Document and Entity Information	6 Months Ended
Document and Entity Information	Jun. 30, 2020
Document and Entity Information
Entity Registrant Name	DANAOS CORPORATION
Entity Central Index Key	0001369241
Document Type	6-K
Document Period End Date	Jun. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 84,955	$ 139,170
Accounts receivable, net	12,552	7,145
Inventories	9,358	8,494
Prepaid expenses	1,353	1,458
Due from related parties	22,376	20,512
Other current assets	14,144	13,607
Total current assets	144,738	190,386
NON-CURRENT ASSETS
Fixed assets at cost, net of accumulated depreciation of $890,269 (2019: $840,429)	2,466,556	2,389,874
Deferred charges, net	19,584	11,455
Investments in affiliates	12,230	8,965
Other non-current assets	56,971	82,339
Total non-current assets	2,555,341	2,492,633
Total assets	2,700,079	2,683,019
CURRENT LIABILITIES
Accounts payable	20,903	11,168
Accrued liabilities	14,620	8,527
Current portion of long-term debt, net	123,084	119,673
Current portion of long-term leaseback obligation, net	23,822	16,342
Accumulated accrued interest, current portion	30,415	34,137
Unearned revenue	18,240	17,960
Other current liabilities	7,848	15,273
Total current liabilities	238,932	223,080
LONG-TERM LIABILITIES
Long-term debt, net	1,240,253	1,270,663
Long-term leaseback obligation, net of current portion	107,353	121,872
Accumulated accrued interest, net of current portion	139,553	156,583
Unearned revenue, net of current portion	23,783	28,528
Other long-term liabilities	393	603
Total long-term liabilities	1,511,335	1,578,249
Total liabilities	1,750,267	1,801,329
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock (par value $0.01, 100,000,000 preferred shares authorized and not issued as of June 30, 2020 and December 31, 2019)
Common stock (par value $0.01, 750,000,000 common shares authorized as of June 30, 2020 and December 31, 2019. 24,789,312 shares issued and outstanding as of June 30, 2020 and December 31, 2019)	248	248
Additional paid-in capital	785,870	785,274
Accumulated other comprehensive loss	(116,993)	(116,934)
Retained earnings	280,687	213,102
Total stockholders' equity	949,812	881,690
Total liabilities and stockholders' equity	$ 2,700,079	$ 2,683,019

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) $ in Thousands	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) $ / shares shares
CONDENSED CONSOLIDATED BALANCE SHEETS
Accumulated depreciation \| $	$ 890,269	$ 840,429
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	24,789,312

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
OPERATING REVENUES	$ 116,824	$ 112,319	$ 223,020	$ 225,210
OPERATING EXPENSES
Voyage expenses	(3,289)	(2,732)	(7,335)	(6,002)
Vessel operating expenses	(28,568)	(27,306)	(54,570)	(53,177)
Depreciation	(25,258)	(24,039)	(49,839)	(47,805)
Amortization of deferred drydocking and special survey costs	(2,941)	(2,063)	(5,251)	(4,254)
General and administrative expenses	(6,013)	(6,492)	(11,853)	(13,361)
Income From Operations	50,755	49,687	94,172	100,611
OTHER INCOME (EXPENSES):
Interest income	1,588	1,569	3,302	3,165
Interest expense	(13,645)	(18,844)	(29,958)	(36,687)
Other finance expenses	(1,038)	(1,770)	(1,660)	(2,094)
Equity income/(loss) on investments	1,720	32	3,265	(52)
Other income, net	19	367	270	434
Loss on derivatives	(903)	(903)	(1,806)	(1,796)
Total Other Expenses, net	(12,259)	(19,549)	(26,587)	(37,030)
Net Income	$ 38,496	$ 30,138	$ 67,585	$ 63,581
EARNINGS PER SHARE
Basic earnings per share	$ 1.57	$ 2.02	$ 2.75	$ 4.26
Diluted earnings per share	$ 1.55	$ 1.97	$ 2.73	$ 4.16
Basic weighted average number of common shares (in thousands)	24,573	14,939	24,573	14,939
Diluted weighted average number of common shares (in thousands)	24,789	15,314	24,789	15,276

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (unaudited)
Net income for the period	$ 38,496	$ 30,138	$ 67,585	$ 63,581
Other comprehensive income/(loss):
Unrealized gain/(loss) on available for sale securities	6,467	(2,021)	(1,865)	(2,626)
Amortization of deferred realized losses on cash flow hedges	903	903	1,806	1,796
Total Other Comprehensive Income/(Loss)	7,370	(1,118)	(59)	(830)
Comprehensive Income	$ 45,866	$ 29,020	$ 67,526	$ 62,751

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

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, 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
Stock compensation		830			830
Net movement in other comprehensive income			288		288
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
Stock compensation	$ 2	1,033			1,035
Stock compensation (in shares)	136
Net movement in other comprehensive income			(1,118)		(1,118)
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 Dec. 31, 2019	$ 248	785,274	(116,934)	213,102	881,690
Balance (in shares) at Dec. 31, 2019	24,789
Increase (Decrease) in Stockholders' Equity
Net Income				29,089	29,089
Stock compensation		298			298
Net movement in other comprehensive income			(7,429)		(7,429)
Balance at Mar. 31, 2020	$ 248	785,572	(124,363)	242,191	903,648
Balance (in shares) at Mar. 31, 2020	24,789
Balance at Dec. 31, 2019	$ 248	785,274	(116,934)	213,102	881,690
Balance (in shares) at Dec. 31, 2019	24,789
Increase (Decrease) in Stockholders' Equity
Net Income					67,585
Net movement in other comprehensive income					(59)
Balance at Jun. 30, 2020	$ 248	785,870	(116,993)	280,687	949,812
Balance (in shares) at Jun. 30, 2020	24,789
Balance at Mar. 31, 2020	$ 248	785,572	(124,363)	242,191	903,648
Balance (in shares) at Mar. 31, 2020	24,789
Increase (Decrease) in Stockholders' Equity
Net Income				38,496	38,496
Stock compensation		298			298
Net movement in other comprehensive income			7,370		7,370
Balance at Jun. 30, 2020	$ 248	$ 785,870	$ (116,993)	$ 280,687	$ 949,812
Balance (in shares) at Jun. 30, 2020	24,789

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash Flows from Operating Activities
Net income	$ 67,585	$ 63,581
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	49,839	47,805
Amortization of deferred drydocking and special survey costs	5,251	4,254
Amortization of finance costs	5,604	5,714
Exit fee accrued on debt	258	295
Debt discount amortization	2,858	3,234
PIK interest	1,550	1,695
Payments for drydocking and special survey costs deferred	(13,380)	(1,690)
Amortization of deferred realized losses on interest rate swaps	1,806	1,796
Stock based compensation	596	1,865
Equity (income)/ loss on investments	(3,265)	52
(Increase)/Decrease in
Accounts receivable	(5,407)	1,729
Inventories	(864)	(281)
Prepaid expenses	105	72
Due from related parties	(1,864)	(2,114)
Other assets, current and non-current	1,934	(8,750)
Increase/(Decrease) in
Accounts payable	5,235	873
Accrued liabilities	3,702	(1,057)
Unearned revenue, current and long-term	(4,465)	(7,252)
Other liabilities, current and long-term	(210)	(365)
Net Cash provided by Operating Activities	116,868	111,456
Cash Flows from Investing Activities
Vessels additions and advances	(98,746)	(10,638)
Investments	(75)
Net Cash used in Investing Activities	(98,821)	(10,638)
Cash Flows from Financing Activities
Payments of long-term debt	(65,176)	(205,811)
Proceeds from sale-leaseback of vessels	139,080	146,523
Proceeds from long-term debt	23,400
Payments of leaseback obligation	(142,065)	(2,086)
Payments of accumulated accrued interest	(15,502)	(17,867)
Finance costs	(11,999)	(20,049)
Net cash used in financing activities	(72,262)	(99,290)
Net Increase/(Decrease) in cash and cash equivalents	(54,215)	1,528
Cash and cash equivalents at beginning of period	139,170	77,275
Cash and cash equivalents at end of period	$ 84,955	$ 78,803

Basis of Presentation and General Information

6 Months Ended

Jun. 30, 2020

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 11, “Stockholders’ Equity”. The Company’s principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel owning companies whose principal activity is the ownership and operation of 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, 2020, the condensed consolidated results of operations for the three and six months ended June 30, 2020 and 2019 and the condensed consolidated cash flows for the six months ended June 30, 2020 and 2019. 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, 2019. The results of operations for the three and six months ended June 30, 2020, 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.”

As of June 30, 2020, 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	Hyundai Smart (ex Maersk Enping)	2012	13,100
Megacarrier (No. 4) Corp.	September 10, 2007	Hyundai Speed (ex Maersk Exeter)	2012	13,100
Megacarrier (No. 5) Corp.	September 10, 2007	Hyundai Ambition (ex 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
Blackwell Seaways Inc.	January 9, 2020	Niledutch Lion	2008	8,626
Oceancarrier (No.1) Corp.	February 20, 2020	SM Charleston	2005	8,533
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
Rewarding International Shipping Inc.	October 1, 2019	Phoebe	2005	8,463
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	Rio Grande (ex 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.

Impact of COVID-19 on the Company's Business

The spread of the COVID-19 virus, which has been declared a pandemic by the World Health Organization, in 2020 has caused substantial disruptions in the global economy and the shipping industry, as well as significant volatility in the financial markets, the severity and duration of which remains uncertain.

The impact of the COVID-19 pandemic continues to unfold and may continue to have negative effect on the Company's business, financial performance and the results of its operations, including due to decreased demand for global seaborne container trade and containership charter rates, the extent of which will depend largely on future developments. As a result, many of the Company's estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company's estimates may change in future periods.

The Company has evaluated the impact of current economic situation on the recoverability of the carrying amount of its vessels. As of June 30, 2020, the Company concluded that events and circumstances triggered the existence of potential impairment of its vessels. These indicators included volatility in the charter market as well as the potential impact the current marketplace may have on the 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 values. As of June 30, 2020, 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 the Company's vessels exceeded the carrying value of the respective vessels. As of June 30, 2020, no vessel impairment loss was identified.

Significant Accounting Policies	6 Months Ended
Significant Accounting Policies	Jun. 30, 2020
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, 2019 filed with the Securities and Exchange Commission on February 27, 2020. During the six months ended June 30, 2020, other than the following, there were no other significant changes made to the Company’s significant accounting policies: Newly Implemented Accounting Principles: We adopted Topic 326 "Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments" on January 1, 2020. This standard provides new guidance for measuring and recognizing credit losses on financial instruments using the modified retrospective approach with a cumulative effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. The standard applies to the allowance for uncollectible debt securities in the Company's books, but did not result in any significant changes to the allowance methodology and did not have a material impact on the Company's unaudited condensed consolidated financial statements. Recent Accounting Pronouncements: In March 2020, the FASB issued ASU 2020-4, "Reference Rate Reform (Topic 848)" ("ASU 2020-4"), which provides optional guidance intended to ease the potential burden in accounting for the expected discontinuation of LIBOR as a reference rate in the financial markets. The guidance can be applied to modifications made to certain contracts to replace LIBOR with a new reference rate. The guidance, if elected, will permit entities to treat such modifications as the continuation of the original contract, without any required accounting reassessments or remeasurements. The ASU 2020-4 was effective for the Company beginning on March 12, 2020 and the Company will apply the amendments prospectively through December 31, 2022. There was no impact to the Company's unaudited condensed consolidation financial statements for the six months ended June 30, 2020 as a result of adopting this standard update. Currently, the Company has various contracts that reference LIBOR and is assessing how this standard may be applied to specific contract modifications.

Fixed Assets, Net

6 Months Ended

Jun. 30, 2020

Fixed Assets, Net

Fixed Assets, Net

3 Fixed assets, net

The Company took delivery of the following vessels in the six months ended June 30, 2020:


Company	Vessel Name	Year Built	TEU	Date of vessel delivery
Blackwell Seaways Inc.	Niledutch Lion	2008	8,626	January 23, 2020
Rewarding International Shipping Inc.	Phoebe	2005	8,463	April 14, 2020
Oceancarrier (No.1) Corp.	SM Charleston	2005	8,533	June 10, 2020

In the six months ended June 30, 2020, the Company installed scrubbers on nine of its vessels with total costs of $39.7 million. The residual value (estimated scrap value at the end of the vessels’ useful lives) of the fleet was estimated at $408.4 million and $378.2 million as of June 30, 2020 and as of December 31, 2019, respectively. 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.

On May 12, 2020, the Company refinanced the existing leaseback obligation related to the vessels Hyundai Honour and Hyundai Respect with a new sale and leaseback arrangement amounting to $139.1 million with a four years term, at the end of which the Company will reacquire these vessels for an aggregate amount of $36.0 million or earlier, at the Company’s option, for a purchase price set forth in the agreement. The Company incurred early termination fees amounting to $0.5 million, which are presented under “Other finance expenses” in the condensed consolidated statements of income. This new arrangement was recorded as a failed sale and leaseback by the Company with the net proceeds received recognized as a financial liability. The carrying value of these vessels amount to $277.0 million as of June 30, 2020.

The scheduled leaseback instalments subsequent to June 30, 2020 are as follows (in thousands):


Instalments due by period ended:
June 30, 2021	$	30,916
June 30, 2022		30,916
June 30, 2023		30,915
Until May 2024		61,833
Total leaseback instalments		154,580
Less: Imputed interest		(19,351)
Total leaseback obligation		135,229
Less: Deferred finance costs, net		(4,054)
Less: Current leaseback obligation		(23,822)
Leaseback obligation, net of current portion	$	107,353

Deferred Charges, Net

6 Months Ended

Jun. 30, 2020

Deferred Charges, Net

Deferred Charges, Net

4 Deferred Charges, net

Deferred charges, net consisted of the following (in thousands):


	Drydocking and
	Special Survey Costs
As of January 1, 2019	$	13,031
Additions		7,157
Amortization		(8,733)
As of December 31, 2019		11,455
Additions		13,380
Amortization		(5,251)
As of June 30, 2020	$	19,584

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.

Investments in affiliates

6 Months Ended

Jun. 30, 2020

Investments in affiliates

Investments in affiliates

5 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. In August 2019, an affiliated company of Gemini acquired an 8,533 TEU container vessel built in 2006 renamed to Belita. 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 June 30, 2020, 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.	Belita	2006	8,533	August 26, 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/(loss) 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, provided that such fair market value is not below the net book value of such equity interests. The net assets of Gemini total $25.0 million and $18.3 million as of June 30, 2020 and December 31, 2019, 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):


	As of		As of
	June 30, 2020		December 31, 2019
Current assets	$	8,469	$	6,242
Non-current assets	$	70,042	$	69,740
Current liabilities	$	8,687	$	9,892
Non-current liabilities	$	44,865	$	47,795

		Six months ended	Six months ended
	June 30, 2020		June 30, 2019
Net operating revenues	$	16,441	$	7,451
Net income/(loss)	$	6,664	$	(106)

Other Non-current Assets

6 Months Ended

Jun. 30, 2020

Other Non-current Assets

Other Non-current Assets

6 Other Non-current Assets

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


	As of		As of
	June 30, 2020		December 31, 2019
Available for sale securities:
ZIM notes, net	$	21,567	$	20,078
HMM notes, net		10,360		11,377
Equity participation ZIM		75		—
Advances for vessels additions		—		18,800
Advances for vessels acquisition		—		2,507
Other assets		24,969		29,577
Total	$	56,971	$	82,339

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. 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, 2019 for further details.

ZIM and HMM unsecured debt securities are not publicly traded, are infrequently traded over the counter by certain brokers and have no readily determinable market value or credit ratings. The unrealized loss was primarily caused by challenging business environment faced by container shipping industry, which affected profitability and liquidity of ZIM and HMM. Credit spreads of debt securities issued by shipping companies, including ZIM and HMM increased due to impact the COVID-19 pandemic on near-term profit and liquidity forecasts of liner companies by the industry analysts. The Company collects cash interest applicable to ZIM securities and rentals on the Company's vessels leased to ZIM and HMM on a regular basis, in accordance with the contractual agreements. The contractual terms of ZIM and HMM debt securities do not permit ZIM or HMM to settle the debt securities at a price less than the amortized cost basis on the investments. The Company currently does not expect ZIM or HMM to settle the debt securities at a price less than the amortized cost basis of the investments. The Company does not intend to sell ZIM and HMM debt securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. These securities are in continuous unrealized loss position for a period exceeding twelve months as of June 30, 2020 and December 31, 2019.

The following tables summarizes the unrealized positions for available-for-sale debt securities as of June 30, 2020 and December 31, 2019 (in thousands):


	Amortized cost
Description of securities	basis		Fair value		Unrealized loss
June 30, 2020
ZIM notes	$	48,494	$	21,567	$	(26,927)
HMM notes		23,522		10,360		(13,162)
Total	$	72,016	$	31,927	$	(40,089)

December 31, 2019
ZIM notes	$	47,171	$	20,078	$	(27,093)
HMM notes		22,508		11,377		(11,131)
Total	$	69,679	$	31,455	$	(38,224)

The unrealized losses, which were recognized in other comprehensive loss, are analyzed as follows as of June 30, 2020 (in thousands):


	Unrealized loss
	on available for
	sale securities
Beginning balance as of January 1, 2020	$	(38,224)
Unrealized loss on available for sale securities		(1,865)
Ending balance as of June 30, 2020	$	(40,089)

Other assets mainly include non-current assets related to straight-lining of the Company’s revenue amounting to $24.8 million and $29.6 million as of June 30, 2020 and December 31, 2019, respectively.

Accrued Liabilities

6 Months Ended

Jun. 30, 2020

Accrued Liabilities

Accrued Liabilities

7 Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	As of		As of
	June 30, 2020		December 31, 2019
Accrued payroll	$	866	$	809
Accrued interest		2,437		3,910
Accrued scrubbers expenses		2,391		—
Accrued dry-docking expenses		4,041		—
Accrued expenses		4,885		3,808
Total	$	14,620	$	8,527

Accrued expenses mainly consisted of accruals related to the operation of the Company’s fleet and vessel additions as of June 30, 2020 and December 31, 2019.

Long-Term Debt, net

6 Months Ended

Jun. 30, 2020

Long-Term Debt, net

Long-Term Debt, net

8 Long-Term Debt, net

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



	Balance as of		Balance as of
Credit Facility	June 30, 2020		December 31, 2019
The Royal Bank of Scotland $475.5 mil. Facility	$	449,692	$	458,604
HSH Nordbank AG - Aegean Baltic Bank - Piraeus Bank $382.5 mil. Facility		362,986		372,340
Citibank $114 mil. Facility		68,587		74,402
Credit Suisse $171.8 mil. Facility		109,695		115,759
Citibank – Eurobank $37.6 mil. Facility		22,499		27,455
Club Facility $206.2 mil.		135,761		143,389
Sinosure Cexim - Citibank - ABN Amro $203.4 mil. Facility		30,510		40,680
Citibank $123.9 mil. Facility		86,947		88,793
Citibank $120 mil. Facility		96,614		100,245
Macquarie Bank $24 mil. Facility		24,000		—
Fair value of debt		(17,136)		(19,994)
Comprehensive Financing Plan exit fees accrued		22,397		22,139
Total long-term debt	$	1,392,552	$	1,423,812
Less: Deferred finance costs, net		(29,215)		(33,476)
Less: Current portion		(123,084)		(119,673)
Total long-term debt net of current portion and deferred finance cost	$	1,240,253	$	1,270,663

On April 8, 2020, the vessel owning companies Rewarding International Shipping Inc. and Blackwell Seaways Inc. entered into a loan agreement with Macquarie Bank, which is guaranteed by Danaos, for an amount up to $24 million drawn down in full on April 9, 2020. The loan was used to partially finance the acquisition costs of two newly acquired vessels Niledutch Lion and Phoebe owned by these vessel owning companies, liens on which vessels secure this loan agreement. The loan bears interest at LIBOR plus 3.9% margin and is repayable in nineteen quarterly instalments starting from September 30, 2020 over a five year period of the loan with a balloon payment at maturity amounting to $10.4 million.

Each of the credit facilities is 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, and in the case of the credit facilities entered into in 2018 the Company’s investments in ZIM and Hyundai Merchant Marine securities, and stock pledges and benefits from corporate guarantees. As of June 30, 2020, fifty-five of the Company's vessels, excluding the SM Charleston, Hyundai Honour and Hyundai Respect, having a net carrying value of $2,165.9 million, were subject to first and second preferred mortgages as collateral to the Company's credit facilities. As of June 30, 2020, 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, 2020 and December 31, 2019. Unpaid loan amendment fees of $7.4 million and $14.8 million are accrued under "Other current liabilities" as of June 30, 2020 and December 31, 2019, respectively.

The Sinosure–Cexim–Citibank–ABN Amro Credit Facility provides for semi-annual amortization payments and the 2018 Credit Facilities provide for quarterly fixed and variable amortization payments, together representing approximately 85% of actual free cash flows from the relevant vessels securing such credit facilities, subject to certain adjustments. The 2018 Credit Facilities have maturity dates of December 31, 2023 (or in some cases June 30, 2024). The scheduled debt maturities of total long-term debt subsequent to June 30, 2020 are as follows (in thousands):



	Fixed principal					Total
Payments due by period ended	repayments			Final payments		principal payments
June 30, 2021	$	123,084			—	$	123,084
June 30, 2022		109,477			—		109,477
June 30, 2023		87,422			—		87,422
June 30, 2024		38,079	*	$	1,017,179		1,055,258
June 30, 2025		1,650			10,400		12,050
Total long-term debt	$	359,712		$	1,027,579	$	1,387,291

* The final payments include the unamortized remaining principal debt balances under the 2018 Credit Facilities, as such amount will be determinable following the fixed amortization. As mentioned above, the Company is also subject to quarterly variable principal amortization based on actual free cash flows, which are included under “Final payments” in this table.

Financial Instruments

6 Months Ended

Jun. 30, 2020

Financial Instruments

Financial Instruments

9 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, 2020 and 2019, 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, 2020 and December 31, 2019.

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


	As of June 30, 2020				As of December 31, 2019
	Book Value		Fair Value		Book Value		Fair Value

	(in thousands of $)
Cash and cash equivalents	$	84,955	$	84,955	$	139,170	$	139,170
ZIM notes	$	21,567	$	21,567	$	20,078	$	20,078
HMM notes	$	10,360	$	10,360	$	11,377	$	11,377
Long-term debt, including current portion	$	1,392,552	$	1,392,552	$	1,423,812	$	1,423,812

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, 2020:


	Fair Value Measurements as of June 30, 2020
	Total		(Level I)		(Level II)		(Level III)

	(in thousands of $)
ZIM notes(1)	$	21,567	$	—	$	21,567	$	—
HMM notes(1)	$	10,360	$	—	$	10,360	$	—

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, 2020:


	Fair Value Measurements as of June 30, 2020
	Total		(Level I)		(Level II)		(Level III)

		(in thousands of $)
Long-term debt, including current portion(2)	$	1,392,552	$	—	$	1,392,552	$	—

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, 2019:


	Fair Value Measurements as of December 31, 2019
	Total		(Level I)		(Level II)		(Level III)

	(in thousands of $)
ZIM notes(1)	$	20,078	$	—	$	20,078	$	—
HMM notes(1)	$	11,377	$	—	$	11,377	$	—

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, 2019:


	Fair Value Measurements as of December 31, 2019
	Total		(Level I)		(Level II)		(Level III)

	(in thousands of $)
Long-term debt, including current portion(2)	$	1,423,812	$	—	$	1,423,812	$	—

(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 $29.2 million and $33.5 million as of June 30, 2020 and December 31, 2019, 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.

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2020