DANAOS CORP, 20-F filed on 2/28/2014
Annual and Transition Report (foreign private issuer)
Document and Entity Information
12 Months Ended
Dec. 31, 2013
Document and Entity Information
 
Entity Registrant Name
Danaos Corp 
Entity Central Index Key
0001369241 
Document Type
20-F 
Document Period End Date
Dec. 31, 2013 
Amendment Flag
false 
Current Fiscal Year End Date
--12-31 
Entity Well-known Seasoned Issuer
No 
Entity Voluntary Filers
No 
Entity Current Reporting Status
Yes 
Entity Filer Category
Accelerated Filer 
Entity Common Stock, Shares Outstanding
109,653,363 
Document Fiscal Year Focus
2013 
Document Fiscal Period Focus
FY 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 68,153 
$ 55,628 
Restricted cash, current portion
14,717 
2,821 
Accounts receivable, net
8,038 
3,741 
Inventories
14,496 
17,731 
Prepaid expenses
819 
706 
Due from related parties
14,459 
12,664 
Other current assets
6,184 
5,382 
Total current assets
126,866 
98,673 
Fixed assets, net
3,842,617 
3,986,138 
Deferred charges, net
67,949 
88,821 
Restricted cash, net of current portion
 
430 
Other non-current assets
29,120 
37,983 
Total non-current assets
3,939,686 
4,113,372 
Total assets
4,066,552 
4,212,045 
CURRENT LIABILITIES
 
 
Accounts payable
13,124 
13,982 
Accrued liabilities
30,911 
32,894 
Current portion of long-term debt
146,462 
125,076 
Current portion of vendor financing
57,388 
57,388 
Unearned revenue
7,305 
5,447 
Other current liabilities
114,698 
130,465 
Total current liabilities
369,888 
365,252 
LONG-TERM LIABILITIES
 
 
Long-term debt, net of current portion
2,965,641 
3,097,472 
Vendor financing, net of current portion
64,367 
121,754 
Other long-term liabilities
68,180 
187,263 
Total long-term liabilities
3,098,188 
3,406,489 
Total liabilities
3,468,076 
3,771,741 
Commitments and Contingencies
   
   
STOCKHOLDERS' EQUITY
 
 
Preferred stock (par value $.01, 100,000,000 preferred shares authorized and not issued as of December 31, 2013 and 2012)
   
   
Common stock (par value $0.01, 750,000,000 common shares authorized as of December 31, 2013 and 2012. 109,653,363 and 109,604,040 issued and outstanding as of December 31, 2013 and 2012, respectively)
1,097 
1,096 
Additional paid-in capital
546,097 
546,023 
Accumulated other comprehensive loss
(232,697)
(353,271)
Retained earnings
283,979 
246,456 
Total stockholders' equity
598,476 
440,304 
Total liabilities and stockholders' equity
$ 4,066,552 
$ 4,212,045 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2013
Dec. 31, 2012
CONSOLIDATED BALANCE SHEETS
 
 
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
109,653,363 
109,604,040 
Common stock, shares outstanding
109,653,363 
109,604,040 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
OPERATING REVENUES
$ 588,117 
$ 589,009 
$ 468,101 
OPERATING EXPENSES:
 
 
 
Voyage expenses
(11,770)
(13,503)
(10,765)
Vessel operating expenses
(122,074)
(123,356)
(119,127)
Depreciation
(137,414)
(143,938)
(106,178)
Amortization of deferred drydocking and special survey costs
(5,482)
(6,070)
(5,800)
Impairment loss
(19,004)
(129,630)
 
General and administrative expenses
(19,458)
(20,379)
(21,028)
(Loss)/gain on sale of vessels
(449)
830 
 
Income from operations
272,466 
152,963 
205,203 
OTHER INCOME (EXPENSES):
 
 
 
Interest income
2,210 
1,642 
1,304 
Interest expense
(91,185)
(87,340)
(55,124)
Other finance expenses
(20,120)
(18,107)
(14,581)
Other income/(expenses), net
302 
811 
(1,986)
Net unrealized and realized losses on derivatives
(126,150)
(155,173)
(121,379)
Total Other Expenses, net
(234,943)
(258,167)
(191,766)
Net Income/(Loss)
$ 37,523 
$ (105,204)
$ 13,437 
EARNINGS/(LOSS) PER SHARE
 
 
 
Basic and diluted net income/(loss) per share (in dollars per share)
$ 0.34 
$ (0.96)
$ 0.12 
Basic and diluted weighted average number of shares (in shares)
109,654,199 
109,612,737 
109,045,468 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
 
 
 
Net Income/(Loss)
$ 37,523 
$ (105,204)
$ 13,437 
Other Comprehensive Income/(Loss)
 
 
 
Change in fair value of financial instruments
 
40,536 
29,766 
Deferred realized losses on cash flow hedges amortized over the life of the newbuildings
 
(7,035)
(31,320)
Amortization of deferred realized losses on cash flow hedges
4,017 
3,524 
1,575 
Reclassification of unrealized losses/(gains) to earnings
116,557 
65,809 
(19,560)
Total Other Comprehensive Income/(Loss)
120,574 
102,834 
(19,539)
Comprehensive Income/(Loss)
$ 158,097 
$ (2,370)
$ (6,102)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Balance at Dec. 31, 2010
$ 392,412 
$ 1,086 
$ (3)
$ 489,672 
$ (436,566)
$ 338,223 
Balance (in shares) at Dec. 31, 2010
 
108,611 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Net Income/(Loss)
13,437 
 
 
 
 
13,437 
Net movement in other comprehensive income
(19,539)
 
 
 
(19,539)
 
Treasury stock distributed
 
 
(3)
 
 
Treasury stock distributed (in shares)
 
(1)
 
 
 
Warrants issued
54,043 
 
 
54,043 
 
 
Issuance of common stock
 
10 
 
(10)
 
 
Issuance of common stock (in shares)
 
952 
 
 
 
 
Stock compensation
2,182 
 
 
2,182 
 
 
Balance at Dec. 31, 2011
442,535 
1,096 
 
545,884 
(456,105)
351,660 
Balance (in shares) at Dec. 31, 2011
 
109,564 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Net Income/(Loss)
(105,204)
 
 
 
 
(105,204)
Net movement in other comprehensive income
102,834 
 
 
 
102,834 
 
Issuance of common stock (in shares)
 
40 
 
 
 
 
Stock compensation
139 
 
 
139 
 
 
Balance at Dec. 31, 2012
440,304 
1,096 
 
546,023 
(353,271)
246,456 
Balance (in shares) at Dec. 31, 2012
 
109,604 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
Net Income/(Loss)
37,523 
 
 
 
 
37,523 
Net movement in other comprehensive income
120,574 
 
 
 
120,574 
 
Issuance of common stock
 
 
(1)
 
 
Issuance of common stock (in shares)
 
49 
 
 
 
 
Stock compensation
75 
 
 
75 
 
 
Balance at Dec. 31, 2013
$ 598,476 
$ 1,097 
 
$ 546,097 
$ (232,697)
$ 283,979 
Balance (in shares) at Dec. 31, 2013
 
109,653 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Cash Flows from operating activities:
 
 
 
Net income/(loss)
$ 37,523 
$ (105,204)
$ 13,437 
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
 
 
 
Depreciation
137,414 
143,938 
106,178 
Amortization of deferred drydocking and special survey costs
5,482 
6,070 
5,800 
Impairment loss
19,004 
129,630 
 
Amortization of finance costs
15,431 
14,314 
9,700 
Exit fees accrued on debt
3,763 
2,762 
1,592 
Payments for drydocking and special survey costs deferred
(283)
(9,308)
(7,218)
Loss/(gain) on sale of vessels
449 
(830)
 
Stock based compensation
75 
139 
2,182 
Change in fair value of warrants
 
 
2,253 
Amortization of deferred realized losses on interest rate swaps
4,017 
3,524 
1,575 
Unrealized (gain)/loss on derivatives
(22,121)
739 
(10,537)
Realized losses on cash flow hedges deferred in Other Comprehensive Loss
 
(7,035)
(31,320)
(Increase)/decrease in:
 
 
 
Accounts receivable
(4,297)
435 
(64)
Inventories
3,235 
(1,544)
(6,269)
Prepaid expenses
(113)
605 
113 
Due from related parties
(1,795)
(3,536)
1,978 
Other assets, current and non-current
(11,379)
(7,338)
(10,352)
Increase/(decrease) in:
 
 
 
Accounts payable
(858)
(1,162)
396 
Accrued liabilities
(1,983)
(1,218)
(15,853)
Unearned revenue
1,858 
(1,546)
(4,404)
Other liabilities, current and long-term
3,603 
3,123 
305 
Net cash provided by operating activities
189,025 
166,558 
59,492 
Cash flows from investing activities:
 
 
 
Vessels under construction and vessels additions
(46,839)
(375,424)
(644,593)
Net proceeds from sale of vessels
52,926 
5,635 
 
Net cash provided by/(used) in investing activities
6,087 
(369,789)
(644,593)
Cash flows from financing activities:
 
 
 
Proceeds from long-term debt
 
266,920 
482,286 
Payments on long-term debt
(113,634)
(48,124)
(45,369)
Payments on Vendor financing
(57,387)
(10,857)
 
Deferred finance costs
(100)
(100)
(30,287)
Increase in restricted cash
(11,466)
(342)
(2)
Net cash (used in)/provided by financing activities
(182,587)
207,497 
406,628 
Net increase/(decrease) in cash and cash equivalents
12,525 
4,266 
(178,473)
Cash and cash equivalents, beginning of year
55,628 
51,362 
229,835 
Cash and cash equivalents, end of year
68,153 
55,628 
51,362 
Supplementary Cash Flow information
 
 
 
Cash paid for interest, net of capitalized interest
92,887 
84,847 
53,741 
Non-cash capitalized interest on vessels under construction
 
 
1,401 
Non-cash other predelivery expenses on vessels under construction
 
 
410 
Final installments for delivered vessels financed under Vendor Financing arrangement
 
124,855 
65,145 
Non-cash deferred financing fees
$ 87 
$ 86 
$ 56,519 
Basis of Presentation and General Information
Basis of Presentation and General Information

1. Basis of Presentation and General Information

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

        Danaos Corporation ("Danaos"), 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 22, Stockholders' Equity.

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

        The Company's principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel owning companies whose principal activity is the ownership and operation of containerships (refer to Note 2, Significant Accounting Policies) that are under the exclusive management of a related party of the Company (refer to Note 14, Related Party Transactions).

        The consolidated financial statements have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the companies listed below have been reflected in the consolidated balance sheets and consolidated Statements of Operations, consolidated statements of comprehensive income, 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 December 31, 2013, Danaos consolidated the vessel owning companies (the "Danaos Subsidiaries") listed below, which all own container vessels, or owned container vessels sold in the year ended December 31, 2013:

Company
  Date of Incorporation   Vessel Name   Year
Built
  TEU  

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  

Expresscarrier (No. 1) Corp. 

  March 5, 2007   YM Mandate     2010     6,500  

Expresscarrier (No. 2) Corp. 

  March 5, 2007   YM Maturity     2010     6,500  

Boxcarrier (No. 1) Corp. 

  June 27, 2006   CMA CGM Moliere(1)     2009     6,500  

Boxcarrier (No. 6) Corp. 

  June 27, 2006   Marathonas     1991     4,814  

Boxcarrier (No. 7) Corp. 

  June 27, 2006   Messologi     1991     4,814  

Boxcarrier (No. 8) Corp. 

  November 16, 2006   Mytilini     1991     4,814  

Federal Marine Inc. 

  February 14, 2006   Federal     1994     4,651  

Duke Marine Inc. 

  April 14, 2003   Duka     1992     4,651  

Commodore Marine Inc. 

  April 14, 2003   Commodore     1992     4,651  

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   Niledutch 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  

Vessels sold during 2013

 

 

 

 

   
 
   
 
 

Seasenator Shipping Ltd. 

  June 11, 1996   Honour     1989     3,908  

Seacaravel Shipping Ltd. 

  June 11, 1996   Hope     1989     3,908  

Saratoga Trading S.A. 

  May 8, 1998   Pride     1988     3,129  

Victory Shipholding Inc. 

  October 9, 2002   Lotus     1988     3,098  

Independence Navigation Inc. 

  October 9, 2002   Independence     1986     3,045  

Tyron Enterprises S.A. 

  January 26, 1999   Henry     1986     3,039  

Appleton Navigation S.A. 

  May 12, 1998   Komodo     1991     2,917  

Geoffrey Shipholding Ltd. 

  September 22, 1997   Kalamata     1991     2,917  

Lacey Navigation Inc. 

  March 5, 1998   Elbe     1991     2,917  

(1)
Vessel subject to charterer's option to purchase vessel after first eight years of time charter term for $78.0 million.
Significant Accounting Policies
Significant Accounting Policies

2. Significant Accounting Policies

        Principles of Consolidation:    The accompanying consolidated financial statements represent the consolidation of the accounts of the Company and its wholly-owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is obtained by the Company.

        The Company also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity's residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Refer to Note 13, Long-Term Debt, which describes an arrangement under the credit facility with ABN Amro, Lloyds TSB and National Bank of Greece for a variable interest entity.

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

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

        Reclassifications in Other Comprehensive Income/(Loss):    The Company had the following reclassifications out of the Accumulated Other Comprehensive Loss as of December 31, 2013, 2012 and 2011, respectively (in thousands):

 
   
  Year ended December 31,  
 
  Location of
Reclassification into
Income
 
 
  2013   2012   2011  

Amortization of deferred realized losses on cash flow hedges

  Net unrealized and realized losses on derivatives     4,017     3,524     1,575  

Reclassification of unrealized losses/(gains) to earnings

  Net unrealized and realized losses on derivatives      116,557     65,809     (19,560 )
                   

Total Reclassifications

      $ 120,574   $ 69,333   $ (17,985 )
                   
                   

        Foreign Currency Translation:    The functional currency of the Company is the U.S. dollar. The Company engages in worldwide commerce with a variety of entities. Although its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Additionally, the Company's wholly-owned vessel subsidiaries transacted a nominal amount of their operations in Euros; however, all of the subsidiaries' primary cash flows are U.S. dollar denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statement of operations. The foreign currency exchange gains/(losses) recognized in the accompanying consolidated Statements of Operations for each of the years ended December 31, 2013, 2012 and 2011 were $0.04 million, $0.02 million and $(0.1) million, respectively.

        Cash and Cash Equivalents:    Cash and cash equivalents consist of interest bearing call deposits, where the Company has instant access to its funds and withdrawals and deposits can be made at any time, as well as time deposits with original maturities of three months or less which are not restricted for use or withdrawal. Cash and cash equivalents of $68.2 million as of December 31, 2013 (December 31, 2012: $55.6 million) comprised cash balances and short term deposits, of which short term time deposits were $2.8 million as of December 31, 2013 and $9.8 million as of December 31, 2012.

        Restricted Cash:    Cash restricted accounts include retention accounts. Certain of the Company's loan agreements require the Company to deposit one-third of quarterly and one-sixth of the semi-annual principal installments and interest installments, respectively, due on the outstanding loan balance monthly in a retention account. On the rollover settlement date, both principal and interest are paid from the retention account. In addition, the Company has a restricted deposit in relation to one of its swaps. Refer to Note 3, Restricted Cash.

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

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

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

        Financing Costs:    Fees incurred for obtaining new loans and loans that have been accounted for as modified are deferred and amortized over the loans' respective repayment periods using the effective interest rate method. These charges are included in the consolidated balance sheet line item "Deferred Charges, net". The amortization expense associated with deferred financing fees is included in "Other finance expense" on the consolidated Statement of Operations.

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

        Vessels acquired in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics such as management agreements, employees and customer base. Otherwise, these are treated as purchase of assets. Where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel purchased in the secondhand market, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. The Company has acquired certain vessels in the secondhand market, all of which were considered to be acquisitions of assets.

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

        Accounting for Special Survey and Drydocking Costs:    The Company follows the accounting guidance for planned major maintenance activities. Drydocking and special survey costs, which are reported in the balance sheet within "Deferred charges, net", include planned major maintenance and overhaul activities for ongoing certification including the inspection, refurbishment and replacement of steel, engine components, electrical, pipes and valves, and other parts of the vessel. The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and amortized on a straight-line basis over the period until the next scheduled survey and drydocking, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off.

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

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

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

        As of December 31, 2013, the Company concluded that events and circumstances triggered the existence of potential impairment of its long-lived assets. These indicators included volatility in the spot market and decline in the vessels' market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company's long-lived assets by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. The Company's strategy is to charter its vessels under multi-year, fixed rate period charters that range from less than 1 to 18 years for vessels in its fleet, providing the Company with contracted stable cash flows. The significant factors and assumptions the Company used in its undiscounted projected net operating cash flow analysis included, among others, operating revenues, off-hire revenues, drydocking costs, operating expenses and management fees estimates. Revenue assumptions were based on contracted time charter rates up to the end of life of the current contract of each vessel as well as the estimated average time charter equivalent rates for the remaining life of the vessel after the completion of its current contract. The estimated daily time charter equivalent rates used for non-contracted revenue days are based on a combination of (i) recent charter market rates, (ii) conditions existing in the containership market as of December 31, 2013 in relation to laid up vessels, (iii) historical average time charter rates, based on publications by independent third party maritime research services, and (iv) estimated future time charter rates, based on publications by independent third party maritime research services that provide such forecasts. Recognizing that the container transportation is cyclical and subject to significant volatility based on factors beyond the Company's control, management believes the use of revenue estimates, based on the combination of factors (i) to (iv) above, to be reasonable as of the reporting date. In addition, the Company used an annual operating expenses escalation factor and estimates of scheduled and unscheduled off-hire revenues based on historical experience. All estimates used and assumptions made were in accordance with the Company's internal budgets and historical experience of the shipping industry.

        The Company's assessment concluded that step two of the impairment analysis was not required and no impairment of vessels existed as of December 31, 2013, as the undiscounted projected net operating cash flows per vessel exceed the carrying value of each vessel. As of December 31, 2012, the Company recorded an impairment loss of $129.6 million for thirteen of its older vessels, which were either laid up, or on short-term charters, 7 of which were sold in the year ended December 31, 2013.

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

        Accounting for Revenue and Expenses:    Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight line basis as the average revenue over the rental periods of such charter agreements, as service is performed. The Company earns revenue from bareboat and time charters. Bareboat and time charters involve placing a vessel at the charterers' disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under a time charter, the daily hire rate includes the crew, lubricants, insurance, spares and stores. Under a bareboat charter, the charterer is provided only with the vessel.

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

        Vessel Operating Expenses:    Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Aggregate expenses increase as the size of the Company's fleet increases. Under multi-year and short-term time charters, such as those on which the Company chartered 57, 62, 57 containerships in its fleet as of December 31, 2013, 2012 and 2011, respectively, the Company pays for vessel operating expenses. Under bareboat charters, such as those on which the Company chartered two of the containerships in its fleet as of December 31, 2013, 2012 and 2011, respectively, the Company's charterers bear most vessel operating expenses, including the costs of crewing, insurance, surveys, drydockings, maintenance and repairs.

        General and administrative expenses:    General and administrative expenses include management fees paid to the vessels' manager (refer to Note 14, Related Party Transactions), audit fees, legal fees, board remuneration, executive officers compensation, directors & officers insurance and stock exchange fees.

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

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

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

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

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

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

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

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

        Earnings/(Loss) Per Share:    The Company has presented net income/(loss) per share for all years presented based on the weighted average number of outstanding shares of common stock of Danaos Corporation at the reported periods. The warrants issued in 2011 were excluded from the diluted (loss)/income per share for the year ended December 31, 2013 and 2012, because they were antidilutive. There are no other dilutive or potentially dilutive securities, accordingly there is no difference between basic and diluted net income per share.

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

        The aggregate number of shares of common stock for which awards may be granted under the Plan cannot exceed 6% of the number of shares of common stock issued and outstanding at the time any award is granted. Awards made under the Plan that have been forfeited, cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence. Unless otherwise set forth in an award agreement, any awards outstanding under the Plan will vest immediately upon a "change of control", as defined in the Plan. The Plan will automatically terminate ten years after it has been most recently approved by the Company's stockholders. Refer to Note 21, Stock Based Compensation.

        As of April 18, 2008, the Company established the Directors Share Payment Plan ("Directors Plan") under the Plan. The purpose of the Directors Plan is to provide a means of payment of all or a portion of compensation payable to directors of the Company in the form of Company's Common Stock. Each member of the Board of Directors of the Company may participate in the Directors Plan. Pursuant to the terms of the Directors Plan, Directors may elect to receive in Common Stock all or a portion of their compensation. On the last business day of each quarter, the rights of common stock are credited to each Director's Share Payment Account. Following December 31st of each year, the Company will deliver to each Director the number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. Refer to Note 21, Stock Based Compensation.

        As of April 18, 2008, the Board of Directors and the Compensation Committee approved the Company's ability to provide, from time to time, incentive compensation to the employees of Danaos Shipping Company Limited (the "Manager"), in the form of free shares of the Company's common stock under the Plan. Prior approval is required by the Compensation Committee and the Board of Directors. The plan was effective since December 31, 2008. Pursuant to the terms of the plan, employees of the Manager may receive (from time to time) shares of the Company's common stock as additional compensation for their services offered during the preceding period. The 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. Refer to Note 21, Stock Based Compensation.

Recent Accounting Pronouncements:

Comprehensive Income

        In February 2013, the FASB issued new guidance for reporting of amounts reclassified out of accumulated other comprehensive income. The amendment requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. Public companies are required to comply with these amendments for all reporting periods presented, including interim periods. The amended guidance was effective for the Company for reporting periods beginning after December 15, 2012. The adoption of the new guidance did not have a material effect on the Company's consolidated financial statements.

Restricted Cash
Restricted Cash

3. Restricted Cash

        Restricted cash accounts were as follows as at December 31 (in thousands):

 
  2013   2012  

Retention accounts

  $ 2,841   $ 2,821  

Restricted deposits

    11,876     430  
           

Total

  $ 14,717   $ 3,251  
           
           

        The Company was required to maintain cash of $2.8 million as of December 31, 2013 and 2012, respectively, in retention bank accounts as collateral for the upcoming scheduled debt payments of its KEXIM and KEXIM-ABN Amro credit facilities.

        On March 27, 2013, the Company has entered into an agreement with the lenders under the HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank credit facility. The agreement provided the Company the option to sell, for cash, up to 9 mortgaged vessels (the Henry, the Pride, the Independence, the Honour, the Elbe, the Hope, the Lotus, the Kalamata and the Komodo) with the sale proceeds less sale commissions from such vessels' sales to be deposited in a restricted cash account and used to finance the acquisition of new containership vessels no later than December 31, 2013. Any funds remaining in this restricted cash account after that date will be applied towards prepayment of the respective credit facility. As of December 31, 2013, the Company concluded the sales of all vessels under the agreement. Furthermore, the Company has acquired a 2,524 TEU containership, the Amalia C, built in 1998 for a contract price of $6.6 million, a 2,602 TEU containership, the Niledutch Zebra, built in 2001 for a contract price of $10.1 million, a 2,524 TEU containership, the Danae C, built in 2001 for a contract price of $11.9 million and a 3,430 TEU containership, the Dimitris C, built in 2001 for a contract price of $14.9 million. As of December 31, 2013, an amount of $11.4 million was recorded as current restricted cash, which will be applied towards prepayment of the respective credit facility within 2014.

        Furthermore, the Company recorded current restricted cash of $0.4 million as cash collateral for one of its outstanding swaps as of December 31, 2013 (which swap expires within 2014) and was classified as non-current restricted cash as of December 31, 2012.

Fixed Assets, Net
Fixed Assets, Net

4. Fixed Assets, Net

        Vessels' cost, accumulated depreciation and changes thereto were as follows (in thousands):

 
  Vessel
Cost
  Accumulated
Depreciation
  Net Book
Value
 

As of January 1, 2012

  $ 3,703,782   $ (461,831 ) $ 3,241,951  

Additions

    1,022,560     (143,938 )   878,622  

Disposals

    (20,606 )   15,801     (4,805 )

Impairment loss

    (129,630 )       (129,630 )
               

As of December 31, 2012

  $ 4,576,106   $ (589,968 ) $ 3,986,138  
               

Additions

    46,839     (137,414 )   (90,575 )

Disposals

    (172,226 )   119,280     (52,946 )
               

As of December 31, 2013

  $ 4,450,719   $ (608,102 ) $ 3,842,617  
               
i.
On February 16, 2012, the Company took delivery of the newbuilding 13,100 TEU vessel, the Hyundai Together, for a contract price of $168.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

ii.
On February 28, 2012, the Company took delivery of the newbuilding 8,530 TEU vessel, the CMA CGM Melisande, for a contract price of $117.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

iii.
On March 8, 2012, the Company took delivery of the newbuilding 13,100 TEU vessel, the Hyundai Tenacity, for a contract price of $168.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

iv.
On April 27, 2012, the Company sold the Montreal (ex Hanjin Montreal). The net sale consideration was $5.6 million and the Company recognized a net gain on sale of $0.8 million during the year ended December 31, 2012.

v.
On May 3, 2012, the Company took delivery of the newbuilding 13,100 TEU vessel, the Hyundai Smart, for a contract price of $168.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

vi.
On June 7, 2012, the Company took delivery of the newbuilding 13,100 TEU vessel, the Hyundai Speed, for a contract price of $168.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

vii.
On June 29, 2012, the Company took delivery of the newbuilding 13,100 TEU vessel, the Hyundai Ambition, for a contract price of $168.5 million. The vessel has been deployed on a 12-year time charter with one of the world's major liner companies.

viii.
On February 13, 2013, the Company sold the Independence. The gross sale consideration was $7.0 million. The Independence was 26 years old.

ix.
On February 28, 2013, the Company sold the Henry. The gross sale consideration was $6.1 million. The Henry was 27 years old.

x.
On March 25, 2013, the Company sold the Pride. The gross sale consideration was $6.5 million. The Pride was 25 years old.

xi.
On May 14, 2013, the Company sold the Honour. The gross sale consideration was $9.1 million. The Honour was 24 years old.
xii.
On May 14, 2013, the Company acquired a 2,452 TEU containership, the Amalia C, built in 1998 for a contract price of $6.6 million.

xiii.
On June 13, 2013, the Company sold the Elbe. The gross sale consideration was $5.6 million. The Elbe was 22 years old.

xiv.
On June 25, 2013, the Company acquired a 2,602 TEU containership, the Niledutch Zebra, built in 2001 for a contract price of $10.1 million.

xv.
On October 3, 2013, the Company sold the Hope. The gross sale consideration was $8.0 million. The Hope was 24 years old.

xvi.
On October 22, 2013, the Company sold the Kalamata. The gross sale consideration was $5.6 million. The Kalamata was 23 years old.

xvii.
On October 25, 2013, the Company sold the Lotus. The gross sale consideration was $6.8 million. The Lotus was 25 years old.

xviii.
On November 12, 2013, the Company sold the Komodo. The gross sale consideration was $5.8 million. The Komodo was 23 years old.

xix.
On November 13, 2013, the Company acquired a 2,524 TEU containership, the Danae C, built in 2001 for a contract price of $11.9 million.

xx.
On November 21, 2013, the Company acquired a 3,430 TEU containership, the Dimitris C, built in 2001 for a contract price of $14.9 million.

        The Company's assessment concluded that no impairment of vessels existed as of December 31, 2013. As of December 31, 2012, the Company recorded an impairment loss of $129.6 million for thirteen of its older vessels, which were either laid up, or on short-term charters in the spot market, seven of which were sold during the year ended December 31, 2013.

        The residual value (estimated scrap value at the end of the vessels' useful lives) of the fleet was estimated at $404.6 million as of December 31, 2013 and $431.9 million as of December 31, 2012. The Company has calculated the residual value of the vessels taking into consideration the 10 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.

        The contract price of each newbuilding vessel, as discussed above, excludes any items capitalized during the construction period, such as interest expense and other predelivery expenses, which increase the total cost of each vessel recorded upon delivery under "Fixed Assets, net" in the Consolidated Balance Sheets.

Advances for Vessels under Construction
Advances for Vessels under Construction

5. Advances for Vessels under Construction

        As of December 31, 2012, the Company completed its extensive newbuilding program and has taken delivery of all of its vessels under construction. Advances for vessels under construction and transfers to vessels' cost as of December 31, 2012 were as follows (in thousands):

As of January 1, 2012

  $ 524,286  

Additions

    497,661  

Transfer to vessels' cost

    (1,021,947 )
       

As of December 31, 2012

  $  
       
       
Deferred Charges, Net
Deferred Charges, Net

6. Deferred Charges, Net

        Deferred charges consisted of the following (in thousands):

 
  Drydocking and
Special Survey
Costs
  Finance
and Other
Costs
  Total
Deferred
Charges
 

As of January 1, 2012

  $ 6,431   $ 93,280   $ 99,711  

Additions

    9,308     186     9,494  

Amortization

    (6,070 )   (14,314 )   (20,384 )
               

As of December 31, 2012

  $ 9,669   $ 79,152   $ 88,821  

Additions

    283     187     470  

Written off amounts

    (429 )       (429 )

Amortization

    (5,482 )   (15,431 )   (20,913 )
               

As of December 31, 2013

  $ 4,041   $ 63,908   $ 67,949  
               
               

        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.

Other Current Assets
Other Current Assets

7. Other Current Assets

        Other current assets consisted of the following as at December 31 (in thousands):

 
  2013   2012  

Insurance claims

  $ 2,815   $ 545  

Advances to suppliers and other assets

    3,369     4,837  
           

Total

  $ 6,184   $ 5,382  
           
           

        Insurance claims, net of applicable deductibles arising from hull and machinery damage or other insured risks, are expected to be fully collected.

Other Non-current Assets
Other Non-current Assets

8. Other Non-current Assets

        Other non-current assets consisted of the following as at December 31 (in thousands):

 
  2013   2012  

Fair value of swaps

  $ 2,472   $ 2,908  

Receivable from ZIM

    25,765     33,899  

Other assets

    883     1,176  
           

Total

  $ 29,120   $ 37,983  
           
           

        Israel Corporation Ltd., the parent company of ZIM Integrated Shipping Services Ltd. ("ZIM"), has announced that ZIM has reached an agreement in principle with its creditors, including the Company, for a restructuring of its obligations. This agreement includes a significant reduction in the charter rates payable by ZIM for the remaining life of its time charters, expiring in 2020 or 2021, for six of the Company's vessels and the Company's receipt of unsecured, interest bearing ZIM notes maturing in nine years and ZIM shares in exchange for such reductions and cancellation of ZIM's other obligations to the Company. Based on these anticipated terms, the Company has written down the value of its long-term receivables from ZIM as of December 31, 2013 and recognized a $19.0 million impairment charge with respect thereto, resulting in an outstanding long-term receivable of $25.8 million as of December 31, 2013. This agreement in principle remains subject to various approvals, including from each of the relevant creditor parties and ZIM's audit committee, board of directors and shareholders, as well as negotiation and execution of definitive documentation.

        In respect to the fair value of swaps, refer to Note 16, Financial Instruments—Fair Value Interest Rate Swap Hedges.

Accounts Payable
Accounts Payable

9. Accounts Payable

        Accounts payable consisted of the following as at December 31 (in thousands):

 
  2013   2012  

Suppliers, repairers

  $ 9,265   $ 8,995  

Insurers, agents, brokers

    1,192     1,373  

Other creditors

    2,667     3,614  
           

Total

  $ 13,124   $ 13,982  
           
           
Accrued Liabilities
Accrued Liabilities

10. Accrued Liabilities

        Accrued liabilities consisted of the following as at December 31 (in thousands):

 
  2013   2012  

Accrued payroll

  $ 1,140   $ 969  

Accrued interest

    11,614     12,473  

Accrued expenses

    18,157     19,452  
           

Total

  $ 30,911   $ 32,894  
           
           

        Accrued expenses mainly consisted of accrued realized losses on cash flow interest rate swaps of $14.3 million and $15.2 million as of December 31, 2013 and December 31, 2012, respectively, as well as other accruals related to the operation of the Company's fleet of $3.9 million and $4.3 million as of December 31, 2013 and December 31, 2012, respectively.

Other Current and Long-term Liabilities
Other Current and Long-term Liabilities

11. Other Current and Long-term Liabilities

        Other current liabilities consisted of the following as at December 31 (in thousands):

 
  2013   2012  

Fair value of swaps

  $ 109,431   $ 130,100  

Other current liabilities

    5,267     365  
           

Total

  $ 114,698   $ 130,465  
           
           

        As of December 31, 2013, other current liabilities mainly consist of $4.9 million in relation to deferred fees accrued in accordance with the Bank Agreement (refer to Note 13, Long-Term Debt), which will be cash settled on December 31, 2014 and are recorded at amortized cost.

        Other long-term liabilities consisted of the following at December 31 (in thousands):

 
  2013   2012  

Fair value of swaps

  $ 59,077   $ 176,948  

Other long-term liabilities

    9,103     10,315  
           

Total

  $ 68,180   $ 187,263  
           
           

        As of December 31, 2012, other long-term liabilities mainly consist of $4.8 million in relation to deferred fees accrued in accordance with the Bank Agreement (refer to Note 13, Long-Term Debt), which will be cash settled on December 31, 2014 and are recorded at amortized cost.

        In respect to the fair value of swaps, refer to Note 16a, Financial Instruments—Cash Flow Interest Rate Swap Hedges.

Lease Arrangements
Lease Arrangements

12. Lease Arrangements

  • Charters-out

        The future minimum revenue, expected to be earned on non-cancellable time charters consisted of the following as at December 31, 2013 (in thousands):

2014

  $ 533,022  

2015

    527,134  

2016

    518,909  

2017

    486,462  

2018

    445,822  

2019 and thereafter

    1,698,564  
       

Total future revenue

  $ 4,209,913  
       
       

        Revenues from time charters are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future. The off-hire assumptions used relate mainly to drydocking and special survey maintenance carried out approximately every 2.5 years per vessel, or every 5 years for vessels less than 15-years old, and which may last approximately 10 to 15 days.

Long-Term Debt
Long-Term Debt

13. Long-Term Debt

        Long-term debt as of December 31, 2013 and 2012 consisted of the following (in thousands):

Lender
  As of
December 31,
2013
  Current
portion
  Long-term
portion
  As of
December 31,
2012
  Current
portion
  Long-term
portion
 

The Royal Bank of Scotland

  $ 683,614   $ 4,628   $ 678,986   $ 686,800   $ 3,771   $ 683,029  

HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank

    658,160     11,447     646,713     658,160         658,160  

HSH Nordbank

    31,163     2,545     28,618     35,000     6,123     28,877  

The Export-Import Bank of Korea ("KEXIM")

    28,942     10,369     18,573     39,311     10,369     28,942  

The Export-Import Bank of Korea & ABN Amro

    68,109     11,250     56,859     79,359     11,250     68,109  

Deutsche Bank

    177,968     3,251     174,717     180,000     2,406     177,594  

Credit Agricole

    151,239     6,770     144,469     156,800     6,279     150,521  

Credit Suisse

    215,613     7,026     208,587     221,100     6,076     215,024  

ABN Amro-Lloyds TSB-National Bank of Greece

    247,001     7,537     239,464     253,200     6,966     246,234  

Commerzbank-Credit Suisse- Credit Agricole

    288,474     13,489     274,985     298,500     11,401     287,099  

The Royal Bank of Scotland (January 2011 Credit Facility)

    94,245     9,226     85,019     100,000     6,069     93,931  

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

    110,396     15,503     94,893     123,750     17,727     106,023  

ABN Amro-Lloyds TSB-National Bank of Greece (January 2011 Credit Facility)

    31,953     5,415     26,538     37,100     5,438     31,662  

Sinosure CEXIM-Citi-ABN Amro Credit Facility

    162,720     20,340     142,380     183,060     20,340     162,720  

Club Facility (January 2011 Credit Facility)

    78,001     12,618     65,383     83,900     6,180     77,720  

Citi—Eurobank Credit Facility (January 2011 Credit Facility)

    74,808     5,048     69,760     80,000     4,681     75,319  

Comprehensive Financing Plan exit fee accrued

    8,117         8,117     4,354         4,354  

Fair value hedged debt

    1,580         1,580     2,154         2,154  
                           

Total long-term debt

  $ 3,112,103   $ 146,462   $ 2,965,641   $ 3,222,548   $ 125,076   $ 3,097,472  
                           
                           

Hyundai Samho Vendor Financing

  $ 121,755   $ 57,388   $ 64,367   $ 179,142   $ 57,388   $ 121,754  
                           
                           

        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 years subsequent to December 31, 2013 are as follows (in thousands):

 
  Fixed
principal
repayments
  Variable
principal
payments
  Final Payment
due on
December 31, 2018
  Total
principal
payments
 

2014

  $ 133,769   $ 12,693   $   $ 146,462  

2015

    155,318     22,066         177,384  

2016

    183,173     82,057         265,230  

2017

    180,430     113,913         294,343  

2018

    270,888     65,175     1,821,904     2,157,967  

2019 and thereafter

    61,020             61,020  
                   

Total long-term debt

  $ 984,598   $ 295,904   $ 1,821,904   $ 3,102,406  
                   
                   

        The maturities of long-term debt for the twelve month periods subsequent to December 31, 2013 are based on the terms of the Bank Agreement, under which the Company was not required to repay any outstanding principal amounts under its credit facilities, other than the KEXIM and KEXIM-ABN Amro credit facilities which are not covered by the Bank Agreement, until May 15, 2013; thereafter until December 31, 2018 it is required to make quarterly principal payments in fixed amounts. In addition, the Company is required to make an additional payment in such amount that, together with the fixed principal payment, equals a certain percentage of its Actual Free Cash Flow of the preceding financial quarter. The table above includes both the fixed payments for which the Company has a contractual obligation, as well as the Company's estimate of the future Actual Free Cash Flows and resulting variable amortization. The last payment due on December 31, 2018, will also include the unamortized remaining principal debt balances, as such amount will be determinable following the fixed and variable amortization.

        Maturities of the Hyundai Samho vendor financing for the years subsequent to December 31, 2013, are as follows (in thousands):

2014

  $ 57,388  

2015

    46,530  

2016

    17,837  
       

Total vendor financing

  $ 121,755  
       
       

        As of September 12, 2013, the Company signed a supplemental letter extending the terms of the February 9, 2012 supplemental letter through November 20, 2018 (the maturity of the respective credit facility), which amended the interest rate margin and the financial covenants of its KEXIM-ABN Amro credit facility. More specifically, the financial covenants were aligned with those set forth in the Bank Agreement (see below), and the interest rate margin was increased by 0.5 percentage points.

Bank Agreement

        On January 24, 2011, the Company entered into a definitive agreement, which became effective on March 4, 2011, referred to as the Bank Agreement, that superseded, amended and supplemented the terms of each of the Company's then-existing credit facilities (other than its credit facilities with KEXIM and KEXIM-ABN Amro which are not covered thereby), and provided for, among other things, revised amortization schedules, maturities, interest rates, financial covenants, events of defaults, guarantee and security packages and approximately $425 million of new debt financing. Subject to the terms of the Bank Agreement and the intercreditor agreement (the "Intercreditor Agreement"), which the Company entered into with each of the lenders participating under the Bank Agreement to govern the relationships between the lenders thereunder, under the January 2011 Credit Facilities (as described and defined below) and under the Hyundai Samho Vendor Financing described below, the lenders participating thereunder continued to provide the Company's then outstanding credit facilities and amended the covenants under such credit facilities in accordance with the terms of the Bank Agreement.

        In accordance with the accounting guidance for troubled debt restructuring, the Company's debt did not meet the conditions of troubled debt restructuring as the lenders have not granted a concession. The effective borrowing rate of the restructured debt was higher than the effective borrowing rate of the old debt.

  • Interest and Fees

        Under the terms of the Bank Agreement, borrowings under each of the Company's then oustanding credit facilities, other than the KEXIM and KEXIM-ABN Amro credit facilities which were not covered by the Bank Agreement, bear interest at an annual interest rate of LIBOR plus a margin of 1.85%.

        The Company was required to make a margin adjustment fee payment equal to 1.55 percentage points of the applicable balance under its previously existing Aegean Baltic—HSH Nordbank—Piraeus Bank credit facility, calculated for the period from July 1, 2009 to the closing date under the Bank Agreement of March 4, 2011, to the participating lenders who are party to the HSH Facility Agreement. The margin adjustment fees were accrued and recorded as interest expense in the Statement of Operations or capitalized into the cost of the vessels under construction. The total amount of $17.6 million was cash settled in March 2011.

        The Company was also required to make a waiver adjustment payment, in respect of prior waivers obtained in 2009 and 2010 (contingent upon the closing of the Bank Agreement), such that each lender under any of the Company's oustanding credit facilities prior to entry into the Bank Agreement would receive cumulative waiver fees during the preceding period of 0.2% of its existing financing commitments. This fee totaled $2.6 million, was paid in January 2011 and was deferred and is being amortized over the life of the respective credit facilities using the effective interest rate method.

        The Company was also required to pay an amendment fee equal to 0.5% of the outstanding commitments under each oustanding financing arrangement, or $12.5 million in the aggregate, of which 20% was paid and deferred on the signing of a commitment letter for the Bank Agreement in August 2010, 40% was paid in January 2011 upon the signing of the Bank Agreement and the remaining 40% is due on December 31, 2014. This amendment fee is accrued under the "Other current liabilities" in the consolidated balance sheet and is deferred and amortized over the life of the respective credit facilities with the effective interest rate method.

        The Company was also required to pay a fee of 0.25% of the total committed amount contemplated by the August 6, 2010 commitment letter for the Bank Agreement for the period starting from August 6, 2010 up until March 4, 2011 (the effective date of the agreement) and which commitment fee was amended to 0.75% for the period after March 4, 2011, which fees were capitalized in cost of vessels under construction as it related to undrawn committed debt designated for specific newbuildings, and a $4.38 million amendment fee (of which $1.22 million was paid in December 2010 and $3.16 million was paid in January 2011) relating to conditions in respect of the Sinosure-CEXIM credit facility. This amendment fee was deferred and is being amortized over the life of the new debt using the effective interest rate method.

  • Principal Payments

        Under the terms of the Bank Agreement, the Company was not required to repay any outstanding principal amounts under its covered credit facilities, other than the KEXIM and KEXIM-ABN Amro credit facilities, which are not covered by the Bank Agreement, until May 15, 2013; thereafter, the Company is required to make quarterly principal payments in fixed amounts, in relation to the Company's total debt commitments from the Company's lenders under the Bank Agreement and the January 2011 Credit Facilities, as specified in the table below:

 
  February 15,   May 15,   August 15,   November 15,   December 31,   Total  

2013

        19,481,395     21,167,103     21,482,169         62,130,667  

2014

    22,722,970     21,942,530     22,490,232     24,654,040         91,809,772  

2015

    26,736,647     27,021,750     25,541,180     34,059,102         113,358,679  

2016

    30,972,971     36,278,082     32,275,598     43,852,513         143,379,164  

2017

    44,938,592     36,690,791     35,338,304     31,872,109         148,839,796  

2018

    34,152,011     37,585,306     44,398,658     45,333,618     65,969,274     227,438,867  
                                     

Total

                                  786,956,945  
                                     
                                     

*
The Company may elect to make the scheduled payments shown in the above table three months earlier.

        Furthermore, an additional variable payment in such amount that, together with the fixed principal payment (as disclosed above), equals 92.5% of Actual Free Cash Flow for such quarter until the earlier of (x) the date on which the Company's consolidated net leverage is below 6:1 and (y) May 15, 2015; and thereafter through maturity, which will be December 31, 2018 for each covered credit facility, it will be required to make fixed quarterly principal payments in fixed amounts as specified in the Bank Agreement and described above plus an additional payment in such amount that, together with the fixed principal payment, equals 89.5% of Actual Free Cash Flow for such quarter. In addition, any additional amounts of cash and cash equivalents, but during the final principal payment period described above only such additional amounts in excess of the greater of (1) $50 million of accumulated unrestricted cash and cash equivalents and (2) 2% of the Company's consolidated debt, would be applied first to the prepayment of the January 2011 Credit Facilities and after the January 2011 Credit Facilities are repaid, to the oustanding credit facilities covered by the Bank Agreement. The last payment due on December 31, 2018, will also include the unamortized remaining principal debt balances, as such amount will be determinable following the fixed and variable amortization.

        Under the Bank Agreement, "Actual Free Cash Flow" with respect to each credit facility covered thereby is equal to revenue from the vessels collateralizing such facility, less the sum of (a) interest expense under such credit facility, (b) pro-rata portion of payments under its interest rate swap arrangements, (c) interest expense and scheduled amortization under the Hyundai Samho Vendor Financing and (d) per vessel operating expenses and pro rata per vessel allocation of general and administrative expenses (which are not permitted to exceed the relevant budget by more than 20%), plus (e) the pro-rata share of operating cash flow of any Applicable Second Lien Vessel (which will mean, with respect to an existing facility, a vessel with respect to which the participating lenders under such facility have a second lien security interest and the first lien credit facility has been repaid in full).

        Under the terms of the Bank Agreement, the Company continues to be required to make any mandatory prepayments provided for under the terms of its existing credit facilities and is required to make additional prepayments as follows

  • 50% of the first $300 million of net equity proceeds (including convertible debt and hybrid instruments), after entering into the Bank Agreement and 25% of any additional net equity proceeds; and

    any debt proceeds (after repayment of any underlying secured debt covered by vessels collateralizing the new borrowings) (excluding the January 2011 Credit Facilities, the Sinosure-CEXIM Credit Facility and the Hyundai Samho Vendor Financing),

which amounts would first be applied to repayment of amounts outstanding under the January 2011 Credit Facilities and then to the existing credit facilities. Any equity proceeds retained by the Company and not used within 12 months for certain specified purposes would be applied for prepayment of the January 2011 Credit Facilities and then to the credit facilities covered by the Bank Agreement. The Company would also be required to prepay the portion of a credit facility attributable to a particular vessel upon the sale or total loss of such vessel; the termination or loss of an existing charter for a vessel, unless replaced within a specified period by a similar charter acceptable to the lenders; or the termination of a newbuilding contract. The Company's respective lenders under its credit facilities covered by the Bank Agreement and the January 2011 Credit Facilities may, at their option, require the Company to repay in full amounts outstanding under such respective credit facilities, upon a "Change of Control" of the Company, which for these purposes is defined as (i) Dr. Coustas ceasing to be its Chief Executive Officer, (ii) its common stock ceasing to be listed on the NYSE (or Nasdaq or other recognized stock exchange), (iii) a change in the ultimate beneficial ownership of the capital stock of any of its subsidiaries or ultimate control of the voting rights of those shares, (iv) Dr. Coustas and members of his family ceasing to collectively own over one-third of the voting interest in its outstanding capital stock or (v) any other person or group controlling more than 20% of the voting power of its outstanding capital stock.

  • Covenants and Events of Default

        On January 24, 2011, the Company entered into the Bank Agreement that superseded, amended and supplemented the terms of each of its then oustanding credit facilities (other than its credit facilities with KEXIM and KEXIM-ABN Amro) and provided for, among other things, revised financial covenant levels under such credit facilities as described below, with which the Company was in compliance as of December 31, 2013 and 2012.

        Under the Bank Agreement, the financial covenants under each of the Company's then oustanding credit facilities (other than under the KEXIM-ABN Amro credit facility which is not covered thereby, but which has been aligned with those covenants until maturity of the respective facility under the supplemental letter dated September 12, 2013 and the KEXIM credit facility, which contains only a collateral coverage covenant of 130%), have been reset to require the Company to:

  • maintain a ratio of (i) the market value of all of the vessels in the Company's fleet, on a charter-inclusive basis, plus the net realizable value of any additional collateral, to (ii) the Company's consolidated total debt above specified minimum levels gradually increasing from 90% through December 31, 2011 to 130% from September 30, 2017 through September 30, 2018;

    maintain a minimum ratio of (i) the market value of the nine vessels (Hyundai Smart, Hyundai Speed, Hyundai Ambition, Hyundai Together, Hyundai Tenacity, Hanjin Greece, Hanjin Italy, Hanjin Germany and CMA CGM Rabelais) collateralizing the January 2011 Credit Facilities, calculated on a charter-free basis, plus the net realizable value of any additional collateral, to (ii) the Company's aggregate debt outstanding under the January 2011 Credit Facilities of 100% from September 30, 2012 through September 30, 2018;

    maintain minimum free consolidated unrestricted cash and cash equivalents, less the amount of the aggregate variable principal amortization amounts, described above, of $30.0 million at the end of each calendar quarter;

    ensure that the Company's (i) consolidated total debt less unrestricted cash and cash equivalents to (ii) consolidated EBITDA (defined as net income before interest, gains or losses under any hedging arrangements, tax, depreciation, amortization and any other non-cash item, capital gains or losses realized from the sale of any vessel, finance charges and capital losses on vessel cancellations and before any non-recurring items and excluding any accrued interest due to us but not received on or before the end of the relevant period; provided that non-recurring items excluded from this calculation shall not exceed 5% of EBITDA calculated in this manner) for the last twelve months does not exceed a maximum ratio gradually decreasing from 12:1 on December 31, 2010 to 4.75:1 on September 30, 2018;

    ensure that the ratio of the Company's (i) consolidated EBITDA for the last twelve months to (ii) net interest expense (defined as interest expense (excluding capitalized interest), less interest income, less realized gains on interest rate swaps (excluding capitalized gains) and plus realized losses on interest rate swaps (excluding capitalized losses)) exceeds a minimum level of 1.50:1 through September 30, 2013 and thereafter gradually increasing to 2.80:1 by September 30, 2018; and

    maintain a consolidated market value adjusted net worth (defined as the amount by which the Company's total consolidated assets adjusted for the market value of the Company's vessels in the water less cash and cash equivalents in excess of the Company's debt service requirements exceeds the Company's total consolidated liabilities after excluding the net asset or liability relating to the fair value of derivatives as reflected in the Company's financial statements for the relevant period) of at least $400 million.

        For the purpose of these covenants, the market value of the Company's vessels will be calculated, except as otherwise indicated above, on a charter-inclusive basis (using the present value of the "bareboat-equivalent" time charter income from such charter) so long as a vessel's charter has a remaining duration at the time of valuation of more than 12 months plus the present value of the residual value of the relevant vessel (generally equivalent to the charter free value of such a vessel at the age such vessel would be at the expiration of the existing time charter). The market value for newbuilding vessels, all of which currently have multi-year charters, would equal the lesser of such amount and the newbuilding vessel's book value.

        Under the terms of the Bank Agreement, the covered credit facilities also contain customary events of default, including those relating to cross-defaults to other indebtedness, defaults under its swap agreements, non-compliance with security documents, material adverse changes to its business, a Change of Control as described above, a change in its Chief Executive Officer, its common stock ceasing to be listed on the NYSE (or Nasdaq or another recognized stock exchange), a change in any material respect, or breach of the management agreement by the manager for the vessels securing the respective credit facilities and cancellation or amendment of the time charters (unless replaced with a similar time charter with a charterer acceptable to the lenders) for the vessels securing the respective credit facilities.

        Under the terms of the Bank Agreement, the Company generally will not be permitted to incur any further financial indebtedness or provide any new liens or security interests, unless such security is provided for the equal and ratable benefit of each of the lenders party to the Intercreditor Agreement, other than security arising by operation of law or in connection with the refinancing of outstanding indebtedness, with the consent, not to be unreasonably withheld, of all lenders with a lien on the security pledged against such outstanding indebtedness. In addition, the Company would not be permitted to pay cash dividends or repurchase shares of its capital stock unless (i) its consolidated net leverage is below 6:1 for four consecutive quarters and (ii) the ratio of the aggregate market value of its vessels to its outstanding indebtedness exceeds 125% for four consecutive quarters and provided that an event of default has not occurred and the Company is not, and after giving effect to the payment of the dividend, in breach of any covenant.

  • Collateral and Guarantees

        Each of the Company's credit facilities and swap arrangements, to the extent applicable covered by the Bank Agreement, continue to be secured by their previous collateral on the same basis, and received, to the extent not previously provided, pledges of the shares of the Company's subsidiaries owning the vessels collateralizing the applicable facilities, cross-guarantees from each subsidiary owning the vessels collateralizing such facilities, assignment of the refund guarantees in relation to any newbuildings funded by such facilities and other customary shipping industry collateral.

January 2011 Credit Facilities (Aegean Baltic Bank—HSH Nordbank—Piraeus Bank, RBS, ABN Amro Club facility, Club Facility and Citi-Eurobank)

        On January 24, 2011, the Company entered into agreements for the following new term loan credit facilities ("January 2011 Credit Facilities"):

  • (i)
    a $123.8 million credit facility provided by HSH, which is secured by the Hyundai Speed, the Hanjin Italy and the CMA CGM Rabelais and customary shipping industry collateral related thereto (the $123.8 million amount includes principal commitment of $23.75 million under the Aegean Baltic Bank—HSH Nordbank—Piraeus Bank credit facility already drawn as of December 31, 2010, which was transferred to the new facility upon finalization of the agreement in 2011);

    (ii)
    a $100.0 million credit facility provided by RBS, which is secured by the Hyundai Smart and the Hanjin Greece and customary shipping industry collateral related thereto;

    (iii)
    a $37.1 million credit facility with ABN Amro and lenders participating under the Bank Agreement which is secured by Hanjin Germany and customary shipping industry collateral related thereto;

    (iv)
    a $83.9 million new club credit facility to be provided, on a pro rata basis, by the other existing lenders participating under the Bank Agreement, which is secured by Hyundai Together and Hyundai Tenacity and customary shipping industry collateral related thereto; and

    (v)
    a $80.0 million credit facility with Citibank and Eurobank, which is secured by the Hyundai Ambition and customary shipping industry collateral related thereto ((i)-(v), collectively, the "January 2011 Credit Facilities").

        As of December 31, 2013, $389.4 million was outstanding under the above January 2011 Credit Facilities and there were no remaining borrowing availability under the remaining credit facilities.

  • Interest and Fees

        Borrowings under each of the January 2011 Credit Facilities above bear interest at an annual interest rate of LIBOR plus a margin of 1.85%, subject, on and after January 1, 2013, to increases in the applicable margin to: (i) 2.50% if the outstanding indebtedness thereunder exceeds $276 million, (ii) 3.00% if the outstanding indebtedness thereunder exceeds $326 million and (iii) 3.50% if the outstanding indebtedness thereunder exceeds $376 million.

        The Company paid an arrangement fee of 2.00%, or $8.5 million in the aggregate, $3.3 million of which was paid in August 2010 (the date the commitment letter was entered into) and $5.2 million paid in January 2011, which was deferred and is being amortized through the Statement of Operations over the life of the respective facilities with the effective interest rate method. Furthermore, the Company paid a commitment fee of 0.75% per annum payable quarterly in arrears on the committed but undrawn portion of the respective loan.

  • Principal Payments

        Under the Bank Agreement, the Company was not required to repay any outstanding principal amounts under its January 2011 Credit Facilities until May 15, 2013 and thereafter it is required to make quarterly principal payments in fixed amounts as specified in the Bank Agreement plus an additional quarterly variable amortization payment, all as described above under "—Bank Agreement—Principal Payments."

  • Covenants, Events of Default and Other Terms

        The January 2011 Credit Facilities contain substantially the same financial and operating covenants, events of default, dividend restrictions and other terms and conditions as applicable to the Company's then oustanding credit facilities as revised under the Bank Agreement described above.

  • Collateral and Guarantees

        The collateral described above relating to the newbuildings financed by the respective credit facilities, will be (other than in respect of the CMA CGM Rabelais) subject to a limited participation by Hyundai Samho in any enforcement thereof until repayment of the related Hyundai Samho Vendor financing (described below) for such vessels. In addition lenders participating in the $83.9 million club credit facility described above received a lien on Hyundai Together and Hyundai Tenacity as additional security in respect of the pre-existing credit facilities the Company had with such lenders. The lenders under the other January 2011 Credit Facilities also received a lien on the respective vessels securing such January 2011 Credit Facilities as additional collateral in respect of its pre-existing credit facilities and interest rate swap arrangements with such lenders and Citibank and Eurobank also received a second lien on Hyundai Ambition as collateral in respect of its previously unsecured interest rate arrangements with them.

        In addition, Aegean Baltic—HSH Nordbank—Piraeus Bank also received a second lien on the Deva , the CSCL Europe and the CSCL Pusan as collateral in respect of all borrowings from Aegean Baltic—HSH Nordbank—Piraeus Bank and RBS also received a second lien on the Derby D, CSCL America and the CSCL Le Havre as collateral in respect of all borrrowings from RBS.

        The Company's obligations under the January 2011 Credit Facilities are guaranteed by its subsidiaries owning the vessels collateralizing the respective credit facilities. The Company's Manager has also provided an undertaking to continue to provide the Company with management services and to subordinate its rights to the rights of its lenders, the security trustee and applicable hedge counterparties.

Sinosure-CEXIM-Citi-ABN Amro Credit Facility

        On February 21, 2011, the Company entered into a bank agreement with Citibank, acting as agent, ABN Amro and the Export-Import Bank of China ("CEXIM") for a senior secured credit facility (the "Sinosure-CEXIM Credit Facility") of up to $203.4 million, in three tranches each in an amount equal to the lesser of $67.8 million and 60.0% of the contract price for the newbuilding vessels, CMA CGM Tancredi, CMA CGM Bianca and CMA CGM Samson, securing such tranche for post-delivery financing of these vessels. The Company took delivery of the respective vessels in 2011. The China Export & Credit Insurance Corporation, or Sinosure, covers a number of political and commercial risks associated with each tranche of the credit facility.

        As of December 31, 2013, $162.7 million was outstanding under the credit facility and there was no remaining borrowing availability under the credit facility.

  • Principal and Interest Payments

        Borrowings under the Sinosure-CEXIM Credit Facility bear interest at an annual interest rate of LIBOR plus a margin of 2.85% payable semi-annually in arrears. Upon entering into the credit facility, the Company paid a commitment fee of 1.14% on undrawn amounts and an arrangement fee of $4.0 million, as well as a flat fee of $8.8 million to Sinosure for its participation. The Company is required to repay principal amounts drawn under each tranche of the Sinosure-CEXIM Credit Facility in consecutive semi-annual installments over a ten-year period commencing after the delivery of the respective newbuilding being financed by such amount through the final maturity date of the respective tranches and repay the respective tranche in full upon the loss of the respective newbuilding.

  • Covenants, Events of Default and Other Terms

        The Sinosure-CEXIM credit facility was amended and restated, effective on June 30, 2013, to align its financial covenants with the Company's Bank Agreement (except for the minimum ratio of the charter free market value of certain vessels, as described in the Bank Agreement, which is not applicable) described above and continues to require the Company to maintain a minimum ratio of the market value of the vessel collateralizing a tranche of the facility to debt outstanding under such tranche of 125%.

        The Sinosure-CEXIM credit facility also contains customary events of default, including those relating to cross-defaults to other indebtedness, defaults under its swap agreements, non-compliance with security documents, material adverse changes to its business, a Change of Control as described above, a change in its Chief Executive Officer, its common stock ceasing to be listed on the NYSE (or Nasdaq or another recognized stock exchange), a change in any material respect, or breach of the management agreement by, the manager for the mortgaged vessels and cancellation or amendment of the time charters (unless replaced with a similar time charter with a charterer acceptable to the lenders) for the mortgaged vessels.

        The Company will not be permitted to pay cash dividends or repurchase shares of its capital stock unless (i) its consolidated net leverage is below 6:1 for four consecutive quarters and (ii) the ratio of the aggregate market value of its vessels to its outstanding indebtedness exceeds 125% for four consecutive quarters and provided that an event of default has not occurred and the Company is not, and after giving effect to the payment of the dividend is not, in breach of any covenant.

  • Collateral

        The Sinosure-CEXIM Credit Facility is secured by customary post-delivery shipping industry collateral with respect to the vessels, CMA CGM Tancredi, CMA CGM Bianca and CMA CGM Samson, securing the respective tranche.

Hyundai Samho Vendor Financing

        The Company entered into an agreement with Hyundai Samho Heavy Industries ("Hyundai Samho") for a financing facility of $190.0 million in respect of eight of its newbuilding containerships built by Hyundai Samho, the Hyundai Speed, the Hyundai Smart, the Hyundai Ambition, the Hyundai Together, the Hyundai Tenacity, the Hanjin Greece, the Hanjin Italy and the Hanjin Germany, in the form of delayed payment of a portion of the final installment for each such newbuilding. As of December 31, 2013, the outstanding balance of the this credit facility was $121.8 million

        Borrowings under this facility bear interest at a fixed interest rate of 8%. The Company is required to repay principal amounts under this financing facility in six consecutive semi-annual installments commencing one and a half years, in the case of three of the newbuilding vessels being financed, and in seven consecutive semi-annual installments commencing one year, in the case of the other five newbuilding vessels, after the delivery of the respective newbuilding being financed. This financing facility does not require the Company to comply with financial covenants, but contains customary events of default, including those relating to cross-defaults. This financing facility is secured by second priority collateral related to the newbuilding vessels being financed.

Exit Fees

        The Company is required to pay an Initial Exit Fee of $15.0 million. Furthermore, the Company is required to pay an Additional Exit Fee of $10.0 million (as it has not repaid at least $150.0 million in the aggregate with equity proceeds by December 31, 2013). Both Exit Fees, in the respective proportion to facilities covered by the Bank Agreement and the January 2011 Credit Facilities, are payable the earlier of (a) December 31, 2018 and (b) the date on which the respective facilities are repaid in full. The Exit Fees will accrete in the consolidated Statement of Operations over the life of the respective facilities (with the effective interest rate method) and are reported under "Long-term debt, net of current portion" in the consolidated Balance Sheets. The Company has recognized an amount of $8.1 million and $4.4 million as of December 31, 2013 and December 31, 2012, respectively.

Credit Facilities Summary Table

Lender
  Outstanding
Principal
Amount
(in millions)(1)
  Collateral Vessels

The Royal Bank of Scotland(2)

  $ 683.6   The Hyundai Progress, the Hyundai Highway, the Hyundai Bridge, the Federal (ex Hyundai Federal), the Zim Monaco, the Hanjin Buenos Aires, the Hanjin Versailles, the Hanjin Algeciras, the CMA CGM Racine and the CMA CGM Melisande

Aegean Baltic Bank—HSH Nordbank—Piraeus Bank(3)

  $ 658.2   The Commodore, the Duka, the Marathonas, the Messologi, the Mytilini, the Hyundai Vladivostok, the Hyundai Advance, the Hyundai Stride, the Hyundai Future, the Hyundai Sprinter, the Amalia C, the Niledutch Zebra, the Danae C, the Dimitris C,

Credit Agricole

  $ 151.2   The CMA CGM Moliere and the CMA CGM Musset

Deutsche Bank

  $ 178.0   The Zim Rio Grande, the Zim Sao Paolo and the OOCL Istanbul (ex Zim Kingston)

Credit Suisse

  $ 215.6   The Zim Luanda, the CMA CGM Nerval and the YM Mandate

ABN Amro—Lloyds TSB—National Bank of Greece

  $ 247.0   The SNL Colombo, the YM Seattle, the YM Vancouver and the YM Singapore

Commerzbank—Credit Suisse—Credit Agricole

  $ 288.5   The OOCL Novorossiysk (ex ZIM Dalian), the Hanjin Santos, the YM Maturity, the Hanjin Constantza and the CMA CGM Attila

HSH Nordbank

  $ 31.2   The Deva and the Derby D

KEXIM

  $ 28.9   The CSCL Europe and the CSCL America

KEXIM-ABN Amro

  $ 68.1   The CSCL Pusan and the CSCL Le Havre

January 2011 Credit Facilities

Aegean Baltic—HSH Nordbank—Piraeus Bank(3)

  $ 110.4   The Hyundai Speed, the Hanjin Italy and the CMA CGM Rabelais

RBS(2)

  $ 94.2   The Hyundai Smart and the Hanjin Germany

ABN Amro Club Facility

  $ 32.0   The Hanjin Greece

Club Facility

  $ 78.0   The Hyundai Together and the Hyundai Tenacity

Citi-Eurobank

  $ 74.8   The Hyundai Ambition

Sinosure-CEXIM-Citi-ABN Amro

  $ 162.7   The CMA CGM Tancredi, the CMA CGM Bianca and the CMA CGM Samson

Vendor Financing

Hyundai Samho

  $ 121.8   Second priority liens on the Hyundai Smart, the Hyundai Speed, the Hyundai Ambition, the Hyundai Together, the Hyundai Tenacity, the Hanjin Greece, the Hanjin Italy and the Hanjin Germany

(1)
As of December 31, 2013.

(2)
Pursuant to the Bank Agreement, this credit facility is also secured by a second priority lien on the Derby D, the CSCL America and the CSCL Le Havre.

(3)
Pursuant to the Bank Agreement, this credit facility is also secured by a second priority lien on the Deva, the CSCL Europe and the CSCL Pusan.

        As of December 31, 2013, there was no remaining borrowing availability under any of the Company's credit facilities.

        In 2008, the Company entered into a credit facility of $253.2 million with ABN Amro (acting as agent), Lloyds TSB and National Bank of Greece in relation to the financing of vessels SNL Colombo, YM Seattle, YM Vancouver and YM Singapore. The structure of this credit facility is such that the group of banks loaned funds of $253.2 million to the Company, which the Company then re-loaned to a newly created entity of the group of banks ("Investor Bank"). With the proceeds, Investor Bank then subscribed for preference shares in Auckland Marine Inc., Seacarriers Services Inc., Seacarriers Lines Inc. and Wellington Marine Inc. (subsidiaries of Danaos Corporation). In addition, four of the Companies' subsidiaries issued a put option in respect of the preference shares. The effect of these transactions is that the Company's subsidiaries are required to pay out fixed preference dividends to the Investor Bank, the Investor Bank is required to pay fixed interest due on the loan from the Company to Investor Bank and finally the Investor Bank is required to pay put option premium on the put options issued in respect of the preference shares.

        The interest payments to the Company by Investor Bank are contingent upon receipt of these preference dividends. In the event these dividends are not paid, the preference dividends will accumulate until such time as there are sufficient cash proceeds to settle all outstanding arrearages. Applying variable interest accounting to this arrangement, the Company has concluded that the Company is the primary beneficiary of Investor Bank and accordingly has consolidated it into the Company's group. Accordingly, as at December 31, 2013, the Consolidated Balance Sheet and Consolidated Statement of Operations includes Investor Bank's net assets of $nil and net income of $nil, respectively, due to elimination on consolidation, of accounts and transactions arising between the Company and the Investor Bank.

        As of December 31, 2013, the Company was in compliance with the covenants under its Bank Agreement and its other credit facilities.

        The weighted average interest rate on long-term borrowings for the years ended December 31, 2013, 2012 and 2011 was 2.7%, 2.7% and 2.5%, respectively.

        Total interest paid during the years ended December 31, 2013, 2012 and 2011 was $92.9 million, $90.0 million and $78.4 million, respectively.

        The total amount of interest cost incurred in 2013 was $91.2 million (2012: $91.0 million, 2011: $71.2 million). The amount of interest expensed in 2013 was $91.2 million (2012: $87.3 million, 2011: $55.1 million) and the amount of interest capitalized in 2013 was nil (2012: $3.7 million, 2011: $16.1 million).

Related Party Transactions
Related Party Transactions

14. Related Party Transactions

        Management Services:    Pursuant to a ship management agreement between each of the vessel owning companies and Danaos Shipping Company Limited (the "Manager"), the Manager acts as the fleet's technical manager responsible for (i) recruiting qualified officers and crews, (ii) managing day to day vessel operations and relationships with charterers, (iii) purchasing of stores, supplies and new equipment for the vessels, (iv) performing general vessel maintenance, reconditioning and repair, including commissioning and supervision of shipyards and subcontractors of drydock facilities required for such work, (v) ensuring regulatory and classification society compliance, (vi) performing operational budgeting and evaluation, (vii) arranging financing for vessels, (viii) providing accounting, treasury and finance services and (ix) providing information technology software and hardware in the support of the Company's processes. The Company's controlling shareholder also controls the Manager.

        On February 8, 2010, the Company signed an addendum to the management contract adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. During 2012 and 2011, the management fee levels remained the same as the 2010 fee levels. Furthermore, the Manager received a flat fee of $0.725 million per newbuilding vessel for the supervision of newbuilding contracts in 2012 and 2011. The Manager also receives a commission on gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in the fleet. On December 16, 2011, the Company signed an addendum to the management contract adjusting the commission of 0.75% on gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in the fleet, effective January 1, 2012, to a commission of 1.0%. In addition, the Manager receives a commission of 0.5% based on the contract price of any vessel bought or sold by the manager on its behalf (excluding newbuildings).

        On December 16, 2013, the Company signed an addendum to the management contract adjusting the management fees, effective January 1, 2014, to a fee of $800 per day for commercial, chartering and administrative services, a fee of $400 per vessel per day for vessels on bareboat charter and $800 per vessel per day for vessels on time charter, as well as adjusting the commission of 1.0% on gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in the fleet, to a commission of 1.25%.

        On December 31, 2012, the Company signed an addendum to the management contract providing that from January 1, 2013, the Manager also provides the Company with the services of its executive officers for a fee of €1.4 million per year.

        Management fees in 2013 amounted to approximately $15.0 million (2012: $15.5 million, 2011: $13.5 million), which are shown under "General and administrative expenses" on the consolidated Statements of Operations. Commissions to Manager in 2013 amounted to approximately $5.8 million (2012: $5.9 million, 2011: $3.4 million), which are shown under "Voyage expenses" on the consolidated Statements of Operations.

        The Company pays monthly advances on account of the vessels' operating expenses. These prepaid amounts are presented in the consolidated balance sheet under "Due from related parties" totaling $14.5 million and $12.7 million as of December 31, 2013 and 2012, respectively.

        Dr. John Coustas, the Chief Executive Officer of the Company, is a member of the Board of Directors of The Swedish Club, the primary provider of insurance for the Company, including a substantial portion of its hull & machinery, war risk and protection and indemnity insurance. During the years ended December 31, 2013, 2012 and 2011 the Company paid premiums to The Swedish Club of $9.6 million, $10.4 million and $8.7 million, respectively. As of December 31, 2013 and 2012, the Company did not have any outstanding balance to The Swedish Club.

Taxes
Taxes

15. Taxes

        Under the laws of the countries of the Company's ship owning subsidiaries' incorporation and/or vessels' registration, the Company's ship operating subsidiaries are not subject to tax on international shipping income, however, they are subject to registration and tonnage taxes, which have been included in Vessel Operating Expenses in the accompanying consolidated Statements of Operations.

        Pursuant to the U.S. Internal Revenue Code (the "Code"), U.S.-source income from the international operation of ships is generally exempt from U.S. tax if the company operating the ships meets certain requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country which grants an equivalent exemption from income taxes to U.S. corporations.

        All of the Company's ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must be more than 50% owned by individuals who are residents, as defined, in the countries of incorporation or another foreign country that grants an equivalent exemption to U.S. corporations. These companies also currently satisfy the more than 50% beneficial ownership requirement. In addition, should the beneficial ownership requirement not be met, the management of the Company believes that by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like the Company, the more than 50% beneficial ownership requirement can also be satisfied based on the trading volume and the anticipated widely-held ownership of the Company's shares, but no assurance can be given that this will remain so in the future, since continued compliance with this rule is subject to factors outside of the Company's control.

Financial Instruments
Financial Instruments

16. Financial 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 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. The interest rates relating to the long-term loans are disclosed in Note 13, Long-term Debt.

        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. Refer to Note 17, Operating Revenue, for further details on revenue from significant clients. 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 consolidated balance sheets of financial assets and liabilities excluding long-term bank loans 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 expenses 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 Operations 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 "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, as of December 31, 2013 and 2012 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
December 31,
2013
  Fair Value
December 31,
2012
 

RBS

  11/28/2006   11/28/2008   11/28/2013   $ 100,000     4.855% p.a.   USD LIBOR 3M BBA         (4,172 )

RBS

  11/28/2006   11/28/2008   11/28/2013   $ 100,000     4.875% p.a.   USD LIBOR 3M BBA         (4,190 )

RBS

  12/01/2006   11/28/2008   11/28/2013   $ 100,000     4.78% p.a.   USD LIBOR 3M BBA         (4,103 )

RBS

  03/09/2007   3/15/2010   3/15/2015   $ 200,000     5.07% p.a.   USD LIBOR 3M BBA   $ (11,586 ) $ (20,759 )

RBS

  03/16/2007   3/20/2009   3/20/2014   $ 200,000     4.922% p.a.   USD LIBOR 3M BBA     (2,052 )   (11,253 )

RBS

  09/13/2007   9/15/2009   9/15/2014   $ 200,000     4.9775% p.a.   USD LIBOR 3M BBA     (6,732 )   (15,882 )

RBS

  11/15/2007   11/19/2010   11/19/2015   $ 100,000     5.12% p.a.   USD LIBOR 3M BBA     (8,919 )   (13,523 )

RBS

  11/16/2007   11/22/2010   11/22/2015   $ 100,000     5.07% p.a.   USD LIBOR 3M BBA     (8,869 )   (13,424 )

HSH Nordbank

  12/06/2006   12/8/2009   12/8/2014   $ 400,000     4.855% p.a.   USD LIBOR 3M BBA     (17,298 )   (34,952 )

CITI

  04/17/2007   4/17/2008   4/17/2015   $ 200,000     5.124% p.a.   USD LIBOR 3M BBA     (12,520 )   (21,792 )

CITI

  04/20/2007   4/20/2010   4/20/2015   $ 200,000     5.1775% p.a.   USD LIBOR 3M BBA     (12,738 )   (22,116 )

CITI

  10/23/2007   10/25/2009   10/27/2014   $ 250,000     4.9975% p.a.   USD LIBOR 3M BBA     (9,797 )   (21,241 )

CITI

  11/02/2007   11/6/2010   11/6/2015   $ 250,000     5.1% p.a.   USD LIBOR 3M BBA     (21,774 )   (33,273 )

CITI

  11/26/2007   11/29/2010   11/30/2015   $ 100,000     4.98% p.a.   USD LIBOR 3M BBA     (8,754 )   (13,243 )

CITI

  02/07/2008   2/11/2011   2/11/2016   $ 200,000     4.695% p.a.   USD LIBOR 3M BBA     (17,870 )   (26,357 )

Eurobank

  12/06/2007   12/10/2010   12/10/2015   $ 200,000     4.8125% p.a.   USD LIBOR 3M BBA     (17,067 )   (25,725 )

Eurobank

  02/11/2008   5/31/2011   5/31/2015   $ 200,000     4.755% p.a.   USD LIBOR 3M BBA     (12,532 )   (21,043 )
                                       

Total fair value of swap liabilities

                              $ (168,508 ) $ (307,048 )
                                       
                                       

ABN Amro

  06/06/2013   1/4/2016   12/31/2016   $ 325,000     1.4975% p.a.   USD LIBOR 3M BBA   $ 382   $  

ABN Amro

  31/05/2013   1/4/2016   12/31/2016   $ 250,000     1.4125% p.a.   USD LIBOR 3M BBA     504      
                                       

Total fair value of swap assets

                              $ 886   $  
                                       
                                       

        The Company recorded in the consolidated Statements of Operations unrealized gains/(losses) of $139.4 million, $64.9 million and $(10.3) million in relation to fair value changes of interest rate swaps for the years ended December 31, 2013, 2012 and 2011, respectively, as well as hedge ineffectiveness gains/(losses) of nil, $1.8 million and $19.7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Furthermore, deferred realized losses of nil, nil and $0.2 million were reclassified from "Accumulated other comprehensive loss" in the consolidated balance sheets to the consolidated Statements of Operations as of and for the years ended December 31, 2013, 2012 and 2011, respectively, as well as $116.6 million and $67.6 million unrealized losses were reclassified from Accumulated Other Comprehensive Loss to earnings for year ended December 31, 2013 and, 2012, respectively (following the hedge accounting discontinuance as of July 1, 2012). The total fair value change of the interest rate swaps for the years ended December 31, 2013 and 2012, amounted to $139.4 million and $105.4 million, respectively.

        The variable-rate interest on specific borrowings that was associated with vessels under construction 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, are 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. Realized losses on cash flow hedges of nil, $7.0 million and $31.3 million were recorded in other comprehensive loss for the years ended December 31, 2013, 2012 and 2011, respectively. In addition, an amount of $4.0 million, $3.5 million and $1.6 million was reclassified into earnings for the years ended December 31, 2013, 2012 and 2011, respectively, representing amortization over the depreciable life of the vessels.

 
  Year ended
December 31,
2013
  Year ended
December 31,
2012
  Year ended
December 31,
2011
 
 
  (in millions)
 

Total realized losses

  $ (145.6 ) $ (159.7 ) $ (163.8 )

Realized losses deferred in Other Comprehensive Loss

        7.0     31.3  
               

Realized losses expensed in consolidated Statements of Operations

    (145.6 )   (152.7 )   (132.5 )

Amortization of deferred realized losses

    (4.0 )   (3.5 )   (1.6 )

Unrealized gains/(losses)

    22.8     (0.9 )   9.2  
               

Unrealized and realized losses on cash flow interest rate swaps

  $ (126.8 ) $ (157.1 ) $ (124.9 )
               
               

        The Company was in an over-hedged position under its cash flow interest rate swaps, which was due to deferred progress payments to shipyards, cancellation of three newbuildings in 2010, replacements of variable interest rate debt with a fixed interest rate seller's financing and equity proceeds from the Company's private placement in 2010, all of which reduced initial forecasted variable interest rate debt and resulted in notional cash flow interest rate swaps being above the variable interest rate debt eligible for hedging. Realized losses attributable to the over-hedging position were nil, $19.0 million and $38.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. The over-hedged position described above was gradually reduced and ultimately eliminated in 2012, following the delivery of all remaining newbuildings and the full drawdown of all credit facilities.

  • 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 "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, as of December 31, 2013 and 2012, 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
December 31,
2013
  Fair Value
December 31,
2012
 

RBS

  11/15/2004   12/15/2004   8/27/2016   $ 60,528     5.0125% p.a.   USD LIBOR 3M BBA + 0.835% p.a.   $ 747   $ 1,390  

RBS

  11/15/2004   11/17/2004   11/2/2016   $ 62,342     5.0125% p.a.   USD LIBOR 3M BBA + 0.855% p.a.     839     1,518  
                                       

Total fair value

                              $ 1,586   $ 2,908  
                                       
                                       

        The total fair value change of the interest rate swaps for the years ended December 31, 2013, 2012 and 2011, amounted to $(1.3) million, $(1.1) million and $(0.5) million, respectively, and is included in the consolidated Statement of Operations in "Unrealized and realized losses on derivatives". The related asset of $1.6 million and $2.9 million as of December 31, 2013 and 2012, respectively, is shown under "Other non-current assets" in the consolidated balance sheet.

        The Company reclassified from "Long-term debt, net of current portion", where its fair value of hedged item is recorded, to its earnings unrealized losses an amount of $0.6 million for the year ended December 31, 2013 and $0.3 million for the six months ended December 31, 2012 (following the hedge accounting discontinuance as of July 1, 2012). The fair value change of the underlying hedged debt for the period from January 1, 2012 until June 30, 2012, was $0.6 million gain and for the year ended December 31, 2011 amounted to $1.0 million, and is included in the consolidated Statement of Operations in "Unrealized and realized losses on derivatives". The amortization of fair value of hedged debt for the period from January 1, 2012 until June 30, 2012, was $0.3 million and for the year ended December 31, 2011 amounted to $0.8 million, and is included in the consolidated Statement of Operations in "Unrealized and realized losses on derivatives". The related liability of the fair value hedged debt of $1.6 million and $2.2 million is shown under "Long-term Debt" in the consolidated balance sheet as of December 31, 2013 and 2012, respectively.

 
  Year ended
December 31,
2013
  Year ended
December 31,
2012
  Year ended
December 31,
2011
 
 
  (in millions)
 

Unrealized gains/(losses) on swap asset

  $ (1.3 ) $ (1.1 ) $ (0.5 )

Unrealized gains/(losses) on fair value of hedged debt

        0.6     1.0  

Amortization of fair value of hedged debt

        0.3     0.8  

Reclassification of fair value of hedged debt to Statement of Operations

    0.6     0.3      

Realized gains

    1.4     1.8     2.2  
               

Unrealized and realized gains on fair value interest rate swaps

  $ 0.7   $ 1.9   $ 3.5  
               
               
  • c. Fair Value of Financial Instruments

        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. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

 
  Fair Value Measurements as of December 31, 2013  
 
  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

  $ 2,472   $   $ 2,472   $  

Liabilities

                         

Interest rate swap contracts

  $ 168,508   $   $ 168,508   $  


 

 
  Fair Value Measurements as of December 31, 2012  
 
  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

  $ 2,908   $   $ 2,908   $  

Liabilities

                         

Interest rate swap contracts

  $ 307,048   $   $ 307,048   $  

        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 16(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 December 31, 2013 and 2012, these financial instruments are in the counterparties' favor. 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 December 31, 2013   As of December 31, 2012  
 
  Book Value   Fair Value   Book Value   Fair Value  
 
  (in thousands of $)
 

Cash and cash equivalents

  $ 68,153   $ 68,153   $ 55,628   $ 55,628  

Restricted cash

  $ 14,717   $ 14,717   $ 3,251   $ 3,251  

Accounts receivable, net

  $ 8,038   $ 8,038   $ 3,741   $ 3,741  

Due from related parties

  $ 14,459   $ 14,459   $ 12,664   $ 12,664  

Receivable from ZIM

  $ 25,765   $ 25,765   $ 33,899   $ 34,071  

Accounts payable

  $ 13,124   $ 13,124   $ 13,982   $ 13,982  

Accrued liabilities

  $ 30,911   $ 30,911   $ 32,894   $ 32,894  

Long-term debt, including current portion

  $ 3,112,103   $ 3,114,101   $ 3,222,548   $ 3,223,337  

Vendor financing, including current portion

  $ 121,755   $ 121,552   $ 179,142   $ 179,500  

        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 December 31, 2013  
 
  Total   (Level I)   (Level II)   (Level III)  
 
  (in thousands of $)
 

Receivable from ZIM(1)

  $ 25,765   $   $ 25,765   $  

Long-term debt, including current portion(2)

  $ 3,114,101   $   $ 3,114,101   $  

Vendor financing, including current portion(3)

  $ 121,552   $   $ 121,552   $  

Accrued liabilities(4)

  $ 30,911   $   $ 30,911   $  


 

 
  Fair Value Measurements as of December 31, 2012  
 
  Total   (Level I)   (Level II)   (Level III)  
 
  (in thousands of $)
 

Receivable from ZIM(1)

  $ 34,071   $   $ 34,071   $  

Long-term debt, including current portion(2)

  $ 3,223,337   $   $ 3,223,337   $  

Vendor financing, including current portion(3)

  $ 179,500   $   $ 179,500   $  

Accrued liabilities(4)

  $ 32,894   $   $ 32,894   $  

(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. Furthermore, Israel Corporation Ltd., the parent company of ZIM Integrated Shipping Services Ltd. ("ZIM"), has announced that ZIM has reached an agreement in principle with its creditors, including the Company, for a restructuring of its obligations. Based on these anticipated terms, the Company written down the value of its long-term receivable from ZIM as of December 31, 2013 (refer to Note 8, Other Non-current Assets).

(2)
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 Vendor financing is estimated based on currently available financing with similar contract terms, interest rate and remaining maturities, as well as taking into account its creditworthiness.

(4)
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.

        The Company's financial items measured at fair value on a non-recurring basis were:

 
  Fair Value Measurements
as of December 31, 2013
 
 
  Total   (Level I)   (Level II)   (Level III)  
 
  (in thousands of $)
 

Receivable from ZIM

  $ 25.8   $   $ 25.8   $  

        As of December 31, 2013, the Company has written down the value of its long-term receivables from ZIM and recognized a $19.0 million impairment charge with respect to the agreement in principle for a restructuring of ZIMs obligations. This agreement includes a significant reduction in the charter rates payable by ZIM for the remaining life of its time charters, expiring in 2020 or 2021, for six of the Company's vessels and receipt of unsecured, interest bearing ZIM notes maturing in nine years and ZIM shares in exchange for such reductions and cancellation of ZIM's other obligations to the Company.

Operating Revenue
Operating Revenue

17. Operating Revenue

        Operating revenue from significant customers (constituting more than 10% of total revenue) for the years ended December 31, were as follows:

Charterer
  2013   2012   2011  

HMM Korea

    27 %   24 %   15 %

CMA CGM

    24 %   24 %   17 %

Hanjin

    17 %   17 %   18 %

YML

    10 %   10 %   14 %

ZIM

    Under 10 %   Under 10 %   11 %

CSCL

    Under 10 %   Under 10 %   10 %
Operating Revenue by Geographic Location
Operating Revenue by Geographic Location

18. Operating Revenue by Geographic Location

        Operating revenue by geographic location for the years ended December 31, was as follows (in thousands):

Continent
  2013   2012   2011  

Australia—Asia

  $ 413,662   $ 403,697   $ 329,300  

Europe

    174,455     185,312     138,801  
               

Total Revenue

  $ 588,117   $ 589,009   $ 468,101  
               
               
Commitments and Contingencies
Commitments and Contingencies

19. Commitments and Contingencies

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

Sale of Vessels
Sale of Vessels

20. Sale of Vessels

        The "(Loss)/gain on sale of vessels" of $449 thousand for the year ended December 31, 2013, reflects the following:

  • i.
    On November 12, 2013, the Company sold the Komodo. The gross sale consideration was $5.8 million. The Company realized a net gain on this sale of $140.5 thousand and net sale proceeds of $5.0 million. The Komodo was 23 years old.

    ii.
    On October 25, 2013, the Company sold the Lotus. The gross sale consideration was $6.8 million. The Company realized a net gain on this sale of $149.6 thousand and net sale proceeds of $6.1 million. The Lotus was 25 years old.

    iii.
    On October 22, 2013, the Company sold the Kalamata. The gross sale consideration was $5.6 million. The Company realized a net loss on this sale of $224.3 thousand and net sale proceeds of $4.9 million. The Kalamata was 23 years old.
  • iv.
    On October 3, 2013, the Company sold the Hope. The gross sale consideration was $8.0 million. The Company realized a net loss on this sale of $670.8 thousand and net sale proceeds of $7.1 million. The Hope was 24 years old.

    v.
    On June 13, 2013, the Company sold the Elbe. The gross sale consideration was $5.6 million. The Company realized a net gain on this sale of $59 thousand and net sale proceeds of $5.0 million. The Elbe was 22 years old.

    vi.
    On May 14, 2013, the Company sold the Honour. The gross sale consideration was $9.1 million. The Company realized a net gain on this sale of $112 thousand and net sale proceeds of $8.0 million. The Honour was 24 years old.

    vii.
    On March 25, 2013, the Company sold the Pride. The gross sale consideration was $6.5 million. The Company realized a net loss on this sale of $671 thousand and net sale proceeds of $5.5 million. The Pride was 25 years old.

    viii.
    On February 28, 2013, the Company sold the Henry. The gross sale consideration was $6.1 million. The Company realized a net gain on this sale of $138 thousand and net sale proceeds of $5.3 million. The Henry was 27 years old.

    ix.
    On February 13, 2013, the Company sold the Independence. The gross sale consideration was $7.0 million. The Company realized a net gain on this sale of $518 thousand and net sale proceeds of $6.0 million. The Independence was 26 years old.

        The "(Loss)/gain on sale of vessels" of $0.8 million for the year ended December 31, 2012, reflects the sale of Montreal (ex Hanjin Montreal), on April 27, 2012. The net sale consideration was $5.6 million. The Company realized a net gain on this sale of $0.8 million. The Montreal (ex Hanjin Montreal) was 28 years old and was generating revenue under its time charter, which expired on March 31, 2012 (refer to Note 4, Fixed Assets, net).

        No vessels were sold by the Company in 2011.

Stock Based Compensation
Stock Based Compensation

21. Stock Based Compensation

        As of April 18, 2008, the Board of Directors and the Compensation Committee approved incentive compensation of the 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 under its 2006 equity compensation plan 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. As of December 12, 2013, the Company granted 16,066 shares to certain employees of the Manager and recorded in "General and Administrative Expenses" an expense of $0.1 million representing the fair value of the stock granted as at the date of grant, which will be issued in 2014 to be distributed to the employees of the Manager in settlement of the shares granted in 2013. As of December 12, 2012, the Company granted 35,101 shares to certain employees of the Manager and recorded in "General and Administrative Expenses" an expense of $0.1 million representing the fair value of the stock granted as at the date of grant, which were issued in 2013 and distributed to the employees of the Manager in settlement of the shares granted in 2012. As of December 12, 2011, the Company granted 18,650 shares to certain employees of the Manager and recorded in "General and Administrative Expenses" an expense of $0.1 million representing the fair value of the stock granted as at the date of grant. The Company issued 18,041 new shares of common stock in 2012 and the remaining 609 shares of common stock in 2013 and distributed to the employees of the Manager in settlement of the shares granted in 2011.

        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. During 2013, none of the directors elected to receive in Company shares his compensation. During 2012, one director elected to receive in Company shares 50% of his compensation and one director elected to receive in Company shares 100% of his compensation only for the first quarter of 2012. During 2011, one director elected to receive in Company shares 50% of his compensation and one director elected to receive in Company shares 100% of his compensation. On the last business day of each quarter of 2013, 2012 and 2011, rights to receive nil, 13,613 and 22,200 shares in aggregate for the years ended December 31, 2013, 2012 and 2011, respectively, were credited to the Director's Share Payment Account. As of December 31, 2013, 2012 and 2011, respectively, nil, $0.05 and $0.1 million were reported in "Additional Paid-in Capital" in respect of these rights. 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. The Company issued 13,613 new shares of common stock in 2013, which were distributed to its directors in settlement of the shares granted in 2012.

        As of December 12, 2011, the Company granted an aggregate of 555,000 restricted shares of common stock to the executive officers of the Company, and recorded in "General and Administrative Expenses" an expense of $2.0 million, representing the fair value of the stock granted as at the date of grant.

Stockholders' Equity
Stockholders' Equity

22. Stockholders' Equity

        As of December 31, 2013 and 2012, the shares issued and outstanding were 109,653,363 and 109,604,040, respectively. Under the Articles of Incorporation as amended on September 18, 2009, the Company's authorized capital stock consists of 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.

        During 2013, the Company issued 49,323 shares of common stock, all of which were newly issued shares, to the employees of the Manager and the directors of the Company (refer to Note 21, Stock Based Compensation). During 2012, the Company issued 40,241 shares of common stock, all of which were newly issued shares, to the employees of the Manager and the directors of the Company (refer to Note 21, Stock Based Compensation).

        During 2013 and 2012, the Company did not declare any dividends. In addition, under the terms of the Bank Agreement (Refer to Note 13, Long-term Debt) the Company is not permitted to pay cash dividends or repurchase shares of its capital stock unless (i) its consolidated net leverage is below 6:1 for four consecutive quarters and (ii) the ratio of the aggregate market value of its vessels to its outstanding indebtedness exceeds 125% for four consecutive quarters and provided that an event of default has not occurred and the Company is not, and after giving effect to the payment of the dividend, in breach of any covenant.

        In 2011, the Company issued an aggregate of 15,000,000 warrants to its lenders under the Bank Agreement and the January 2011 Credit Facilities to purchase, solely on a cash-less exercise basis, an aggregate of 15,000,000 shares of its common stock, which warrants have an exercise price of $7.00 per share. All of these warrants will expire on January 31, 2019.

Earnings/(Loss) per Share
Earnings/(Loss) per Share

23. Earnings/(Loss) per Share

        The following table sets forth the computation of basic and diluted earnings/(losses) per share for the years ended December 31 (in thousands):

 
  2013   2012   2011  

Numerator:

                   

Net income/(loss)

  $ 37,523   $ (105,204 ) $ 13,437  

Denominator (number of shares):

                   

Basic and diluted weighted average ordinary shares outstanding

    109,654.2     109,612.7     109,045.5  

        The warrants issued and outstanding were excluded from the diluted Earnings/(losses) per Share for the years ended December 31, 2013, 2012 and 2011, because they were antidilutive.

Impairment Loss
Impairment Loss

24. Impairment Loss

        Israel Corporation Ltd., the parent company of ZIM Integrated Shipping Services Ltd. ("ZIM"), has announced that ZIM has reached an agreement in principle with its creditors, including the Company, for a restructuring of its obligations. This agreement includes a significant reduction in the charter rates payable by ZIM for the remaining life of its time charters, expiring in 2020 or 2021, for six of the Company's vessels and the Company's receipt of unsecured, interest bearing ZIM notes maturing in nine years and ZIM shares in exchange for such reductions and cancellation of ZIM's other obligations to the Company. Based on these anticipated terms, the Company has written down the value of its long-term receivables from ZIM as of December 31, 2013 and recognized a $19.0 million impairment charge with respect thereto, resulting in an outstanding long-term receivable of $25.8 million as of December 31, 2013.

        As of December 31, 2012, the Company concluded that events and circumstances triggered the existence of potential impairment of its long-lived assets. These indicators included volatility in the spot market and decline in the vessels' market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company's long-lived assets by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. The Company's assessment concluded that step two of the impairment analysis was required for certain of its vessels, as the undiscounted projected net operating cash flows of certain vessels did not exceeded the carrying value of the respective vessels. Fair value of each vessel was determined with the assistance from valuations obtained by third party independent shipbrokers. As of December 31, 2012, the Company recorded an impairment loss of $129.6 million for thirteen of its older vessels, which were either laid up, or on short-term charters in the spot market, seven of which were sold in the year ended December 31, 2013 (refer to Note 20, Sale of Vessels).

        No impairment loss was recorded in 2011.

Other income/(expenses), net
Other income/(expenses), net

25. Other income/(expenses), net

        Other income/(expenses), net, of $0.3 million and $0.8 million in the year ended December 31, 2013 and 2012, respectively, consisted of various other non-operating items. Other income/(expenses), net, of $(2.0) million in 2011 mainly consisted of legal and advisory expenses of $(2.3) million (attributed to fees related to preparing and structuring the comprehensive financing plan of the Company), which were partially offset by $0.3 million income in relation to other non-operating items.

Subsequent Events
Subsequent Events

26. Subsequent Events

        Israel Corporation Ltd., the parent company of ZIM Integrated Shipping Services Ltd. ("ZIM"), has announced that ZIM has reached an agreement in principle with its creditors, including the Company, for a restructuring of its obligations. This agreement includes a significant reduction in the charter rates payable by ZIM for the remaining life of its time charters, expiring in 2020 or 2021, for six of the Company's vessels and the Company's receipt of unsecured, interest bearing ZIM notes maturing in nine years and ZIM shares in exchange for such reductions and cancellation of ZIM's other obligations to the Company. This agreement in principle remains subject to various approvals, including from each of the relevant creditor parties and ZIM's audit committee, board of directors and shareholders, as well as negotiation and execution of definitive documentation (refer to Note 8, Other Non-current Assets).

        On February 13, 2014, the Company has entered into an agreement to sell the Marathonas for a gross sale consideration of $11.5 million. The vessel was laid-up in the year ended December 31, 2013. The vessel was delivered to its buyers on February 26, 2014.

        Between January 1, 2014 and February 28, 2014, the Company issued 16,066 new shares of common stock, to the employees of the Manager in respect of grants made in 2013, as described in Note 21, Stock Based Compensation.

Significant Accounting Policies (Policies)

Principles of Consolidation:    The accompanying consolidated financial statements represent the consolidation of the accounts of the Company and its wholly-owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is obtained by the Company.

        The Company also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity's residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Refer to Note 13, Long-Term Debt, which describes an arrangement under the credit facility with ABN Amro, Lloyds TSB and National Bank of Greece for a variable interest entity.

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

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

Reclassifications in Other Comprehensive Income/(Loss):    The Company had the following reclassifications out of the Accumulated Other Comprehensive Loss as of December 31, 2013, 2012 and 2011, respectively (in thousands):

 
   
  Year ended December 31,  
 
  Location of
Reclassification into
Income
 
 
  2013   2012   2011  

Amortization of deferred realized losses on cash flow hedges

  Net unrealized and realized losses on derivatives     4,017     3,524     1,575  

Reclassification of unrealized losses/(gains) to earnings

  Net unrealized and realized losses on derivatives      116,557     65,809     (19,560 )
                   

Total Reclassifications

      $ 120,574   $ 69,333   $ (17,985 )
                   
                   
Foreign Currency Translation:    The functional currency of the Company is the U.S. dollar. The Company engages in worldwide commerce with a variety of entities. Although its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Additionally, the Company's wholly-owned vessel subsidiaries transacted a nominal amount of their operations in Euros; however, all of the subsidiaries' primary cash flows are U.S. dollar denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statement of operations. The foreign currency exchange gains/(losses) recognized in the accompanying consolidated Statements of Operations for each of the years ended December 31, 2013, 2012 and 2011 were $0.04 million, $0.02 million and $(0.1) million, respectively.
Cash and Cash Equivalents:    Cash and cash equivalents consist of interest bearing call deposits, where the Company has instant access to its funds and withdrawals and deposits can be made at any time, as well as time deposits with original maturities of three months or less which are not restricted for use or withdrawal. Cash and cash equivalents of $68.2 million as of December 31, 2013 (December 31, 2012: $55.6 million) comprised cash balances and short term deposits, of which short term time deposits were $2.8 million as of December 31, 2013 and $9.8 million as of December 31, 2012.
Restricted Cash:    Cash restricted accounts include retention accounts. Certain of the Company's loan agreements require the Company to deposit one-third of quarterly and one-sixth of the semi-annual principal installments and interest installments, respectively, due on the outstanding loan balance monthly in a retention account. On the rollover settlement date, both principal and interest are paid from the retention account. In addition, the Company has a restricted deposit in relation to one of its swaps. Refer to Note 3, Restricted Cash.
Accounts Receivable, Net:    The amount shown as Accounts Receivable, net, at each balance sheet date includes estimated recoveries from charterers for hire and demurrage billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts based on the Company's history of write-offs, level of past due accounts based on the contractual term of the receivables and its relationships with and economic status of its customers. Bad debts are written off in the period in which they are identified.
Insurance Claims:    Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from insurance companies. Any costs to complete the claims are included in accrued liabilities. The Company accounts for the cost of possible additional call amounts under its insurance arrangements in accordance with the accounting guidance for contingencies based on the Company's historical experience and the shipping industry practices. Insurance claims are included in the consolidated balance sheet line item "Other current assets".
Prepaid Expenses and Inventories:    Prepaid expenses consist mainly of insurance expenses, and inventories consist of bunkers, lubricants and provisions remaining on board the vessels at each period end, which are valued at the lower of cost or market value as determined using the first-in, first-out method. Costs of spare parts are expensed as incurred.
Financing Costs:    Fees incurred for obtaining new loans and loans that have been accounted for as modified are deferred and amortized over the loans' respective repayment periods using the effective interest rate method. These charges are included in the consolidated balance sheet line item "Deferred Charges, net". The amortization expense associated with deferred financing fees is included in "Other finance expense" on the consolidated Statement of Operations.

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

        Vessels acquired in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics such as management agreements, employees and customer base. Otherwise, these are treated as purchase of assets. Where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel purchased in the secondhand market, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. The Company has acquired certain vessels in the secondhand market, all of which were considered to be acquisitions of assets.

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

Accounting for Special Survey and Drydocking Costs:    The Company follows the accounting guidance for planned major maintenance activities. Drydocking and special survey costs, which are reported in the balance sheet within "Deferred charges, net", include planned major maintenance and overhaul activities for ongoing certification including the inspection, refurbishment and replacement of steel, engine components, electrical, pipes and valves, and other parts of the vessel. The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and amortized on a straight-line basis over the period until the next scheduled survey and drydocking, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off.

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

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

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

        As of December 31, 2013, the Company concluded that events and circumstances triggered the existence of potential impairment of its long-lived assets. These indicators included volatility in the spot market and decline in the vessels' market values, as well as the potential impact the current marketplace may have on its future operations. As a result, the Company performed step one of the impairment assessment of the Company's long-lived assets by comparing the undiscounted projected net operating cash flows for each vessel to its carrying value. The Company's strategy is to charter its vessels under multi-year, fixed rate period charters that range from less than 1 to 18 years for vessels in its fleet, providing the Company with contracted stable cash flows. The significant factors and assumptions the Company used in its undiscounted projected net operating cash flow analysis included, among others, operating revenues, off-hire revenues, drydocking costs, operating expenses and management fees estimates. Revenue assumptions were based on contracted time charter rates up to the end of life of the current contract of each vessel as well as the estimated average time charter equivalent rates for the remaining life of the vessel after the completion of its current contract. The estimated daily time charter equivalent rates used for non-contracted revenue days are based on a combination of (i) recent charter market rates, (ii) conditions existing in the containership market as of December 31, 2013 in relation to laid up vessels, (iii) historical average time charter rates, based on publications by independent third party maritime research services, and (iv) estimated future time charter rates, based on publications by independent third party maritime research services that provide such forecasts. Recognizing that the container transportation is cyclical and subject to significant volatility based on factors beyond the Company's control, management believes the use of revenue estimates, based on the combination of factors (i) to (iv) above, to be reasonable as of the reporting date. In addition, the Company used an annual operating expenses escalation factor and estimates of scheduled and unscheduled off-hire revenues based on historical experience. All estimates used and assumptions made were in accordance with the Company's internal budgets and historical experience of the shipping industry.

        The Company's assessment concluded that step two of the impairment analysis was not required and no impairment of vessels existed as of December 31, 2013, as the undiscounted projected net operating cash flows per vessel exceed the carrying value of each vessel. As of December 31, 2012, the Company recorded an impairment loss of $129.6 million for thirteen of its older vessels, which were either laid up, or on short-term charters, 7 of which were sold in the year ended December 31, 2013.

Pension and Retirement Benefit Obligations-Crew:    The crew on board the companies' vessels serve in such capacity under short-term contracts (usually up to seven months) and accordingly, the vessel-owning companies are not liable for any pension or post-retirement benefits.
Accounting for Revenue and Expenses:    Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight line basis as the average revenue over the rental periods of such charter agreements, as service is performed. The Company earns revenue from bareboat and time charters. Bareboat and time charters involve placing a vessel at the charterers' disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under a time charter, the daily hire rate includes the crew, lubricants, insurance, spares and stores. Under a bareboat charter, the charterer is provided only with the vessel.
Voyage Expenses:    Voyage expenses include port and canal charges, bunker (fuel) expenses (bunker costs are normally covered by the Company's charterers, except in certain cases such as vessel re-positioning), address commissions and brokerage commissions. Under multi-year time charters and bareboat charters, such as those on which the Company charters its containerships and under short-term time charters, the charterers bear the voyage expenses other than brokerage and address commissions. As such, voyage expenses represent a relatively small portion of the vessels' overall expenses.
Vessel Operating Expenses:    Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Aggregate expenses increase as the size of the Company's fleet increases. Under multi-year and short-term time charters, such as those on which the Company chartered 57, 62, 57 containerships in its fleet as of December 31, 2013, 2012 and 2011, respectively, the Company pays for vessel operating expenses. Under bareboat charters, such as those on which the Company chartered two of the containerships in its fleet as of December 31, 2013, 2012 and 2011, respectively, the Company's charterers bear most vessel operating expenses, including the costs of crewing, insurance, surveys, drydockings, maintenance and repairs.
General and administrative expenses:    General and administrative expenses include management fees paid to the vessels' manager (refer to Note 14, Related Party Transactions), audit fees, legal fees, board remuneration, executive officers compensation, directors & officers insurance and stock exchange fees.
Repairs and Maintenance:    All repair and maintenance expenses are charged against income when incurred and are included in vessel operating expenses in the accompanying consolidated Statements of Operations.
Dividends:    Dividends, if any, are recorded in the Company's financial statements in the period in which they are declared by the Company's board of directors.
Segment Reporting:    The Company reports financial information and evaluates its operations by total charter revenues. Although revenue can be identified for different types of charters, management does not identify expenses, profitability or other financial information for different charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it has only one operating and reportable segment.

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

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

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

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

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

Earnings/(Loss) Per Share:    The Company has presented net income/(loss) per share for all years presented based on the weighted average number of outstanding shares of common stock of Danaos Corporation at the reported periods. The warrants issued in 2011 were excluded from the diluted (loss)/income per share for the year ended December 31, 2013 and 2012, because they were antidilutive. There are no other dilutive or potentially dilutive securities, accordingly there is no difference between basic and diluted net income per share.

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

        The aggregate number of shares of common stock for which awards may be granted under the Plan cannot exceed 6% of the number of shares of common stock issued and outstanding at the time any award is granted. Awards made under the Plan that have been forfeited, cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence. Unless otherwise set forth in an award agreement, any awards outstanding under the Plan will vest immediately upon a "change of control", as defined in the Plan. The Plan will automatically terminate ten years after it has been most recently approved by the Company's stockholders. Refer to Note 21, Stock Based Compensation.

        As of April 18, 2008, the Company established the Directors Share Payment Plan ("Directors Plan") under the Plan. The purpose of the Directors Plan is to provide a means of payment of all or a portion of compensation payable to directors of the Company in the form of Company's Common Stock. Each member of the Board of Directors of the Company may participate in the Directors Plan. Pursuant to the terms of the Directors Plan, Directors may elect to receive in Common Stock all or a portion of their compensation. On the last business day of each quarter, the rights of common stock are credited to each Director's Share Payment Account. Following December 31st of each year, the Company will deliver to each Director the number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. Refer to Note 21, Stock Based Compensation.

        As of April 18, 2008, the Board of Directors and the Compensation Committee approved the Company's ability to provide, from time to time, incentive compensation to the employees of Danaos Shipping Company Limited (the "Manager"), in the form of free shares of the Company's common stock under the Plan. Prior approval is required by the Compensation Committee and the Board of Directors. The plan was effective since December 31, 2008. Pursuant to the terms of the plan, employees of the Manager may receive (from time to time) shares of the Company's common stock as additional compensation for their services offered during the preceding period. The 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. Refer to Note 21, Stock Based Compensation.

Recent Accounting Pronouncements:

Comprehensive Income

        In February 2013, the FASB issued new guidance for reporting of amounts reclassified out of accumulated other comprehensive income. The amendment requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. Public companies are required to comply with these amendments for all reporting periods presented, including interim periods. The amended guidance was effective for the Company for reporting periods beginning after December 15, 2012. The adoption of the new guidance did not have a material effect 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 December 31, 2013, Danaos consolidated the vessel owning companies (the "Danaos Subsidiaries") listed below, which all own container vessels, or owned container vessels sold in the year ended December 31, 2013:

Company
  Date of Incorporation   Vessel Name   Year
Built
  TEU  

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  

Expresscarrier (No. 1) Corp. 

  March 5, 2007   YM Mandate     2010     6,500  

Expresscarrier (No. 2) Corp. 

  March 5, 2007   YM Maturity     2010     6,500  

Boxcarrier (No. 1) Corp. 

  June 27, 2006   CMA CGM Moliere(1)     2009     6,500  

Boxcarrier (No. 6) Corp. 

  June 27, 2006   Marathonas     1991     4,814  

Boxcarrier (No. 7) Corp. 

  June 27, 2006   Messologi     1991     4,814  

Boxcarrier (No. 8) Corp. 

  November 16, 2006   Mytilini     1991     4,814  

Federal Marine Inc. 

  February 14, 2006   Federal     1994     4,651  

Duke Marine Inc. 

  April 14, 2003   Duka     1992     4,651  

Commodore Marine Inc. 

  April 14, 2003   Commodore     1992     4,651  

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