Danaos Corporation (NYSE:DAC) Q1 2020 Earnings Conference Call - Final Transcript

May 19, 2020 • 09:00 am ET


Danaos Corporation (NYSE:DAC) Q1 2020 Earnings Conference Call - Final Transcript


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Good day and welcome to the Danaos Corporation Conference Call to discuss the financial results for the three months ended March 31, 2020. [Operator Instructions]

Hosting the call today are Dr. John Coustas, Chief Executive Officer of Danaos Corporation; and Mr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Coustas and Mr. Chatzis will be making some introductory comments. Then we will open up the call for question-and-answer session.

Mr. Chatzis, please proceed.

Evangelos Chatzis

Thank you, operator and good morning to everyone and thank you for joining us today. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected to date. These forward-looking statements are made as of today and we undertake no obligation to update. Factors that might affect future results are discussed in our filings with the SEC and we encourage you to review these detail to safe harbor and risk factor disclosures.

Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA and adjusted net income to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials.

Now, let me turn the call over to Dr. Coustas, who will provide the broad overview of the quarter.

John Coustas

Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss our results for the first quarter of 2020. Our results for the first quarter of 2020 were not impacted by the COVID-19 pandemic, except for the increase in off-hire days related to delays in scrubber installations in Chinese shipyards. The Company's adjusted net income of $33.3 million for the first quarter of 2020 decreased by $5.3 million when compared to the first quarter of 2019.

Adjusted EBITDA for the first quarter of 2020 was $71.9 million, $5.6 million lower when compared to the first quarter of 2019. COVID-19 pandemic has swiftly and dramatically disrupted the container market and caused a significant drop in container volumes. There is no doubt that the pandemic will have a very negative effect on GDP, unemployment and countless other macroeconomic indicators in the near term.

Although countries are gradually starting to lift restrictions and allow economic activity to resume, the speed of any potential recovery and the long-term impact of the pandemic on consumer demand and global manufacturing supply chain is unclear. There is certainly optimism about the positive impacts of sweeping fiscal and monetary initiatives being undertaken globally, but it is too early to assess any such impacts.

Liner companies have addressed the drop in volumes brought on by the pandemic by cancelling sailings and idling capacity. As a result, short-term charter rates have dropped by between 25% and 40%, depending on vessel size. Despite lower transportation demand, prudent capacity management, reduced bunker prices and falling interest rates have significantly alleviated pressure on the cash flows of our liner