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 2012-2013 cover the period from April 1, 2012 to March 31, 2013 while the comparative numbers are for the period from April 1, 2011 to March 31, 2012.
Results of Operations
The Corporation’s revenue includes amounts from the broadcasting distribution undertakings (BDU’s), the federal government through the Department, recoveries on production investments, and interest. Total revenue decreased 0.5% in the fiscal year, from $365.4M in 2011-2012 to $363.7M in 2012-2013.
Contributions from BDUs decreased 0.7% or $1.6M in the fiscal year, from $218.2M in 2011-2012 to $216.7M in 2012-2013. 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 2012-2013 was consistent with 2011-2012.
Revenue from the recoupment of production investments and repayment of advances increased by 2.1% or $0.2M in the fiscal year, from $10.3M in 2011-2012 to $10.5M in 2012-2013. In the fiscal year 2012-2013, revenue from recoupment of production investments was $5.9M and advance repayments comprised $4.6M.
Interest decreased by 15.1% or $0.4M in the fiscal year, from $2.8M in 2011-2012 to $2.4M in 2012-2013. The fair value adjustment on the long-term investment in 2011-2012 was $0.3M less than in 2010-2011. The balance of the difference is due to a lower investment balance during the last six months of the fiscal year than in the previous fiscal year.
Total expenses increased 3.8% or $14.2M in the fiscal year, from $372.3M in 2011-2012 to $386.5M in 2012-2013. Program commitments represent 95.2% of total expenses in the fiscal year, a decrease from 95.4% of total expenses in 2011-2012. 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 $17.3M or 4.8% of total revenue, compared to 4.3% in 2011-2012.
Total program commitments increased 3.6% or $12.7M in the fiscal year, from $355.3M in 2011-2012 to $368.0M in 2012-2013. The CMF provides financial contributions to Canadian producers through two program streams: Convergent and Experimental. The Convergent Stream program commitments increased by $9.9M in 2012-2013, from $326.8M in 2011-2012 to $336.7M in 2012-2013. The Experimental Stream program commitments increased by $2.2M in 2012-2013, from $32.9M in 2011-2012 to $35.1M in 2012-2013. Prior years’ negative adjustments of about $3.8M were also reflected in the fiscal year.
The financial contributions can be made in a variety of forms depending on the program stream, all of which are expensed in the fiscal year in which the CMF approves a commitment to the project. The payments to the applicants are typically made over several years as the project is being completed.
Industry partnerships increased by 7.5% or $0.1M in the fiscal year, from $1.1M in 2011-2012 to $1.2M in 2012-2013. Fourteen additional partnership events were supported, with added digital media and international events as well as new partnerships with venture capital events.
General and Administrative Expenses
General and administrative expenses increased by 22.6% or $1.2M in the fiscal year, an increase from $5.3M in 2011-2012 to $6.5M in 2012-2013. There were increases in compensation of about $0.3M, $0.6M in risk management, $0.2M in marketing and $0.1M in digital media measurement. Although risk management activities did not materially change, there was a one-time credit adjustment in 2011-2012 of about $0.6M in this category resulting in the variance year over year.
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 increased $0.3M or 2.2% in the fiscal year, from $10.5M in 2011-2012 to $10.8M in 2012-2013.
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 through the receipt of revenue in excess of budget and program and administrative under spending. Funds accumulated in reserves can be used to support the following year’s program budget.
At the end of the fiscal year, there was $14.8M in unrestricted reserves, and $27.5M in restricted reserves. At the end of 2011-2012, there was $30.7M in an unrestricted reserve and $34.5M in restricted reserves.
The restricted reserves at 2012-2013 include amounts for the settlement of expenses in the event of dissolution of the CMF of $9.9M and $17.6M to support the 2013-2014 program budget. The restricted reserve of $24.5M to support the 2012-2013 program budget was released during the fiscal year.
The Corporation anticipates total revenue of $361.7M and total expenses of $379.3M. The shortfall between total revenues and total expenses will be funded by the restricted program reserve of $17.6M. Total revenue in 2013-2014 is expected to be $2.0M or 0.5% less than in 2012-2013 and total expenses are expected to be $7.2M or 1.9% less than in 2012-2013.
Contributions from BDU’s are anticipated to be $215.6M in 2013-2014. The Corporation has entered into a Contribution Agreement with the Department for 2013-2014 in the amount of $134.1M, which is consistent with the prior year’s agreement. Revenue from recoupment of CMF contributions to productions and interest are expected to be $10.0M and $2.0M respectively.
The CMF program budget is $360.7M, $326.4M for the Convergent Stream, $34.6M for the Experimental Stream and $0.7M for two digital media pilot programs. Industry partnerships are expected to be $1.1M, general and administrative expenses are expected to be $6.8M, and program administration expenses are expected to be $10.7M. Total administrative expenses are expected to be $17.5M, or 4.8% of total revenue, which is consistent with 2012-2013.