DANAOS CORP, 6-K filed on 8/2/2016
Report of Foreign Issuer
Document and Entity Information
6 Months Ended
Jun. 30, 2016
Document and Entity Information
 
Entity Registrant Name
Danaos Corp 
Entity Central Index Key
0001369241 
Document Type
6-K 
Document Period End Date
Jun. 30, 2016 
Amendment Flag
false 
Current Fiscal Year End Date
--12-31 
Document Fiscal Year Focus
2016 
Document Fiscal Period Focus
Q2 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 101,060 
$ 72,253 
Restricted cash
5,880 
2,818 
Accounts receivable, net
21,359 
10,652 
Inventories
9,809 
11,040 
Prepaid expenses
1,769 
1,079 
Due from related parties
32,131 
19,007 
Vessels held for sale
 
6,264 
Other current assets
3,638 
4,457 
Total current assets
175,646 
127,570 
NON-CURRENT ASSETS
 
 
Fixed assets at cost, net of accumulated depreciation of $754,916 (2015: $690,794)
3,384,191 
3,446,323 
Deferred charges, net
8,715 
4,751 
Investments in affiliates
15,500 
11,289 
Other non-current assets
74,242 
72,188 
Total non-current assets
3,482,648 
3,534,551 
Total assets
3,658,294 
3,662,121 
CURRENT LIABILITIES
 
 
Accounts payable
11,937 
12,971 
Accrued liabilities
14,628 
14,014 
Current portion of long-term debt
272,408 
269,979 
Unearned revenue
11,624 
9,853 
Other current liabilities
3,184 
5,328 
Total current liabilities
313,781 
312,145 
LONG-TERM LIABILITIES
 
 
Long-term debt, net
2,376,004 
2,470,417 
Unearned revenue, net of current portion
21,465 
24,426 
Other long-term liabilities
14,174 
13,219 
Total long-term liabilities
2,411,643 
2,508,062 
Total liabilities
2,725,424 
2,820,207 
Commitments and Contingencies
   
   
STOCKHOLDERS' EQUITY
 
 
Preferred stock (par value $0.01, 100,000,000 preferred shares authorized and not issued as of June 30, 2016 and December 31, 2015)
   
   
Common stock (par value $0.01, 750,000,000 common shares authorized as of June 30, 2016 and December 31, 2015. 109,799,352 and 109,781,744 issued and outstanding as of June 30, 2016 and December 31, 2015, respectively)
1,098 
1,098 
Additional paid-in capital
546,822 
546,822 
Accumulated other comprehensive loss
(100,894)
(103,081)
Retained earnings
485,844 
397,075 
Total stockholders' equity
932,870 
841,914 
Total liabilities and stockholders' equity
$ 3,658,294 
$ 3,662,121 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
Accumulated depreciation
$ 754,916 
$ 690,794 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
100,000,000 
100,000,000 
Preferred stock, shares issued
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
750,000,000 
750,000,000 
Common stock, shares issued
109,799,352 
109,781,744 
Common stock, shares outstanding
109,799,352 
109,781,744 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
OPERATING REVENUES
$ 136,999 
$ 141,469 
$ 274,473 
$ 280,074 
OPERATING EXPENSES:
 
 
 
 
Voyage expenses
(3,240)
(3,161)
(6,690)
(6,218)
Vessel operating expenses
(27,983)
(29,570)
(56,895)
(56,893)
Depreciation
(32,075)
(32,853)
(64,122)
(65,341)
Amortization of deferred drydocking and special survey costs
(1,395)
(882)
(2,430)
(2,056)
General and administrative expenses
(5,446)
(5,381)
(10,662)
(10,651)
Loss on sale of vessels
 
 
(36)
 
Income From Operations
66,860 
69,622 
133,638 
138,915 
OTHER INCOME (EXPENSES):
 
 
 
 
Interest income
890 
850 
1,840 
1,690 
Interest expense
(20,616)
(21,230)
(40,774)
(43,116)
Other finance expenses
(1,111)
(1,162)
(2,238)
(2,335)
Equity loss on investments
(211)
 
(934)
 
Other income/(expense), net
(23)
28 
400 
35 
Net unrealized and realized losses on derivatives
(1,141)
(10,036)
(3,163)
(26,775)
Total Other Expenses, net
(22,212)
(31,550)
(44,869)
(70,501)
Net Income
$ 44,648 
$ 38,072 
$ 88,769 
$ 68,414 
EARNINGS PER SHARE
 
 
 
 
Basic and diluted earnings per share
$ 0.41 
$ 0.35 
$ 0.81 
$ 0.62 
Basic and diluted weighted average number of common shares
109,800 
109,785 
109,800 
109,785 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
 
Net income for the period
$ 44,648 
$ 38,072 
$ 88,769 
$ 68,414 
Other Comprehensive Income
 
 
 
 
Amortization of deferred realized losses on cash flow hedges
1,001 
1,001 
2,003 
1,992 
Reclassification of unrealized losses to earnings
 
8,239 
184 
21,488 
Total Other Comprehensive Income
1,001 
9,240 
2,187 
23,480 
Comprehensive Income
$ 45,649 
$ 47,312 
$ 90,956 
$ 91,894 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Cash Flows from Operating Activities
 
 
Net income
$ 88,769 
$ 68,414 
Adjustments to reconcile net income to net cash provided by operating activities
 
 
Depreciation
64,122 
65,341 
Amortization of deferred drydocking and special survey costs
2,430 
2,056 
Amortization of finance costs
6,520 
7,200 
Exit fee accrued on debt
1,755 
1,842 
Payments for drydocking and special survey costs deferred
(6,394)
(1,217)
Loss on sale of vessels
36 
 
Amortization of deferred realized losses on interest rate swaps
2,003 
1,992 
Unrealized gains on derivatives
(2,138)
(8,903)
Equity loss on investments
934 
 
(Increase)/Decrease in
 
 
Accounts receivable
(10,707)
2,721 
Inventories
1,231 
739 
Prepaid expenses
(1,072)
(267)
Due from related parties
(13,124)
(8,195)
Other assets, current and non-current
(1,349)
827 
Increase/(Decrease) in
 
 
Accounts payable
398 
(1,315)
Accrued liabilities
614 
(5,424)
Unearned revenue, current and long-term
(1,190)
(2,144)
Other liabilities, current and long-term
954 
953 
Net Cash provided by Operating Activities
133,792 
124,620 
Cash Flows from Investing Activities:
 
 
Vessels additions
(1,990)
(538)
Investments in affiliates
(5,145)
 
Net proceeds from sale of vessels
5,178 
 
Net Cash used in Investing Activities
(1,957)
(538)
Cash Flows from Financing Activities:
 
 
Payments on long-term debt
(99,966)
(78,291)
Payments on vendor financing
 
(28,694)
Deferred finance costs
 
(692)
Increase in restricted cash
(3,062)
 
Net Cash used in Financing Activities
(103,028)
(107,677)
Net Increase in Cash and Cash Equivalents
28,807 
16,405 
Cash and Cash Equivalents at beginning of period
72,253 
57,730 
Cash and Cash Equivalents at end of period
$ 101,060 
$ 74,135 
Basis of Presentation and General Information
Basis of Presentation and General Information

 

1Basis 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 13, Stockholders’ Equity.

 

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, 2016 and December 31, 2015, the condensed consolidated results of operations for the three and six months ended June 30, 2016 and 2015 and the condensed consolidated cash flows for the six months ended June 30, 2016 and 2015. 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, 2015. The results of operations for the three and six months ended June 30, 2016, 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 audited financial statements except for the effect of the adoption of the Accounting Standards Update No. 2015-03 “Simplifying the Presentation of Debt Issuance Costs” (Note 2), but does not include all disclosures required by accounting principles generally accepted in the United States of America.

 

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.

 

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, 2016, 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(2)

Megacarrier (No. 1) Corp.

 

September 10, 2007

 

Hyundai Together

 

2012 

 

13,100 

Megacarrier (No. 2) Corp.

 

September 10, 2007

 

Hyundai Tenacity

 

2012 

 

13,100 

Megacarrier (No. 3) Corp.

 

September 10, 2007

 

Hyundai Smart

 

2012 

 

13,100 

Megacarrier (No. 4) Corp.

 

September 10, 2007

 

Hyundai Speed

 

2012 

 

13,100 

Megacarrier (No. 5) Corp.

 

September 10, 2007

 

Hyundai Ambition

 

2012 

 

13,100 

CellContainer (No. 6) Corp.

 

October 31, 2007

 

Hanjin Germany

 

2011 

 

10,100 

CellContainer (No. 7) Corp.

 

October 31, 2007

 

Hanjin Italy

 

2011 

 

10,100 

CellContainer (No. 8) Corp.

 

October 31, 2007

 

Hanjin Greece

 

2011 

 

10,100 

Karlita Shipping Co. Ltd.

 

February 27, 2003

 

CSCL Pusan

 

2006 

 

9,580 

Ramona Marine Co. Ltd.

 

February 27, 2003

 

CSCL 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

 

CSCL Europe

 

2004 

 

8,468 

Oceanprize Navigation Ltd.

 

January 21, 2003

 

CSCL America

 

2004 

 

8,468 

Boxcarrier (No. 2) Corp.

 

June 27, 2006

 

CMA CGM Musset(1)

 

2010 

 

6,500 

Boxcarrier (No. 3) Corp.

 

June 27, 2006

 

CMA CGM Nerval(1)

 

2010 

 

6,500 

Boxcarrier (No. 4) Corp.

 

June 27, 2006

 

CMA CGM Rabelais(1)

 

2010 

 

6,500 

Boxcarrier (No. 5) Corp.

 

June 27, 2006

 

CMA CGM Racine(1)

 

2010 

 

6,500 

Boxcarrier (No. 1) Corp.

 

June 27, 2006

 

CMA CGM Moliere(1)

 

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

 

Priority

 

2002 

 

6,402 

Auckland Marine Inc.

 

January 27, 2005

 

SNL Colombo

 

2004 

 

4,300 

Wellington Marine Inc.

 

January 27, 2005

 

YM Singapore

 

2004 

 

4,300 

Continent Marine Inc.

 

March 22, 2006

 

Zim Monaco

 

2009 

 

4,253 

Medsea Marine Inc.

 

May 8, 2006

 

OOCL Novorossiysk

 

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

 

OOCL Istanbul

 

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

 

Deva

 

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

 

Hanjin Algeciras

 

2011 

 

3,400 

CellContainer (No. 5) Corp.

 

March 23, 2007

 

Hanjin Constantza

 

2011 

 

3,400 

CellContainer (No. 1) Corp.

 

March 23, 2007

 

Hanjin Buenos Aires

 

2010 

 

3,400 

CellContainer (No. 2) Corp.

 

March 23, 2007

 

Hanjin Santos

 

2010 

 

3,400 

CellContainer (No. 3) Corp.

 

March 23, 2007

 

Hanjin Versailles

 

2010 

 

3,400 

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

 

Hyundai Highway

 

1998 

 

2,200 

Speedcarrier (No. 6) Corp.

 

December 6, 2007

 

Hyundai Progress

 

1998 

 

2,200 

Speedcarrier (No. 8) Corp.

 

December 6, 2007

 

Hyundai Bridge

 

1998 

 

2,200 

Speedcarrier (No. 1) Corp.

 

June 28, 2007

 

Hyundai Vladivostok

 

1997 

 

2,200 

Speedcarrier (No. 2) Corp.

 

June 28, 2007

 

Hyundai Advance

 

1997 

 

2,200 

Speedcarrier (No. 3) Corp.

 

June 28, 2007

 

Hyundai Stride

 

1997 

 

2,200 

Speedcarrier (No. 5) Corp.

 

June 28, 2007

 

Hyundai Future

 

1997 

 

2,200 

Speedcarrier (No. 4) Corp.

 

June 28, 2007

 

Hyundai Sprinter

 

1997 

 

2,200 

Vessel sold in 2016

 

 

 

 

 

 

 

 

Federal Marine Inc.

 

February 14, 2006

 

Federal

 

1994 

 

4,651 

 

(1)

Vessel subject to charterer’s option to purchase vessel after first eight years of time charter term for $78.0 million.

(2)

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

Significant Accounting Policies
Significant Accounting Policies

 

2Significant Accounting Policies

 

All accounting policies are as described in the Company’s Annual Report on Form 20-F for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 15, 2016, except as described below under “Change in Accounting Principle”.

 

Change in Accounting Principle

 

The Company historically presented fees incurred for obtaining loans as deferred charges in the consolidated balance sheets. During the six months ended June 30, 2016, the Company adopted Accounting Standards Update No. 2015-03 “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a direct deduction from the carrying amount of debt liability, consistent with debt discounts. Upon adoption, the Company applied the new guidance retrospectively to prior periods presented in the consolidated financial statements. The effect of the retrospective application of this change in accounting principle on the Company’s consolidated balance sheet as of December 31, 2015 resulted in a reduction of deferred charges, net by $35.0 million, with a corresponding reduction of long-term debt, net. Additionally, amortization of deferred charges amounting to $7.2 million was reclassified from other finance expenses to interest expense in the condensed consolidated statements of income for the six months ended June 30, 2015.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-9 “Revenue from Contracts with Customers” (“ASU 2014-09”), which will supersede the current revenue recognition guidance and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The ASU 2014-09 was amended by ASU 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date” (“ASU 2015-014”), which was issued in August 2015. Public entities can now elect to defer implementation of ASU 2014-09 to interim and annual periods beginning after December 15, 2017. Additionally, ASU 2015-14 permits early adoption of the standard but not before the original effective date, i.e. annual period beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In addition, in 2016, the FASB issued four amendments, which clarified the guidance on certain items such as reporting revenue as a principal versus agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability and presentation of sales taxes. The Company is currently evaluating the impact that the adoption of the new standard will have on its consolidated financial statements and associated disclosures, and have not yet selected a transition method.

 

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this Update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition the amendments in this Update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement for to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amendments are effective for annual periods ending after December 15, 2017, including interim periods within those fiscal years.  Early application is not permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements and notes disclosures.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 will apply to both types of leases — capital (or finance) leases and operating leases. According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016 — 02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323)” (“ASU 2016-07”), which simplifies the accounting for equity method investments by removing the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, and must be applied prospectively. Early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations. The amendments in ASU 2016-8 affect the guidance in the ASU 2014-09, which is not yet effective. ASU 2016-08 is effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early application is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the provisions of this guidance and assessing its impact on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation - Improvements to Employee Share-Based Payment Accounting (Topic 718)” (“ASU 2016-09”), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, all excess income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period, however early adoption is permitted. The Company is currently evaluating the guidance to determine the Company’s adoption method and the effect it will have on its consolidated financial statements and notes disclosures.

 

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 ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.

Restricted Cash
Restricted Cash

 

3Restricted Cash

 

The Company was required to maintain cash of $5,880 thousand and $2,818 thousand as of June 30, 2016 and as of December 31, 2015, respectively, in a retention bank account as a collateral for the upcoming scheduled debt payments of its KEXIM and KEXIM-ABN Amro credit facilities, which were recorded under current assets in the Company’s Balance Sheets.

Fixed assets, net
Fixed assets, net

 

4Fixed assets, net

 

On December 23, 2015, the Company entered into an agreement to sell the Federal for gross sale consideration of $7.2 million, of which $1.4 million was received in advance during the year ended December 31, 2015 and the remaining $5.8 million was received upon the completion of the sale on January 8, 2016. As of December 31, 2015, the Federal was classified as vessel held for sale in the consolidated Balance Sheet and was valued at $6.3 million, net of impairment loss of $2.1 million. The sale of the vessel resulted in a loss on sale of the vessel of $36 thousand.

 

During the year ended December 31, 2015, the Company recorded an impairment loss of $39.0 million in relation to its twelve of the older vessels that are held and used. Fair value of each vessel was determined with the assistance from valuations obtained by third party independent shipbrokers.

 

The residual value (estimated scrap value at the end of the vessels’ useful lives) of the fleet was estimated at $379.6 million and $386.4 million as of June 30, 2016 and as of December 31, 2015, 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.

Deferred Charges, net
Deferred Charges, net

 

5Deferred Charges, net

 

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

 

 

 

Drydocking and
Special Survey Costs

 

As of January 1, 2015

 

$

6,255

 

Additions

 

2,341

 

Amortization

 

(3,845

)

 

 

 

 

As of December 31, 2015

 

4,751

 

Additions

 

6,394

 

Amortization

 

(2,430

)

 

 

 

 

As of June 30, 2016

 

$

8,715

 

 

 

 

 

 

 

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
Investments in affiliates

 

6Investments 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 NYK Lodestar and NYK Leo. Gemini financed these acquisitions with the assumption of capital lease obligations of $35.4 million, $19.0 million of borrowings under secured loan facilities and an aggregate of $37.5 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, 2016, 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

 

NYK Lodestar

 

2001

 

6,422 

 

September 21, 2015

 

Leo Shipping and Trading S.A.

 

NYK Leo

 

2002

 

6,422 

 

February 4, 2016

 

 

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 loss on investments” in the 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, or earlier if permitted under its credit facilities. The net assets of Gemini total $31.6 million and $23.0 million as of June 30, 2016 and December 31, 2015, 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, 2016

 

December 31, 2015

 

Current assets

 

$

12,701 

 

$

12,578 

 

Non-current assets

 

$

70,547 

 

$

54,771 

 

Current liabilities

 

$

7,014 

 

$

5,552 

 

Non-current liabilities

 

$

44,601 

 

$

38,758 

 

 

 

 

Six months ended

 

 

 

June 30, 2016

 

Net operating revenues

 

$

6,266 

 

Net loss

 

$

1,906 

 

 

Other Current and Non-current Assets
Other Current and Non-current Assets

 

7Other Current and Non-current Assets

 

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

 

 

 

As of

 

As of

 

 

 

June 30, 2016

 

December 31, 2015

 

Fair value of swaps

 

$

24 

 

$

138 

 

Claims receivable

 

1,178 

 

954 

 

Advances to suppliers and other assets

 

2,436 

 

3,365 

 

 

 

 

 

 

 

Total

 

$

3,638 

 

$

4,457 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2016 and December 31, 2015, claims receivable consists of insurance and other claims. In respect to the fair value of swaps, refer to Note 11b, Financial Instruments—Fair Value Interest Rate Swap Hedges.

 

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

 

 

 

As of

 

As of

 

 

 

June 30, 2016

 

December 31, 2015

 

Series 1 ZIM notes, net

 

$

6,540 

 

$

6,587 

 

Series 2 ZIM notes, net

 

33,345 

 

32,507 

 

Equity participation ZIM

 

28,693 

 

28,693 

 

Other assets

 

5,664 

 

4,401 

 

 

 

 

 

 

 

Total

 

$

74,242 

 

$

72,188 

 

 

 

 

 

 

 

 

 

 

As of July 16, 2014, ZIM and its creditors entered into definitive documentation effecting ZIM’s restructuring with its creditors on substantially the same terms as the agreement in principle previously announced by ZIM in January 2014. The terms of the restructuring include a reduction in the charter rates payable by ZIM under its time charters, expiring in 2020 or 2021, for six of the Company’s vessels, which had already been implemented beginning in January 2014. The terms also include the receipt of approximately $49.9 million aggregate principal amount of unsecured, interest bearing ZIM notes maturing in 2023 (consisting of $8.8 million of 3% Series 1 Notes due 2023 amortizing subject to available cash flow in accordance with a corporate cash sweep mechanism, and $41.1 million of 5% Series 2 Notes due 2023 non-amortizing (of the 5% interest rate, 3% is payable quarterly in cash and 2% is accrued quarterly with deferred cash payment on maturity)) and ZIM shares representing approximately 7.4% of the outstanding ZIM shares immediately after the restructuring, in exchange for such charter rate reductions and cancellation of ZIM’s other obligations to the Company which related to the outstanding long term receivable as of December 31, 2013.

 

As of July 16, 2014, the Company calculated the fair value of the instruments received from ZIM based on the agreement discussed above, other available information on ZIM, other contracts with similar terms, remaining maturities and interest rates and recorded at fair value an amount of $6.1 million in relation to the Series 1 Notes, $30.1 million in relation to the Series 2 Notes and $28.7 million in relation to its equity participation in ZIM. On a quarterly basis, the Company accounts for the fair value unwinding of the Series 1 Notes and Series 2 Notes until the value of the instruments equals their face values on maturity. As of June 30, 2016 and December 31, 2015, the Company recorded $6.5 million and $6.6 million in relation to the Series 1 Notes and $33.3 million and $32.5 million in relation to the Series 2 Notes, respectively and recognized $0.6 million and $0.5 million in relation to their fair value unwinding in the condensed consolidated Statements of Income in “Interest income” for the six months ended June 30, 2016 and 2015, respectively. In relation to Series 1 Notes, the Company received redemption of $0.3 million in the six months ended June 30, 2016. Furthermore, for the six months ended June 30, 2016 and 2015, the Company recognized in the condensed consolidated Statements of Income in “Interest income”, a non-cash interest income of $0.4 million and $0.4 million, respectively, in relation to the 2% interest of Series 2 Notes, which is accrued quarterly with deferred cash payment on maturity. The Company tests periodically for impairment of these investments based on the existence of triggering events that indicate ZIM’s debt instruments and interest in equity may have been impaired.

 

Furthermore, as of July 16, 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 condensed consolidated Statements of Income in “Operating revenues” over the remaining life of the respective time charters. For the six months ended June 30, 2016 and 2015, the Company recorded an amount of $3.0 million and $3.0 million, respectively, of unearned revenue amortization in “Operating revenues”. As of June 30, 2016, the outstanding balances of the current and non-current portion of unearned revenue in relation to ZIM amounted to $6.0 million and $21.5 million, respectively. As of December 31, 2015, the corresponding outstanding balances of the current and non-current portion of unearned revenue amounted to $6.0 million and $24.4 million, respectively. Refer to Note 11c, Financial Instruments- Fair value of Financial Instruments.

Accrued Liabilities
Accrued Liabilities

 

8Accrued Liabilities

 

Accrued liabilities consisted of the following (in thousands):

 

 

 

As of

 

As of

 

 

 

June 30, 2016

 

December 31, 2015

 

Accrued payroll

 

$

1,182 

 

$

1,162 

 

Accrued interest

 

8,465 

 

8,059 

 

Accrued expenses

 

4,981 

 

4,793 

 

 

 

 

 

 

 

Total

 

$

14,628 

 

$

14,014 

 

 

 

 

 

 

 

 

 

 

Accrued expenses mainly consisted of accruals related to the operation of the Company’s fleet of $5.0 million and $3.6 million as of June 30, 2016 and December 31, 2015, respectively and accrued realized losses on cash flow interest rate swaps of nil and $1.2 million as of June 30, 2016 and December 31, 2015, respectively.

 

Other Current Liabilities
Other Current Liabilities

 

9Other Current Liabilities

 

Other current liabilities consisted of the following (in thousands):

 

 

 

As of

 

As of

 

 

 

June 30, 2016

 

December 31,2015

 

Fair value of swaps

 

$

2,395 

 

$

4,538 

 

Other current liabilities

 

789 

 

790 

 

 

 

 

 

 

 

Total

 

$

3,184 

 

$

5,328 

 

 

 

 

 

 

 

 

 

 

In respect of the fair value of swaps, refer to Note 11a, Financial Instruments — Cash Flow Interest Rate Swap Hedges.

Long-Term Debt, net
Long-Term Debt, net

 

10Long-Term Debt, net

 

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

 

Lender

 

As of
June 30, 2016

 

Current
portion

 

Long-term
portion

 

As of
December 31,
2015

 

Current
portion

 

Long-term
portion

 

The Royal Bank of Scotland

 

$

657,788

 

$

22,066

 

$

635,722

 

$

667,134

 

$

24,327

 

$

642,807

 

HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank

 

627,818

 

876

 

626,942

 

627,818

 

50

 

627,768

 

HSH Nordbank

 

16,762

 

9,204

 

7,558

 

21,208

 

9,006

 

12,202

 

The Export-Import Bank of Korea (“KEXIM”)

 

3,020

 

3,020

 

 

8,204

 

8,204

 

 

The Export-Import Bank of Korea & ABN Amro

 

39,984

 

11,250

 

28,734

 

45,609

 

11,250

 

34,359

 

Deutsche Bank

 

167,419

 

5,882

 

161,537

 

169,921

 

5,338

 

164,583

 

Citi

 

132,396

 

12,323

 

120,073

 

136,719

 

11,425

 

125,294

 

Credit Suisse

 

194,457

 

11,953

 

182,504

 

199,373

 

11,978

 

187,395

 

ABN Amro-Bank of America Merrill Lynch-Burlington Loan Management-National Bank of Greece-Sequoia

 

223,470

 

15,388

 

208,082

 

228,999

 

13,509

 

215,490

 

Commerzbank-Credit Suisse-Golden Tree

 

250,885

 

22,577

 

228,308

 

258,089

 

20,139

 

237,950

 

The Royal Bank of Scotland (January 2011 Credit Facility)

 

60,847

 

33,212

 

27,635

 

69,948

 

30,990

 

38,958

 

HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank (January 2011 Credit Facility)

 

56,934

 

39,352

 

17,582

 

69,562

 

37,901

 

31,661

 

ABN Amro-Bank of America Merrill Lynch-Burlington Loan Management -National Bank of Greece (January 2011 Credit Facility)

 

14,977

 

12,840

 

2,137

 

20,582

 

14,244

 

6,338

 

Sinosure CEXIM-Citi-ABN Amro Credit Facility

 

111,870

 

20,340

 

91,530

 

122,040

 

20,340

 

101,700

 

Club Facility (January 2011 Credit Facility)

 

39,943

 

30,132

 

9,811

 

50,404

 

32,665

 

17,739

 

Citi—Eurobank Credit Facility (January 2011 Credit Facility)

 

60,908

 

21,853

 

39,055

 

63,834

 

18,180

 

45,654

 

Comprehensive Financing Plan exit fees accrued

 

17,256

 

 

17,256

 

15,501

 

 

15,501

 

Fair value hedged debt

 

140

 

140

 

 

433

 

433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total long-term debt

 

$

2,676,874

 

$

272,408

 

$

2,404,466

 

$

2,775,378

 

$

269,979

 

$

2,505,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Deferred finance costs, net

 

(28,462

)

 

(28,462

)

(34,982

)

 

(34,982

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total long-term debt net of deferred finance costs

 

$

2,648,412

 

$

272,408

 

$

2,376,004

 

$

2,740,396

 

$

269,979

 

$

2,470,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All floating rate loans discussed above are collateralized by first and second preferred mortgages over the vessels financed, general assignment of all hire freights, income and earnings, the assignment of their insurance policies, as well as any proceeds from the sale of mortgaged vessels and the corporate guarantee of Danaos Corporation.

 

Maturities of long-term debt for the next five years and thereafter subsequent to June 30, 2016, are as follows (in thousands):

 

Payment due by period ended

 

Fixed
principal
repayments

 

Variable
principal
payments

 

Final Payment
due on
December 31, 2018*

 

Total
principal
payments

 

June 30, 2017

 

$

192,367 

 

$

79,901 

 

 

$

272,268 

 

June 30, 2018

 

170,538 

 

97,276 

 

 

267,814 

 

June 30, 2019

 

127,556 

 

15,281 

 

$

1,925,709 

 

2,068,546 

 

June 30, 2020

 

20,340 

 

 

 

20,340 

 

June 30, 2021

 

20,340 

 

 

 

20,340 

 

Thereafter

 

10,170 

 

 

 

10,170 

 

 

 

 

 

 

 

 

 

 

 

Total long-term debt

 

$

541,311 

 

$

192,458 

 

$

1,925,709 

 

$

2,659,478 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* The last payment due on December 31, 2018, includes the unamortized remaining principal debt balances under the restructuring agreement, as such amount will be determinable following the fixed and variable amortization.

 

There were no significant changes to the terms of the Company’s credit facilities during the six months ended June 30, 2016. As of June 30, 2016, there was no remaining borrowing availability under the Company’s credit facilities. The Company was in compliance with all covenants under its Bank Agreement and its other credit facilities as of June 30, 2016.

Financial Instruments
Financial Instruments

 

11Financial Instruments

 

The principal financial assets of the Company consist of cash and cash equivalents, trade receivables and other assets. The principal financial liabilities of the Company consist of long-term bank loans, accounts payable and derivatives.

 

Derivative Financial Instruments:  The Company only uses derivatives for economic hedging purposes. 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, trade accounts receivable and derivatives. 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 to derivative instruments, 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. The Company’s maximum exposure to credit risk is mainly limited to the carrying value of its derivative instruments. The Company is not a party to master netting arrangements.

 

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 the swap agreements equals the amount that would be paid by the Company to cancel the swaps.

 

Interest Rate Swaps:  The off-balance sheet risk in outstanding swap agreements involves both the risk of a counter-party not performing under the terms of the contract and the risk associated with changes in market value. The Company monitors its positions, the credit ratings of counterparties and the level of contracts it enters into with any one party. The counterparties to these contracts are major financial institutions. The Company has a policy of entering into contracts with parties that meet stringent qualifications and, given the high level of credit quality of its derivative counter-parties, the Company does not believe it is necessary to obtain collateral arrangements.

 

a.  Cash Flow Interest Rate Swap Hedges

 

The Company, according to its long-term strategic plan to maintain relative stability in its interest rate exposure, has decided to swap part of its interest expense from floating to fixed. To this effect, the Company has entered into interest rate swap transactions with varying start and maturity dates, in order to pro-actively and efficiently manage its floating rate exposure.

 

These interest rate swaps are designed to economically hedge the variability of interest cash flows arising from floating rate debt, attributable to movements in three month USD$ LIBOR. According to the Company’s Risk Management Accounting Policy, and after putting in place the formal documentation required by hedge accounting in order to designate these swaps as hedging instruments, as from their inception, these interest rate swaps qualified for hedge accounting, and, accordingly, from that time until June 30, 2012, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item were recognized in the Company’s earnings. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps were performed on a quarterly basis. For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge was recognized initially in stockholders’ equity, and recognized to the Statement of Income in the periods when the hedged item affects profit or loss.

 

On July 1, 2012, the Company elected to prospectively de designate 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 are 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 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 interest rate swap agreements converting floating interest rate exposure into fixed were as follows (in thousands):

 

Counter-party

 

Contract
Trade
Date

 

Effective
Date

 

Termination
Date

 

Notional
Amount
on
Effective
Date

 

Fixed Rate
(Danaos pays)

 

Floating Rate
(Danaos receives)

 

Fair Value
June 30, 2016

 

Fair Value
December 31,
2015

 

CITI

 

02/07/2008

 

2/11/2011

 

2/11/2016

 

$

200,000

 

4.695

% p.a.

USD LIBOR 3M BBA

 

 

$

(1,012

)

ABN Amro

 

06/06/2013

 

1/4/2016

 

12/31/2016

 

$

325,000

 

1.4975

% p.a.

USD LIBOR 3M BBA

 

$

(1,415

)

$

(2,113

)

ABN Amro

 

05/31/2013

 

1/4/2016

 

12/31/2016

 

$

250,000

 

1.4125

% p.a.

USD LIBOR 3M BBA

 

(980

)

(1,413

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fair value of swap liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(2,395

)

$

(4,538

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company recorded in the condensed consolidated Statements of Income unrealized gains of $2.1 million and $30.4 million in relation to fair value changes of interest rate swaps for the six months ended June 30, 2016 and 2015, respectively. Furthermore, unrealized losses of $0.2 million and $21.5 million were reclassified from Accumulated Other Comprehensive Loss to earnings for the six months ended June 30, 2016 and 2015, respectively (following the hedge accounting discontinuance as of July 1, 2012).

 

The variable-rate interest on specific borrowings was associated with vessels under construction and was capitalized as a cost of the specific vessels. In accordance with the accounting guidance on derivatives and hedging, the amounts in accumulated other comprehensive income/(loss) related to realized gains or losses on cash flow hedges that have been entered into and qualify for hedge accounting, in order to hedge the variability of that interest, were classified under other comprehensive income/(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 $2.0 million was reclassified into earnings for the six months ended June 30, 2016 and 2015, respectively, representing its amortization over the depreciable life of the vessels.

 

 

 

Three months
ended
June 30,

 

Three months
ended
June 30,

 

 

 

2016

 

2015

 

 

 

(in millions)

 

Total realized losses

 

$

(1.2

)

$

(13.7

)

Amortization of deferred realized losses

 

(1.0

)

(1.0

)

Unrealized gains

 

0.9

 

4.5

 

 

 

 

 

 

 

Net unrealized and realized losses on cash flow interest rate swaps

 

$

(1.3

)

$

(10.2

)

 

 

 

 

 

 

 

 

 

 

 

Six months
ended
June 30,

 

Six months
ended
June 30,

 

 

 

2016

 

2015

 

 

 

(in millions)

 

Total realized losses

 

$

(3.4

)

$

(34.0

)

Amortization of deferred realized losses

 

(2.0

)

(2.0

)

Unrealized gains

 

1.9

 

8.9

 

 

 

 

 

 

 

Net unrealized and realized losses on cash flow interest rate swaps

 

$

(3.5

)

$

(27.1

)

 

 

 

 

 

 

 

 

 

b.  Fair Value Interest Rate Swap Hedges

 

These interest rate swaps are designed to economically hedge the fair value of the fixed rate loan facilities against fluctuations in the market interest rates by converting the Company’s fixed rate loan facilities to floating rate debt. Pursuant to the adoption of the Company’s Risk Management Accounting Policy, and after putting in place the formal documentation required by hedge accounting in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for hedge accounting, and, accordingly, from that time until June 30, 2012, hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item were recognized in the Company’s earnings. The Company considered its strategic use of interest rate swaps to be a prudent method of managing interest rate sensitivity, as it prevented earnings from being exposed to undue risk posed by changes in interest rates. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps was performed on a quarterly basis, on the financial statement and earnings reporting dates.

 

On July 1, 2012, the Company elected to prospectively de-designate fair value interest rate swaps for which it was applying hedge accounting treatment due to the compliance burden associated with this accounting policy. All changes in the fair value of the Company’s fair value interest rate swap agreements continue to be 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 will not occur in the originally specified time period. The Company has concluded that the previously hedged forecasted interest payments continue to be probable of occurring. Therefore, the fair value of the hedged item associated with the previously designated fair value interest rate swaps will be frozen and recognized in earnings when the interest payments are recognized. If such interest payments were to be identified as being probable of not occurring, the fair value of hedged debt balance pertaining to these amounts would be reversed through earnings immediately.

 

The interest rate swap agreements converting fixed interest rate exposure into floating were as follows (in thousands):

 

Counter
party

 

Contract
trade Date

 

Effective
Date

 

Termination
Date

 

Notional
Amount
on
Effective
Date

 

Fixed Rate
(Danaos
receives)

 

Floating Rate
(Danaos pays)

 

Fair Value
June 30, 2016

 

Fair Value
December 31,
2015

 

RBS

 

11/15/2004

 

12/15/2004

 

8/27/2016

 

$

60,528 

 

5.0125 

% p.a.

USD LIBOR 3M BBA + 0.835% p.a.

 

$

 

$

55 

 

RBS

 

11/15/2004

 

11/17/2004

 

11/2/2016

 

$

62,342 

 

5.0125 

% p.a.

USD LIBOR 3M BBA + 0.855% p.a.

 

18 

 

83 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

$

24 

 

$

138 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The total fair value change of the interest rate swaps amounted to $0.1 million loss and $0.3 million loss for the six months ended June 30, 2016 and 2015, respectively and are included in the condensed consolidated Statements of Income under “Net unrealized and realized losses on derivatives”. The related assets are presented under “Other current assets” in the condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015, respectively. The Company reclassified from “Long-term debt, net”, where its fair value of hedged item was recorded, to its earnings unrealized gains of $0.3 million and gains of $0.3 million for the six months ended June 30, 2016 and 2015, respectively (following the hedge accounting discontinuance as of July 1, 2012). The related liability of the fair value hedged debt of $0.1 million and $0.4 million is presented under “Current portion of long-term debt” in the condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015, respectively.

 

 

 

Three months
ended
June 30, 2016

 

Three months
ended
June 30, 2015

 

 

 

(in millions)

 

Unrealized losses on swap asset

 

$

 

$

(0.1

)

Reclassification of fair value of hedged debt to Statement of Income

 

0.1

 

0.1

 

Realized gains

 

 

0.1

 

 

 

 

 

 

 

Net unrealized and realized gains on fair value interest rate swaps

 

$

0.1

 

$

0.1

 

 

 

 

 

 

 

 

 

 

 

 

Six months
ended
June 30, 2016

 

Six months
ended
June 30, 2015

 

 

 

(in millions)

 

Unrealized losses on swap asset

 

$

(0.1

)

$

(0.3

)

Reclassification of fair value of hedged debt to Statement of Income

 

0.3

 

0.3

 

Realized gains

 

0.1

 

0.3

 

 

 

 

 

 

 

Net unrealized and realized gains on fair value interest rate swaps

 

$

0.3

 

$

0.3

 

 

 

 

 

 

 

 

 

 

c.  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 we have 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, 2016 and December 31, 2015.

 

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

 

 

 

Fair Value Measurements as of June 30, 2016

 

 

 

Total

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(in thousands of $)

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swap contracts

 

$

24 

 

 

$

24 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swap contracts

 

$

2,395 

 

 

$

2,395 

 

 

 

 

 

Fair Value Measurements as of December 31, 2015

 

 

 

Total

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(in thousands of $)

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swap contracts

 

$

138 

 

 

$

138 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Interest rate swap contracts

 

$

4,538 

 

 

$

4,538 

 

 

 

Interest rate swap contracts are measured at fair value on a recurring basis. Fair value is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Such instruments are typically classified within Level 2 of the fair value hierarchy. The fair values of the interest rate swap contracts have been calculated by discounting the projected future cash flows of both the fixed rate and variable rate interest payments. Projected interest payments are calculated using the appropriate prevailing market forward rates and are discounted using the zero-coupon curve derived from the swap yield curve. Refer to Note 11(a)-(b) above for further information on the Company’s interest rate swap contracts.

 

The Company is exposed to credit-related losses in the event of nonperformance of its counterparties in relation to these financial instruments. As of June 30, 2016, these financial instruments are in the counterparties’ favor, apart from the interest rate swap agreements with RBS. The Company has considered its risk of non-performance and of its counterparties in accordance with the relevant guidance of fair value accounting. The Company performs evaluations of its counterparties for credit risk through ongoing monitoring of their financial health and risk profiles to identify risk or changes in their credit ratings.

 

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

 

 

 

As of June 30, 2016

 

As of December 31, 2015

 

 

 

Book Value

 

Fair Value

 

Book Value

 

Fair Value

 

 

 

(in thousands of $)

 

Cash and cash equivalents

 

$

101,060 

 

$

101,060 

 

$

72,253 

 

$

72,253 

 

Restricted cash

 

$

5,880 

 

$

5,880 

 

$

2,818 

 

$

2,818 

 

Accounts receivable, net

 

$

21,874 

 

$

21,874 

 

$

10,652 

 

$

10,652 

 

Due from related parties

 

$

32,131 

 

$

32,131 

 

$

19,007 

 

$

19,007 

 

Series 1 ZIM Notes

 

$

6,540 

 

$

6,540 

 

$

6,587 

 

$

6,587 

 

Series 2 ZIM Notes

 

$

33,345 

 

$

33,345 

 

$

32,507 

 

$

32,507 

 

Equity investment in ZIM

 

$

28,693 

 

$

37,903 

 

$

28,693 

 

$

35,831 

 

Accounts payable

 

$

11,937 

 

$

11,937 

 

$

12,971 

 

$

12,971 

 

Accrued liabilities

 

$

14,628 

 

$

14,628 

 

$

14,014 

 

$

14,014 

 

Long-term debt, including current portion (2)

 

$

2,676,874 

 

$

2,677,411 

 

$

2,775,378 

 

$

2,776,739 

 

 

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 (in thousands):

 

 

 

Fair Value Measurements as of June 30, 2016

 

 

 

Total

 

(Level I)

 

(Level II)

 

(Level III)

 

 

 

(in thousands of $)

 

Series 1 ZIM Notes (1)

 

$

6,540 

 

 

$

6,540 

 

 

Series 2 ZIM Notes (1)

 

$

33,345 

 

 

$

33,345 

 

 

Equity investment in ZIM (1) 

 

$

37,903 

 

 

$

37,903 

 

 

Long-term debt, including current portion(2) 

 

$

2,677,411 

 

 

$

2,677,411 

 

 

Accrued liabilities(3) 

 

$

14,628 

 

 

$

14,628 

 

 

 

 

 

Fair Value Measurements as of December 31, 2015

 

 

 

Total

 

(Level I)

 

(Level II)

 

(Level III)

 

 

 

(in thousands of $)

 

Series 1 ZIM Notes (1)

 

$

6,587 

 

 

$

6,587 

 

 

Series 2 ZIM Notes (1)

 

$

32,507 

 

 

$

32,507 

 

 

Equity investment in ZIM (1) 

 

$

35,831 

 

 

$

35,831 

 

 

Long-term debt, including current portion(2) 

 

$

2,776,739 

 

 

$

2,776,739 

 

 

Accrued liabilities(3) 

 

$

14,014 

 

 

$

14,014 

 

 

 

(1)

The fair value is estimated based on currently available information on the Company’s counterparty, other contracts with similar terms, remaining maturities and interest rates.

(2)

Long-term debt is presented gross of deferred finance costs of $28.5 million and $35.0 million as of June 30, 2016 and December 31, 2015, 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 creditworthiness.

(3)

The fair value of the Company’s accrued liabilities, which mainly consists of accrued interest on its credit facilities and accrued realized losses on its cash flow interest rate swaps, is estimated based on currently available debt and swap agreements with similar contract terms, interest rates and remaining maturities, as well as taking into account its creditworthiness.

Commitments and Contingencies
Commitments and Contingencies

 

12Commitments and Contingencies

 

There are no material legal proceedings to which the Company is a party or to which any of its properties are the subject, or other contingencies that the Company is aware of, other than routine litigation incidental to the Company’s business. Furthermore, the Company does not have any commitments outstanding.

Stockholders' Equity
Stockholders' Equity

 

13Stockholders’ Equity

 

As of April 18, 2008, the Board of Directors and the Compensation Committee approved incentive compensation of Manager’s employees with its shares from time to time, after specific for each such time, decision by the compensation committee and the Board of Directors in order to provide a means of compensation in the form of free shares to certain employees of the Manager of the Company’s common stock. The plan was effective as of December 31, 2008. Pursuant to the terms of the plan, employees of the Manager may receive (from time to time) shares of the Company’s common stock as additional compensation for their services offered during the preceding period. The stock will have no vesting period and the employee will own the stock immediately after grant. The total amount of stock to be granted to employees of the Manager will be at the Company’s Board of Directors’ discretion only and there will be no contractual obligation for any stock to be granted as part of the employees’ compensation package in future periods. During the six months ended June 30, 2016, the Company did not grant any shares under the plan. During the six months ended June 30, 2016, the Company issued 17,608 new shares of common stock, which were distributed to the employees of the Manager in partial settlement of 2015 and 2014 grants.

 

The Company has also established the Directors Share Payment Plan under its 2006 equity compensation plan. The purpose of the plan is to provide a means of payment of all or a portion of compensation payable to directors of the Company in the form of Company’s Common Stock. The plan was effective as of April 18, 2008. Each member of the Board of Directors of the Company may participate in the plan. Pursuant to the terms of the plan, directors may elect to receive in Common Stock all or a portion of their compensation. Following December 31 of each year, the Company delivers to each Director the number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. During the six months ended June 30, 2016 and June 30, 2015, none of the directors elected to receive their compensation in Company shares.

Earnings per Share
Earnings per Share

 

14Earnings per Share

 

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

 

 

 

Three months ended

 

 

 

June 30, 2016

 

June 30, 2015

 

 

 

(in thousands)

 

Numerator:

 

 

 

 

 

Net income

 

$

44,648 

 

$

38,072 

 

 

 

 

 

 

 

Denominator (number of shares in thousands):

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

109,800 

 

109,785 

 

 

 

 

Six months ended

 

 

 

June 30, 2016

 

June 30, 2015

 

 

 

(in thousands)

 

Numerator:

 

 

 

 

 

Net income

 

$

88,769 

 

$

68,414 

 

 

 

 

 

 

 

Denominator (number of shares in thousands):

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

109,800 

 

109,785 

 

 

The Warrants issued and outstanding as of June 30, 2016 and 2015, were excluded from the diluted earnings per share for the three and six months ended June 30, 2016 and 2015, because they were antidilutive.

Subsequent Events
Subsequent Events

 

15Subsequent Events

 

On July 15, 2016, the Company entered into a charter restructuring agreement with Hyundai Merchant Marine (‘HMM”) as part of the agreements it reached with its creditors and owners of its chartered-in fleet in connection with the restructuring of its obligations. The charter restructuring agreement provides for a 20% reduction, for the period until December 31, 2019 (or earlier charter expiration in the case of eight vessels), in the charter hire rates payable for thirteen of the Company’s vessels currently employed with HMM. In exchange, under the charter restructuring agreement the Company received (i) $6.2 million principal amount of senior, unsecured, non-amortizing loan notes, which accrue interest at 3% per annum payable on maturity in December 2022, (ii) $32.8 million principal amount of senior, unsecured loan notes, amortizing subject to available cash flows, which accrue interest at 3% per annum payable on maturity in July 2024 and (iii) 4,637,558 HMM shares issued on July 23, 2016, which will be freely tradable on the Stock Market Division of the Korean Exchange from August 5, 2016 onwards.

 

On July 29, 2016, at the Company’s annual meeting of stockholders, Mr. William Repko and Mr. Miklόs Konkoly-Thege were re-elected as Class III directors, each for a three-year term expiring at the annual meeting of the Company’s stockholders in 2019.

Significant Accounting Policies (Policies)

 

Change in Accounting Principle

 

The Company historically presented fees incurred for obtaining loans as deferred charges in the consolidated balance sheets. During the six months ended June 30, 2016, the Company adopted Accounting Standards Update No. 2015-03 “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a direct deduction from the carrying amount of debt liability, consistent with debt discounts. Upon adoption, the Company applied the new guidance retrospectively to prior periods presented in the consolidated financial statements. The effect of the retrospective application of this change in accounting principle on the Company’s consolidated balance sheet as of December 31, 2015 resulted in a reduction of deferred charges, net by $35.0 million, with a corresponding reduction of long-term debt, net. Additionally, amortization of deferred charges amounting to $7.2 million was reclassified from other finance expenses to interest expense in the condensed consolidated statements of income for the six months ended June 30, 2015.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-9 “Revenue from Contracts with Customers” (“ASU 2014-09”), which will supersede the current revenue recognition guidance and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The ASU 2014-09 was amended by ASU 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date” (“ASU 2015-014”), which was issued in August 2015. Public entities can now elect to defer implementation of ASU 2014-09 to interim and annual periods beginning after December 15, 2017. Additionally, ASU 2015-14 permits early adoption of the standard but not before the original effective date, i.e. annual period beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In addition, in 2016, the FASB issued four amendments, which clarified the guidance on certain items such as reporting revenue as a principal versus agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability and presentation of sales taxes. The Company is currently evaluating the impact that the adoption of the new standard will have on its consolidated financial statements and associated disclosures, and have not yet selected a transition method.

 

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this Update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition the amendments in this Update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement for to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amendments are effective for annual periods ending after December 15, 2017, including interim periods within those fiscal years.  Early application is not permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements and notes disclosures.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 will apply to both types of leases — capital (or finance) leases and operating leases. According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016 — 02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323)” (“ASU 2016-07”), which simplifies the accounting for equity method investments by removing the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, and must be applied prospectively. Early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations. The amendments in ASU 2016-8 affect the guidance in the ASU 2014-09, which is not yet effective. ASU 2016-08 is effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early application is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the provisions of this guidance and assessing its impact on its consolidated financial statements and notes disclosures.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation - Improvements to Employee Share-Based Payment Accounting (Topic 718)” (“ASU 2016-09”), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, all excess income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period, however early adoption is permitted. The Company is currently evaluating the guidance to determine the Company’s adoption method and the effect it will have on its consolidated financial statements and notes disclosures.

 

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 ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.

 

Basis of Presentation and General Information (Tables)
Schedule of the vessel owning companies (the Danaos Subsidiaries)

 

As of June 30, 2016, 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(2)

Megacarrier (No. 1) Corp.

 

September 10, 2007

 

Hyundai Together

 

2012 

 

13,100 

Megacarrier (No. 2) Corp.

 

September 10, 2007

 

Hyundai Tenacity

 

2012 

 

13,100 

Megacarrier (No. 3) Corp.

 

September 10, 2007

 

Hyundai Smart

 

2012 

 

13,100 

Megacarrier (No. 4) Corp.

 

September 10, 2007

 

Hyundai Speed

 

2012 

 

13,100 

Megacarrier (No. 5) Corp.

 

September 10, 2007

 

Hyundai Ambition

 

2012 

 

13,100 

CellContainer (No. 6) Corp.

 

October 31, 2007

 

Hanjin Germany

 

2011 

 

10,100 

CellContainer (No. 7) Corp.

 

October 31, 2007

 

Hanjin Italy

 

2011 

 

10,100 

CellContainer (No. 8) Corp.

 

October 31, 2007

 

Hanjin Greece

 

2011 

 

10,100 

Karlita Shipping Co. Ltd.

 

February 27, 2003

 

CSCL Pusan

 

2006 

 

9,580 

Ramona Marine Co. Ltd.

 

February 27, 2003

 

CSCL 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

 

CSCL Europe

 

2004 

 

8,468 

Oceanprize Navigation Ltd.

 

January 21, 2003

 

CSCL America

 

2004 

 

8,468 

Boxcarrier (No. 2) Corp.

 

June 27, 2006

 

CMA CGM Musset(1)

 

2010 

 

6,500 

Boxcarrier (No. 3) Corp.

 

June 27, 2006

 

CMA CGM Nerval(1)

 

2010 

 

6,500 

Boxcarrier (No. 4) Corp.

 

June 27, 2006

 

CMA CGM Rabelais(1)

 

2010 

 

6,500 

Boxcarrier (No. 5) Corp.

 

June 27, 2006

 

CMA CGM Racine(1)

 

2010 

 

6,500 

Boxcarrier (No. 1) Corp.

 

June 27, 2006

 

CMA CGM Moliere(1)

 

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

 

Priority

 

2002 

 

6,402 

Auckland Marine Inc.

 

January 27, 2005

 

SNL Colombo

 

2004 

 

4,300 

Wellington Marine Inc.

 

January 27, 2005

 

YM Singapore

 

2004 

 

4,300 

Continent Marine Inc.

 

March 22, 2006

 

Zim Monaco

 

2009 

 

4,253 

Medsea Marine Inc.

 

May 8, 2006

 

OOCL Novorossiysk

 

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

 

OOCL Istanbul

 

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

 

Deva

 

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

 

Hanjin Algeciras

 

2011 

 

3,400 

CellContainer (No. 5) Corp.

 

March 23, 2007

 

Hanjin Constantza

 

2011 

 

3,400 

CellContainer (No. 1) Corp.

 

March 23, 2007

 

Hanjin Buenos Aires

 

2010 

 

3,400 

CellContainer (No. 2) Corp.

 

March 23, 2007

 

Hanjin Santos

 

2010 

 

3,400 

CellContainer (No. 3) Corp.

 

March 23, 2007

 

Hanjin Versailles

 

2010 

 

3,400 

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

 

Hyundai Highway

 

1998 

 

2,200 

Speedcarrier (No. 6) Corp.

 

December 6, 2007

 

Hyundai Progress

 

1998 

 

2,200 

Speedcarrier (No. 8) Corp.

 

December 6, 2007

 

Hyundai Bridge

 

1998 

 

2,200 

Speedcarrier (No. 1) Corp.

 

June 28, 2007

 

Hyundai Vladivostok

 

1997 

 

2,200 

Speedcarrier (No. 2) Corp.

 

June 28, 2007

 

Hyundai Advance

 

1997 

 

2,200 

Speedcarrier (No. 3) Corp.

 

June 28, 2007

 

Hyundai Stride

 

1997 

 

2,200 

Speedcarrier (No. 5) Corp.

 

June 28, 2007

 

Hyundai Future

 

1997 

 

2,200 

Speedcarrier (No. 4) Corp.

 

June 28, 2007

 

Hyundai Sprinter

 

1997 

 

2,200 

Vessel sold in 2016

 

 

 

 

 

 

 

 

Federal Marine Inc.

 

February 14, 2006

 

Federal

 

1994 

 

4,651 

 

(1)

Vessel subject to charterer’s option to purchase vessel after first eight years of time charter term for $78.0 million.

(2)

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

Deferred Charges, net (Tables)
Schedule of deferred charges, net

 

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

 

 

 

Drydocking and
Special Survey Costs

 

As of January 1, 2015

 

$

6,255

 

Additions

 

2,341

 

Amortization

 

(3,845

)

 

 

 

 

As of December 31, 2015

 

4,751

 

Additions

 

6,394

 

Amortization

 

(2,430

)

 

 

 

 

As of June 30, 2016

 

$

8,715

 

 

 

 

 

 

 

Investments in affiliates (Tables)

 

As of June 30, 2016, 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

 

NYK Lodestar

 

2001

 

6,422 

 

September 21, 2015

 

Leo Shipping and Trading S.A.

 

NYK Leo

 

2002

 

6,422 

 

February 4, 2016

 

 

 

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, 2016

 

December 31, 2015

 

Current assets

 

$

12,701 

 

$

12,578 

 

Non-current assets

 

$

70,547 

 

$

54,771 

 

Current liabilities

 

$

7,014 

 

$

5,552 

 

Non-current liabilities

 

$

44,601 

 

$

38,758