DANAOS CORP, 20-F filed on 2/27/2020
Annual and Transition Report (foreign private issuer)
v3.19.3.a.u2
Document and Entity Information
12 Months Ended
Dec. 31, 2019
shares
Document and Entity Information  
Entity Registrant Name DANAOS CORPORATION
Document Registration Statement false
Document Transition Report false
Document Annual Report true
Document Shell Company Report false
Entity Central Index Key 0001369241
Document Type 20-F
Document Period End Date Dec. 31, 2019
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer No
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Non-accelerated Filer
Entity Common Stock, Shares Outstanding 0
Document Fiscal Year Focus 2019
Document Fiscal Period Focus FY
Entity Emerging Growth Company false
Entity Shell Company false
v3.19.3.a.u2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
CURRENT ASSETS    
Cash and cash equivalents $ 139,170 $ 77,275
Accounts receivable, net 7,145 9,225
Inventories 8,494 8,884
Prepaid expenses 1,458 1,214
Due from related parties 20,512 17,970
Other current assets 13,607 5,182
Total current assets 190,386 119,750
NON-CURRENT ASSETS    
Fixed assets at cost, net of accumulated depreciation of $840,429 (2018: $743,924) 2,389,874 2,480,329
Deferred charges, net 11,455 13,031
Investments in affiliates 8,965 7,363
Other non-current assets 82,339 59,369
Total non-current assets 2,492,633 2,560,092
Total assets 2,683,019 2,679,842
CURRENT LIABILITIES    
Accounts payable 11,168 10,477
Accrued liabilities 8,527 11,770
Current portion of long-term debt, net 119,673 113,777
Current portion of long-term leaseback obligation, net 16,342  
Accumulated accrued interest, current portion 34,137 35,782
Unearned revenue 17,960 19,753
Other current liabilities 15,273 31,142
Total current liabilities 223,080 222,701
LONG-TERM LIABILITIES    
Long-term debt, net 1,270,663 1,508,108
Long-term leaseback obligation, net of current portion 121,872  
Accumulated accrued interest, net of current portion 156,583 200,574
Unearned revenue, net of current portion 28,528 41,730
Other long-term liabilities 603 15,876
Total long-term liabilities 1,578,249 1,766,288
Total liabilities 1,801,329 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 December 31, 2019 and December 31, 2018)
Common stock (par value $0.01, 750,000,000 common shares authorized as of December 31, 2019 and December 31, 2018. 24,789,312 and 15,237,456 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively 248 152
Additional paid-in capital 785,274 727,562
Accumulated other comprehensive loss (116,934) (118,710)
Retained earnings 213,102 81,849
Total stockholders' equity 881,690 690,853
Total liabilities and stockholders' equity $ 2,683,019 $ 2,679,842
v3.19.3.a.u2
CONSOLIDATED BALANCE SHEETS (Parenthetical)
$ in Thousands
Dec. 31, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
CONSOLIDATED BALANCE SHEETS    
Accumulated depreciation | $ $ 840,429 $ 743,924
Preferred stock, par value (in dollars per share) | $ / shares $ 0.01 $ 0.01
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares issued 0 0
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 24,789,312 15,237,456
Common stock, shares outstanding 24,789,312 15,237,456
v3.19.3.a.u2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
CONSOLIDATED STATEMENTS OF OPERATIONS      
OPERATING REVENUES $ 447,244 $ 458,732 $ 451,731
OPERATING EXPENSES      
Voyage expenses (11,593) (12,207) (12,587)
Vessel operating expenses (102,502) (104,604) (106,999)
Depreciation (96,505) (107,757) (115,228)
Amortization of deferred drydocking and special survey costs (8,733) (9,237) (6,748)
Impairment loss   (210,715)  
General and administrative expenses (26,837) (26,334) (22,672)
Income/(loss) from operations 201,074 (12,122) 187,497
OTHER INCOME (EXPENSES):      
Interest income 6,414 5,781 5,576
Interest expense (72,069) (85,706) (86,556)
Other finance expenses (2,702) (3,026) (4,126)
Equity income on investments 1,602 1,365 965
Gain on debt extinguishment   116,365  
Other income/(expense), net 556 (50,456) (15,757)
Loss on derivatives (3,622) (5,137) (3,694)
Total Other Expenses, net (69,821) (20,814) (103,592)
Net Income/(Loss) $ 131,253 $ (32,936) $ 83,905
EARNINGS/(LOSS) PER SHARE      
Basic earnings/(loss) per share of common stock $ 8.29 $ (3.10) $ 10.70
Diluted earnings/(loss) per share of common stock $ 8.09 $ (3.10) $ 10.70
Basic weighted average number of common shares 15,834,913 10,622,839 7,844,595
Diluted weighted average number of common shares 16,220,697 10,622,839 7,844,595
v3.19.3.a.u2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)      
Net Income/(Loss) $ 131,253 $ (32,936) $ 83,905
Other comprehensive income/(loss):      
Unrealized losses on available for sale securities (1,846) (9,771) (26,607)
Amortization of deferred realized losses on cash flow hedges 3,622 3,694 3,694
Accelerated amortization of deferred realized losses on cash flow hedges   1,443  
Total Other Comprehensive Income/(Loss) 1,776 (4,634) (22,913)
Comprehensive Income/(Loss) $ 133,029 $ (37,570) $ 60,992
v3.19.3.a.u2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Common Stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total
Balance at Dec. 31, 2016 $ 78 $ 547,918 $ (91,163) $ 30,880 $ 487,713
Balance (in shares) at Dec. 31, 2016 7,843,000        
Increase (Decrease) in Stockholders' Equity          
Net Income/(Loss)       83,905 $ 83,905
Stock compensation (in shares)         0
Net movement in other comprehensive income     (22,913)   $ (22,913)
Balance at Dec. 31, 2017 $ 78 547,918 (114,076) 114,785 548,705
Balance (in shares) at Dec. 31, 2017 7,843,000        
Increase (Decrease) in Stockholders' Equity          
Net Income/(Loss)       (32,936) (32,936)
Paid-in capital   10,000     10,000
Issuance of common stock $ 71 168,641     168,712
Issuance of common stock (in shares) 7,096,000        
Stock compensation $ 3 1,003     1,006
Stock compensation (in shares) 298,000        
Net movement in other comprehensive income     (4,634)   (4,634)
Balance at Dec. 31, 2018 $ 152 727,562 (118,710) 81,849 690,853
Balance (in shares) at Dec. 31, 2018 15,237,000        
Increase (Decrease) in Stockholders' Equity          
Net Income/(Loss)       131,253 131,253
Issuance of common stock $ 94 53,473     53,567
Issuance of common stock (in shares) 9,418,000        
Stock compensation $ 2 4,239     4,241
Stock compensation (in shares) 134,000        
Net movement in other comprehensive income     1,776   1,776
Balance at Dec. 31, 2019 $ 248 $ 785,274 $ (116,934) $ 213,102 $ 881,690
Balance (in shares) at Dec. 31, 2019 24,789,000        
v3.19.3.a.u2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities      
Net income/(loss) $ 131,253 $ (32,936) $ 83,905
Adjustments to reconcile net income/(loss) to net cash provided by operating activities      
Depreciation 96,505 107,757 115,228
Amortization of deferred drydocking and special survey costs 8,733 9,237 6,748
Impairment losses   210,715  
Amortization of finance costs 10,795 11,771 11,153
Exit fee accrued on debt 556 2,059 3,169
Debt discount amortization 6,071 3,186  
Gain on debt extinguishment   (116,365)  
PIK interest 3,375 1,433  
Loss on sale of securities     2,357
Payments for drydocking and special survey costs deferred (7,157) (13,306) (7,511)
Stock based compensation 4,241 1,006  
Amortization of deferred realized losses on interest rate swaps 3,622 5,137 3,694
Equity income/(loss) on investments (1,602) (1,365) (965)
(Increase)/Decrease in:      
Accounts receivable 2,080 (2,723) (2,544)
Inventories 390 (43) 2,554
Prepaid expenses (244) 20 117
Due from related parties (2,542) 16,037 (1,404)
Other assets, current and non-current (17,354) (13,728) (9,099)
Increase/(Decrease) in:      
Accounts payable 114 (894) 215
Accrued liabilities (3,295) (3,456) (238)
Unearned revenue, current and long-term (14,995) (17,529) (19,301)
Other liabilities, current and long-term (668) (1,327) (7,005)
Net cash provided by operating activities 219,878 164,686 181,073
Cash flows from investing activities      
Vessels additions (5,680) (2,830) (4,478)
Advances for vessels additions (13,173) (5,420)  
Advances for vessels acquisition (2,507)    
Net proceeds from sale of securities     6,236
Net cash provided by/(used in) investing activities (21,360) (8,250) 1,758
Cash flows from financing activities      
Proceeds from long-term debt   325,852  
Payments of long-term debt (262,572) (440,990) (189,653)
Proceeds from sale-leaseback of vessels 146,523    
Payments of leaseback obligation (8,309)    
Payments of accumulated accrued interest (35,358) (8,556)  
Finance costs (30,474) (35,005)  
Paid-in capital 54,440 10,000  
Share issuance costs (873) (169)  
Net cash used in financing activities (136,623) (148,868) (189,653)
Net increase/(decrease) in cash, cash equivalents and restricted cash 61,895 7,568 (6,822)
Cash, cash equivalents and restricted cash, beginning of year 77,275 69,707 76,529
Cash, cash equivalents and restricted cash, end of year 139,170 77,275 69,707
Supplemental cash flow information      
Cash paid for interest $ 54,868 $ 71,915 $ 74,643
v3.19.3.a.u2
Basis of Presentation and General Information
12 Months Ended
Dec. 31, 2019
Basis of Presentation and General Information  
Basis of Presentation and General Information

1. Basis of Presentation and General Information

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

Danaos Corporation, formerly Danaos Holdings Limited, was formed on December 7, 1998 under the laws of Liberia and is presently the sole owner of all outstanding shares of the companies listed below. Danaos Holdings Limited was redomiciled in the Marshall Islands on October 7, 2005. In connection with the redomiciliation, the Company changed its name to Danaos Corporation. On October 14, 2005, the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. The authorized capital stock of Danaos Corporation is 750,000,000 shares of common stock with a par value of $0.01 and 100,000,000 shares of preferred stock with a par value of $0.01. Refer to Note 18, “Stockholders’ Equity”.

The Company’s vessels operate worldwide, carrying containers for many established charterers.

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 (refer to Note 2, “Significant Accounting Policies”) that are under the exclusive management of a related party of the Company (refer to Note 11, “Related Party Transactions”).

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 consolidated financial statements 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 consolidated financial statements of the Company 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 consolidated balance sheets and consolidated statements of operations, consolidated statements of comprehensive income/(loss), cash flows and stockholders’ equity at and for each period since their respective incorporation dates.

As of December 31, 2019, Danaos consolidated the vessel owning companies (the “Danaos Subsidiaries”) listed below. All vessels are container vessels:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

Company

    

Date of Incorporation

    

Vessel Name

    

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

 

Seattle C (ex 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

Rewarding International Shipping Inc.

 

October 1, 2019

 

(2)

 

2005

 

8,463


(1)

Twenty-foot equivalent unit, the international standard measure for containers and containership capacity.

(2)

Vessel expected to be delivered in 2020.

v3.19.3.a.u2
Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Significant Accounting Policies  
Significant Accounting Policies

2. Significant Accounting Policies

Principles of Consolidation:  The accompanying consolidated financial statements 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 obtained by the Company.

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 accounting guidance, if it determines that it is the primary beneficiary. 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.

Inter‑company transaction balances and unrealized gains/(losses) on transactions between the companies are eliminated.

Investments in affiliates: The Company’s investments in affiliates are accounted for using the equity method of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. The Company evaluates its investments in affiliates for impairment when events or circumstances indicate that the carrying value of such investments may have experienced other than temporary decline in value below their carrying value. If the estimated fair value is less than the carrying value and is considered an other than temporary decline, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Consolidated Statements of Operations.

Use of Estimates:  The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on‑going basis, management evaluates the estimates and judgments, including those related to future drydock dates, the selection of useful lives for tangible assets, expected future cash flows from long‑lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes, and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.

 

Reclassifications in Other Comprehensive Income/(Loss): The Company had the following reclassifications out of Accumulated Other Comprehensive Loss during the years ended December 31, 2019, 2018 and 2017, respectively (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

    

Location of Reclassification into Income

    

2019

    

2018

    

2017

Amortization of deferred realized losses on cash flow hedges

 

Net unrealized and realized losses on derivatives

 

$

3,622

 

$

3,694

 

$

3,694

Accelerated amortization of deferred realized losses on cash flow hedges

 

Net unrealized and realized losses on derivatives

 

 

 —

 

 

1,443

 

 

Total Reclassifications

 

 

 

$

3,622

 

$

5,137

 

$

3,694

 

Foreign Currency Translation:  The functional currency of the Company is the U.S. dollar. The Company engages in worldwide commerce with a variety of entities. Although its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Additionally, the Company’s wholly‑owned vessel subsidiaries transacted a nominal amount of their operations in Euros; however, all of the subsidiaries’ primary cash flows are U.S. dollar denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the Consolidated Statements of Operations. The foreign currency exchange gains/(losses) recognized in the accompanying Consolidated Statements of Operations for each of the years ended December 31, 2019, 2018 and 2017 were $0.2 million loss, $0.1 million loss and $0.4 million loss, respectively.

Cash and Cash Equivalents:  Cash and cash equivalents consist of interest bearing call deposits, where the Company has instant access to its funds and withdrawals and deposits can be made at any time, as well as time deposits with original maturities of three months or less which are not restricted for use or withdrawal. Cash and cash equivalents of $139.2 million as of December 31, 2019 (December 31, 2018: $77.3 million) comprised cash balances and short-term deposits.

Restricted Cash:  Cash restricted accounts include retention accounts. Until the full repayment of the KEXIM ABN Amro loan facility in June 2018, the Company was required to deposit one-third of quarterly and one‑sixth of the semi‑annual principal installments and interest payments, respectively, due on the outstanding loan balance monthly in a retention account. On the rollover settlement date, both principal and interest were paid from the retention account. Refer to Note 3, "Cash, Cash Equivalents and Restricted Cash”.

Accounts Receivable, Net:  The amount shown as Accounts Receivable, net, at each balance sheet date includes estimated recoveries from charterers for hire and demurrage billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts based on the Company’s history of write‑offs, level of past due accounts based on the contractual term of the receivables and its relationships with and economic status of its customers. Bad debts are written off in the period in which they are identified.

Insurance Claims:  Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from insurance companies. Any costs to complete the claims are included in accrued liabilities. The Company accounts for the cost of possible additional call amounts under its insurance arrangements in accordance with the accounting guidance for contingencies based on the Company’s historical experience and the shipping industry practices. Insurance claims are included in the consolidated balance sheet line item “Other current assets”.

Prepaid Expenses and Inventories:  Prepaid expenses consist mainly of insurance expenses, and inventories consist of bunkers, lubricants and provisions remaining on board the vessels at each period end, which are valued at cost as determined using the first‑in, first‑out method. Costs of spare parts are expensed as incurred.

Deferred Financing Costs: Loan arrangement fees incurred for obtaining new loans, for loans that have been accounted for as modified and the fees paid to third parties for loans that have been accounted for as extinguished, where there is a replacement debt and the lender remains the same, are deferred and amortized over the loans’ respective repayment periods using the effective interest rate method and are presented in the consolidated balance sheets as a direct deduction from the carrying amount of debt liability. Unamortized deferred financing costs for extinguished facilities are written-off. Loan arrangement fees related to the facilities accounted for under troubled debt restructuring with future undiscounted cash flows greater than the net carrying value of the original debt are capitalized and amortized over the loan respective repayment period using the effective interest rate method. Additionally, amortization of deferred finance costs amounting to $16.9 million, $15.00 million and $11.2 million is included in interest expenses in the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017, respectively.  

Fixed Assets:  Fixed assets consist of vessels. Vessels are stated at cost, less accumulated depreciation. The cost of vessels consists of the contract purchase price and any material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Otherwise, these expenditures are charged to expense as incurred. Interest costs while under construction are included in vessels’ cost.

The Company has acquired certain vessels in the secondhand market in prior years, all of which were considered to be acquisitions of assets. Following adoption of ASU 2017-01 “Business Combinations (Topic 805)” on January 1, 2018, the Company evaluates if any vessel acquisition in secondhand market constitutes a business or not. When substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. The following assets are considered as a single asset for the purposes of the evaluation (i) a tangible asset that is attached to and cannot be physically removed and used separately from another tangible assets (or an intangible asset representing the right to use a tangible asset); (ii) in place lease intangibles, including favorable and unfavorable intangible assets or liabilities, and the related leased assets.    

The Company charters in two of its vessels Hyundai Honour and Hyundai Respect under a five years sale and leaseback arrangement. The proceeds received by the Company from the buyer-lessor were recognized as a financial leaseback obligation as this arrangement did not qualify for a sale of these vessels. The Company has substantive repurchase obligation of these vessels at the end of the leaseback period or earlier, at the Company's option, and retains the control over these vessels. Each leaseback payment is allocated between the liability and interest expense to achieve a constant interest rate on the leaseback obligation outstanding. The interest element of the leaseback payment is charged under "Interest expense" in the accompanying Consolidated Statements of Operations over the leaseback period.

Depreciation:  The cost of the Company’s vessels is depreciated on a straight-line basis over the vessels’ remaining economic useful lives after considering the estimated residual value (refer to Note 4, “Fixed Assets, net”). Management has estimated the useful life of the Company’s vessels to be 30 years from the year built.

Vessels held for sale: Vessels are classified as “Vessels held for sale” when all of the following criteria are met: management has committed to a plan to sell the vessel; the vessel is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of vessels; an active program to locate a buyer and other actions required to complete the plan to sell the vessel have been initiated; the sale of the vessel is probable and transfer of the vessel is expected to qualify for recognition as a completed sale within one year; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Vessels classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. These vessels are not depreciated once they meet the criteria to be held for sale.

Accounting for Special Survey and Drydocking Costs:  The Company follows the accounting guidance for planned major maintenance activities. Drydocking and special survey costs, which are reported in the balance sheet within “Deferred charges, net”, include planned major maintenance and overhaul activities for ongoing certification including the inspection, refurbishment and replacement of steel, engine components, electrical, pipes and valves, and other parts of the vessel. The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and amortized on a straight‑line basis over the period until the next scheduled survey and drydocking, 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.

The amortization periods reflect the estimated useful economic life of the deferred charge, which is the period between each special survey and drydocking.

Costs incurred during the drydocking period relating to routine repairs and maintenance are expensed. The unamortized portion of special survey and drydocking costs for vessels sold is included as part of the carrying amount of the vessel in determining the gain/(loss) on sale of the vessel.

Impairment of Long‑lived Assets:  The accounting standard for impairment of long‑lived assets requires that long‑lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In the case of long‑lived assets held and used, if the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.

As of December 31, 2019 and 2018, the Company concluded that events and circumstances triggered the existence of potential impairment of its vessels. These indicators included volatility in the charter market and the vessels’ market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company’s vessels by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. The Company’s strategy is to charter its vessels under multi‑year, fixed rate period charters that range from less than 1 to 18 years for vessels in its fleet, providing the Company with contracted stable cash flows. The significant factors and assumptions the Company used in its undiscounted projected net operating cash flow analysis included, among others, operating revenues, off‑hire revenues, drydocking costs, operating expenses and management fees estimates. Revenue assumptions were based on contracted time charter rates up to the end of life of the current contract of each vessel as well as the estimated average time charter equivalent rates for the remaining life of the vessel after the completion of its current contract. The estimated daily time charter equivalent rates used for non‑contracted revenue days are based on a combination of (i) recent charter market rates, (ii) conditions existing in the containership market as of December 31, 2019; (iii) historical average time charter rates, based on publications by independent third party maritime research services, and (iv) estimated future time charter rates, based on publications by independent third party maritime research services that provide such forecasts. Recognizing that the container transportation industry is cyclical and subject to significant volatility based on factors beyond the Company’s control, management believes the use of revenue estimates, based on the combination of factors (i) to (iv) above, to be reasonable as of the reporting date. In addition, the Company used an annual operating expenses escalation factor and estimates of scheduled and unscheduled off‑hire revenues based on historical experience. All estimates used and assumptions made were in accordance with the Company’s internal budgets and historical experience of the shipping industry.

As at December 31, 2019, the Company's assessment concluded that step two of the impairment analysis was not required for any vessel, as the undiscounted projected net operating cash flows of all vessels exceeded the carrying value of the respective vessels. As of December 31, 2019, no impairment loss was identified. As at December 31, 2018, the Company’s assessment concluded that step two of the impairment analysis was required for certain of its vessels, as the undiscounted projected net operating cash flows of certain vessels did not exceed the carrying value of the respective vessels. Fair value of each vessel was determined by management with the assistance from valuations obtained by third party independent shipbrokers. As of December 31, 2018, the Company recorded an impairment loss of $210.7 million for ten of its vessels that are held and used, which is reflected under “Impairment loss” in the accompanying Consolidated Statements of Operations.

Investments in Debt Securities: The Company classified its debt securities originally as held-to-maturity based on management’s positive intent and ability to hold to maturity and were reported at amortized cost, subject to impairment up until December 31, 2016.

During 2017, the Company sold a portion of its debt securities, originally classified as held to maturity and as such reclassified remaining held to maturity debt securities into the available for sale category. The transfer between the categories is accounted for at fair value. The unrealized holding gain/(loss) upon transfer from held to maturity category to available for sale category is recorded in accumulated other comprehensive income/(loss). Available for sale securities are carried at fair value with net unrealized gain/(loss) included in accumulated other comprehensive income/(loss), subject to impairment. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Interest income, including amortization of premiums and accretion of discounts are recognized in the interest income in the consolidated statements of operations. Upon sale, realized gain/(loss) is recognized in the consolidated statement of operations based on specific identification method. Management evaluates securities for other than temporary impairment on a quarterly basis. An investment is considered impaired if the fair value of the investment is less than its amortized cost. Consideration is given to: 1) if the Company intends to sell the security (that is, it has decided to sell the security); 2) it is more likely than not that the Company will be required to sell the security before the recovery of its entire amortized cost basis; or 3) a credit loss exists—that is, the Company does not expect to recover the entire amortized cost basis of the security (the present value of cash flows expected to be collected is less than the amortized cost basis of the security).

Investments in Equity Securities: The Company classifies its equity securities of ZIM at cost as the Company does not have the ability to exercise significant influence. Equity securities of HMM were acquired and held principally for the purpose of resale in the near term and were classified as trading securities based on management’s intention on the date of acquisition and were recorded at fair value based on quoted market prices with changes in fair value and realized gains/(losses) presented under “Other income/(expenses), net” in the Consolidated Statements of Operations. The Company sold equity securities of HMM in 2016.

Management evaluates the equity security for other than temporary impairment on a quarterly basis. An investment is considered impaired if the fair value of the investment is less than its cost. Consideration is given to significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, significant adverse change in the regulatory, economic, or technological environment of the investee, significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates, as well as factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants.

Pension and Retirement Benefit Obligations‑Crew:  The crew on board the companies’ vessels serve in such capacity under short‑term contracts (usually up to seven months) and accordingly, the vessel‑owning companies are not liable for any pension or post‑retirement benefits.

Accounting for Revenue and Expenses:  The Company derives its revenue from time charters and bareboat charters of its vessels, each of which contains a lease. These charters involve placing the specified vessel at charterers’ use for a specified rental period of time in return for the payment of specified daily hire rates. Most of the charters include options for the charterers to extend their terms. Under a time charter, the daily hire rate includes lease component related to the right of use of the vessel and non-lease components primarily related to the operating expenses of the vessel incurred by the Company such as commissions, vessel operating expenses: crew expenses, lubricants, certain insurance expenses, repair and maintenance, spares, stores etc. and vessel management fees. Under a bareboat charter, the daily hire rate includes only lease component related to the right of use of the vessel. The revenue earned based on time charters is not negotiated in separate components. Revenue from the Company’s time charters and bareboat charters of vessels is accounted for as operating leases on a straight line basis based on the average fixed rentals over the minimum fixed rental period of the time charter and bareboat charter agreements, as service is performed.

The Company elected the practical expedient which allows the Company to treat the lease and non-lease components as a single lease component for the leases where the timing and pattern of transfer for the nonlease component and the associated lease component to the lessees are the same and the lease component, if accounted for separately, would be classified as an operating lease. The combined component is therefore accounted for as an operating lease under ASC 842, as the lease components are the predominant characteristics, in 2019.

The Company adopted the new “Leases” standard (Topic 842) on January 1, 2019 using the modified retrospective method. 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 (i) to not reassess whether any expired or existing contracts are considered or contain leases; (ii) to not reassess the lease classification for any expired or existing leases (iii) to not 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 due to its predominant characteristic. The adoption of this standard did not have a material effect on the  consolidated financial statements since the Company is primarily a lessor and the accounting for lessors is largely unchanged under this standard.

Voyage Expenses:  Voyage expenses include port and canal charges, bunker (fuel) expenses (bunker costs are normally covered by the Company’s charterers, except in certain cases such as vessel re‑positioning), address commissions and brokerage commissions. Under multi‑year time charters and bareboat charters, such as those on which the Company charters its containerships and under short‑term time charters, the charterers bear the voyage expenses other than brokerage and address commissions. As such, voyage expenses represent a relatively small portion of the vessels’ overall expenses.

Vessel Operating Expenses:  Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Aggregate expenses increase as the size of the Company’s fleet increases. Under multi‑year time charters, the Company pays for vessel operating expenses. Under bareboat charters, the Company’s charterers bear most vessel operating expenses, including the costs of crewing, insurance, surveys, drydockings, maintenance and repairs.

General and administrative expenses:  General and administrative expenses include management fees paid to the vessels’ manager (refer to Note 11, “Related Party Transactions”), audit fees, legal fees, board remuneration, executive officers compensation, directors & officers insurance and stock exchange fees.

Repairs and Maintenance:  All repair and maintenance expenses are charged against income when incurred and are included in vessel operating expenses in the accompanying Consolidated Statements of Operations.

Dividends:  Dividends, if any, are recorded in the Company’s financial statements in the period in which they are declared by the Company’s board of directors.

Troubled Debt Restructuring and Accumulated Accrued Interest: Prior to the finalization of the Refinancing (refer to Note 10, “Long-Term Debt, Net”), the Company concluded that it was experiencing financial difficulty and that certain of the lenders granted a concession (as part of the Refinancing). The Company was experiencing financial difficulty primarily as a result of the projected cash flows not being sufficient to service the balloon payment due as of December 31, 2018 without restructuring and the Company was not able to obtain funding from sources other than existing creditors at an effective interest rate equal to the current market interest rate for similar debt. As a result, the accounting guidance for troubled debt restructuring (“TDR”) was applied at the Closing Date. The TDR accounting guidance requires the Company to record the value of the new debt to its restructured undiscounted cash flows over the life of the loan, including cash flows associated with the remaining scheduled interest and principal payments not to exceed the carrying amount of the original debt. In cases in which the recorded value of the debt instrument exceeds the sum of undiscounted future cash flows to be received under the restructured debt instrument, the recorded value is reduced to the sum of undiscounted future cash flows, and a gain is recorded. As a result of the TDR accounting, the interest expense related to the future periods on certain facilities was recognized under the accumulated accrued interest line in the Balance Sheet. Interest payments relating to the future interest recognized in accumulated accrued interest, are recognized as a reduction to the accumulated accrued interest payable when these are paid. As a result, these interest payments are not recorded as interest expense.

In the future, when interest rates change, actual cash flows will differ from the cash flows measured on the Refinancing closing date. The accounting treatment for changes in cash flows due to changes in interest rates depends on whether there is an increase or a decrease from the spot interest rate used in the initial TDR accounting (“threshold interest rate”). Fluctuations in the effective interest rate after the Refinancing from changes in the interest rate or other cause are accounted for as changes in estimates in the periods in which these changes occur. Upon an increase in the interest rates from the threshold interest rate used to calculate accumulated accrued interest payable, the Company recognizes additional interest expenses in the period the expense is incurred. The additional interest expense is calculated by multiplying the difference between the current interest rate and the threshold interest rate with the current carrying value of the debt. A gain due to decrease in interest rates (‘interest windfall’) will not be recognized until the debt facilities have been settled and there are no future interest payments. In case there are subsequent increases in interest rates above the threshold interest rate after a previous decrease in interest rates, the carrying amount of the accumulated accrued interest will be reduced by the interest payments in excess of the threshold interest rate until the prior interest windfall due to decrease in the interest rates is recaptured on a cumulative basis.

The Paid-in-kind interest (“PIK interest”) related to each period will increase the carrying value of the loan facility and correspondingly decrease the carrying value of the accumulated accrued interest. PIK interest in excess of the amount recognized in the accumulated accrued interest is expensed in the period the expense is incurred.

Segment Reporting:  The Company reports financial information and evaluates its operations by total charter revenues. Although revenue can be identified for different types of charters, management does not identify expenses, profitability or other financial information for different charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it has only one operating and reportable segment.

Going Concern: The management of the Company assesses the Company’s ability to continue as a going concern at each period end. The assessment evaluates whether there are conditions that give rise to substantial doubt to continue as a going concern within one year from the consolidated financial statements issuance date.

If a substantial doubt to continue as a going concern is identified and after considering management’s plans this substantial doubt is alleviated the Company discloses the following: (i) principal conditions or events that raised substantial doubt about the Company’s ability to continue as a going concern (before consideration of management’s plans), (ii) management’s evaluation of the significance of those conditions or events in relation to the Company’s ability to meet its obligations, (iii) management’s plans that alleviated substantial doubt about the Company’s ability to continue as a going concern.

If a substantial doubt to continue as a going concern is identified and after considering management’s plans this substantial doubt is not alleviated the Company discloses the following: (i) a statement indicating that there is substantial doubt about the Company’s ability to continue as a going concern, (ii) principal conditions or events that raised substantial doubt about the Company’s ability to continue as a going concern, (iii) management’s evaluation of the significance of those conditions or events in relation to the Company’s ability to meet its obligations, and (iv) management’s plans that are intended to mitigate the conditions or events that raised substantial doubt about the Company’s ability to continue as a going concern.

The Company updates the going concern disclosure in subsequent periods until the period in which substantial doubt no longer exists disclosing how the relevant conditions or events that raised substantial doubt were resolved.

Derivative Instruments:  The Company entered into interest rate swap contracts to create economic hedges for its interest rate risks. The Company recorded these financial instruments at their fair value. When such derivatives do not qualify for hedge accounting, changes in their fair value are recorded in the Consolidated Statement of Operations. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in the fair value of derivatives are either offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income (effective portion) and are reclassified to earnings when the hedged transaction is reflected in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in income.

At the inception of the transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its risk management objective and the strategy for undertaking various hedging transactions. The Company also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

On July 1, 2012, the Company elected to prospectively de‑designate fair value and cash flow interest rate swaps for which it was obtaining hedge accounting treatment due to the compliance burden associated with this accounting policy. As a result, all changes in the fair value of the Company’s cash flow interest rate swap agreements were recorded in earnings under “Net Unrealized and Realized Losses on Derivatives” from the de‑designation date forward.

The Company evaluated whether it is probable that the previously hedged forecasted interest payments are probable to not occur in the originally specified time period. The Company has concluded that the previously hedged forecasted interest payments are probable of occurring. Therefore, unrealized gains or losses in accumulated other comprehensive loss associated with the previously designated cash flow interest rate swaps will remain frozen in accumulated other comprehensive loss and recognized in earnings when the interest payments will be recognized. If such interest payments were to be identified as being probable of not occurring, the accumulated other comprehensive loss balance pertaining to these amounts would be reversed through earnings immediately.

The Company does not use financial instruments for trading or other speculative purposes.

Earnings/(Loss) Per Share:  The Company has presented net earnings/(loss) per share for all years presented based on the weighted average number of outstanding shares of common stock of Danaos Corporation at the reported periods. Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised. The warrants issued in 2011 were excluded from the diluted earnings/(loss) per share for the year ended December 31, 2019, 2018 and 2017, because they were antidilutive. Unvested shares of restricted stock are included in the calculation of the diluted earnings per share, unless considered antidilutive, based on the weighted average number of shares of restricted stock outstanding during the period.

Equity Compensation Plan:  The Company has adopted an equity compensation plan (the “Plan”) in 2006 (as amended on August 2, 2019), which is generally administered by the compensation committee of the Board of Directors. The Plan allows the plan administrator to grant awards of shares of common stock or the right to receive or purchase shares of common stock to employees, directors or other persons or entities providing significant services to the Company or its subsidiaries. The actual terms of an award will be determined by the plan administrator and set forth in written award agreement with the participant. Any options granted under the Plan will be accounted for in accordance with the accounting guidance for share‑based compensation arrangements.

The aggregate number of shares of common stock for which awards may be granted under the Plan shall not exceed 1,000,000 shares plus the number of unvested shares granted before August 2, 2019. Awards made under the Plan that have been forfeited, cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence. Unless otherwise set forth in an award agreement, any awards outstanding under the Plan will vest immediately upon a “change of control”, as defined in the Plan. Refer to Note 17, “Stock Based Compensation”.

As of April 18, 2008, the Company established the Directors Share Payment Plan (“Directors Plan”). The purpose of the Directors 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. Each member of the Board of Directors of the Company may participate in the Directors Plan. Pursuant to the terms of the Directors Plan, Directors may elect to receive in Common Stock all or a portion of their compensation. On the last business day of each quarter, the rights of common stock are credited to each Director’s Share Payment Account. Following December 31st of each year, the Company will deliver to each Director the number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. Refer to Note 17, “Stock Based Compensation”.

As of April 18, 2008, the Board of Directors and the Compensation Committee approved the Company’s ability to provide, from time to time, incentive compensation to the employees of Danaos Shipping Company Limited (the “Manager”), in the form of free shares of the Company’s common stock under the Plan. Prior approval is required by the Compensation Committee and the Board of Directors. The plan was effective since 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. Refer to Note 17, “Stock Based Compensation”.    

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; Accounting Standards Update No. 2019-4 “Codification improvements to Topic 326, Topic 815 and Topic 825” in April 2019,  Accounting Standards Update No. 2019-11 "Codification improvements to Topic 326, Financial Instruments-Credit Losses" in November 2019 and Accounting Standards Update No. 2020-2 "Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842)" in February 2020, which clarify or addresses related issues. The ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.

v3.19.3.a.u2
Cash, Cash Equivalents and Restricted Cash
12 Months Ended
Dec. 31, 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

 

    

December 31, 2019

    

December 31, 2018

    

December 31, 2017

Cash and cash equivalents

 

$

139,170

 

$

77,275

 

$

66,895

Restricted cash

 

 

 —

 

 

 

 

2,812

Total 

 

$

139,170

 

$

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 Consolidated Balance Sheets. This credit facility was fully repaid in July 2018.

v3.19.3.a.u2
Fixed Assets, Net
12 Months Ended
Dec. 31, 2019
Fixed Assets, Net  
Fixed Assets, Net

4. Fixed Assets, Net

Fixed assets, net consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Vessel

 

 

 

 

Net Book

 

    

Costs

    

Accumulated Depreciation

    

Value

As of January 1, 2017

 

$

3,554,683

 

$

(647,962)

 

$

2,906,721

Additions

 

 

4,478

 

 

 

 

4,478

Depreciation

 

 

 

 

(115,228)

 

 

(115,228)

As of December 31, 2017

 

$

3,559,161

 

$

(763,190)

 

$

2,795,971

Additions

 

 

2,830

 

 

 

 

2,830

Impairment Loss

 

 

(337,738)

 

 

127,023

 

 

(210,715)

Depreciation

 

 

 

 

(107,757)

 

 

(107,757)

As of December 31, 2018

 

$

3,224,253

 

$

(743,924)

 

$

2,480,329

Additions

 

 

6,050

 

 

 —

 

 

6,050

Depreciation

 

 

 —

 

 

(96,505)

 

 

(96,505)

As of December 31, 2019

 

$

3,230,303

 

$

(840,429)

 

$

2,389,874

 

As of December 31, 2019, the Company concluded that events and circumstances triggered the existence of potential impairment of its long-lived assets. These indicators included volatility in the charter market and the vessels’ market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company’s vessels by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. As at December 31, 2019, the Company’s assessment concluded that step two of the impairment analysis was not required for any vessel, as the undiscounted projected net operating cash flows of all vessels exceeded the carrying value of the respective vessels. As of December 31, 2019, no impairment loss was identified.

As of December 31, 2018, the Company concluded that events and circumstances triggered the existence of potential impairment of its long-lived assets. These indicators included volatility in the charter market and the vessels’ market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company’s vessels by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. As at December 31, 2018, the Company’s assessment concluded that step two of the impairment analysis was required for certain of its vessels, as the undiscounted projected net operating cash flows of certain vessels did not exceed the carrying value of the respective vessels. Fair value of each vessel was determined by management with the assistance from valuations obtained by third party independent shipbrokers. As of December 31, 2018, the Company recorded an impairment loss of $210.7 million for ten of its vessels that are held and used, which is reflected under “Impairment loss” in the accompanying Consolidated Statements of Operations.

As of December 31, 2017, the Company concluded that there are no events and circumstances, which may trigger the existence of potential impairment of the Company’s vessels. The indicators which were considered were mainly the current improved charter market and the improved vessel’s market values compared to the prior year, as well as the potential impact the marketplace may have on the future operations.

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 December 31, 2019 and 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 a  failed sale and leaseback by the Company with the received proceeds recognized as a financial liability. The carrying value of these vessels amount to $271.9 million as of December 31, 2019.

The scheduled leaseback instalments subsequent to December 31, 2019 are as follows (in thousands):

 

 

 

 

 

Instalments due by period ended:

    

 

  

December 31, 2020

 

$

32,611

December 31, 2021

 

 

32,522

December 31, 2022

 

 

32,521

December 31, 2023

 

 

32,521

December 31, 2024

 

 

60,733

Total leaseback instalments

 

 

190,908

Less: Imputed interest

 

 

(52,694)

Total leaseback obligation

 

 

138,214

Less: Current leaseback obligation

 

 

(16,342)

Leaseback obligation, net of current portion

 

$

121,872

 

v3.19.3.a.u2
Deferred Charges, Net
12 Months Ended
Dec. 31, 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, 2017

 

$

8,199

Additions

 

 

7,511

Amortization

 

 

(6,748)

As of December 31, 2017

 

$

8,962

Additions

 

 

13,306

Amortization

 

 

(9,237)

As of December 31, 2018

 

$

13,031

Additions

 

 

7,157

Amortization

 

 

(8,733)

As of December 31, 2019

 

$

11,455

 

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.

v3.19.3.a.u2
Investments in affiliates
12 Months Ended
Dec. 31, 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 two entities with capital leases for the container vessels Suez Canal and Genoa and two entities 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, $30.0 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 December 31, 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 Consolidated Statements of Operations. 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 $18.3 million and $15.0 million as of December 31, 2019 and December 31, 2018, respectively. 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):

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

Current assets

 

$

6,242

 

$

8,327

 

 

 

Non-current assets

 

$

69,740

 

$

41,155

 

 

 

Current liabilities

 

$

9,892

 

$

5,201

 

 

 

Long-term liabilities

 

$

47,795

 

$

29,254

 

 

 

Net operating revenues

 

$

20,264

 

$

18,885

 

$

17,388

Net income

 

$

3,268

 

$

2,787

 

$

1,969

 

v3.19.3.a.u2
Other Non-current Assets
12 Months Ended
Dec. 31, 2019
Other Non-current Assets  
Other Non-current Assets

7. Other Non‑current Assets

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

 

 

 

 

 

 

 

 

 

    

2019

    

2018

Available for sale securities:

 

 

 

 

 

 

ZIM notes, net

 

$

20,078

 

$

21,044

HMM notes, net

 

 

11,377

 

 

7,847

Equity participation ZIM

 

 

 —

 

 

Advances for vessels additions

 

 

18,800

 

 

5,420

Advances for vessels acquisition

 

 

2,507

 

 

 —

Other assets

 

 

29,577

 

 

25,058

Total

 

$

82,339

 

$

59,369

 

a.     ZIM

In July 2014, after the charter restructuring agreements with ZIM, the Company obtained equity participation in ZIM and interest bearing unsecured ZIM notes maturing in 2023, consisting of $8.8 million Series 1 Notes and $41.1 million of Series 2 Notes. ZIM notes were originally classified as held to maturity securities and recorded at amortized costs less other than temporary impairment since initial recognition. The Company classifies its equity participation in ZIM at cost as the Company does not have the ability to exercise significant influence. In 2016, the Company tested for impairment of its equity participation in ZIM based on the existence of triggering events that indicate the interest in equity may have been impaired and recorded an impairment loss of $28.7 million, thus reducing its book value to nil. The Company also tests periodically for impairment of its investments in debt securities based on the existence of triggering events that indicate debt instruments may have been impaired.

The Company recognized $1.6 million, $1.4 million and $1.3 million in relation to their fair value unwinding of ZIM notes in the Consolidated Statements of Operations in “Interest income” for years ended December 31, 2019, 2018 and 2017, respectively. Furthermore, for each of the years ended December 31, 2019, 2018 and 2017, the Company recognized in the Consolidated Statements of Operations in “Interest income”, a non-cash interest income of $0.9 million in relation to ZIM notes, which is accrued quarterly with deferred cash payment on maturity.

Furthermore, in July 2014, an amount of $39.1 million, which represents the additional compensation received from ZIM, was recorded as unearned revenue representing compensation to the Company for the future reductions in the daily charter rates payable by ZIM under its time charters, expiring in 2020 or 2021, for six of the Company’s vessels. This amount is recognized in the Consolidated Statements of Operations in “Operating revenues” over the remaining life of the respective time charters. For each of the years ended December 31, 2019, 2018 and 2017, the Company recorded an amount of $6.0 million of unearned revenue amortization in “Operating revenues”. As of December 31, 2019, the outstanding balances of the current and non-current portion of unearned revenue in relation to ZIM amounted to $5.4 million and $1.1 million, respectively. As of December 31, 2018, the corresponding outstanding balances of the current and non-current portion of unearned revenue amounted to $6.0 million and $6.5 million, respectively. Refer to Note 13, “Financial Instruments—Fair value of Financial Instruments”.

b.     HMM

In July 2016, after the charter restructuring agreements with HMM, the Company obtained interest bearing senior unsecured HMM notes consisting of $32.8 million Loan Notes 1 maturing in July 2024 and $6.2 million Loan Notes 2 maturing in December 2022 and 4.6 million HMM shares. The HMM notes were originally classified as held to maturity securities and recorded at amortized costs less other than temporary impairment since initial recognition. Based on the management’s intention, the HMM shares were held principally for the purpose of the resale in the near term and were classified as trading securities. The Company also tests periodically for impairment of its investments in debt securities based on the existence of triggering events that indicate debt instruments may have been impaired.

On September 1, 2016, the Company sold all HMM shares and the net proceeds were used to repay outstanding debt obligations. Furthermore, for the years ended December 31, 2019, 2018 and 2017, the Company recognized $1.9 million, $1.8 million and $1.8 million, respectively, of non-cash interest income and fair value unwinding of HMM notes under “Interest income” in the Consolidated Statement of Operations.

On July 18, 2016, the Company recognized unearned revenue of $75.6 million representing compensation to the Company for the future reductions in the daily charter rates payable by HMM under the time charter agreements. The amortization of unearned revenue is recognized in the Consolidated Statement of Operations under “Operating revenues” over the remaining life of the respective charters. For the years ended December 31, 2019, December 31, 2018 and December 31, 2017, the Company recorded an amount of $8.2 million, $8.8 million and $15.6 million, respectively, of unearned revenue amortization. As of December 31, 2019, the outstanding balances of the current and non-current portion of unearned revenue in relation to HMM amounted to $8.2 million and $27.0 million, respectively. As of December 31, 2018, the corresponding outstanding balances of the current and non-current portion of unearned revenue amounted to $8.2 million and $35.2 million, respectively. Refer also to Note 13, “Financial Instruments–Fair value of Financial Instruments”.

c.      Transfer to Available for sale category

On March 28, 2017, the Company sold $13.0 million principal amount of HMM Loan Notes 1 maturing in July 2024 carried at amortized costs of $8.6 million for gross cash proceeds on sale of $6.2 million, which were received in April 2017. The sale resulted in a loss of $2.4 million, which was recognized in the “Other income/(expenses), net” in the accompanying Consolidated Statements of Operations for year ended December 31, 2017. The proceeds were used to repay related outstanding debt obligations in April 2017. The sale of  these notes resulted in a transfer of all remaining held to maturity HMM and ZIM notes into the available for sale securities at fair value.The unrealized losses, which were recognized in other comprehensive loss, are analyzed as follows as of December 31, 2019 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

 

 

 

 

 

Description of securities

    

basis

    

Fair value

    

Unrealized loss

ZIM notes

 

$

47,171

 

$

20,078

 

$

(27,093)

HMM notes

 

 

22,508

 

 

11,377

 

 

(11,131)

Total

 

$

69,679

 

$

31,455

 

$

(38,224)

 

 

 

 

 

 

    

Unrealized loss

 

 

on available for

 

    

sale securities

Balance as of January 1, 2017

 

 

 —

Unrealized loss on available for sale securities

 

$

(26,607)

Balance as of December 31, 2017

 

 

(26,607)

Unrealized loss on available for sale securities

 

 

(9,771)

Balance as of December 31, 2018

 

$

(36,378)

Unrealized loss on available for sale securities

 

 

(1,846)

Balance as of December 31, 2019

 

$

(38,224)

 

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 out of which advances of $18.2 million were paid before December 31, 2019 and the remaining amount of $19.0 million is expected to be paid in 2020. On October 2, 2019, the Company entered into an agreement to acquire a 8,463 TEU container vessel built in 2005 for a gross purchase price of $25.0 million, of which $2.5 million was advanced before December 31, 2019. This vessel is expected to be delivered by the end of May 2020.

Other assets mainly include non-current assets related to straight-lining of the Company’s revenue amounting to $29.6 million and $23.1 million as of December 31, 2019 and December 31, 2018, respectively.

v3.19.3.a.u2
Accrued Liabilities
12 Months Ended
Dec. 31, 2019
Accrued Liabilities  
Accrued Liabilities

8. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

2019

    

2018

Accrued payroll

 

$

809

 

$

924

Accrued interest

 

 

3,910

 

 

6,304

Accrued expenses

 

 

3,808

 

 

4,542

Total

 

$

8,527

 

$

11,770

 

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

v3.19.3.a.u2
Lease Arrangements
12 Months Ended
Dec. 31, 2019
Lease Arrangements  
Lease Arrangements

9. Lease Arrangements

Charters‑out

As of December 31, 2019, the Company generated operating revenues from its 55 vessels on time charters or bareboat charter agreements, with remaining terms ranging from less than one year to April 2028. Under the terms of the charter party agreements, most charterers have options to extend the duration of contracts ranging from less than one year to three years after the expiration of the contract. The Company determines fair value of its vessels at the lease commencement date and at the end of lease term for lease classification with the assistance from valuations obtained by third party independent shipbrokers. The Company manages its risk associated with the residual value of its vessels after the expiration of the charter party agreements by seeking multi-year charter arrangements for its vessels.

The future minimum rentals, expected to be earned on non-cancellable time charters consisted of the following as of December 31, 2019 (in thousands):

 

 

 

 

 

2020

    

$

383,412

2021

 

 

339,528

2022

 

 

270,307

2023

 

 

187,727

2024

 

 

57,070

2025 and thereafter

 

 

62,214

Total future rentals

 

$

1,300,258

 

The future minimum rentals, expected to be earned on non-cancellable time charters consisted of the following as of December 31, 2018 (in thousands):

 

 

 

 

 

2019

    

$

366,659

2020

 

 

345,174

2021

 

 

319,423

2022

 

 

257,533

2023

 

 

172,454

2024 and thereafter

 

 

116,111

Total future rentals

 

$

1,577,354

 

Rentals 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.

v3.19.3.a.u2
Long-Term Debt, net
12 Months Ended
Dec. 31, 2019
Long-Term Debt, net  
Long-Term Debt, net

10. Long‑Term Debt, net

Long‑term debt consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

Balance as of

    

Balance as of

 

 

December 31, 

 

December 31, 

Credit Facility

 

2019

 

2018

The Royal Bank of Scotland $475.5 mil. Facility

 

$

458,604

 

$

474,743

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

 

 

372,340

 

 

379,762

Citibank $114 mil. Facility

 

 

74,402

 

 

110,644

Credit Suisse $171.8 mil. Facility

 

 

115,759

 

 

167,990

Citibank—Eurobank $37.6 mil. Facility

 

 

27,455

 

 

35,544

Club Facility $206.2 mil.

 

 

143,389

 

 

202,439

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

 

 

40,680

 

 

61,020

Citibank $123.9 mil. Facility

 

 

88,793

 

 

122,523

Citibank $120 mil. Facility