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 2013-2014 cover the period from April 1, 2013 to March 31, 2014 while the comparative numbers are for the period from April 1, 2012 to March 31, 2013.
Results of Operations
The Corporation’s revenue includes amounts from the broadcasting distribution undertakings (BDUs), the federal government through the Department, recoveries on production investments, and interest. Total revenue increased 6.3% in the fiscal year, from $363.7M in 2012-2013 to $386.4M in 2013-2014.
Contributions from BDUs increased 7.8% or $16.9M in the fiscal year, from $216.7M in 2012-2013 to $233.6M in 2013-2014. $9.4M of the $16.9M increase is a one-time adjustment. BDU contributions to the CMF are a function of the BDU’s revenue from broadcasting activities, as that revenue fluctuates so do contributions to the CMF.
The federal government funding of $134.1M in 2013-2014 was consistent with 2012-2013.
Revenue from the recoupment of production investments increased 47.8% or $2.8M in the fiscal year, from $5.9M in 2012-2013 to $8.7M in 2013-2014. Revenue from repayment advances increased 60% or $2.7M in the fiscal year, from $4.6M in 2012-2013 to $7.3M in 2013-2014.
Interest increased by 12.3% or $0.3M in the fiscal year, from $2.4M in 2012-2013 to $2.7M in 2013-2014. The fair value adjustment on the long-term investment in 2013-2014 of $0.5M contributed to that increase.
Total expenses decreased 4.9% or $19.1M in the fiscal year, from $386.5M in 2012-2013 to $367.6M in 2013-2014. Program commitments represent 95.0% of total expenses in the fiscal year, a decrease from 95.2% of total expenses in 2012-2013. The balance of the total expenses includes industry partnerships, general and administrative, program administration, and amortization.
Under the terms of the Contribution Agreement with Canadian Heritage, CMF’s total administrative expenses (excluding industry partnerships) are capped at 6% of total revenue. In the fiscal year, the total administrative expenses were $17.4M or 4.5% of total revenue, compared to 4.8% in 2012-2013.
Industry partnerships of $1.1M in 2013-2014 were consistent with 2012-2013. The CMF continued to support television and digital media events in Canada and internationally.
General and Administrative Expenses
General and administrative expenses increased by 6.4% or $0.4M in the fiscal year, an increase from $6.5M in 2012-2013 to $6.9M in 2013-2014. There were increases in compensation of $0.5M and $0.1M in consultation expenses offset by decreases of $0.1M in marketing and $0.1M in travel.
Program Administration Expenses
The CMF has outsourced the program administration activities to Telefilm Canada through a services agreement. Total program administration expenses in the fiscal year decreased $0.4M or 3.4% in the fiscal year, from $10.8M in 2012-2013 to $10.4M in 2013-2014.
Cash Flow and Reserves
BDU contributions are received monthly; the CMF invoices the Department 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; most investments are in low-risk federal or provincial securities. 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 year’s program.
At the end of the fiscal year, there was $31.6M in unrestricted reserves, and $29.8M in restricted reserves. At the end of 2012-2013, there was $14.9M in an unrestricted reserve and $27.5M in restricted reserves.
The restricted reserves at 2013-2014 include amounts for the settlement of expenses in the event of dissolution of the CMF of $9.9M and $19.8M to support the 2014-2015 program budget. The restricted reserve of $17.6M to support the 2013-2014 program budget was released during the fiscal year.
The Corporation anticipates total revenue of $366.8M and total expenses of $386.5M in 2014-2015. The shortfall between total revenues and total expenses will be funded by the restricted program reserve of $19.8M. Total revenue in 2014-2015 is expected to be $19.6M or 5.1% less than in 2013-2014 and total expenses are expected to be $19.0M or 5.2% more than in 2013-2014.
Contributions from BDU’s are anticipated to be $216.6M in 2014-2015. The Corporation has entered into a Contribution Agreement with the Department for 2014-2015 in the amount of $134.1M, which is consistent with the prior year’s agreement. Revenue from recoupment of CMF contributions to productions repayment of advances and interest are expected to be $14.0M and $2.0M respectively.
The CMF program budget is $368.0M, $326.1M for the Convergent Stream, $39.0M for the Experimental Stream and $2.9M for three pilot programs. Industry partnerships are expected to be $1.2M, general and administrative expenses are expected to be $6.7M, and program administration expenses are expected to be $10.6M. Total administrative expenses are expected to be $17.3 M or 4.7% of total revenue, a decrease of $0.1 M from 2013-2014.