Management Discussion and Analysis
The review of the Corporation’s financial position and operating results should be read in conjunction with the audited financial statements on the following pages. The results for 2014-2015 cover the period from April 1, 2014 to March 31, 2015 while the comparative numbers are for the period from April 1, 2013 to March 31, 2014.
Results of Operations
The Corporation’s revenue includes amounts from the broadcasting distribution undertakings (BDUs), the federal government through the Department of Canadian Heritage, recoveries on production investments, repayment of advances, and interest. Total revenue increased 4.5% in the fiscal year, from $386.4M in 2013-2014 to $403.6M in 2014-2015.
Contributions from BDUs increased 9.0% or $21.0M in the fiscal year, from $233.6M in 2013-2014 to $254.6M in 2014-2015. One-time adjustments of $26.6M were recognized in 2014-2015. The adjustments were the result of the CRTC’s audits of BDUs’ compliance with the contribution requirements of the regulations.
The federal government funding of $134.1M in 2014-2015 was consistent with 2013-2014.
Revenue from the recoupment of production investments decreased 16.4% or $1.4M in the fiscal year, from $8.7M in 2013-2014 to $7.3M in 2014-2015. Revenue from repayment advances decreased 29.2% or $2.1M in the fiscal year, from $7.3M in 2013-2014 to $5.2M in 2014-2015.
Interest decreased by 9.6% or $0.3M in the fiscal year, from $2.7M in 2013-2014 to $2.4M in 2014-2015.
Total expenses increased 3.1% or $11.5M in the fiscal year, from $367.4M in 2013-2014 to $378.9M in 2014-2015. Program commitments represent 95.3% of total expenses in the fiscal year, an increase from 95.0% of total expenses in 2013-2014. The balance of the total expenses includes industry partnerships, general and administrative, program administration, and amortization.
Under the terms of the Contribution Agreement with the Department of Canadian Heritage, CMF’s total administrative expenses (excluding industry partnerships) are capped at 6.0% of total revenue. In the fiscal year, the total administrative expenses were $16.5M or 4.1% of total revenue, compared to 4.5% in 2013-2014.
Total program commitments increased 3.5% or $12.1M in the fiscal year, from $348.9M in 2013-2014 to $361.0M in 2014-2015. The CMF provides financial contributions to Canadian digital media and television producers primarily through two program streams: Convergent and Experimental. The Convergent Stream program commitments increased by $6.1M, from $319.5M in 2013-2014 to $325.6M in 2014-2015. The Experimental Stream program commitments increased by $4.1M, from $34.5M in 2013-2014 to $38.6M in 2014-2015. The program commitments for the international matching programs was $0.9M, the accelerator program of $0.4M, and prior years’ negative adjustments of about $4.5M were also reflected in the fiscal year.
Program Administration Expenses
The CMF outsourced the program administration activities to Telefilm Canada through a services agreement. Total program administration expenses in the fiscal year increased $0.1M or 1.2%, from $10.4M in 2013-2014 to $10.5M in 2014-2015.
Industry partnerships of $1.4M in 2014-2015 represented an increase of $0.3M from 2013-2014. The CMF continued to partner with television and digital media events in Canada and internationally.
General and Administrative Expenses
General and administrative expenses decreased by 14.3% or $1.0M in the fiscal year, from $6.9M in 2013-2014 to $5.9M in 2014-2015. There were reductions in compensation of $0.8M, marketing and communications of $0.1M and reporting of $0.1M.
Cash Flow and Reserves
BDU contributions are received monthly; the CMF invoices the Department of Canadian Heritage monthly in arrears based on payments to producers. Repayment of development advances are received throughout the year and the majority of recoupment is received twice a year.
The CMF invests any funds not required for operations; investments are in federal treasury bills, provincial notes, Canadian bankers’ acceptances, GIC’s, term deposits, and asset-backed term notes. The Corporation’s investments are drawn on as required to fund program contractual obligations as they come due.
The CMF maintains unrestricted and restricted reserves. The funds in the reserves are accumulated over time through the excess of revenue over expenses and are used to support future years’ programs.
At the end of the fiscal year, there was $80.5M in restricted reserves and $5.6M unrestricted. At the end of 2013-2014, there was $29.8M in restricted reserves and $31.6M unrestricted.
The restricted reserves at March 31, 2015 include amounts for the settlement of expenses in the event of dissolution of the CMF of $9.9M, $23.1M to support the 2015-2016 program budget, and a $47.4M program funding contingency reserve.
The Corporation anticipates total revenue of $370.6M and total expenses of $393.7M in 2015-2016. The shortfall between total revenues and total expenses will be funded by the 2015-2016 restricted program reserve of $23.1M. Total revenue in 2015-2016 is expected to be $33.1M or 8.2% less than in 2014-2015 and total expenses are expected to be $14.8M or 3.9% more than in 2014-2015.
Contributions from BDU’s are anticipated to be $219.2M in 2015-2016 or $35.4M less than in 2014-2015. It is assumed that no further compliance adjustments will be received in 2015-2016 and that the regular contributions will decline. Contributions are expected to decline as consumers have increasing options to access content on platforms other than through their traditional television subscription. The Corporation has entered into a Contribution Agreement with the Department of Canadian Heritage for 2015-2016 in the amount of $134.1M, which is consistent with the prior year’s commitment. Revenue from recoupment, repayment of advances, and interest are expected to be $9.0M, $5.0M, and $2.0M respectively. CMF will receive $1.2M from Corus Entertainment for the administration of tangible benefits related to their acquisition of several broadcast channels.
The CMF program budget is $375.2.0M, $330.5M for the Convergent Stream, $40.5M for the Experimental Stream, $2.5M for international matching programs, $1.2M for the Corus program, and $0.5M for the accelerator program. Industry partnerships are expected to be $1.2M, general and administrative expenses are expected to be $6.5M, and program administration expenses are expected to be $10.7M. Total administrative expenses are expected to be $17.2M or 4.6% of total revenue.