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 2015-2016 cover the period from April 1, 2015 to March 31, 2016 while the comparative numbers are for the period from April 1, 2014 to March 31, 2015.
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, interest, and tangible benefits. Total revenue decreased 6.0% in the fiscal year, from $403.6M in 2014-2015 to $379.4M in 2015-2016.
Contributions from BDUs decreased 9.7% or $24.7M in the fiscal year, from $254.6M in 2014-2015 to $229.9M in 2015-2016. One-time adjustments declined $26.0M from $26.6M in 2014-2015 to $0.6M in 2015-2016. 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 2015-2016 was consistent with 2014-2015.
Revenue from the recoupment of production investments increased 5.5% or $0.4M in the fiscal year, from $7.3M in 2014-2015 to $7.7M in 2015-2016. Revenue from repayment advances decreased 9.7% or $0.5M in the fiscal year, from $5.2M in 2014-2015 to $4.7M in 2015-2016.
Interest decreased by 12.6% or $0.3M in the fiscal year, from $2.4M in 2014-2015 to $2.1M in 2015-2016.
CMF administers a tangible benefit program for Corus Entertainment, $0.6M was recognized as revenue. An additional $0.3M in tangible benefits flowed directly to the CMF under the revised CRTC Tangible Benefits Policy.
Total expenses increased 2.2% or $8.4M in the fiscal year, from $378.9M in 2014-2015 to $387.3M in 2015-2016. Program commitments represent 95.2% of total expenses in the fiscal year, a decrease from 95.3% of total expenses in 2014-2015. The balance of the total expenses includes program administration, general and administrative, industry partnerships, 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 $16.9M or 4.5% of total revenue, compared to 4.1% in 2014-2015.
Total program commitments increased 2.1% or $7.5M in the fiscal year, from $361.0M in 2014-2015 to $368.5M in 2015-2016. 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 $3.6M, from $325.6M in 2014-2015 to $329.2M in 2015-2016. The Experimental Stream program commitments increased by $1.9M, from $38.6M in 2014-2015 to $40.5M in 2015-2016. The program commitments for the international matching programs was $1.5M, the accelerator program of $0.4M, and prior years’ negative adjustments of about $3.2M were also reflected in the fiscal year.
Program Administration Expenses
The total program administration expenses increased $0.1M or 1.0% in the fiscal year, from $10.5M in 2014-2015 to $10.6M in 2015-2016. The CMF outsourced the program administration activities to Telefilm Canada through a services agreement, their service fee remained consistent $10.4M with the prior year. Other program administration expenses in the fiscal year increased $0.1M in 2015-2016.
General and Administrative Expenses
General and administrative expenses increased by 6.4% or $0.4M in the fiscal year, from $5.9M in 2014-2015 to $6.3M in 2015-2016. There were increases in compensation and consulting of $0.1M, consultation of $0.1M, reporting of $0.1M, and overhead of $0.1M.
Industry partnerships of $1.2M in 2015-2016 represented a decrease of $0.2M from 2014-2015. The CMF continued to partner with television and digital media events in Canada and internationally.
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, 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 $73.3M in restricted reserves and $5.0M unrestricted. At the end of 2014-2015, there was $80.6M in restricted reserves and $5.6M unrestricted.
The restricted reserves at March 31, 2016 include amounts for the settlement of expenses in the event of dissolution of the CMF of $5.0M, $20.9M to support the 2016-2017 program budget, and a $47.4M program funding contingency reserve.
The Corporation anticipates total revenue of $370.7M and total expenses of $391.6M in 2016-2017. The shortfall between total revenues and total expenses will be funded by the 2016-2017 restricted program reserve of $20.9M. Total revenue in 2016-2017 is expected to be $8.7M or 2.3% less than in 2015-2016 and total expenses are expected to be $4.3M or 1.1% more than in 2015-2016.
Contributions from BDU’s are estimated to be $219.6M in 2016-2017 or $10.3M less than in 2015-2016. That estimate is conservative and is based on the trends in the industry. It is assumed that no further compliance adjustments will be received in 2016-2017 and that the regular contributions will decline due to changing dynamics in the industry. The Department of Canadian Heritage has confirmed their financial commitment for 2016-2017 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 $1.5M respectively. The CMF will receive $1.2M from Corus Entertainment for the administration of tangible benefits and $0.2M from other tangible benefits.
The CMF program budget is $371.2M, $323.8M for the Convergent Stream, $40.5M for the Experimental Stream, $2.5M for international matching programs, $2.5M for an export initiative, $1.2M for the Corus program, and $0.7M for the accelerator program. Industry partnerships are expected to be $1.2M, general and administrative expenses are expected to be $7.0M, and program administration expenses are expected to be $12.1M. Total administrative expenses are expected to be $19.1M or 5.2% of total revenue.