May 31, 2017
Executives
Dr. John Coustas - CEO Evangelos Chatzis - CFO
Analysts
Operator
Good day and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the Three Months Ended March 31, 2017. As a reminder, today's call is being recorded.
Hosting the call today is 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 and then we will open the call to a question-and-answer session.
Evangelos Chatzis
Thank you, Operator. Good morning 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 today. These forward-looking statements are made as of today and we undertake no obligation to update them.
Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these detailed 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 the accompanying materials. With that, let me now turn the call over to Dr.
Coustas, who will provide the broad overview of the quarter.
Dr. 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 2017.
The results of Danaos first quarter of 2017 continue to reflect the impact of the Hanjin bankruptcy on the Company's financial performance. The 22.7 million decrease in our adjusted net income was primarily attributable to 22 million of operating revenues lost from Hanjin.
Excluding the off-hire days related to three 10,100 TEU vessels that were previously chartered by Hanjin and were delivered to their new charterers in April 2017, our fleet utilization increased to 98.1% compared to 94.6% in the first quarter of 2016. Including those vessels, our fleet utilization was 92.7%.
As previously reported, the Company is in breach of certain financial covenants as a result of the Hanjin bankruptcy. We had obtained a waiver for these breaches until April 1, 2017, and we have asked our lenders for an extension of this waiver until July 1st, and are engaged in constructive conversations to resolve this matter.
In the meantime, we continue to generate positive cash flows from our operations and currently are in a position to service all our operational obligations as well as scheduled principal and interest payments under the original terms of our debt agreements. Charter rates increased during the month of April.
These increases were considerable on a percentage basis, but still low in absolute terms at levels that may be slightly above operating expenses, but still not enough to service investment returns. This market improvement is mainly due to the commencement of the new alliances between liner companies.
While we do not expect the market to return to the lows of 2016, we also see signs of the charter market tailing off. Nonetheless, the more disciplined capacity utilization strategy by the liner companies in the context of the new alliances has led to an improvement in box rates which has in turn improved the performance of our customers and reduced our counterparty credit risks.
Danaos continues to have low near term exposure to the weak spot market with charter coverage of 90% for the next 12 months based on current operating revenues and 73% in terms of contracted operating days. During this extended period of market weakness which has presented many challenges, we remain focused on taking necessary actions to preserve the value of our company by managing our fleet efficiently and taking prudent measures to manage and ultimately deleverage our balance sheet.
With that, I'll hand over the call back to Evangelos, who will take you through the financials for the quarter.
Evangelos Chatzis
Thank you and good morning again to everyone and thank you for joining us today. I will briefly review the results for the quarter and then give call participants the opportunity to ask questions.
During the first quarter of 2017, we had an average of 55 containerships compared to 55.1 containerships during the first quarter of 2016. Our adjusted net income was 24.5 million or $0.22 per share for the quarter compared to 47.2 million or $0.43 per share of adjusted net income for the first quarter of 2016.
This decrease of 22.7 million is mainly attributed to 22 million of lower operating revenues as a result of the Hanjin bankruptcy. A further decline in revenues of 5.4 million as a result of weaker charter market conditions was partially offset by a 1.6 million decrease in net finance costs mainly due to lower debt balances and interest rate swap expirations, a 2.2 million decrease in total operating expenses, and a 0.9 million improvement in the operating performance of our equity investment in Gemini Shipholdings Corp.
Vessel operating expenses decreased by 4.8% or 1.4 million to 27.5 million in the current quarter compared to 28.9 million in the first quarter of 2016 mainly as a result of the decrease in the daily operating costs per vessel to $5,756 per day this quarter from $5,985 per day in the first quarter of 2016, which constitutes an improvement of 3.8%. G&A expenses increased by 0.9 million to 6.1 million in the current quarter from 5.2 million in the first quarter of 2016 due to increased professional fees related to the refinancing discussions with our lenders.
Interest expense excluding amortization of deferred finance costs increased by 1.1 million to 18 million in the current quarter compared to 16.9 million in the first quarter of 2016 mainly as a result of approximately 0.5 percentage point of higher LIBOR rates between the two partners. This increase in LIBOR rates was partially offset by our persistent efforts to delever our balance sheet.
During the last 12 months, we reduced our indebtedness by $256 million. Finally, adjusted EBITDA decreased by 27% or 26.9 million to 72.5 million in the current quarter from 99.4 million in the first quarter of 2016 for the reasons outlined earlier on this call.
With that, I would like to thank you all for listening to this first part of our call. Operator, we're now ready to open the call to Q&A.
Operator
Dr. John Coustas
Thank you all for joining this conference call and for your continued interest in our story. Look forward hosting you on our next earnings calls.
Have a nice day. Thank you.
Operator
Thank you. This concludes today's teleconference.
We would like to thank everyone for their participation. Have a wonderful afternoon.