John Coustas
Analyst · McQuilling Holdings. Please go ahead
Thank you, Evangelos. Good morning and thank you all for joining today's call to discuss our results for the first quarter of 2016. We’re pleased to report another strong quarter with adjusted net income of $47.2 million, or $0.43 of share, an increase $16.6 million, or 54.2% from the adjusted net income of $30.6 million, or $0.28 of share, reported in the first quarter of 2015. This increase is mainly attributable to a reduction in net finance cost of $19.4 million resulting from the expiration of interest rate swaps and lower debt balances and is partially offset by a $3.3 million reduction of our EBITDA, as described further below. As of the end of the first quarter of 2016, all of the expensive interest rate swaps we entered into in 2007 and 2008 have finally expired. The absence of such swaps going forward combined with today's low interest rate environment will contribute to our continued improving financing costs through 2016 and beyond. The containership market is going through a very challenging period. We need only to look at basic industry data like record-low average box freight rates, falling volumes and declining load factors to see a situation similar to ones faced by the industry in late 2008 and 2009 during the financial crisis. This environment has resulted in negative operating margins for the major liner companies, all of which are trying to manage through this downturn with further cost-cutting and idling of vessels. Several liner companies, including Hyundai Merchant Marine and Hanjin Shipping, two of our largest customers, have publicly announced their intentions to restructure their balance sheets and seek concessions from charter owners in an effort to reduce their operating costs. These events are still unfolding and have not come to any resolution and we cannot speculate now how they will conclude. Needless to say, these developments have our full attention, and we are very focused on approaching these discussions with the goal of maintaining the value of our charter contracts. We are fortunate however, that Danaos has very limited near-term exposure to the spot market, which is currently very weak. A small number of our vessels are under charters that expire within the next year, and we therefore have 95% charter cover in terms of operating revenues for the next 12 months. As of the end of the first quarter of 2016, the average charter duration of our fleet was seven years, weighted by aggregate contracted charter hire, with our longest charters extending through 2028. We are also fortunate to have invested significant resources into operational efficiency and technological innovation. This has helped us achieve daily operating costs of $5,985 a day for the first quarter, which clearly positions us as one of the most efficient operators in the industry and is particularly beneficial in today's environment. Meanwhile, market consolidation initiatives continue to develop. We expect to see mergers between liner companies and a re-shaping of commercial alliances. There should be further clarity on the evolving landscape during the second half of 2016. Additionally, new deliveries for 2016 are expected to be lower than 2015, newbuilding ordering has come to a halt and scrapping activity has accelerated, particularly on the panamax segment. The combination of the above, together with expectations for gradually improving demand growth fundamentals justify some measured optimism that the market will not deteriorate further in 2016 and will be better balanced in 2017. Amidst this challenging economic environment, we will remain singularly focused on preserving value, de-levering our balance sheet, managing our fleet efficiently and capitalizing on the resilience of our business model. With that I will hand over the call back to Evangelos, who will take you through the financials for the quarter.
