Recently, Disney Cruise Line’s annual report for fiscal year 2020 was filed and it includes interesting insight within the strategic report compiled by the directors on the continued impact of the coronavirus pandemic on the cruise line.
Before we get into the details, it is worth mentioning The Walt Disney Company released their FY20 earnings report back in November 2020. Disney Cruise Line is part of the Disney Parks, Experiences and Products division, More often than not, there is very little mention of the cruise line during the quarterly earnings webcast and report. Due to the company’s size, Disney Cruise Line’s financials are bundled in the Disney Parks, Experiences and Products line item leaving little insight into the cruise line’s business. Since, Disney Cruise Line is actually Magical Cruise Company, Limited registered in London, it is required to submit an annual report to the United Kingdom.
Remember, the financial information in the annual report is for FY20 (year ending October 3, 2020), we will get to this eventually. The interesting information, prepared on behalf of the Board dated September 30, 2021, from the strategic report is transcribed below.
Magical Cruise Company, Limited
Strategic report for the year ended 3 October 2020
The Directors present their Strategic report for Magical Cruise Company, Limited (the ‘Company’) for the year ended 3 October 2020 (prior financial year ended 28 September 2019).
Principal activities, business review and future developments
The Company’s principal activity is the operation of luxury cruise vessels. It is considered that the Company’s activities will remain unchanged for the foreseeable future.
The Company’s loss for the financial year is $255,853,000 (profit in 2019: $406,170,000). In December 2019 there was an outbreak of COVID-19; which the World Health Organisation declared a pandemic on 11 March 2020. The COVID-19 pandemic created a significant impact on the operations of the-Company. Revenue and Operating Income decreased year over year primarily due to the COVID-19 outbreak and the suspension of cruise vessel operations since 14 March 2020.
Cruise ships sailings were suspended since 14 March 2020. Post year end operations have resumed. Disney Magic resumed sailing on 15 July 2021, Disney Fantasy resumed sailing on 11 September 2021, Disney Dream resumed sailing on 9 August 2021 and Disney Wonder will resume siailing on 1 October 2021.
The Company has experienced increased cancellation and booking postponement requests which has led to refunds, cruise credits of 125% of the reservation amount as well as future booking payment deferrals. The Company has introduced a short term cruise date flexibility booking policy allowing guests to change their sail date up to 15 days before departure.
Operational expenses have been reduced or mitigated as a result of the suspension of all cruises, this includes reductions in operating labour. However, there was a certain amount of cost that needed to be incurred monthly to maintain the ships in warm layup, which could not be mitigated by actions.
DCL Maritime LLC (an affiliated entity) has credit facilities to finance three new cruise ships, which were originally scheduled to be delivered in calendar 2021, 2022 and 2023. The impact of COVID-19 on the shipyard has resulted in a delay to the delivery of the cruise ships, now anticipated in calendar 2022, 2024, and 2025.
As the situation continues to evolve, the Directors continue to monitor closely by way of ongoing risk assessments and revised projections for the business. During the year the Directors have been managing and will continue to manage closely, for at least the next 12 months from the date of this Annual report, day to day working capital requirements with its related parent entity in order to meet the Company’s liabilities as they fall due. This has seen the amounts owed to group undertakings increase from $158.4
million in the prior year to $551.8 million at the 3 October 2020. As there is an expectation that the Company will continue to rely on group undertakings to meet its liquidity requirements, the Company has received assurances of financial support from a group undertaking for at least the next 12 months from the date these financial statements are approved. The Company has not had to raise any external financing during the year.
As a result of the COVID-19 pandemic and in preparation for resumed Operations which began 15 July 2021, the Company has developed Multiple layers of health and safety measures in compliance with UK government regulations and the United States Centers for Disease Control and Prevention (CDC) including ship modifications and COVID-19 vaccination and testing protocols for crew and guests.
Management continues to believe the long lived assets of the Company have longer term prospects relative to the uncertain duration of the effects of the pandemic as evidenced by the post year end re-launch of the Disney Magic, Disney Dream, and Disney Fantasy and the imminent re-launch of the Disney Wonder.
On 24th September 2021, the Company entered into a purchase agreement to acquire the Disney Wonder vessel from Disney Magic Corporation (“DMC”) for the ship’s determined fair market value of $303,950,000.
On 24th September 2021, the Company entered into a purchase agreement to acquire the Disney Magic vessel from Disney Magic Company Limited (“DMCL”) for the ship’s determined fair market value of $278,650,000.
In order to fund these purchases and repay an intercompany amount of $900,000,000, the Company allotted 989,248,884 ordinary shares of £1 .00 (the amount payable being the USD equivalent of 1,352,600,000) to Wedco Global Ventures LLP.
Principal risks and uncertainties and future outlook
From the perspective of the Company, its principal. risks and uncertainties and future outlook are integrated with those of The Walt Disney Company (‘Group’) and are not managed separately. Accordingly, the risks and uncertainties of The Group; which include those of the Company, are discussed in The Group’s annual report which does not form part of this report. However, the Directors view the following as being the principal risks facing the Company:
1) Our sales may be adversely affected by changes in economic factors, pandemics, political uncertainty and changes in consumer spending patterns
Many economic and other factors outside our control, including consumer confidence, consumer spending levels, pandemics, political uncertainty, employment levels, consumer debt levels, inflation and deflation, as well as the availability of consumer credit, affect consumer spending habits. A significant deterioration in the global financial markets and economic environment, recessions or an uncertain economic outlook adversely affects consumer spending habits and results in lower levels of economic activity. In-addition, an increase in price levels generally, or in price levels in a particular sector such as the energy sector, could result in a shift in consumer demand away from the entertainment and consumer products we offer, which could also adversely affect our revenues and, at the same time, increase our costs. Any of these events and factors could cause consumers to curtail spending and could have a negative impact on our financial performance and position in future financial years. The, impact of pandemics on consumer confidence and ultimately occupancy levels could also affect our financial performance. We have resumed sailing since suspension on 14 March 2020 and are yet to see how occupancy levels bounce back.
2) Our industry is highly competitive and competitive conditions may adversely affect our revenues and overall profitability
The cruise industry is highly competitive and our results of operations are sensitive to, and may be adversely affected by competitive pricing and other factors.
3) A variety of uncontrollable events may reduce demand for our products and services, impair our ability to provide our products and services or increase the cost of providing our products and services.
Demand for and consumption of our products and services, particularly our cruise business, is highly dependent on the general environment for travel and tourism. The environment for travel and tourism, as well as demand for and consumption of other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: adverse weather conditions arising from short-term weather patterns or long-term change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, tsunamis and earthquakes), health concerns (including as it has been by COVID-19), international, political or military developments, and terrorist attacks. These events and others, such as fluctuations in travel and. energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our ships directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our ships. Moreover, the costs of protecting against such incidents, including the costs of protecting against the spread of COVID-19, reduces the profitability of our operations.
4) Changes in regulations applicable to our businesses may impair the profitability of our businesses and environmental risk to the Company.
These regulations may include, but are not limited to:
- Federal, state and’ foreign privacy and data protection laws and regulations.
- Regulation of the safety and supply chain of consumer products and Cruise Line operations.
- Domestic and international wage laws, tax laws or currency controls.
- Environmental protection regulations.
As well as the impacts of environmental protection regulations on profitability, there is also an increased focus on the environment, climate, public health of coastal communities and wildlife conservation. Any actions that cause an adverse impact will damage the brand and therefore the Company needs to continue to minimize its impact on the environment through utilizing new technologies, increasing fuel efficiency, minimizing waste and promoting conservation worldwide.
5) Fuel prices
Our objectives in managing exposure to commodity fluctuations are to use Commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel oil and gasoline. With respect to the risks the Directors regularly review such matters to mitigate their respective impact on the Company.
Key performance indicators (“KPIs”)
The operations of the Group are managed at an operating segment level. For this reason, the Company’s Directors believe that an analysis using key performance indicators for the Company is not necessary or appropriate for an understanding of the development, performance or position of the business of the Company. The development, performance and position of the Parks, Experiences and Products operating segment of the Group, which includes the Company, are discussed on page 43 of the Group’s annual report, which does not form part of this report.
Section 172 statement
As a subsidiary within the group of companies of which The Walt Disney Company is the ultimate parent company (the “Group”), Magical Cruise Company Limited (also known as Disney Cruise Line) is subject to organizational and management systems which enable the Board of Directors (“the Board”) to oversee governance of the activities of the CoMpany. As is normal for large companies, the Board delegates authority for day-to-day management of the Company to the managers responsible for the management of the Company. The Board ensures that when-applying group policies and delegating responsibility for operational matters to the managers, it does so with due regard to its fiduciary duties and responsibilities.
The Directors are aware of their duty under section 172 of the Companies Act 2006 to act in a way that they consider to be in good faith and would be most likely to promote the success of the Company for the benefit of its Members as a whole. In doing so they have considered (amongst other matters) factors (1) (a) to (f) listed below:
- the likely consequences of any decision in the long term,
- the interests of the Company’s employees (known as “Cast Members”),
- the need to foster the Company’s business relationships with suppliers, customers (known as “Guests”) and others,
- the impact of the Company’s operations on the community and the environment,
- the desirability of the Company maintaining a reputation for high standards of business conduct, and
- the need to act fairly between Members of the Company.
We have detailed below how, throughout the year each of these factors have been considered by the Board, how stakeholder engagement has impacted its decision making and policies.
a. The likely consequences of any decision in the long term
We are aware that our decisions and strategies can have long-term effects on our business and its stakeholders. Therefore we aim to make well informed, fair and balanced decisions. Our key stakeholders include Crew Members, Cast Members, Guests, home ports and ports of call, regulators and suppliers who are at the forefront of our minds when making decisions. We set. out below some of the decisions the
Board has taken during the course of the year with a view to creating long term success for the Company
and its stakeholders as a whole.
Immediately after the World Health Organization declared COVID-19 a pandemic in mid-March 2020, Disney Cruise Line voluntarily suspended passenger operations and responded swiftly by implementing health and safety protocols aboard all four ships, developed considering guidance from the government and public health experts. Ship staffing was reduced to levels supporting critical manning only, and we worked with national and international authorities to repatriate-Crew Members to their home countries amid rapidly changing global travel restrictions. All non-essential Crew successfully returned home. Disney Cruise Line continued to work with governmental authorities and industry partners to identify a
path toward resuming passenger operations as soon as practicable, which commenced from the UK on July 15, 2021 and from the U.S. on August 9, 2021.
As previously announced, in-addition to its four current ships – the Magic, Wonder, Dream and Fantasy – Disney Cruise Line is building three additional cruise ships, each of them showcasing the immersive family entertainment, enchanting storytelling and unparalleled service that only Disney can deliver. Plans continued forward in FY20 and construction began on the fifth ship – the Disney Wish – although delivery
dates for all three new ships to be operated by the company shifted from 2021, 2022 and 2023 to 2022, 2024 and 2025. The three new ships will be powered by liquefied natural gas and, at approximately 144,000 gross tons and, 1,250 Guest staterooms, will be slightly larger than the Disney Dream and Disney Fantasy. The Disney Wish will sail its maiden voyage on June 9, 2022. At the current time the Company has no obligations or plans to fund these ship builds as they are initially being purchased by another group undertaking.
Plans also continued for Disney Cruise Line’s second private island destination, Lighthouse Point, in Southern Eleuthera, The Bahamas. The project was originally scheduled to open in late 2022 / early 2023, however, the timing is being reassessed in conjunction with the new ship delivery dates. The destination will create sustainable economic opportunities for Bahamians, protect and sustain the natural beauty of the site, celebrate culture, and help strengthen the community in Eleuthera. It will complement Castaway Cay, a Disney destination located in the Abaco chain of The Bahamas, giving families the opportunity to enjoy the site’s beautiful beaches and explore nature, as well as enjoy the broader tourism offerings in
Eleuthera. At the current time the Company has no obligations or plans to fund this project but will evaluate the situation as the project progresses.
b. The interests of the Company’s employees (known as “Crew” and “Cast Members”)
Since its launch in 1998, Disney Cruise Line is a well-established name in the cruise industry, providing a setting where families can reconnect, adults can recharge and children can experience all Disney has to offer. We strive to provide exceptional service that reflects our iconic brand, enabled by the passion and hard work of our Cast and Crew. We understand the importance of our employees to our long-term success and are committed to providing a safe working environment, a diverse and inclusive culture and appropriate training and development.
The health and safety of our Cast and Crew Members is a top priority. Health and Safety policies are in place and relevant health and safety training is provided. As a result of the COVID-19 pandemic, Disney Cruise Line developed multiple layers of health and safety measures in compliance with UK government regulations, EU Healthy Gateways, and guidance from industry organizations such as Cruise ‘Lines
International Association (CLIA) and the UK Chamber of Shipping. This includes ensuring all Crew Members are vaccinated and tested routinely for COVID-19.
Disney Cruise Line also complies with, and in some cases exceeds, the requirements set forth in the International Labour Organization’s (ILO’s) Maritime Labour Convention (MLC) which governs almost all aspects of working aboard a ship. Crew Members are organized through a collective bargaining unit (union) through the Federazione Italiana Transporti (FIT). The current union agreement went into effect on January 1, 2020 and is binding for four years. It stipulates compensation, benefits, working hours, and contract lengths for the range of work positions on-board.
Disney Cruise Line Crew and Members receive a wide range of employment benefits. while on contract in service of the ship, Crew Members receive medical care by the on-board medical team. Officers are offered full health benefits year-round when signed to a contract. Crew Members have access to mental health resources through an Employer Assistance Program offered in multiple languages, as well as access to online resources and wellness content offered on-demand via Crew stateroom TVs.
Disney has an ongoing commitment to diversity and inclusion (D&l). In June 2020 TWDC CEO Bob Chapek launched a new Company-wide initiative comprised of six pillars focused on increasing D&l: Transparency, Representation, Accountability, Community, Content, and Culture.
c. The need to foster the Company’s business relationships with suppliers, customers (“Guests”) and others
We pride ourselves on delivering exceptional service and world-class family holidays. We have strong relationships with our suppliers and work closely with them to provide our Guests with high quality experiences and products.
Creating unforgettable holiday experiences for our Guests is the primary motivation of our dedicated Disney Cruise Line Crew Members and Cast. Disney Cruise Line is considered a leader in the cruise industry by travel professionals, hospitality industry groups, and most importantly – by our Guests. Families sailing with Disney Cruise Line expect a unique holiday experience that only Disney can deliver at the heart of all we do is the Guest experience and satisfaction with the Disney Cruise Line product. Multiple touch points provide us the opportunity to hear directly from our Guests about what we’re doing right and areas for improvement. Our Call Center and Guest Communications team resolves issues brought to our attention in a timely manner, corresponding directly with any Guest who reaches out to us for assistance before, during and after their cruise. Our team is specifically trained to assist our Guests with their holiday needs and consistently receives some of the highest Guest Service satisfaction ratings within our company. In response to the pandemic, Disney Cruise Line has implemented temporary booking and cancelations policies allowing Guests to adjust their sail date or receive a full refund should they choose.
Disney Cruise. Line has high standards for suppliers and has a thorough process for sourcing products and services of the best quality and value. Suppliers of products are held to TWDC’s International Labour Standards and Code of Conduct for Manufacturers. Our supply chains follow Disney policies and comply with UK government regulations. Food and beverage suppliers must follow a uniform set of TWDC guidelines that meet both Company and local standards, including conducting periodic sanitation and safety audits-and maintaining liability insurance.
Disney Cruise Line also partners with travel agents for a significant source of cruise bookings. Travel agents must be a registered Member supplier in good standing with CLIA or the International Air Transport Association (IATA), and supply proof of all qualifying tax and other documentation required to do business as a travel agent/agency in its domestic and international markets. Travel agents and agencies must operate ethically, representing the Disney Cruise Line brand in good faith and providing accurate marketing and information about Disney Cruise Line’s products.
Disney Cruise Line is committed to conducting business and providing products and services in an ethical manner. We also believe that including diverse suppliers in our sourcing process provides us the greatest opportunity to develop the most innovative, highest quality, and most cost-effective business solutions. We know this strengthens our Company as well as supporting our communities.
Disney Cruise Line is very mindful of our impact on local communities we engage in an ongoing basis with all our relevant stakeholders whether port authorities, minsters of tourism, shore excursion operators, and other in-destination partners to best understand how we can best collaborate with them to maximize the positive impacts of our business on their communities. Today, 75 percent of the cruises offered by Disney Cruise Line have at least one stop in The Bahamas. Disney Cruise Line has made significant economic contributions to The Bahamas while demonstrating a strong commitment to the environment and the community. It is estimated that Disney Cruise Line operations contribute more than $70 million toward the Bahamas gross domestic product annually.
Disney Cruise Line takes careful steps to ensure it respects the communities, environment and culture of each of its destinations through collaboration with stakeholders and relevant partners in ports of call. This includes understanding how to introduce our brand most appropriately to those communities as well as introduce the unique character and culture of each destination to Disney Cruise Line Guests. We source products in our ports of call when it meets our quality standards, and we work with a variety of tour providers in each destination to diversify our products.
d. The impact of the Company’s operations on the community and the environment
Disney’s global Social Responsibility framework clarifies its mission as: “tube an honorable company that provides comfort to those in need, and creates inspiration and opportunity for those who want to improve their world”.
Disney Cruise Line strives to make a positive impact in the many places around the world it calls home. The Cast and Crew of Disney Cruise Line support many charitable organizations that nurture the lives of children and enrich the environment. Crew Members lead reading education programs in schools, give to local animal shelters and bring Disney characters to entertain children in port communities around the globe. Disney VoluntEARS also donate their time to paint murals for hospitals and care facilities, raise
funds for worldwide disaster relief efforts, and host annual shore clean-ups to remove litter and debris from fragile coastlines. Each year, Cast and Crew Members donate thousands of hours of their personal time to benefit worthwhile causes in port communities around the World.
In March 2020, as part of Disney Cruise Line’s Captain Minnie initiative, Disney awarded scholarships to four female cadets to attend the LJM Maritime Academy in Nassau. The scholarships, one for each of the ships in the Disney Cruise Line fleet, include two years of study at LJM Maritime Academy and one year of service aboard a Disney ship.
Disney recognizes the importance of building generational wealth and is committed to helping small businesses and entrepreneurs maximize economic opportunities. In February 2020, Disney entered into an agreement with the National Small Business Development Centre and the Eleuthera Chamber of Commerce, providing more than $1 million (over three years) to fund a new Eleuthera Business Center.
Disney also made significant contributions to Hurricane Dorian relief and recovery efforts in September 2019, including monetary donations to non-profit organizations and supplies for impacted communities and direct assistance to Disney’s Bahamian employees.
The Group aims to establish and sustain a positive environmental legacy for Disney and for future generations. The Company has ambitious environmental goals for 2030 focused on key areas of our business where we believe we can have a significant, lasting impact and make a positive difference in protecting our planet. Goals include:
- achieving net zero greenhouse gas emissions for direct operations;
- purchasing or producing 100% zero carbon electricity for all direct operations,
- collaborating with industry groups and investing in low carbon fuel innovation,
- investing in natural climate solutions;
- implementing site-specific watershed stewardship strategies at high-impact sites,
- working to achieve zero waste to landfill for Disney’s wholly owned and operated parks and resorts,
- new construction projects to be designed to near net zero, minimize water consumption and support zero waste operations,
- reduce the Company’s plastics footprint across all businesses.
At Disney Cruise Line, we are dedicated to minimizing our impact on the environment through efforts focused on utilizing hew technologies, increasing fuel efficiency, minimizing waste and promoting conservation worldwide. We strive to instil positive environmental stewardship in our Cast and Crew Members and seek to inspire others through programs that engage Our Guests and the communities in our ports of call.
Disney Cruise Line is consistently recognized as an industry leader. All four Disney Cruise Line ships have the U.S. Coast Guard’s QUALSHIP 21 with Zero-E designation, which recognizes exemplary vessels that have consistently adhered to environmental compliance, while also demonstrating a commitment to environmental stewardship. Disney Cruise Line also regularly wins awards such as the Blue Circle Award from Port of Vancouver for voluntary efforts to conserve energy and reduce emissions.
As of Jan. 1, 2020, the lntenational Maritime Organization instituted a regulation that requires all ships to use 0.5% sulfur fuel compared to 3.5% previously. Disney Cruise Line has taken this a step further by using 0.1% low sulfur fuel fleetwide at all times. As previously mentioned, the three additional cruise ships will be powered by liquefied natural gas, or LNG, one of the cleanest burning fuels available. Currently, three Disney Cruise Line ships have the equipment necessary to plug into shore power if the option is available at the port. Disney Cruise Line coordinates itineraries to be sure shore power-capable ships sail to ports of call that offer this technology.
As part of the Group’s overall efforts to reduce the amount of single-use plastics, Disney Cruise Line has taken great measures to eliminate single-use plastics on-board and on Disney Castaway Cay, Disney’s Island in The Bahamas, This effort has resulted in removing an annual volume of more than 14.7 million plastic straws and 2.2 million plastic amenity containers. Disney Cruise Line has also gone from annually distributing nearly 1 million plastic merchandise bags fleetwide annually to nearly zero. Other measures include the removal of plastic cutlery, stirrers and condiment packets. Disney Cruise Line is committed to diverting waste from traditional waste streams. Shipboard recycling processes have helped to eliminate on average more than 2,500 tons of metals, glass, plastic and paper from traditional waste streams each year.
Disney Cruise Line has invested in technology to ensure water purity and taken steps to select earth-friendly cleaners. All Disney Cruise Line ships feature Advanced Wastewater Purification Systems (AWPS) that utilize natural processes to treat and purify on-board wastewater to levels far exceeding international shipping standards, and in some cases shore side potable water standards.
Disney also is committed to ensuring a world where wildlife thrives and nature is treasured and protected by saving wildlife, inspiring action and protecting the planet. For more than 60 years, animals have been a part of Disney storytelling, and these stories continue today alongside immersive experiences that connect children and families around the world with the magic of nature. Since 1995, the Disney. Conservation Fund (DCF) has directed more than $100 million to protect 1,000 species through community-led conservation efforts spanning half the countries in the world. This includes nearly $17M invested in ocean conservation programs aimed at protecting marine ecosystems and wildlife. In addition, the DCF has supported programs that have provided more than 12 million nature experiences to kids and families across the globe.
The Disney Conservation Fund is focused on saving wildlife for future generations. through grants to leading conservation organizations working together to stabilize and increase the populations of at-risk animals including sea turtles, coral reefs, sharks and rays, apes, cranes, butterflies, elephants, monkeys, rhinos and tigers. A Disney conservationist works with each organization to identify where Disney expertise can also play a role in reversing the decline of these animals and their habitats.
Disney has long been committed to protecting the environment in The Bahamas. For more than a decade, several experts from Disney’s Animals, Science and Environment team have been engaged in significant conservation work there in partnership with local organizations and Scientists. Their work includes an initiative that has been underway since2007 to rehabilitate coral reefs. DCL also supports summer eco camps and community engagement efforts in Abaco, and helps provide conservation curriculum support for Bahamian school children.
More details on Disney Cruise Line’s dedication to minimizing its impact on the environment is available at: https://dclnews.com/uploads/sites/4/2021/07/DCL_Env_Fact_2021.pdf.
More details on TWDC’s environmental goals can be found at: https://thewaltdisneycompany.com/environmental-sustainability
e. The desirability of the Company maintaining a reputation for high standards of business conduct
We are committed to operating our businesses with integrity and adopting governance policies that promote the thoughtful and independent representation of our stakeholders’ interests. The Board of Directors has adopted Corporate Governance Guidelines which address, among other things, the composition and functions of the Board of Directors.. Our Board of Directors is also expected to uphold our Code of Business Conduct. Similarly, the Group Company’s Standards of Business Conduct are applicable to all Cast Members of the Company including board Members.
We regularly engage our leaders and Cast Members on these Standards through training and other forms of communication. It is compulsory that all office based Cast Members complete the mandatory online courses, examples include: Standards of Business Conduct, Bribery and Avoiding Corrupt Business Practices.
Acting responsibly and conducting our business ethically is an integral part of our brand.
f.The need to act fairly as between Members of the Company
We are a wholly owned subsidiary of Wedco Global Ventures LLP, whose ultimate parent company is The Walt Disney Company (TWDC). Magical Cruise Company Limited is consolidated within TWDC results as part of the Disney Parks, Experiences, and Products Segment. Our parent company as well as TWDC are aware of key decisions and financial performance of the Company and take a keen interest in the strategies and future outlook of the Company.
The strategic report is approved by the Board on 30 September 2021 and signed on its behalf by
W Diercksen Jr
For FY20, Disney Cruise Line reported a loss of $255,853,000 directly attributed to the impact of the COVID-19 pandemic which shutdown cruise operations. The company has NOT had to resort to raising any external financing during the fiscal year.
Disney Cruise Line was originally scheduled take delivery of of 3 new cruise ships from Meyer Werft in calendar 2021, 2022 and 2023. However, the impact of COVID-19 on the Meyer Werft shipyard with the now anticipated delivery of the cruise ships in 2022, 2024, and 2025.
On September 24, 2021, the Company entered into purchase agreements from two separate subsidiaries for the fair market value of the fleets original ships: the Disney Wonder for $303,950,000, and the Disney Magic for $278,650,000.
The new cruise ships on order are LNG-powered, therefore, Disney Cruise Line entered into an agreement on March 29, 2019, for the exclusive procurement of liquid natural gas for the fleet expansion. Under this agreement, Disney Cruise Line is not required to make any payments on the LNG contract until 2022, the year the Disney Wish is slated to enter service.
The report shows the Directors have assessed COVID-19 as a non-adjusting post balance sheet event (occurring after the close of FY19). It is believed that the long lived assets of the Company have longer term prospects for sustained performance relative to the uncertain duration of the effects of the pandemic. Therefore, it was concluded that it was premature to consider any of these assets for impairment (recoverable amount of the asset with future cash flow is worth more than the fair value less cost to if the asset were to be sold or scrapped like some other cruise ships) . The Directors are managing day to day working capital requirements close with The Walt Disney Company, which issued a letter of financial support to the Directors for at least 12 months from the date of the the annual report in order to meet the cruise line’s liabilities as they fall due.
Furthermore, the Company’s principal activity is the operation of luxury cruise vessels. It is considered that the Company’s activities will remain unchanged for the foreseeable future.