CBC/Radio-Canada releases 2014-2015 third quarter financial report

February 27, 2015, Ottawa

Key highlights:

  • Revenues and expenses decreased this quarter by $46.9 million and $44.7 million, respectively, mainly due to the end of our broadcasting rights contract with the National Hockey League. Expenses in the quarter were also impacted by the continuation of our cost-reduction initiatives, offset by severance costs incurred.
  • Government funding recognized for accounting purposes increased by $34.7 million as a result of differences in the timing of our cash drawdowns. By year-end, total government funding is expected to be $45.5 million lower than last year, consistent with the last instalment of reductions announced in Federal Budget 2012.

CBC/Radio-Canada today issued its third quarter financial report for 2014-2015. The report highlights significant business and financial developments occurring in the third quarter ended December 31, 2014. The report is available in full on the CBC/Radio-Canada corporate website, here.

“Though we continue to navigate difficult changes for the Corporation, we’ve made progress on the initial phases of our new strategy by furthering our collaboration and partnerships, and increasing the touch points we have with Canadians across the country,” said Hubert T. Lacroix, President and CEO of CBC/Radio-Canada. “Looking forward, television in 2015 is off to a great start with hits like Book of Negroes, Schitt’s Creek, Unité 9 and 30 Vies.”

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Changes in revenue, expenses and funding were as follows:

  • This quarter was our first full period without direct advertising revenue from broadcasting professional hockey following the end of our broadcast rights contract with the National Hockey League (NHL). As a result, overall revenue decreased by $46.9 million (24.7%) compared to the third quarter of 2013-2014. Our operating expenses have also decreased similarly as we no longer pay the associated programming costs, as discussed below. Our advertising revenue was also affected by the weaker advertising market relative to last year.
  • Total expenses were lower by $44.7 million (9.7%) compared to the third quarter last year, reflecting lower ongoing operating costs following the end of our broadcast rights contract with the NHL, and the continuation of our cost-reduction initiatives. These decreases were partially offset by severance costs associated with workforce reduction announcements in November.
  • Government funding recognized for accounting purposes increased by $34.7 million (15.1%), due to higher drawdowns of funding this quarter relative to the same period last year. The increase in drawdowns is due to a timing difference in our cash flow requirements resulting in drawdowns of government funding later in the year relative to 2013-2014. By year-end, total government funding is expected to be $45.5 million less than last year, consistent with the last instalment of reductions announced in Federal Budget 2012.
  • Results on a Current Operating Basis for the period reflected a gain of $15.4 million primarily arising from the timing of government funding drawdowns, as discussed above. This result excludes items that do not generate or require funds from operations, the most significant individual item being an $8.5 million charge for non-cash pension expense. Further details reconciling net results to Results on a Current Operating Basis are provided below.

Business Update

CBC/Radio-Canada offered audiences seasonal-specific and day-to-day programming across both networks. In television markets, CBC Television (prime-time share) is trending below its target due in part to program changes, expanding English-language competition and evolving audience consumption habits. Meanwhile, ICI Radio-Canada Télé obtained a solid share in a fiercely competitive French-language market, keeping it on track to meet its annual targets. CBC’s and Radio-Canada’s radio fall surveys reported the highest listenership ever, on both markets, for share combined. These results are particularly satisfying because the industry is experiencing an overall decline in listenership across both language markets.

CBC/Radio-Canada continued to provide content of interest and significance to Canadians across the nation’s regions. In particular this quarter, the tragic events in Saint-Jean-sur-Richelieu and Ottawa demonstrated the efficiency of local reporting teams providing critical news to Canadians minute by minute. These events were covered live on CBC and Radio-Canada platforms, and were followed so intently by Canadians that October 22 was the highest single day of web traffic in the history of CBC.ca, with almost 49,000 hits per second at the traffic’s peak.

The Corporation was involved in numerous multiplatform events this quarter. Among these were the Scotiabank Giller Prize, which was broadcast by CBC Television, and live-streamed on CBC Books; and Radio-Canada’s 37th Salon du livre, which was supplemented by a hosted feature of 10 young authors on ICI Radio-Canada.ca.

In December, the Corporation announced it is expanding local digital services and local connection across the day to establish more local points of contact with Canadians across the country. This initiative is part of the new strategy for 2020, A space for us all, and more can be read about it here.

Two new content partnerships were announced this quarter, which is another important component of A space for us all. Radio-Canada partnered with Fox International Content Sales in October to enrich its lineup of National Geographic programming for ICI EXPLORA, while CBC News teamed up with The Weather Network on weather-related content and news stories.

In corporate matters, CBC/Radio-Canada released its annual Environmental Report, hosted its Annual Public Meeting, and filed its first set of reports detailing how it is meeting its new regulatory requirements. Also in November, Canada’s Information Commissioner awarded CBC/Radio-Canada an “A” grade for compliance with the Access to Information Act. This official recognition, for the second year running, validates the public broadcaster’s ongoing commitment to transparency and accountability to Canadians.

Reconciliation of Results on a Current Operating Basis:

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CBC/Radio-Canada defines Results on a Current Operating Basis as Net Results under IFRS, less the adjustments for non-cash expenses that will not require operating funds within one year and non-cash revenues that will not generate operating funds within one year. This measure is used by management to help monitor performance, and balance the Corporation’s budget consistent with government funding methodology. We believe this measure provides useful complementary information to readers, while recognizing that it does not have a standard meaning under IFRS and will not likely be comparable to measures presented by other companies.

Adjustments include the elimination of non-cash pension and other employee future benefit costs, which represent the excess of the IFRS expense over the actual cash contribution for the period. Adjustments are also made for other non-cash items such as the depreciation, amortization and decommissioning of capital assets; the amortization of deferred capital funding; and non-budgetary annual leave. Other less significant items not funded or generating funds in the current period, primarily employee benefit–related, are adjusted for in the reconciliation to Results on a Current Operating Basis.

Results on a Current Operating Basis amounted to a gain of $15.4 million this quarter, an increase of $31.2 million when compared to last year. This increase primarily reflects lower operating costs and higher government funding recognized in income this quarter, consistent with timing differences in the drawdown and recognition of appropriations into income as discussed above in IFRS results. On a year-to-date basis, lower government funding drawdowns (directly recognized in income) were lower relative to last year by $104.3 million, explaining a significant part of the decrease of our results on a Current Operating Basis to $52.0 million. This decrease in government funding recognized in income, when compared to the same period last year, was offset by additional sources of operating funds this year from the sale of some of our shares in Sirius XM Canada Holdings Inc., as well as lower operating costs.

About CBC/Radio-Canada

CBC/Radio-Canada is Canada’s national public broadcaster and one of its largest cultural institutions. The Corporation is a leader in reaching Canadians on new platforms and delivers a comprehensive range of radio, television, internet, and satellite-based services. Deeply rooted in the regions, CBC/Radio-Canada is the only domestic broadcaster to offer diverse regional and cultural perspectives in English, French and eight Aboriginal languages.

A space for us all is CBC/Radio-Canada’s strategy to transform the public broadcaster, and ensure that it continues to fulfill its mandate for Canadians, now and for future generations. Through to 2020, the Corporation will increase its investment in prime-time television programming and continue to create radio programs of the highest quality, while promoting the development of digital and mobile platforms and content.

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