DANAOS CORP, 6-K filed on 8/6/2019
Report of Foreign Issuer
v3.19.2
Document and Entity Information
6 Months Ended
Jun. 30, 2019
Document and Entity Information  
Entity Registrant Name Danaos Corp
Entity Central Index Key 0001369241
Document Type 6-K
Document Period End Date Jun. 30, 2019
Amendment Flag false
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2019
Document Fiscal Period Focus Q2
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
CURRENT ASSETS    
Cash and cash equivalents $ 78,803 $ 77,275
Accounts receivable, net 7,496 9,225
Inventories 9,165 8,884
Prepaid expenses 1,142 1,214
Due from related parties 20,084 17,970
Other current assets 6,175 5,182
Total current assets 122,865 119,750
NON-CURRENT ASSETS    
Fixed assets at cost, net of accumulated depreciation of $791,729 (2018: $743,924) 2,433,731 2,480,329
Deferred charges, net 10,467 13,031
Investments in affiliates 7,311 7,363
Other non-current assets 73,931 59,369
Total non-current assets 2,525,440 2,560,092
Total assets 2,648,305 2,679,842
CURRENT LIABILITIES    
Accounts payable 11,350 10,477
Accrued liabilities 10,765 11,770
Current portion of long-term debt, net 113,826 113,777
Current portion of long-term leaseback obligation 14,097  
Accumulated accrued interest, current portion 35,351 35,782
Unearned revenue 19,556 19,753
Other current liabilities 18,363 31,142
Total current liabilities 223,308 222,701
LONG-TERM LIABILITIES    
Long-term debt, net 1,318,207 1,508,108
Long-term leaseback obligation, net of current portion 130,340  
Accumulated accrued interest, net of current portion 178,065 200,574
Unearned revenue, net of current portion 34,675 41,730
Other long-term liabilities 8,241 15,876
Total long-term liabilities 1,669,528 1,766,288
Total liabilities 1,892,836 1,988,989
Commitments and Contingencies
STOCKHOLDERS' EQUITY    
Preferred stock (par value $0.01, 100,000,000 preferred shares authorized and not issued as of June 30, 2019 and December 31, 2018)
Common stock (par value $0.01, 750,000,000 common shares authorized as of June 30, 2019 and December 31, 2018. 15,373,194 and 15,237,456 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively (213,324,455 shares before 1-for-14 reverse stock split as of December 31, 2018)) 154 152
Additional paid-in capital 729,425 727,562
Accumulated other comprehensive loss (119,540) (118,710)
Retained earnings 145,430 81,849
Total stockholders' equity 755,469 690,853
Total liabilities and stockholders' equity $ 2,648,305 $ 2,679,842
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
CONDENSED CONSOLIDATED BALANCE SHEETS    
Accumulated depreciation | $ $ 743,924 $ 791,729
Preferred stock, par value (in dollars per share) | $ / shares $ 0.01 $ 0.01
Preferred stock, shares authorized 100,000,000 100,000,000
Common stock, par value (in dollars per share) | $ / shares $ 0.01 $ 0.01
Common stock, shares authorized 750,000,000 750,000,000
Common stock, shares issued 15,237,456 15,373,194
Common stock, shares outstanding 15,237,456 15,373,194
Common stock, shares outstanding before reverse stock split (213,324,455)  
Number of shares issued for one share under reverse stock split 0.0714  
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF INCOME        
OPERATING REVENUES $ 112,319 $ 113,466 $ 225,210 $ 225,320
OPERATING EXPENSES        
Voyage expenses (2,732) (3,186) (6,002) (6,347)
Vessel operating expenses (27,306) (26,742) (53,177) (53,591)
Depreciation (24,039) (26,697) (47,805) (53,757)
Amortization of deferred drydocking and special survey costs (2,063) (2,409) (4,254) (4,252)
General and administrative expenses (6,492) (5,777) (13,361) (10,959)
Income From Operations 49,687 48,655 100,611 96,414
OTHER INCOME (EXPENSES):        
Interest income 1,569 1,418 3,165 2,793
Interest expense (18,844) (23,020) (36,687) (45,869)
Other finance expenses (1,770) (961) (2,094) (1,932)
Equity income/(loss) on investments 32 210 (52) 184
Other income/(expense), net 367 (19,543) 434 (28,928)
Loss on derivatives (903) (921) (1,796) (1,832)
Total Other Expenses, net (19,549) (42,817) (37,030) (75,584)
Net Income $ 30,138 $ 5,838 $ 63,581 $ 20,830
EARNINGS PER SHARE        
Basic earnings per share $ 2.02 $ 0.74 $ 4.26 $ 2.66
Diluted earnings per share $ 1.97 $ 0.74 $ 4.16 $ 2.66
Basic weighted average common shares outstanding 14,939 7,843 14,939 7,843
Diluted weighted average common shares outstanding 15,314 7,843 15,276 7,843
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)        
Net income for the period $ 30,138 $ 5,838 $ 63,581 $ 20,830
Other comprehensive income/(loss):        
Unrealized gain/(loss) on available for sale securities (2,021) 1,057 (2,626) 2,509
Amortization of deferred realized losses on cash flow hedges 903 921 1,796 1,832
Total Other Comprehensive Income/(Loss) (1,118) 1,978 (830) 4,341
Comprehensive Income $ 29,020 $ 7,816 $ 62,751 $ 25,171
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Common Stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total
Balance at Dec. 31, 2017 $ 78 $ 547,918 $ (114,076) $ 114,785 $ 548,705
Balance (in shares) at Dec. 31, 2017 7,843        
Increase (Decrease) in Stockholders' Equity          
Net Income       14,992 14,992
Net movement in other comprehensive income     2,363   2,363
Balance at Mar. 31, 2018 $ 78 547,918 (111,713) 129,777 566,060
Balance (in shares) at Mar. 31, 2018 7,843        
Balance at Dec. 31, 2017 $ 78 547,918 (114,076) 114,785 548,705
Balance (in shares) at Dec. 31, 2017 7,843        
Increase (Decrease) in Stockholders' Equity          
Net Income         20,830
Net movement in other comprehensive income         4,341
Balance at Jun. 30, 2018 $ 78 547,918 (109,735) 135,615 573,876
Balance (in shares) at Jun. 30, 2018 7,843        
Balance at Mar. 31, 2018 $ 78 547,918 (111,713) 129,777 566,060
Balance (in shares) at Mar. 31, 2018 7,843        
Increase (Decrease) in Stockholders' Equity          
Net Income       5,838 5,838
Net movement in other comprehensive income     1,978   1,978
Balance at Jun. 30, 2018 $ 78 547,918 (109,735) 135,615 573,876
Balance (in shares) at Jun. 30, 2018 7,843        
Balance at Dec. 31, 2018 $ 152 727,562 (118,710) 81,849 690,853
Balance (in shares) at Dec. 31, 2018 15,237        
Increase (Decrease) in Stockholders' Equity          
Net Income       33,443 33,443
Net movement in other comprehensive income     288   288
Stock compensation   830     830
Balance at Mar. 31, 2019 $ 152 728,392 (118,422) 115,292 725,414
Balance (in shares) at Mar. 31, 2019 15,237        
Balance at Dec. 31, 2018 $ 152 727,562 (118,710) 81,849 690,853
Balance (in shares) at Dec. 31, 2018 15,237        
Increase (Decrease) in Stockholders' Equity          
Net Income         63,581
Net movement in other comprehensive income         (830)
Balance at Jun. 30, 2019 $ 154 729,425 (119,540) 145,430 755,469
Balance (in shares) at Jun. 30, 2019 15,373        
Balance at Mar. 31, 2019 $ 152 728,392 (118,422) 115,292 725,414
Balance (in shares) at Mar. 31, 2019 15,237        
Increase (Decrease) in Stockholders' Equity          
Net Income       30,138 30,138
Net movement in other comprehensive income     (1,118)   (1,118)
Stock compensation $ 2 1,033     1,035
Stock compensation (in shares) 136        
Balance at Jun. 30, 2019 $ 154 $ 729,425 $ (119,540) $ 145,430 $ 755,469
Balance (in shares) at Jun. 30, 2019 15,373        
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash Flows from Operating Activities    
Net income $ 63,581 $ 20,830
Adjustments to reconcile net income/(loss) to net cash provided by operating activities    
Depreciation 47,805 53,757
Amortization of deferred drydocking and special survey costs 4,254 4,252
Amortization of finance costs 5,714 5,114
Exit fee accrued on debt 295 1,484
Debt discount amortization 3,234  
PIK interest 1,695  
Payments for drydocking and special survey costs deferred (1,690) (10,351)
Amortization of deferred realized losses on interest rate swaps 1,796 1,832
Stock based compensation 1,865  
Equity (income)/loss on investments 52 (184)
(Increase)/Decrease in    
Accounts receivable 1,729 (9,292)
Inventories (281) (216)
Prepaid expenses 72 (727)
Due from related parties (2,114) (932)
Other assets, current and non-current (8,750) (6,953)
Increase/(Decrease) in    
Accounts payable 873 4,919
Accrued liabilities (1,057) 3,174
Unearned revenue, current and long-term (7,252) (10,724)
Other liabilities, current and long-term (365) (391)
Net Cash provided by Operating Activities 111,456 55,592
Cash Flows from Investing Activities    
Vessels additions (1,207) (1,683)
Advances for vessels additions (9,431)  
Net Cash used in Investing Activities (10,638) (1,683)
Cash Flows from Financing Activities    
Proceeds from sale-leaseback of vessels 146,523  
Payments of long-term debt (205,811) (48,381)
Payments of leaseback obligation (2,086)  
Payments of accumulated accrued interest (17,867)  
Finance costs (20,049)  
Net Cash used in Financing Activities (99,290) (48,381)
Net Increase in cash, cash equivalents and restricted cash 1,528 5,528
Cash, cash equivalents and restricted cash at beginning of period 77,275 69,707
Cash, cash equivalents and restricted cash at end of period $ 78,803 $ 75,235
v3.19.2
Basis of Presentation and General Information
6 Months Ended
Jun. 30, 2019
Basis of Presentation and General Information  
Basis of Presentation and General Information

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 June 30, 2019, the condensed consolidated results of operations for the three and six months ended June 30, 2019 and 2018 and the condensed consolidated cash flows for the three and six months ended June 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 six months ended June 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.

 

As of June 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.

v3.19.2
Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Significant Accounting Policies  
Significant Accounting Policies

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 six months ended June 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. In December 2018, the FASB issued Accounting Standards Update No. 2018-19 "Codification improvements to Topic 326", which clarifies that impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. 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.

 

v3.19.2
Cash, Cash Equivalents and Restricted Cash
6 Months Ended
Jun. 30, 2019
Cash, Cash Equivalents and Restricted Cash  
Cash, Cash Equivalents and Restricted Cash

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

 

 

June 30, 2019

 

December 31, 2018

 

December 31, 2017

Cash and cash equivalents

 

$

78,803

 

$

77,275

 

$

66,895

Restricted cash

 

 

 —

 

 

 —

 

 

2,812

Total 

 

$

78,803

 

$

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.

v3.19.2
Fixed assets, net
6 Months Ended
Jun. 30, 2019
Fixed assets, net  
Fixed assets, net

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 June 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 June 30, 2019 are as follows (in thousands):

 

 

 

 

 

Instalments due by period ended:

    

 

 

June 30, 2020

 

$

31,304

June 30, 2021

 

 

32,522

June 30, 2022

 

 

32,521

June 30, 2023

 

 

32,522

June 30, 2024

 

 

77,127

Total leaseback instalments

 

 

205,996

Less: Imputed interest

 

 

(61,559)

Total leaseback obligation

 

 

144,437

Less: Current leaseback obligation

 

 

(14,097)

Leaseback obligation, net of current portion

 

$

130,340

 

v3.19.2
Deferred Charges, net
6 Months Ended
Jun. 30, 2019
Deferred Charges, net  
Deferred Charges, net

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

 

 

1,690

Amortization

 

 

(4,254)

As of June 30, 2019

 

$

10,467

 

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.

v3.19.2
Investments in affiliates
6 Months Ended
Jun. 30, 2019
Investments in affiliates  
Investments in affiliates

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 June 30, 2019, Gemini consolidated its wholly owned subsidiaries listed below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

 

Date of vessel

Company

    

Vessel Name

    

Built

    

TEU

    

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

 

 

 

 —

 

 

On May 29, 2019, an affiliated company of Gemini has entered into an agreement to acquire a 8,500 TEU container vessel built in 2006 for a gross purchase price of $25.3 million. An advance payment of $2.5 million was made and is outstanding as of June 30, 2019. This vessel is expected to be delivered in August 2019.

 

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 $14.9 million as of June 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.

 

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

 

    

June 30, 2019

    

December 31, 2018

Current assets

 

$

4,355

 

$

8,327

Non-current assets

 

$

45,173

 

$

41,155

Current liabilities

 

$

9,252

 

$

5,201

Non-current liabilities

 

$

25,355

 

$

29,254

 

 

 

 

 

 

 

 

 

Six months ended

 

Six months ended

 

    

June 30, 2019

    

June 30, 2018

Net operating revenues

 

$

7,451

 

$

8,625

Net income/(loss)

 

$

(106)

 

$

376

 

v3.19.2
Other Non-current Assets
6 Months Ended
Jun. 30, 2019
Other Non-current Assets  
Other Non-current Assets

7     Other Non-current Assets

 

Other non-current assets consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

    

June 30, 2019

    

December 31, 2018

Available for sale securities:

 

 

 

 

 

 

ZIM notes, net

 

$

19,733

 

$

21,044

HMM notes, net

 

 

8,678

 

 

7,847

Equity participation ZIM

 

 

 —

 

 

 —

Advances for vessels additions

 

$

14,851

 

$

5,420

Other assets

 

 

30,669

 

 

25,058

Total

 

$

73,931

 

$

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.

 

The unrealized losses, which were recognized in other comprehensive loss, are analyzed as follows as of June 30, 2019 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

 

 

 

 

Description of securities

    

basis

    

Fair value

    

Unrealized loss

ZIM notes

 

$

45,899

 

$

19,733

 

$

(26,166)

HMM notes

 

 

21,516

 

 

8,678

 

 

(12,838)

Total

 

$

67,415

 

$

28,411

 

$

(39,004)

 

 

 

 

 

 

 

Unrealized loss

 

 

on available for

 

    

sale securities

Beginning balance as of January 1, 2019

 

$

(36,378)

Unrealized loss on available for sale securities 2019

 

 

(2,626)

Ending balance as of June 30, 2019

 

$

(39,004)

 

The Company has agreed to install scrubbers on nine of its vessels, with estimated total costs amounting to approximately $27.9 million out of which advances of $13.2 million were paid before June 30, 2019 and the remaining amount of $14.7 million is expected to be paid in 2019.

 

Other assets mainly include non-current assets related to straight-lining of the Company’s revenue amounting to $29.9 million and $23.1 million as of June 30, 2019 and December 31, 2018, respectively.

v3.19.2
Accrued Liabilities
6 Months Ended
Jun. 30, 2019
Accrued Liabilities  
Accrued Liabilities

8     Accrued Liabilities

 

Accrued liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

As of

    

As of

 

 

June 30, 2019

 

December 31, 2018

Accrued payroll

 

$

830

 

$

924

Accrued interest

 

 

4,896

 

 

6,304

Accrued expenses

 

 

5,039

 

 

4,542

Total 

 

$

10,765

 

$

11,770

 

Accrued expenses mainly consisted of accruals related to the operation of the Company’s fleet and other expenses as of June 30, 2019 and December 31, 2018.

v3.19.2
Long-Term Debt, net
6 Months Ended
Jun. 30, 2019
Long-Term Debt, net  
Long-Term Debt, net

9      Long-Term Debt, net

 

Long-term debt, net consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of

 

Balance as of

Credit Facility

    

June 30, 2019

    

December 31, 2018

The Royal Bank of Scotland $475.5 mil. Facility

 

$

466,789

 

$

474,743

HSH Nordbank AG - Aegean Baltic Bank - Piraeus Bank $382.5 mil. Facility

 

 

376,001

 

 

379,762

Citibank $114 mil. Facility

 

 

79,143

 

 

110,644

Credit Suisse $171.8 mil. Facility

 

 

121,710

 

 

167,990

Citibank – Eurobank $37.6 mil. Facility

 

 

31,539

 

 

35,544

Club Facility $206.2 mil.

 

 

147,965

 

 

202,439

Sinosure Cexim - Citibank - ABN Amro $203.4 mil. Facility

 

 

50,850

 

 

61,020

Citibank $123.9 mil. Facility

 

 

90,435

 

 

122,523

Citibank $120 mil. Facility

 

 

107,110

 

 

115,973

Fair value of debt

 

 

(22,831)

 

 

(26,065)

Comprehensive Financing Plan exit fees accrued

 

 

21,879

 

 

21,583

Total long-term debt

 

$

1,470,590

 

$

1,666,156

Less: Deferred finance costs, net

 

 

(38,557)

 

 

(44,271)

Less: Current portion

 

 

(113,826)

 

 

(113,777)

Total long-term debt net of current portion and deferred finance cost

 

$

1,318,207

 

$

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 June 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 June 30, 2019 and December 31, 2018.

 

The Sinosure–Cexim–Citibank–ABN Amro Credit Facility provides for semi-annual amortization payments and the New 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 New 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 June 30, 2019 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed principal

 

 

 

Total

Payments due by period ended

    

repayments

    

Final payments*

    

principal payments

June 30, 2020

 

$

113,826

 

 

 —

 

$

113,826

June 30, 2021

 

 

119,084

 

 

 —

 

 

119,084

June 30, 2022

 

 

105,927

 

 

 —

 

 

105,927

June 30, 2023

 

 

85,222

 

 

 —

 

 

85,222

June 30, 2024

 

 

35,879

 

$

1,011,604

 

 

1,047,483

Total long-term debt

 

$

459,938

 

$

1,011,604

 

$

1,471,542


*    The final payments include the unamortized remaining principal debt balances under the New 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 $29.7 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 six months ended June 30, 2019 and 2018, respectively.

 

Unpaid loan amendment fees of $17.8 million and $30.5 million are accrued under “Other current liabilities” and of $7.4 million and $14.8 million are accrued under “Other long-term liabilities” as of June 30, 2019 and December 31, 2018, respectively.

v3.19.2
Financial Instruments
6 Months Ended
Jun. 30, 2019
Financial Instruments  
Financial Instruments

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.

 

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 six months ended June 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 June 30, 2019 and December 31, 2018.

 

The estimated fair values of the Company’s financial instruments are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2019

 

As of December 31, 2018

 

    

Book Value

    

Fair Value

    

Book Value

    

Fair Value

 

 

(in thousands of $)

Cash and cash equivalents

 

$

78,803

 

$

78,803

 

$

77,275

 

$

77,275

Due from related parties

 

$

20,084

 

$

20,084

 

$

17,970

 

$

17,970

ZIM notes

 

$

19,733

 

$

19,733

 

$

21,044

 

$

21,044

HMM notes

 

$

8,678

 

$

8,678

 

$

7,847

 

$

7,847

Equity investment in ZIM

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Long-term debt, including current portion

 

$

1,470,590

 

$

1,470,590

 

$

1,666,156

 

$

1,666,156

 

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 June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of June 30, 2019

 

    

Total

    

(Level I)

    

(Level II)

    

(Level III)

 

 

(in thousands of $)

ZIM notes(1)

 

$

19,733

 

$

 —

 

$

19,733

 

$

 —

HMM notes(1)

 

$

8,678

 

$

 —

 

$

8,678

 

$

 —

 

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 June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of June 30, 2019

 

    

Total

    

(Level I)

 

    

(Level II)

    

(Level III)

 

 

 

(in thousands of $)

Long-term debt, including current portion(2)

 

$

1,470,590

 

$

 —

 

$

1,470,590

 

$

 —

 

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 $38.6 million and $44.3 million as of June 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.

v3.19.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies  
Commitments and Contingencies

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.

v3.19.2
Stockholders' Equity
6 Months Ended
Jun. 30, 2019
Stockholders' Equity  
Stockholders' Equity

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. During the six months ended June 30, 2019, the Company did not grant any shares under the plan. During the six months ended June 30, 2019, no new shares were issued.

 

The Company has also established the Directors Share Payment Plan under its 2006 equity compensation 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 six months ended June 30, 2019 and June 30, 2018, none of the directors elected to receive their compensation in Company shares.

 

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 135,738 are outstanding as of June 30, 2019 due to forfeiture of 2,206 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. 434,512 shares and 298,774 shares of restricted stock are issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.

 

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.

v3.19.2
Lease Arrangements
6 Months Ended
Jun. 30, 2019
Lease Arrangements  
Lease Arrangements

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 June 30, 2019 (in thousands):

 

 

 

 

 

Remainder of 2019

    

$

184,430

2020

 

 

362,091

2021

 

 

339,528

2022

 

 

268,529

2023

 

 

182,786

2024 and thereafter

 

 

119,284

Total future rentals

 

$

1,456,648

 

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.

v3.19.2
Earnings per Share
6 Months Ended
Jun. 30, 2019
Earnings per Share  
Earnings per Share

14    Earnings per Share

 

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

Three months ended

 

    

June 30, 2019

    

June 30, 2018

 

 

(in thousands)

Numerator: