DAC Danaos Corp

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 6-K

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REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR

15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

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For the month of August 2023

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Commission File Number 001-33060

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DANAOS CORPORATION

(Translation of registrant’s name into English)

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Danaos Corporation

c/o Danaos Shipping Co. Ltd.

14 Akti Kondyli

185 45 Piraeus

Greece

Attention: Secretary

011 030 210 419 6480

(Address of principal executive office)

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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

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Form 20-F   ⌧        Form 40-F  ◻

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AGM Results

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On July 28, 2023, at our annual meeting of stockholders, Mr. Iraklis Prokopakis was re-elected as a Class II director for a three-year term expiring at the annual meeting of our stockholders in 2026. Our stockholders also ratified the appointment of Deloitte Certified Public Accountants, S.A. as our independent auditors.

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EXHIBIT INDEX

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This report on Form 6-K is hereby incorporated by reference into the Company’s (i) Registration Statement on Form F-3 (Reg. No. 333-237284) filed with the SEC on March 19, 2020, (ii) the post effective Amendment to Form F-1 in the Registration Statement on Form F-3 (Reg. No. 333-226096) filed with the SEC on March 6, 2019, (iii) Registration Statement on Form F-3 (Reg. No. 333-174494) filed with the SEC on May 25, 2011, (iv) Registration Statement on Form F-3 (Reg. No. 333-147099), the related prospectus supplements filed with the SEC on December 17, 2007, January 16, 2009 and March 27, 2009, (v) Registration Statement on Form S-8 (Reg. No. 333-233128) filed with the SEC on August 8, 2019 and the reoffer prospectus, dated August 8, 2019, contained therein, (vi) Registration Statement on Form S-8 (Reg. No. 333-138449) filed with the SEC on November 6, 2006 and the reoffer prospectus, dated November 6, 2006, contained therein, (vii) Registration Statement on Form F-3 (Reg. No. 333-169101) filed with the SEC on October 8, 2010, (viii) Registration Statement on Form F-3 (Reg. No. 333-255984) filed with the SEC on May 10, 2021 and (ix) Registration Statement on Form F-3 (Reg. No. 333-270457) filed with the SEC on March 10, 2023.

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SIGNATURES

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

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Date: August 7, 2023

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EXHIBIT 99.1

DANAOS CORPORATION

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Results of Operations

Three months ended June 30, 2023 compared to three months ended June 30, 2022

During the three months ended June 30, 2023, Danaos had an average of 68.0 containerships compared to 71.0 containerships during the three months ended June 30, 2022. Our fleet utilization for the three months ended June 30, 2023 was 98.7% compared to 99.9% for the three months ended June 30, 2022.

Operating Revenues

Operating revenues decreased by 3.7%, or $9.4 million, to $241.5 million in the three months ended June 30, 2023 from $250.9 million in the three months ended June 30, 2022.

Operating revenues for the three months ended June 30, 2023 reflected:

Voyage Expenses

Voyage expenses decreased by $1.0 million to $8.4 million in the three months ended June 30, 2023 from $9.4 million in the three months ended June 30, 2022 primarily as a result of a decrease in the average number of vessels in our fleet.

Vessel Operating Expenses

Vessel operating expenses increased by $1.3 million to $41.9 million in the three months ended June 30, 2023 from $40.6 million in the three months ended June 30, 2022, primarily as a result of an increase in the average daily operating cost for vessels on time charter to $6,970 per vessel per day for the three months ended June 30, 2023 compared to $6,463 per vessel per day for the three months ended June 30, 2022, which was partially offset by a decrease in the average number of vessels in our fleet. The average daily operating cost increased mainly due to increased repair and maintenance expenses. Management believes that our daily operating costs remain among the most competitive in the industry.

Depreciation

Depreciation expense decreased by 5.3%, or $1.8 million, to $31.9 million in the three months ended June 30, 2023 from $33.7 million in the three months ended June 30, 2022 mainly due to our recent sale of three vessels.

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Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $1.3 million to $4.5 million in the three months ended June 30, 2023 from $3.2 million in the three months ended June 30, 2022.

General and Administrative Expenses

General and administrative expenses increased by $0.1 million to $7.2 million in the three months ended June 30, 2023, from $7.1 million in the three months ended June 30, 2022.

Interest Expense and Interest Income

Interest expense decreased by 63.4%, or $10.2 million, to $5.9 million in the three months ended June 30, 2023 from $16.1 million in the three months ended June 30, 2022. The decrease in interest expense is a result of:

As of June 30, 2023, outstanding debt, gross of deferred finance costs, was $424.3 million, which included $262.8 million principal amount of our Senior Notes. These balances compare to debt of $885.1 million, which included $300.0 million principal amount of our Senior Notes, and a leaseback obligation of $105.8 million, gross of deferred finance costs, as of June 30, 2022. See “Liquidity and Capital Resources”.

Interest income increased by $3.5 million to $3.6 million in the three months ended June 30, 2023 compared to $0.1 million in the three months ended June 30, 2022 mainly as a result of increased interest rates in the three months ended June 30, 2023.

Gain/(loss) on Investments

We recognized a $6.4 million gain on marketable securities in the three months ended June 30, 2023 on our shareholding interest in Eagle Bulk Shipping Inc. (“Eagle Bulk”) of 1,552,865 shares of common stock. This gain compares to a loss on investments of $168.6 million, which consisted of the change in fair value of our shareholding interest in ZIM recognized in the three months ended June 30, 2022. In September 2022, we sold all of our remaining ordinary shares of ZIM for net proceeds of $161.3 million.

Dividend Income

Dividend income of $16.2 million was recognized on ZIM ordinary shares in the three months ended June 30, 2022 compared to none in the three months ended June 30, 2023.

Gain/(loss) on Debt Extinguishment

A $2.3 million loss on early extinguishment of our leaseback obligations in the three months ended June 30, 2023 compares to a $22.9 million gain related to our early extinguishment of debt in the three months ended June 30, 2022.

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Equity Loss on Investments

Equity loss on investments amounting to $0.7 million in the three months ended June 30, 2023 relates to our share of initial expenses of a newly established company, Carbon Termination Technologies Corporation (“CTTC”), currently engaged in the research and development of decarbonization technologies for the shipping industry.

Other Finance Expenses

Other finance expenses increased by $0.8 million to $1.1 million in the three months ended June 30, 2023 compared to $0.3 million in the three months ended June 30, 2022 mainly due to commitment fees for our recently established revolving credit facility.

Loss on Derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $0.9 million in each of the three months ended June 30, 2023 and June 30, 2022.

Other Income/(expenses), net

Other income, net was $0.3 million in the three months ended June 30, 2023 compared to other income, net of $0.4 million in the three months ended June 30, 2022.

Income Taxes

Income taxes of $2.3 million in the three months ended June 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares compare to no income tax in the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022

During the six months ended June 30, 2023, Danaos had an average of 68.2 containerships compared to 71.0 containerships during the six months ended June 30, 2022. Our fleet utilization for the six months ended June 30, 2023 was 97.8% compared to 98.7% for the six months ended June 30, 2022.

Operating Revenues

Operating revenues increased by 0.9%, or $4.2 million, to $485.0 million in the six months ended June 30, 2023 from $480.8 million in the six months ended June 30, 2022.

Operating revenues for the six months ended June 30, 2023 reflect:

Voyage Expenses

Voyage expenses decreased by $0.3 million to $16.3 million in the six months ended June 30, 2023 from $16.6 million in the six months ended June 30, 2022.

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Vessel Operating Expenses

Vessel operating expenses increased by $2.8 million to $82.5 million in the six months ended June 30, 2023 from $79.7 million in the six months ended June 30, 2022, primarily as a result of an increase in the average daily operating cost for vessels on time charter to $6,889 per vessel per day for the six months ended June 30, 2023 compared to $6,385 per vessel per day for the six months ended June 30, 2022, which was partially offset by a decrease in the average number of vessels in our fleet. The average daily operating cost increased mainly due to increased repair and maintenance expenses. Management believes that our daily operating costs remain among the most competitive in the industry.

Depreciation

Depreciation expense decreased by 5.5%, or $3.7 million, to $63.4 million in the six months ended June 30, 2023 from $67.1 million in the six months ended June 30, 2022 due to our recent sale of three vessels.

Amortization of Deferred Drydocking and Special Survey Costs

Amortization of deferred dry-docking and special survey costs increased by $2.4 million to $8.3 million in the six months ended June 30, 2023 from $5.9 million in the six months ended June 30, 2022.

General and Administrative Expenses

General and administrative expenses decreased by $0.5 million to $14.0 million in the six months ended June 30, 2023, from $14.5 million in the six months ended June 30, 2022. The decrease was primarily attributable to decreased management fees due to the recent sale of three vessels.

Gain on Sale of Vessels

In January 2023, we completed the sale of the Amalia C for net proceeds of $4.9 million resulting in a gain of $1.6 million.

Interest Expense and Interest Income

Interest expense decreased by 62.0%, or $20.6 million, to $12.6 million in the six months ended June 30, 2023 from $33.2 million in the six months ended June 30, 2022. The decrease in interest expense is a result of:

As of June 30, 2023, outstanding debt, gross of deferred finance costs, was $424.3 million, which included $262.8 million principal amount of our Senior Notes. These balances compare to debt of $885.1 million, which included $300.0 million principal amount of our Senior Notes, and a leaseback obligation of $105.8 million, gross of deferred finance costs, as of June 30, 2022.

Interest income increased by $6.2 million to $6.3 million in the six months ended June 30, 2023 compared to $0.1 million in the six months ended June 30, 2022 mainly as a result of increased interest rates in the six months ended June 30, 2023.

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Gain/(loss) on Investments

We recognized a $6.4 million gain on marketable securities in the six months ended June 30, 2023 on our shareholding interest in Eagle Bulk of 1,552,865 shares of common stock. This gain compares to a loss on investments of $69.1 million, which consisted of the change in fair value of our shareholding interest in ZIM recognized in the six months ended June 30, 2022. In September 2022, we sold all of our remaining ordinary shares of ZIM for net proceeds of $161.3 million.

Dividend Income

Dividend income of $138.4 million was recognized on ZIM ordinary shares in the six months ended June 30, 2022 compared to none in the six months ended June 30, 2023.

Gain/(loss) on Debt Extinguishment

A $2.3 million loss on early extinguishment of our leaseback obligations in the six months ended June 30, 2023 compares to a $22.9 million gain related to our early extinguishment of debt in the six months ended June 30, 2022

Equity Loss on Investments

Equity loss on investments amounting to $3.3 million in the six months ended June 30, 2023 relates to our share of initial expenses of a newly established company, CTTC, currently engaged in the research and development of decarbonization technologies for the shipping industry.

Other Finance Expenses

Other finance expenses increased by $1.2 million to $2.1 million in the six months ended June 30, 2023 compared to $0.9 million in the six months ended June 30, 2022 mainly due to commitment fees for our recently established revolving credit facility.

Loss on Derivatives

Amortization of deferred realized losses on interest rate swaps remained stable at $1.8 million in each of the six months ended June 30, 2023 and June 30, 2022.

Other Income/(expenses), net

Other income, net was $0.5 million in the six months ended June 30, 2023 compared to other income, net of $0.9 million in the six months ended June 30, 2022.

Income Taxes

Income taxes of $14.5 million, in the six months ended June 30, 2022, related to the taxes withheld on dividend income earned on ZIM ordinary shares and compared to no income tax in the six months ended June 30, 2023.

Liquidity and Capital Resources

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

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Our short-term liquidity needs primarily relate to the funding of our vessel operating expenses, drydocking costs, installment payments for our ten contracted newbuildings and the five capsize bulk carriers we in principle agreed to acquire in July 2023 for $103 million, debt interest payments, servicing our debt obligations, payment of dividends and repurchase of our common stock. Our long-term liquidity needs primarily relate to installment payments for our ten contracted newbuildings and any additional vessel acquisitions in the containership or drybulk sector and debt repayment. We anticipate that our primary sources of funds will be cash from operations and equity or debt financings. We currently expect that the sources of funds available to us will be sufficient to meet our short-term liquidity (for the next 12 months after the issuance of the condensed consolidated financial statements) and long-term liquidity requirements.

Under our existing multi-year charters as of June 30, 2023, we had $2.5 billion of total contracted cash revenues, or $454.1 million for the remainder of 2023, $797.8 million for 2024 and thereafter $1.3 billion. Although these contracted cash revenues are based on contracted charter rates, we are dependent on the ability and willingness of our charterers to meet their obligations under these charters. In May 2022, we received a $238.9 million charter hire prepayment related to charter contracts for 15 of our vessels, representing partial prepayment of charter hire payable during the period from May 2022 through January 2027. This prepayment is recorded as unearned revenue on our balance sheet and recognized as revenue in our income statement over the term of the applicable charters.

As of June 30, 2023, we had cash and cash equivalents of $293.3 million. As of June 30, 2023, we had $360.0 million of remaining borrowing availability under a reducing revolving credit facility, the availability under which reduces on a quarterly basis. As of June 30, 2023, we had $424.3 million of outstanding indebtedness (gross of deferred finance costs), including $262.8 million relating to our Senior Notes. As of June 30, 2023, we were obligated to make quarterly fixed amortization payments, totaling $27.5 million to June 30, 2024, related to the long-term bank debt. We are also obligated to make certain payments to our Manager, Danaos Shipping, under our management agreement which has a term through December 31, 2024.

In June 2022, we drew down $130.0 million under a new senior secured term loan facility from BNP Paribas and Credit Agricole, which is secured by six 5,466 TEU sister vessels acquired in 2021. This facility is repayable in 8 quarterly instalments of $5.0 million, followed by 12 quarterly instalments of $1.9 million together with a balloon payment of $67.2 million payable over five-year term. In December 2022, we early extinguished the remaining $437.75 million of the Citibank/Natwest $815 mil. Facility and replaced it with the $382.5 mil. Revolving Credit Facility with Citibank, out of which nil is drawn down as of June 30, 2023 and with the Alpha Bank $55.25 mil. Facility, which was drawn down in full and under which $51.5 million is outstanding as of June 30, 2023. The Citibank $382.5 mil. Revolving Credit Facility is reducing and repayable over 5 years in 20 quarterly reductions of $11.25 million each together with a final reduction of $157.5 million at maturity in December 2027. We pay a commitment fee at a rate of 0.8% per annum on the undrawn amount of this facility. The Alpha Bank $55.25 mil. Facility is repayable over 5 years with 20 consecutive quarterly instalments of $1.875 million each, together with a balloon payment of $17.75 million at maturity in December 2027.

On March 11, 2022, we entered into contracts for the construction of two 7,100 TEU container vessels with expected vessels delivery in 2024. On April 1, 2022, as amended on April 21, 2022, we entered into contracts for the construction of four 8,000 TEU container vessels with expected vessels delivery in 2024. On April 28, 2023, we entered into contracts for the construction of two 6,000 TEU container vessels with expected vessels delivery in 2024 and 2025. On June 20, 2023, we entered into contracts for the construction of two 8,200 TEU container vessels with expected vessels delivery in 2026. The aggregate purchase price of the vessel construction contracts amounts to $834.9 million. The remaining contractual commitments under these vessel construction contracts are analyzed as follows as of June 30, 2023 (in millions of U.S. dollars):

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Additionally, a supervision fee of $725 thousand per newbuilding vessel will be payable to Danaos Shipping Company Limited (“the Manager”) over the construction period starting from steel cutting. Supervision fees totaling $1.1 million were charged by the Manager and capitalized to the vessels under construction in the six months ended June 30, 2023. Interest expense amounting to $5.0 million and $7.2 million was capitalized to the vessels under construction in the year ended December 31, 2022 and in the six months ended June 30, 2023, respectively.

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Subsequent to June 30, 2023, we declared a dividend of $0.75 per share of common stock payable on September 1, 2023 to holders of record on August 23, 2023. We intend to pay a regular quarterly dividend on our common stock, which will have an impact on our liquidity. Payments of dividends are subject to the discretion of our board of directors, provisions of Marshall Islands law affecting the payment of distributions to stockholders and the terms of our credit facilities, which permit the payment of dividends so long as there has been no event of default thereunder nor would occur as a result of such dividend payment, and Senior Notes, which include limitations on the amount of dividends and other restricted payments that we may make, and will be subject to conditions in the container shipping industry, our financial performance and us having sufficient available excess cash and distributable reserves.

In June 2022, we announced a share repurchase program of up to $100 million of our common stock. We had repurchased 466,955 shares of our common stock in the open market for $28.6 million as of December 31, 2022. In the six months ended June 30, 2023, we repurchased an additional 597,697 shares for $36.0 million, out of which 3,400 shares valued at $0.2 million remained unsettled as of June 30, 2023. Subsequent to June 30, 2023, we repurchased 15,895 shares of our common stock in the open market for $1.0 million. All purchases have been made on the open market within the safe harbor provisions of Regulation 10b-18 under the Exchange Act. Under the share repurchase program, shares of our common stock may be purchased in open market or privately negotiated transactions, at times and prices that are considered to be appropriate by the Company, and the program may be suspended or discontinued at any time.

Marketable Securities

In the three months ended June 30, 2023, we acquired marketable securities, comprising 1,552,865 shares of common stock of Eagle Bulk for $68.2 million (out of which $24.4 million from Virage International Ltd., our related company). As of June 30, 2023, these marketable securities were fair valued at $74.6 million and we recognized a $6.4 million gain on these marketable securities. Eagle Bulk is listed on the New York Stock Exchange (Ticker: EGLE) and currently owns and operates a fleet of 52 Ultramax and Supramax bulk carriers that aggregate to approximately 3.2 million deadweight tons (“DWT”).

ZIM Equity Securities

On January 27, 2021, ZIM completed its initial public offering and listing on the New York Stock Exchange of its ordinary shares. Following this offering the Company owned 10,186,950 ordinary shares of ZIM. These shares were recorded at a book value of $75 thousands as of December 31, 2020. In 2021, we sold 3,000,000 ZIM ordinary shares resulting in net proceeds to us of $120.7 million. In April 2022, we sold 1,500,000 ZIM ordinary shares resulting in net proceeds to us of $85.3 million and we sold our remaining shareholding interest in ZIM of 5,686,950 ordinary shares for $161.3 million in September 2022. For the year ended December 31, 2022 we recognized a $176.4 million loss on these shares. Additionally we recognized dividend income on these shares amounting to $165.4 million gross of withholding taxes of $18.3 million in the year ended December 31, 2022. See Note 6, “Other Current and Non-current Assets” to our condensed consolidated financial statements included in this report.

Investments in Affiliates

In March 2023, we invested $4.3 million in the common shares of a newly established company Carbon Termination Technologies Corporation (“CTTC”), incorporated in the Republic of the Marshall Islands, which represents a 49% ownership interest. CTTC currently engages in research and development of decarbonization technologies for the shipping industry. We use equity method of accounting for this investment. Our share of CTTC’s initial expenses amounted to $3.3 million and is presented under “Equity loss on investments” in the condensed consolidated statement of income in the six months ended June 30, 2023.

Acquisition of Capesize Bulk Carriers

In July 2023, we reached an in principle agreement to acquire 5 Capesize bulk carriers built in 2010 through 2012 that aggregate to 879,306 DWT for a total of $103 million. The agreement is subject to entry into definitive documentation. The vessels are expected to be delivered to us between September and October 2023.

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Impact of the war in Ukraine on our Business

As disclosed in our Annual Report on Form 20-F for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 9, 2023, the current conflict between Russia and Ukraine, and related sanctions imposed by the U.S., EU and others, adversely affect the crewing operations of our Manager, which has crewing offices in St. Petersburg, Odessa and Marioupol (damaged by the war), and trade patterns involving ports in the Black Sea or Russia, and as well as impacting world energy supply and creating uncertainties in the global economy, which in turn impact containership demand. The extent of the impact will depend largely on future developments.

Cash Flows

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Net Cash Provided by Operating Activities

Net cash flows provided by operating activities decreased by $339.9 million, to $280.6 million provided by operating activities in the six months ended June 30, 2023 compared to $620.5 million provided by operating activities in the six months ended June 30, 2022. The decrease was the result of: (i) $126.6 million in ZIM dividends that were collected during the six months ended June 30, 2022 compared to nil dividends collected from ZIM during the six months ended June 30, 2023 as we no longer held ZIM shares during the latter period, (ii) a $261.4 million decrease in cash operating revenues as a result of the charter revenue prepayment that occurred during the six months ended June 30, 2022, (iii) a $8.7 million decrease in operating revenues due to a decrease in the average number of vessels in our fleet as a result of vessel sales and (iv) a $4.9 million increase in drydocking expenses which were partially offset by: (i) a $35.9 million increase in operating revenues due to higher charter rates, (ii) a $21.0 million decrease in net finance costs and (iii) a $4.8 million improvement in cash operating expenses and working capital between the two periods.

Net Cash Provided by/(Used in) Investing Activities

Net cash flows provided by/(used in) investing activities decreased by $114.6 million, to $100.3 million used in investing activities in the six months ended June 30, 2023 compared to $14.3 million provided by investing activities in the six months ended June 30, 2022. The decrease was due to: (i) $85.3 million in proceeds from the sale of ZIM shares collected during the six months ended June 30, 2022 compared to no such proceeds for the six months ended June 30, 2023 as we no longer held ZIM shares during the latter period, (ii) a $9.1 million decrease in vessel sale proceeds, (iii) a $1.8 million increase in additions to vessel cost and (iv) $74.4 million in net investments during the six months ended June 30, 2023, which include $68.2 million invested in Eagle Bulk Shipping and our investment in Carbon Termination Technologies, which were partially offset by a $56 million decrease in advance payments for vessels under construction between the two periods.

Net Cash Used in Financing Activities

Net cash flows used in financing activities decreased by $277.3 million, to $154.7 million used in financing activities in the six months ended June 30, 2023 compared to $432.0 million used in financing activities in the six months ended June 30, 2022 due to (i) a $417.1 million decrease in payments of long-term debt and leaseback obligations, (ii) a $13.2 million decrease in finance costs, (iii) a $3.4 million decrease in payments of accumulated accrued interest and (iv) a $0.7 million decrease in dividend payments on our common stock, which were partially offset by (i) a $127.7 million decrease in proceeds from long-term debt and (ii) a $29.4 million increase in repurchase of common stock in the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

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Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes, however, that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating our performance. See the table below for supplemental financial data and corresponding reconciliation to GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.

EBITDA and Adjusted EBITDA

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

EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA/Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA/Adjusted EBITDA do not reflect any cash requirements for such capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Because of these limitations, EBITDA/Adjusted EBITDA should not be considered as principal indicators of our performance.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

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EBITDA decreased by $67.5 million, to $362.2 million in the six months ended June 30, 2023 from $429.7 million in the six months ended June 30, 2022. This decrease was mainly attributed to (i) $138.4 million in dividends from ZIM (gross of withholding taxes) recognized in the six months ended June 30, 2022, (ii) a $25.2 million decrease in gain on debt extinguishment between the two periods, (iii) a $3.3 million equity loss on investments in the six months ended June 30, 2023 and (iv) a $1.9 million increase in total operating expenses between the two periods, which were partially offset by (i) a $75.5 million change in fair value of investments, (ii) a $24.2 million increase in operating revenues (excluding $20.0 million decrease in amortization of assumed time charters) and (iii) a $1.6 million gain on sale of vessel in the six months ended June 30, 2023 compared to no such gain in the six months ended June 30, 2022.

Adjusted EBITDA decreased by $105.3 million, to $356.3 million in the six months ended June 30, 2023 from $461.6 million in the six months ended June 30, 2022. This decrease was mainly attributed to (i) recognition of a $123.9 million dividend from ZIM (net of withholding taxes) in the six months ended June 30, 2022 compared to none in the six months ended June 30, 2023, (ii) a $2.3 million increase in total operating expenses and (iii) a $3.3 million equity loss on investments in the six months ended June 30, 2023, which were partially offset by a $24.2 million increase in operating revenues (excluding a $20.0 million decrease in amortization of assumed time charters). Adjusted EBITDA for the six months ended June 30, 2023 is adjusted for a $6.4 million change in fair value of investments, a $2.3 million loss on debt extinguishment and a $1.6 million gain on sale of vessel.

Credit Facilities

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

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As of June 30, 2023, there was $360.0 million of remaining borrowing availability under our Citibank $382.5 mil. Revolving Credit Facility. As of June 30, 2023, 44 of our vessels were unencumbered. For additional information regarding the credit facilities and related repayment schedule, please refer to Note 4 “Fixed Assets, net & Advances for Vessels under Construction” and Note 8 “Long-term Debt, net” in the unaudited condensed consolidated financial statements included in this report.

Senior Notes

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

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

In December 2022, we repurchased $37.2 million aggregate principal amount of our Senior Notes in a privately negotiated transaction. For additional details regarding the Senior Notes please refer to Note 8, “Long-term Debt, net” in the unaudited condensed consolidated financial statements included elsewhere in this report and “Item 5. Operating and Financial Review and Prospects –Senior Notes” in our Annual Report on Form 20-F for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 9, 2023.

Qualitative and Quantitative Disclosures about Market Risk

Interest Rate Swaps

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

Foreign Currency Exchange Risk

We did not enter into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions during the six months ended June 30, 2023 and 2022.

Impact of Inflation and Interest Rates Risk on our Business

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

Capitalization and Indebtedness

The table below sets forth our consolidated capitalization as of June 30, 2023.

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Other than these adjustments, there have been no other material changes to our capitalization from debt or equity issuances, re-capitalizations, special dividends, or debt repayments as adjusted in the table below between July 1, 2023 and August 4, 2023.

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Our Fleet

The following table describes in detail our fleet deployment profile as of August 3, 2023:

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