The fundamentals of the containership market still remain weak as the Far-East Europe trade volumes remain flat having difficulty supporting the inflow of large containerships. This is also evidenced by lower freight rates in these routes compared to one year ago, while the liner companies are making yet another attempt to restore rates at healthier levels with announced General Rate Increases in May. The Pacific lanes show a much better picture which is the effect of the recovery in the US economy. Non-mainlane trade growth remains healthy and helps absorb capacity that is cascaded down from the mainlane routes but this adds pressure to the charter market, particularly on the mid-size containerships. As we enter into the peak season we expect some improvement in the market fundamentals, but all-in-all we do not anticipate spectacular changes.
Despite this challenging container market environment, we are reporting yet another solid quarter. Adjusted Net Income for this quarter came in at $13.9 million or 13 cents per share, $3 million lower than the first quarter of 2012 due to the weaker charter market today when compared to 1 year ago. However, as our vessels on the spot market are currently running at operating break-even levels, an improving market going forward is a one way option to improving our results.
Adjusted EBITDA increased by 12.7% to $108.6 million in the current quarter compared to $96.4 million in the first quarter of 2012 as a result of our fleet expansion program that was concluded in 2012.
Out of the 7 vessels we had on cold lay-up at the end of 2012, we only had 2 vessels on lay-up at the end of the first quarter. During this quarter, we re-activated one vessel, while we sold 4 of our older vessels and we intend to use the sale proceeds to make accretive acquisitions of younger containerships.
With a strong 98% contract coverage and only 2% of our current revenue stream at stake through re-chartering over the next 12 months, we are largely insulated from the effects of the weak charter market while we expect our EBITDA and free cash flow generation to be safeguarded. At the same time, we continue to be one of the most cost competitive operators in the market with our daily operating expenses being consistently below $6,000 per day.
We will continue to manage our fleet efficiently, while in 2013 we will focus on rapidly de-leveraging the company and creating value for our shareholders.
Three months ended March 31, 2013 compared to the three months ended March 31, 2012
During the three months ended March 31, 2013, Danaos had an average of 63.1 containerships compared to 60.1 containerships for the three months ended March 31, 2012. Our fleet utilization declined to 89.6% in the three months ended March 31, 2013 compared to 94.5% in the three months ended March 31, 2012, mainly due to the 546 days for which 7 of our vessels were off-charter and laid-up in the three months ended March 31, 2013 compared to 246 days for which 3 of our vessels were off-charter and laid-up in the three months ended March 31, 2012. During the three months ended March 31, 2013, our fleet utilization for the fleet under employment was 99.1% (which excludes the vessels on lay up). During the first quarter of 2013, we sold three vessels, the Henry, the Pride and the Independence for an amount of $18.8 million, which represents the gross sale proceeds less commissions.
Our adjusted net income was $13.9 million, or $0.13 per share, for the three months ended March 31, 2013 compared to $16.9 million, or $0.15 per share, for the three months ended March 31, 2012. We have adjusted our net income in the three months ended March 31, 2013 mainly for unrealized gains on derivatives of $4.4 million, as well as a non-cash expense of $4.8 million for fees related to our comprehensive financing plan (comprised of non-cash, amortizing and accrued finance fees). Please refer to the Adjusted Net Income reconciliation table, which appears later in this earnings release.
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