5

 
DANAOS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Expressed in thousands of United States Dollars)

 	 	Nine months ended	 	
 	 	September 30,	 	
 	 	2019	 	2018	 	
 	 	 	 	 	 	
Cash Flows from Operating Activities	 	 	 	 	 	
Net income	 	$	97,436	 	$	148,047	 	
 	 	 	 	 	 	
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	 	 	
Depreciation	 	72,141	 	80,752	 	
Amortization of deferred drydocking and special survey costs	 	6,525	 	6,888	 	
Amortization of finance costs	 	8,220	 	8,337	 	
Exit fee accrued on debt	 	424	 	1,888	 	
Debt discount amortization	 	4,626	 	1,207	 	
Gain on debt extinguishment	 	—	 	(116,365	)	
PIK interest	 	2,545	 	414	 	
Payments for drydocking and special survey costs deferred	 	(5,214	)	(11,905	)	
Amortization of deferred realized losses on interest rate swaps	 	2,709	 	2,763	 	
Stock based compensation	 	3,060	 	157	 	
Equity income on investments	 	(508	)	(912	)	
(Increase)/Decrease in	 	 	 	 	 	
Accounts receivable	 	1,588	 	(2,316	)	
Inventories	 	(82	)	(899	)	
Prepaid expenses	 	315	 	(207	)	
Due from related parties	 	(2,439	)	20,880	 	
Other assets, current and non-current	 	(11,790	)	(11,262	)	
Increase/(Decrease) in	 	 	 	 	 	
Accounts payable	 	1,567	 	2,387	 	
Accrued liabilities	 	(2,130	)	(3,995	)	
Unearned revenue, current and long-term	 	(10,831	)	(13,829	)	
Other liabilities, current and long-term	 	(517	)	(1,130	)	
Net Cash provided by Operating Activities	 	167,645	 	110,900	 	
 	 	 	 	 	 	
Cash Flows from Investing Activities	 	 	 	 	 	
Vessels additions	 	(3,716	)	(2,083	)	
Advances for vessels additions	 	(11,046	)	—	 	
Net Cash used in Investing Activities	 	(14,762	)	(2,083	)	
 	 	 	 	 	 	
Cash Flows from Financing Activities	 	 	 	 	 	
Proceeds from long-term debt	 	—	 	325,852	 	
Payments of long-term debt	 	(231,389	)	(407,107	)	
Proceeds from sale-leaseback of vessels	 	146,523	 	—	 	
Payments of leaseback obligation	 	(5,149	)	—	 	
Payments of accumulated accrued interest	 	(26,846	)	—	 	
Finance costs	 	(30,474	)	(26,967	)	
Paid-in capital	 	—	 	10,000	 	
Share issuance costs	 	—	 	(169	)	
Net Cash used in Financing Activities	 	(147,335	)	(98,391	)	
 	 	 	 	 	 	
Net Increase in cash, cash equivalents and restricted cash	 	5,548	 	10,426	 	
Cash, cash equivalents and restricted cash at beginning of period	 	77,275	 	69,707	 	
Cash, cash equivalents and restricted cash at end of period	 	$	82,823	 	$	80,133	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
F-6

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1                              Basis of Presentation and General Information
 
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 the Company is the United States Dollar.
 
Danaos Corporation (“Danaos” or “Company”), 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 12, “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 containerships 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 present fairly, in all material respects, the Company’s condensed consolidated financial position as of September 30, 2019, the condensed consolidated results of operations for the three and nine months ended September 30, 2019 and 2018 and the condensed consolidated cash flows for the three and nine months ended September 30, 2019 and 2018. 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, 2018. The results of operations for the three and nine months ended September 30, 2019, 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, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
 
The accompanying condensed consolidated financial statements (unaudited) represent the consolidation of the accounts of the Company and its wholly owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. Inter-company transaction balances and unrealized gains on transactions between the companies are eliminated.
 
The Company also consolidates entities that are determined to be variable interest entities, of which the Company is the primary beneficiary, as defined in the authoritative guidance under U.S. GAAP. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. 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, cash flows and stockholders’ equity at and for each period since their respective incorporation dates. The consolidated companies are referred to as “Danaos,” or “the Company.”
 
On May 2, 2019, the Company effected a 1-for-14 reverse stock split of the issued and outstanding shares of common stock of the Company. All share and per share data disclosed in the accompanying condensed consolidated financial statements (unaudited) give effect to this reverse stock split retroactively, for all periods presented. The reverse stock split reduced the number of the Company’s outstanding shares of common stock from 213,324,455 to 15,237,456 on May 2, 2019 and affected all issued and outstanding shares of common stock. No fractional shares were issued in connection to the reverse stock split. Stockholders who would otherwise hold a fractional share of the Company’s common stock received a cash payment in lieu of such fractional share. The par value and other terms of the Company’s common stock were not affected by the reverse stock split.
 
F-7

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
As of September 30, 2019, Danaos included the vessel owning companies (the “Danaos Subsidiaries”) listed below. All vessels are container vessels:

Company	 	Date of Incorporation	 	Vessel Name	 	Year Built	 	TEU(1)	 	
Megacarrier (No. 1) Corp.	 	September 10, 2007	 	Hyundai Honour	 	2012	 	13,100	 	
Megacarrier (No. 2) Corp.	 	September 10, 2007	 	Hyundai Respect	 	2012	 	13,100	 	
Megacarrier (No. 3) Corp.	 	September 10, 2007	 	Maersk Enping	 	2012	 	13,100	 	
Megacarrier (No. 4) Corp.	 	September 10, 2007	 	Maersk Exeter	 	2012	 	13,100	 	
Megacarrier (No. 5) Corp.	 	September 10, 2007	 	MSC Ambition	 	2012	 	13,100	 	
CellContainer (No. 6) Corp.	 	October 31, 2007	 	Express Berlin	 	2011	 	10,100	 	
CellContainer (No. 7) Corp.	 	October 31, 2007	 	Express Rome	 	2011	 	10,100	 	
CellContainer (No. 8) Corp.	 	October 31, 2007	 	Express Athens	 	2011	 	10,100	 	
Karlita Shipping Co. Ltd.	 	February 27, 2003	 	Pusan C	 	2006	 	9,580	 	
Ramona Marine Co. Ltd.	 	February 27, 2003	 	Le Havre	 	2006	 	9,580	 	
Teucarrier (No. 5) Corp.	 	September 17, 2007	 	CMA CGM Melisande	 	2012	 	8,530	 	
Teucarrier (No. 1) Corp.	 	January 31, 2007	 	CMA CGM Attila	 	2011	 	8,530	 	
Teucarrier (No. 2) Corp.	 	January 31, 2007	 	CMA CGM Tancredi	 	2011	 	8,530	 	
Teucarrier (No. 3) Corp.	 	January 31, 2007	 	CMA CGM Bianca	 	2011	 	8,530	 	
Teucarrier (No. 4) Corp.	 	January 31, 2007	 	CMA CGM Samson	 	2011	 	8,530	 	
Oceanew Shipping Ltd.	 	January 14, 2002	 	Europe	 	2004	 	8,468	 	
Oceanprize Navigation Ltd.	 	January 21, 2003	 	America	 	2004	 	8,468	 	
Boxcarrier (No. 2) Corp.	 	June 27, 2006	 	CMA CGM Musset	 	2010	 	6,500	 	
Boxcarrier (No. 3) Corp.	 	June 27, 2006	 	CMA CGM Nerval	 	2010	 	6,500	 	
Boxcarrier (No. 4) Corp.	 	June 27, 2006	 	CMA CGM Rabelais	 	2010	 	6,500	 	
Boxcarrier (No. 5) Corp.	 	June 27, 2006	 	CMA CGM Racine	 	2010	 	6,500	 	
Boxcarrier (No. 1) Corp.	 	June 27, 2006	 	CMA CGM Moliere	 	2009	 	6,500	 	
Expresscarrier (No. 1) Corp.	 	March 5, 2007	 	YM Mandate	 	2010	 	6,500	 	
Expresscarrier (No. 2) Corp.	 	March 5, 2007	 	YM Maturity	 	2010	 	6,500	 	
Actaea Company Limited	 	October 14, 2014	 	Performance	 	2002	 	6,402	 	
Asteria Shipping Company Limited	 	October 14, 2014	 	Dimitra C	 	2002	 	6,402	 	
Continent Marine Inc.	 	March 22, 2006	 	Zim Monaco	 	2009	 	4,253	 	
Medsea Marine Inc.	 	May 8, 2006	 	Zim Dalian	 	2009	 	4,253	 	
Blacksea Marine Inc.	 	May 8, 2006	 	Zim Luanda	 	2009	 	4,253	 	
Bayview Shipping Inc.	 	March 22, 2006	 	Zim Rio Grande	 	2008	 	4,253	 	
Channelview Marine Inc.	 	March 22, 2006	 	Zim Sao Paolo	 	2008	 	4,253	 	
Balticsea Marine Inc.	 	March 22, 2006	 	Zim Kingston	 	2008	 	4,253	 	
Seacarriers Services Inc.	 	June 28, 2005	 	YM Seattle	 	2007	 	4,253	 	
Seacarriers Lines Inc.	 	June 28, 2005	 	YM Vancouver	 	2007	 	4,253	 	
Containers Services Inc.	 	May 30, 2002	 	ANL Tongala	 	2004	 	4,253	 	
Containers Lines Inc.	 	May 30, 2002	 	Derby D	 	2004	 	4,253	 	
Boulevard Shiptrade S.A	 	September 12, 2013	 	Dimitris C	 	2001	 	3,430	 	
CellContainer (No. 4) Corp.	 	March 23, 2007	 	Express Spain	 	2011	 	3,400	 	
CellContainer (No. 5) Corp.	 	March 23, 2007	 	Express Black Sea	 	2011	 	3,400	 	
CellContainer (No. 1) Corp.	 	March 23, 2007	 	Express Argentina	 	2010	 	3,400	 	
CellContainer (No. 2) Corp.	 	March 23, 2007	 	Express Brazil	 	2010	 	3,400	 	
CellContainer (No. 3) Corp.	 	March 23, 2007	 	Express France	 	2010	 	3,400	 	
Wellington Marine Inc.	 	January 27, 2005	 	Singapore	 	2004	 	3,314	 	
Auckland Marine Inc.	 	January 27, 2005	 	Colombo	 	2004	 	3,314	 	
Vilos Navigation Company Ltd.	 	May 30, 2013	 	MSC Zebra	 	2001	 	2,602	 	
Trindade Maritime Company	 	April 10, 2013	 	Amalia C	 	1998	 	2,452	 	
Sarond Shipping Inc.	 	January 18, 2013	 	Danae C	 	2001	 	2,524	 	
Speedcarrier (No. 7) Corp.	 	December 6, 2007	 	Highway	 	1998	 	2,200	 	
Speedcarrier (No. 6) Corp.	 	December 6, 2007	 	Progress C	 	1998	 	2,200	 	
Speedcarrier (No. 8) Corp.	 	December 6, 2007	 	Bridge	 	1998	 	2,200	 	
Speedcarrier (No. 1) Corp.	 	June 28, 2007	 	Vladivostok	 	1997	 	2,200	 	
Speedcarrier (No. 2) Corp.	 	June 28, 2007	 	Advance	 	1997	 	2,200	 	
Speedcarrier (No. 3) Corp.	 	June 28, 2007	 	Stride	 	1997	 	2,200	 	
Speedcarrier (No. 5) Corp.	 	June 28, 2007	 	Future	 	1997	 	2,200	 	
Speedcarrier (No. 4) Corp.	 	June 28, 2007	 	Sprinter	 	1997	 	2,200	 	

(1)                                 Twenty-feet equivalent unit, the international standard measure for containers and containership capacity.
 
F-8

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2                              Significant Accounting Policies
 
For a detailed discussion about the Company’s significant accounting policies, see Note 2 “Significant Accounting Policies” in the Company’s consolidated financial statements included in the Annual Report on Form 20-F for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 5, 2019. During the nine months ended September 30, 2019, other than the following, there were no other significant changes made to the Company’s significant accounting policies:
 
Changes in Accounting Principles:
 
Leases
 
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 applies to both types of leases — capital (or finance) leases and operating leases. According to the new Accounting Standard, lessees are required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. This guidance requires companies to identify lease and non-lease components of a lease agreement. Lease components relate to the right to use the leased asset and non-lease components relate to payments for goods or services that are transferred separately from the right to use the underlying asset. Total lease consideration is allocated to lease and non-lease components on a relative standalone basis. The recognition of revenues related to lease components are governed by ASC 842 while revenue related to non-lease components are subject to ASC 606. In March 2018, the FASB tentatively approved a proposed amendment to ASU 842, that provide entities the optional transition method to initially account for the impact of the adoption with a cumulative adjustment to retained earnings on the effective date of the ASU. In addition, lessors can elect, as a practical expedient, not to allocate the total consideration to lease and non-lease components based on their relative standalone selling prices. As adopted by the Accounting Standards Update No. 2018-11 in July 2018, this practical expedient allows lessors to elect and account for the combined component based on its predominant characteristic. ASC 842 provides practical expedients that allow entities to not (i) reassess whether any expired or existing contracts are considered or contain leases; (ii) reassess the lease classification for any expired or existing leases; and (iii) reassess initial direct costs for any existing leases. In July 2018, the FASB issued Accounting Standards Update No. 2018-10, “Codification Improvements to Topic 842, Leases” and in December 2018 the Accounting Standards Update No. 2018-20 “Narrow-scope improvements for lessors”, which further improve and clarify ASU 2016-02.
 
The Company adopted this standard on January 1, 2019 using the modified retrospective method. The Company derives its revenue from the time charters and bareboat charters of its vessels that are classified as operating leases. These charters involve placing the vessels at charterers use for a period of time in return for daily hire rates, which include lease component related to the right of use of the vessels and non-lease components primarily related to the operating expenses of the vessels paid by the Company. The revenue earned based on these charters is not negotiated in separate components. The Company elected the practical expedient to use the effective date of adoption as the date of initial application. Furthermore the Company elected practical expedients, which allow entities not (i) reassess whether any expired or existing contracts are considered or contain leases; (ii) reassess the lease classification for any expired or existing leases (iii) reassess initial direct costs for any existing leases and (iv) which allows to treat the lease and non-lease components as a single lease component provided the criteria are met. The adoption of this standard did not have a material effect on the condensed consolidated financial statements since the Company is primarily a lessor and the accounting for lessors is largely unchanged under this standard.
 
Recent Accounting Pronouncements:
 
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB issued Accounting Standards Update No. 2018-19 “Codification improvements to Topic 326” in December 2018, which clarifies that impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases; and Accounting Standards Update No. 2019-4 “Codification improvements to Topic 326, Topic 815 and Topic 825” in April 2019, which clarifies or addresses related issues. The ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.
 
F-9

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
3                              Cash, Cash Equivalents and Restricted Cash
 
Cash, cash equivalents and restricted cash consisted of the following (in thousands):

 	 	As of	 	As of	 	As of	 	
 	 	September 30, 2019	 	December 31, 2018	 	December 31, 2017	 	
Cash and cash equivalents	 	$	82,823	 	$	77,275	 	$	66,895	 	
Restricted cash	 	—	 	—	 	2,812	 	
Total	 	$	82,823	 	$	77,275	 	$	69,707	 	
 
The Company was required to maintain cash of $2.8 million as of December 31, 2017 in retention bank accounts as a collateral for the upcoming scheduled debt payments of its KEXIM-ABN Amro credit facility, which were recorded under current assets in the Company’s Condensed Consolidated Balance Sheets. This credit facility was fully repaid in July 2018.
 
4                                         Fixed assets, net
 
As of December 31, 2018, the Company recorded an impairment loss of $210.7 million in relation to ten of its vessels that are held and used. Fair value of each vessel was determined by management with the assistance from valuations obtained by third party independent shipbrokers.
 
The residual value (estimated scrap value at the end of the vessels’ useful lives) of the fleet was estimated at $378.2 million as of September 30, 2019 and as of December 31, 2018. The Company has calculated the residual value of the vessels taking into consideration the 10 year average and the 5 year average of the scrap. The Company has applied uniformly the scrap value of $300 per ton for all vessels. The Company believes that $300 per ton is a reasonable estimate of future scrap prices, taking into consideration the cyclicality of the nature of future demand for scrap steel. Although the Company believes that the assumptions used to determine the scrap rate are reasonable and appropriate, such assumptions are highly subjective, in part, because of the cyclical nature of future demand for scrap steel.
 
In connection with the 2018 debt refinancing, the Company undertook to seek to refinance two of its 13,100 TEU vessels, the Hyundai Honour and Hyundai Respect, which refinancing was completed on April 12, 2019 through a sale and leaseback arrangement with a term of five years, at the end of which the Company will reacquire the vessels for an aggregate amount of $52.6 million or earlier, at the Company’s option, for a purchase price set forth in the agreement. The net proceeds amounting to $144.8 million were applied pro rata to partially repay the existing credit facilities (Club Facility, Credit Suisse Facility, Citibank $114 mil. Facility and Citibank $123.9 mil. Facility) secured by mortgages on such vessels. This arrangement was recorded as failed sale and leaseback by the Company with the received proceeds recognized as a financial liability.
 
The scheduled leaseback instalments subsequent to September 30, 2019 are as follows (in thousands):

Instalments due by period ended:	 	 	 	
September 30, 2020	 	$	31,957	 	
September 30, 2021	 	32,522	 	
September 30, 2022	 	32,521	 	
September 30, 2023	 	32,522	 	
September 30, 2024	 	68,930	 	
Total leaseback instalments	 	198,452	 	
Less: Imputed interest	 	(57,078	)	
Total leaseback obligation	 	141,374	 	
Less: Current leaseback obligation	 	(15,202	)	
Leaseback obligation, net of current portion	 	$	126,172	 	
 
F-10

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
5                                         Deferred Charges, net
 
Deferred charges, net consisted of the following (in thousands):

 	 	Drydocking and
Special Survey Costs	 	
As of January 1, 2018	 	$	8,962	 	
Additions	 	13,306	 	
Amortization	 	(9,237	)	
As of December 31, 2018	 	13,031	 	
Additions	 	5,214	 	
Amortization	 	(6,525	)	
As of September 30, 2019	 	$	11,720	 	
 
The Company follows the deferral method of accounting for drydocking and special survey costs in accordance with accounting for planned major maintenance activities, whereby actual costs incurred are deferred and amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years.  If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off. Furthermore, when a vessel is drydocked for more than one reporting period, the respective costs are identified and recorded in the period in which they were incurred and not at the conclusion of the drydocking.
 
6                                         Investments in affiliates
 
In August 2015, an affiliated company Gemini Shipholdings Corporation (“Gemini”) was formed by the Company and Virage International Ltd. (“Virage”), a company controlled by the Company’s largest shareholder. Gemini acquired a 100% interest in entities with capital leases for the Suez Canal and Genoa and that own the container vessels Catherine C and Leo C. Gemini financed these acquisitions with the assumption of capital lease obligations of $35.4 million, $19.0 million of borrowings under secured loan facilities and an aggregate of $47.4 million from equity contributions from the Company and Virage, which subscribed in cash for 49% and 51%, respectively, of Gemini’s issued and outstanding share capital. As of September 30, 2019, Gemini consolidated its wholly owned subsidiaries listed below:

Company	 	Vessel Name	 	Year
Built	 	TEU	 	Date of vessel
delivery	 	
Averto Shipping S.A.	 	Suez Canal	 	2002	 	5,610	 	July 20, 2015	 	
Sinoi Marine Ltd.	 	Genoa	 	2002	 	5,544	 	August 2, 2015	 	
Kingsland International Shipping Limited	 	Catherine C	 	2001	 	6,422	 	September 21, 2015	 	
Leo Shipping and Trading S.A.	 	Leo C	 	2002	 	6,422	 	February 4, 2016	 	
Springer Shipping Co	 	Belita	 	2006	 	8,533	 	August 26, 2019	 	
 
On August 26, 2019, an affiliated company of Gemini acquired a 8,533 TEU container vessel built in 2006 renamed to Belita for a gross purchase price of $25.3 million.
 
The Company has determined that Gemini is a variable interest entity of which the Company is not the primary beneficiary, and as such, this affiliated company is accounted for under the equity method and recorded under “Equity income on investments” in the condensed consolidated statements of income. The Company does not guarantee the debt of Gemini and its subsidiaries and has the right to purchase all of the beneficial interest in Gemini that it does not own for fair market value at any time after December 31, 2018, to the extent permitted under its credit facilities. The net assets of Gemini total $16.1 million as of September 30, 2019. The Company’s exposure is limited to its share of the net assets of Gemini proportionate to its 49% equity interest in Gemini.
 
F-11

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
6                              Investments in affiliates (Continued)
 
A condensed summary of the financial information for equity accounted investments 49% owned by the Company shown on a 100% basis are as follows (in thousands):

 	 	As of	 	As of	 	
 	 	September 30, 2019	 	December 31, 2018	 	
Current assets	 	$	5,500	 	$	8,327	 	
Non-current assets	 	$	68,836	 	$	41,155	 	
Current liabilities	 	$	9,020	 	$	5,201	 	
Non-current liabilities	 	$	49,254	 	$	29,254	 	

 	 	Nine months ended	 	Nine months ended	 	
 	 	September 30, 2019	 	September 30, 2018	 	
Net operating revenues	 	$	12,746	 	$	14,052	 	
Net income	 	$	1,035	 	$	1,862	 	
 
7                              Other Non-current Assets
 
Other non-current assets consisted of the following (in thousands):

 	 	As of	 	As of	 	
 	 	September 30, 2019	 	December 31, 2018	 	
Available for sale securities:	 	 	 	 	 	
ZIM notes, net	 	$	20,707	 	$	21,044	 	
HMM notes, net	 	9,149	 	7,847	 	
Equity participation ZIM	 	—	 	—	 	
Advances for vessels additions	 	$	16,466	 	$	5,420	 	
Other assets	 	31,909	 	25,058	 	
Total	 	$	78,231	 	$	59,369	 	
 
Equity participation in ZIM and interest bearing unsecured ZIM notes maturing in 2023, which consist of $8.8 million Series 1 Notes and $41.1 million of Series 2 Notes, were obtained after the charter restructuring agreements with ZIM in July 2014. Interest bearing senior unsecured HMM notes consist of $32.8 million Loan Notes 1 maturing in July 2024 and $6.2 million Loan Notes 2 maturing in December 2022, which were obtained after the charter restructuring agreements with HMM in July 2016. As of December 31, 2016, the Company has recorded an impairment loss on its equity participation in ZIM amounting to $28.7 million, thus reducing its book value to nil and $0.7 million impairment loss on ZIM notes.
 
See Note 7 “Other Non-current Assets” to the consolidated financial statements in the Annual Report on Form 20-F for the year ended December 31, 2018 for further details.
 
F-12

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
7                              Other Non-current Assets (Continued)
 
The unrealized losses, which were recognized in other comprehensive loss, are analyzed as follows as of September 30, 2019 (in thousands):

Description of securities	 	Amortized cost
basis	 	Fair value	 	Unrealized loss	 	
ZIM notes	 	$	46,529	 	$	20,707	 	$	(25,822	)	
HMM notes	 	22,007	 	9,149	 	(12,858	)	
Total	 	$	68,536	 	$	29,856	 	$	(38,680	)	

 	 	Unrealized loss
on available for
sale securities	 	
Beginning balance as of January 1, 2019	 	$	(36,378	)	
Unrealized loss on available for sale securities 2019	 	(2,302	)	
Ending balance as of September 30, 2019	 	$	(38,680	)	
 
The Company has agreed to install scrubbers on nine of its vessels with contracted obligations therefore, together with estimated costs related to their installation, expected to amount to approximately $37.2 million as of September 30, 2019, of which $15.5 million was paid as advances before September 30, 2019 and the remaining amount is expected to be paid in the next twelve months.
 
Other assets mainly include non-current assets related to straight-lining of the Company’s revenue amounting to $31.9 million and $23.1 million as of September 30, 2019 and December 31, 2018, respectively.
 
8                                         Accrued Liabilities
 
Accrued liabilities consisted of the following (in thousands):

 	 	As of	 	As of	 	
 	 	September 30, 2019	 	December 31, 2018	 	
Accrued payroll	 	$	795	 	$	924	 	
Accrued interest	 	4,454	 	6,304	 	
Accrued expenses	 	4,443	 	4,542	 	
Total	 	$	9,692	 	$	11,770	 	
 
Accrued expenses mainly consisted of accruals related to the operation of the Company’s fleet and other expenses as of September 30, 2019 and December 31, 2018.
 
F-13

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
9                              Long-Term Debt, net
 
Long-term debt, net consisted of the following (in thousands):

Credit Facility	 	Balance as of
September 30,
2019	 	Balance as of
December 31, 2018	 	
The Royal Bank of Scotland $475.5 mil. Facility	 	$	462,496	 	$	474,743	 	
HSH Nordbank AG - Aegean Baltic Bank - Piraeus Bank $382.5 mil. Facility	 	375,775	 	379,762	 	
Citibank $114 mil. Facility	 	76,579	 	110,644	 	
Credit Suisse $171.8 mil. Facility	 	118,671	 	167,990	 	
Citibank – Eurobank $37.6 mil. Facility	 	29,489	 	35,544	 	
Club Facility $206.2 mil.	 	145,802	 	202,439	 	
Sinosure Cexim - Citibank - ABN Amro $203.4 mil. Facility	 	47,460	 	61,020	 	
Citibank $123.9 mil. Facility	 	89,638	 	122,523	 	
Citibank $120 mil. Facility	 	103,494	 	115,973	 	
Fair value of debt	 	(21,439	)	(26,065	)	
Comprehensive Financing Plan exit fees accrued	 	22,008	 	21,583	 	
Total long-term debt	 	$	1,449,973	 	$	1,666,156	 	
Less: Deferred finance costs, net	 	(36,051	)	(44,271	)	
Less: Current portion	 	(115,551	)	(113,777	)	
Total long-term debt net of current portion and deferred finance cost	 	$	1,298,371	 	$	1,508,108	 	
 
Each of the new credit facilities are collateralized by first and second preferred mortgages over the vessels financed, general assignment of all hire freights, income and earnings, the assignment of their insurance policies, as well as any proceeds from the sale of mortgaged vessels, the Company’s investments in ZIM and Hyundai Merchant Marine securities, stock pledges and benefits from corporate guarantees.
 
As of September 30, 2019, there was no remaining borrowing availability under the Company’s credit facilities. The Company was in compliance with the financial covenants of the credit facilities as of September 30, 2019 and December 31, 2018.
 
F-14

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
9                              Long-Term Debt, net (Continued)
 
The Sinosure–Cexim–Citibank–ABN Amro Credit Facility provides for semi-annual amortization payments and the 2018 Credit Facilities provide for quarterly fixed and variable amortization payments, together representing approximately 85% of actual free cash flows from the relevant vessels securing such credit facilities, subject to certain adjustments. The 2018 Credit Facilities have maturity dates of December 31, 2023 (or in some cases June 30, 2024). The scheduled debt maturities of total long-term debt subsequent to September 30, 2019 are as follows (in thousands):

Payments due by period ended	 	Fixed principal
repayments	 	Final
payments*	 	Total
principal payments	 	
September 30, 2020	 	$	115,551	 	—	 	$	115,551	 	
September 30, 2021	 	120,326	 	—	 	120,326	 	
September 30, 2022	 	99,891	 	—	 	99,891	 	
September 30, 2023	 	81,360	 	—	 	81,360	 	
September 30, 2024	 	17,792	 	$	1,014,484	 	1,032,276	 	
Total long-term debt	 	$	434,920	 	$	1,014,484	 	$	1,449,404	 	

* The final payments include the unamortized remaining principal debt balances under the 2018 Credit Facilities, as such amount will be determinable following the fixed amortization. As mentioned above, the Company is also subject to quarterly variable principal amortization based on actual free cash flows, which are included under “Final payments” in this table.
 
The Company incurred nil and $51.5 million of professional fees related to the refinancing discussions with its lenders reported under “Other income/(expenses), net” in the accompanying condensed consolidated statements of income for the nine months ended September 30, 2019 and 2018, respectively. Additionally, the Company incurred a gain on debt extinguishment of $116.4 million in the nine months ended September 30, 2018 related to the 2018 Credit Facilities.
 
Unpaid loan amendment fees of $14.8 million and $30.5 million are accrued under “Other current liabilities” and of nil and $14.8 million are accrued under “Other long-term liabilities” as of September 30, 2019 and December 31, 2018, respectively.
 
10                       Financial Instruments
 
The principal financial assets of the Company consist of cash and cash equivalents and trade receivables and other assets. The principal financial liabilities of the Company consist of long-term bank loans. The following is a summary of the Company’s risk management strategies and the effect of these strategies on the Company’s condensed consolidated financial statements.
 
Interest Rate Risk:  Interest rate risk arises on bank borrowings. The Company monitors the interest rate on borrowings closely to ensure that the borrowings are maintained at favorable rates.
 
Concentration of Credit Risk:  Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its temporary cash investments, consisting mostly of deposits, with established financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy. The Company is exposed to credit risk in the event of non-performance by counterparties, however, the Company limits this exposure by diversifying among counterparties with high credit ratings. The Company depends upon a limited number of customers for a large part of its revenues. Credit risk with respect to trade accounts receivable is generally managed by the selection of customers among the major liner companies in the world and their dispersion across many geographic areas.
 
F-15

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
10                       Financial Instruments (Continued)
 
Fair Value:  The carrying amounts reflected in the accompanying condensed consolidated balance sheets of financial assets and liabilities (excluding long-term bank loans and certain other non-current assets) approximate their respective fair values due to the short maturity of these instruments. The fair values of long-term floating rate bank loans approximate the recorded values, generally due to their variable interest rates. The fair value of available for sale securities is estimated based on either observable market based inputs or unobservable inputs that are corroborated by market data. The Company is exposed to changes in fair value of available for sale securities as there is no hedging strategy.
 
a.  Interest Rate Swap Hedges
 
The Company currently has no outstanding interest rate swaps agreements. However, in the past years, the Company entered into interest rate swap agreements with its lenders in order to manage its floating rate exposure. Certain variable-rate interests on specific borrowings were associated with vessels under construction and were capitalized as a cost of the specific vessels. In accordance with the accounting guidance on derivatives and hedging, the amounts related to realized gains or losses on cash flow hedges that have been entered into and qualified for hedge accounting, in order to hedge the variability of that interest, were recognized in accumulated other comprehensive loss and are reclassified into earnings over the depreciable life of the constructed asset, since that depreciable life coincides with the amortization period for the capitalized interest cost on the debt. An amount of $1.8 million was reclassified into earnings for the nine months ended September 30, 2019 and 2018, representing its amortization over the depreciable life of the vessels. An amount of $3.6 million is expected to be reclassified into earnings within the next 12 months.
 
b.  Fair Value of Financial Instruments
 
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
 
Level I:  Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Valuation of these items does not entail a significant amount of judgment.
 
Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
 
Level III: Inputs that are unobservable. The Company did not use any Level 3 inputs as of September 30, 2019 and December 31, 2018.
 
The estimated fair values of the Company’s financial instruments are as follows:

 	 	As of September 30, 2019	 	As of December 31, 2018	 	
 	 	Book Value	 	Fair Value	 	Book Value	 	Fair Value	 	
 	 	(in thousands of $)	 	
Cash and cash equivalents	 	$	82,823	 	$	82,823	 	$	77,275	 	$	77,275	 	
Due from related parties	 	$	20,409	 	$	20,409	 	$	17,970	 	$	17,970	 	
ZIM notes	 	$	20,707	 	$	20,707	 	$	21,044	 	$	21,044	 	
HMM notes	 	$	9,149	 	$	9,149	 	$	7,847	 	$	7,847	 	
Equity investment in ZIM	 	—	 	—	 	—	 	—	 	
Long-term debt, including current portion	 	$	1,449,973	 	$	1,449,973	 	$	1,666,156	 	$	1,666,156	 	
 
F-16

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
10                       Financial Instruments (Continued)
 
The estimated fair value of the financial instruments that are measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows as of September 30, 2019:

 	 	Fair Value Measurements as of September 30, 2019	 	
 	 	Total	 	(Level I)	 	(Level II)	 	(Level III)	 	
 	 	(in thousands of $)	 	
ZIM notes(1)	 	$	20,707	 	$	—	 	$	20,707	 	$	—	 	
HMM notes(1)	 	$	9,149	 	$	—	 	$	9,149	 	$	—	 	
 
The estimated fair value of the financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows as of September 30, 2019:

 	 	Fair Value Measurements as of September 30, 2019	 	
 	 	Total	 	(Level I)	 	(Level II)	 	(Level III)	 	
 	 	(in thousands of $)	 	
Long-term debt, including current portion(2)	 	$	1,449,973	 	$	—	 	$	1,449,973	 	$	—	 	

The estimated fair value of the financial instruments that are measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows as of December 31, 2018:

 	 	Fair Value Measurements as of December 31, 2018	 	
 	 	Total	 	(Level I)	 	(Level II)	 	(Level III)	 	
 	 	(in thousands of $)	 	
ZIM notes(1)	 	$	21,044	 	$	—	 	$	21,044	 	$	—	 	
HMM notes(1)	 	$	7,847	 	$	—	 	$	7,847	 	$	—	 	
 
The estimated fair value of the financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows as of December 31, 2018:

 	 	Fair Value Measurements as of December 31, 2018	 	
 	 	Total	 	(Level I)	 	(Level II)	 	(Level III)	 	
 	 	(in thousands of $)	 	
Long-term debt, including current portion(2)	 	$	1,666,156	 	$	—	 	$	1,666,156	 	$	—	 	

(1)    The fair value is estimated based on either observable market based inputs or unobservable inputs that are corroborated by market data, including currently available information on the Company’s counterparty, other contracts with similar terms, remaining maturities and interest rates.
(2)    Long-term debt, including current portion is presented gross of deferred finance costs of $36.1 million and $44.3 million as of September 30, 2019 and December 31, 2018, respectively. The fair value of the Company’s debt is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities, as well as taking into account its increased credit risk and does not include amounts related to the accumulated accrued interest.
 
F-17

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
11                       Commitments and Contingencies
 
There are no material legal proceedings to which the Company is a party or to which any of its properties are the subject, or other contingencies that the Company is aware of, other than routine litigation incidental to the Company’s business. Furthermore, the Company does not have any commitments outstanding.
 
See the Note 7 “Other Non-current Assets” for capital commitments related to the installation of scrubbers on certain of the Company’s vessels.
 
12                       Stockholders’ Equity
 
The Company’s largest stockholder, Danaos Investment Limited (“DIL”), contributed $10 million to the Company in connection with the consummation of the Company’s debt refinancing on August 10, 2018. DIL did not receive any shares of common stock or other interests in the Company as a result of this contribution.
 
Additionally, on August 10, 2018, in connection with this debt refinancing, the Company issued 7,095,877 shares (99,342,271 shares before the 1-for-14 reverse stock split) new shares of common stock to certain of the Company’s lenders, which represented 47.5% of the outstanding common stock immediately after this issuance.
 
As of April 18, 2008, the Board of Directors and the Compensation Committee approved incentive compensation of Manager’s employees with its shares from time to time, after specific for each such time, decision by the compensation committee and the Board of Directors in order to provide a means of compensation in the form of free shares to certain employees of the Manager of the Company’s common stock. The plan was effective as of December 31, 2008. Pursuant to the terms of the plan, employees of the Manager may receive (from time to time) shares of the Company’s common stock as additional compensation for their services offered during the preceding period. The total amount of stock to be granted to employees of the Manager will be at the Company’s Board of Directors’ discretion only and there will be no contractual obligation for any stock to be granted as part of the employees’ compensation package in future periods.
 
On September 14, 2018, the Company granted 298,774 shares (4,182,832 shares before the 1-for-14 reverse stock split) of restricted stock to executive officers of the Company, 50% of which are scheduled to vest on December 31, 2019 and 50% of which are scheduled to vest on December 31, 2021. Additionally, on May 10, 2019, the Company granted 137,944 shares of restricted stock to certain employees of the Manager, out of which 134,014 are outstanding as of September 30, 2019 due to forfeiture of 3,930 shares, 50% of which restricted shares are scheduled to vest on December 31, 2019 and 50% of which are scheduled to vest on December 31, 2021. The issuance of these shares is subject to satisfaction of the vesting terms, under the Company’s 2006 Equity Compensation Plan, as amended. 432,788 shares and 298,774 shares of restricted stock are issued and outstanding as of September 30, 2019 and December 31, 2018, respectively.
 
The Company has also established the Directors Share Payment Plan. The purpose of the plan is to provide a means of payment of all or a portion of compensation payable to directors of the Company in the form of Company’s Common Stock. The plan was effective as of April 18, 2008. Each member of the Board of Directors of the Company may participate in the plan. Pursuant to the terms of the plan, directors may elect to receive in Common Stock all or a portion of their compensation. Following December 31 of each year, the Company delivers to each Director the number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. During the nine months ended September 30, 2019 and September 30, 2018, none of the directors elected to receive their compensation in Company shares.
 
The Company has 1,000,000 shares of common stock available for issuance in connection with equity awards that may be granted by the Company’s Compensation Committee or Board of Directors under its amended and restated 2006 equity compensation plan.
 
F-18

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
12                        Stockholders’ Equity (Continued)
 
On May 2, 2019, the Company effected a 1-for-14 reverse stock split of the issued and outstanding shares of common stock of the Company. All share and per share data disclosed in the accompanying condensed consolidated financial statements (unaudited) give effect to this reverse stock split retroactively, for all periods presented. The reverse stock split reduced the number of the Company’s outstanding shares of common stock from 213,324,455 to 15,237,456 on May 2, 2019 and affected all issued and outstanding shares of common stock. No fractional shares were issued in connection to the reverse stock split. Stockholders who would otherwise hold a fractional share of the Company’s common stock received a cash payment in lieu of such fractional share. The par value and other terms of the Company’s common stock were not affected by the reverse stock split.
 
The Company is not permitted to pay cash dividends under the terms of the 2018 debt refinancing until (1) the Company receives in excess of $50 million in net cash proceeds from offerings of Common Stock and (2) the payment in full of the first installment of amortization payable following the consummation of the debt refinancing under each new credit facility and provided that an event of default has not occurred and the Company is not, and after giving effect to the payment of the dividend, in breach of any covenant.
 
13                       Lease Arrangements
 
Charters-out
 
The future minimum charter revenue, expected to be earned on non-cancellable time charters and bareboat charters classified as operating leases consisted of the following as of September 30, 2019 (in thousands):

Remainder of 2019	 	$	96,495	 	
2020	 	370,954	 	
2021	 	339,528	 	
2022	 	270,307	 	
2023	 	182,786	 	
2024 and thereafter	 	119,284	 	
Total future rentals	 	$	1,379,354	 	
 
Revenue from time charters are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the future minimum rentals, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future. The off-hire assumptions used relate mainly to drydocking and special survey maintenance carried out approximately every 2.5 years per vessel, or every 5 years for vessels less than 15-years old, and which may last approximately 10 to 15 days.
 
F-19

 
DANAOS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
14                       Earnings per Share
 
The following table sets forth the computation of basic and diluted earnings per share:

 	 	Three months ended	 	
 	 	September 30, 2019	 	September 30, 2018	 	
 	 	(in thousands)	 	
Numerator:	 	 	 	 	 	
Net income	 	$	33,855	 	$	127,217	 	
 	 	 	 	 	 	
Denominator (number of shares in thousands):	 	 	 	 	 	
Basic weighted average common shares outstanding	 	14,939	 	11,776	 	
Effect of dilutive securities:	 	 	 	 	 	
Share based compensation	 	434	 	52	 	
Diluted weighted average common shares outstanding	 	15,373	 	11,828	 	

 	 	Nine months ended	 	
 	 	September 30, 2019	 	September 30, 2018	 	
 	 	(in thousands)	 	
Numerator:	 	 	 	 	 	
Net income	 	$	97,436	 	$	148,047	 	
 	 	 	 	 	 	
Denominator (number of shares in thousands):	 	 	 	 	 	
Basic weighted average common shares outstanding	 	14,939	 	9,168	 	
Effect of dilutive securities:	 	 	 	 	 	
Share based compensation	 	370	 	18	 	
Diluted weighted average common shares outstanding	 	15,309	 	9,186	 	

The issued and outstanding 15,000,000 warrants to purchase shares of the Company’s common stock (on a pre-split basis), which expired in January 2019, were excluded from the diluted earnings/(loss) per share for the three and nine months ended September 30, 2019 and 2018, as applicable before the expiry because they were antidilutive.
 
15                       Related Party Transactions
 
Management fees to Danaos Shipping Company Limited (“the Manager”) amounted to $12.5 million in the nine months ended September 30, 2019 and 2018, and are presented under “General and administrative expenses” in the condensed consolidated statements of income.
 
Commissions to the Manager amounted to $4.0 million in the nine months ended September 30, 2019 and 2018, and are presented under “Voyage expenses” in the condensed consolidated statements of income.
 
The balance “Due from related parties” in the condensed consolidated balance sheets totaling $20.4 million and $18.0 million as of September 30, 2019 and December 31, 2018, respectively, represents advances to the Manager on account of the vessels’ operating and other expenses. An amount of $0.6 million as of September 30, 2019 and December 31, 2018 was due to executive officers and is presented under “Accounts payable” in the condensed consolidated balance sheets.
 
16                       Subsequent Events
 
On October 2, 2019, the Company entered into an agreement to acquire a 8,500 TEU container vessel built in 2005 for a gross purchase price of $25.0 million. This vessel is expected to be delivered by the end of May 2020.
 
F-20