Morgan:News:2010 |VANOC| #2400
VANOC THIRD-QUARTERLY FISCAL REPORT: CASH HEAVY, WITH SOME KEY BENCHMARKS ACHIEVED
The Vancouver Organizing Committee for the 2010 Olympic and Paralympic Games (VANOC) today released its third-fiscal quarter financial report, showing that it had quite a bit of cash in the bank as of April 30. The report also showed that it had passed the halfway mark in spending its venue construction budget and that it is tapping the contingency portion, but not in a significant way.
Here are the things we learned from the report and subsequent interviews with VANOC's senior executives:
OPERATIONAL REVENUES:
VANOC had a surplus of C$53.7 million on April 30, compared with C$6.8 million at the end of the previous quarter (because VANOC grows exponentially, it makes more sense to compare the current quarter with the previous one than the same period a year earlier). The large amount of cash is due to a C$64.8 million advance payment by the International Olympic Committee from the expected total broadcasting revenue, and the cash position is expected to be whittled down as expenses over the next few months eat into it, but flatten as operational revenues flow in.
Operational revenues net of the IOC payment were C$19.6 million, but C$12.2 million of that was eaten by marketing-rights royalties, mostly an C$11 million payment to the Canadian Olympic Committee. Just about all of VANOC's revenue streams have royalty payments associated with them. The COC payment for instance, is because it has a deal with the COC to pay it 16% royalty on sponsorship cash revenue, and 12% on value in kind revenue. The last-quarter's payment brings the total VANOC's paid to the COC to C$27 million. VANOC also pays the IOC 7.5% royalty on sponsorship cash revenues, and 5% on VIK, which is why it paid the IOC C$1.2 million during the quarter for those revenues.
International sponsorship income: Value-in-kind -- materials and services -- from international sponsors totaled C$2.2 million during the last quarter. That amount alone accounted for about half of such operational revenue recorded by VANOC since it began operations in 2003, and it reflects the quickening operational buildup of the organization. The international sponsors haven't yet started paying the cash component of their deals. That's to come later.
Domestic sponsors: They're already paying in cash and VIK for the Games. C$12.7 million arrived in cash from them during the third fiscal quarter, with another C$3.6 million in VIK.
Licensee revenues: This amount is holding steady for the moment at about C$600,000 per quarter, but that's expected to swell as more products licensed earlier this year get into the marketplace over the next few months.
OPERATIONAL EXPENSES:
VANOC spent C$31.1 million during the quarter (without including the big, but notional, ebbs and flows of fluctuations in its financial position from its foreign-exchange protection program). Most of the spending focused on C$8 million for technology, plus another C$9.9 million for the combined spending of staffing, sustainability programs being launched or monitored, and work done by its International Client Services, mostly around a visit last March by the IOC commission that oversees VANOC's franchise.
About C$5.5 million was spent on office and administration, but a goodly chunk of that was due to the fact that VANOC also did a lot of the fit-out of the second, two-storey building it's using as part of its headquarters in east Vancouver during the third fiscal quarter. That's where its technology control centre is located.
As for foreign exchange, it was up an unrealized C$11 million during the quarter, but that was still shy of the C$12 million it notionally lost the previous quarter. However it was actually out about C$1 million on some Euro contracts that settled on March 31. The hedging is aimed at protecting its substantial future revenue flows, which are paid in US dollars and Euros, from the vagaries of currency markets.
As of April 30, VANOC had 370 full-time equivalent employees, up 67 during the quarter, and it expects to have 550 by the end of this calendar year. Some of the expenses noted in the last-quarter report included some accrual accounting for VANOC's new C$44.6-million employee-retention program, which has now been approved by VANOC's board of directors.
Cobb says the amount has several components: part is a salary-increase provision for all VANOC staff that works out to about 3% per year. As VANOC will have about 1,400 staff by 2009, about of quarter of the budgeted amount, about C$11 million, accounts for that component, but, he adds, "the actual amounts we pay will depend on the market at the time, and the circumstances that any business would go through when determining their salary increases."
The second element of the program, which is also open to all VANOC employees, "is there to deal with a significant issue that every organizing committee has to deal with -- and any project has to deal with: people who join us know they are going to be out of work at the end of the Games. It's natural for people to worry about where they're going to get their next paycheque from. History shows that organizing committees lose a significant amount of people in the last year or two before the Games, because they start thinking about what they're going to do next. Over the last several Olympic Games, the average has been about eight people per month during their last year. The success of our Games is dependent to a large degree on our people, and we do have to keep them. This part of the plan is to pay our employees for a period of time after the Games end, so they can go out and look for work, and not go through financial hardship because of that." There are two caveats, according to Cobb. Staffers only get that extended pay if they stay with VANOC to the end of their role with the Games, and senior executives will see their portion of that compensation package reduced if they fail to make budget, a provision VANOC's board insisted be in place. "All recent Games have put these plans in place," says Cobb.
Three days ago, VANOC signed its venue-management agreement with Orca Bay Arena Limited Partnership, owner of VANOC's key hockey venue, General Motors Place arena, and immediately gave it a cheque for C$18.9 million, including C$300,000 worth of interest owed due to delays in coming to a conclusion on the deal. VANOC's new chief financial officer John McLaughlin, in the quarterly report, describes the payment as "a facility enhancement agreement." Dave Cobb, VANOC's executive vice-president of Revenue, Marketing and Communications, says the 2010 organization has a "general understanding" with Orca Bay that "the building will be maintained in a first-class state in 2010." Cobb says "the first area" where it committed to put the money to work, based on discussions a year ago, is "into their new scoreboard system, which was a significant investment. The other areas they'll be putting the money into will be things that we'll work with them as we go, between now and 2010, but there isn't a specific plan, at this point, about where each dollar will go." There aren't any further payments due before 2010 under the arrangement. There's currently a bitter civil court case over the ownership of Orca Bay; Cobb says VANOC is protected by the agreement so that its arrangements will be supported by the winner of the court case.
VANOC has so far reached commitments totalling C$34 million of its best-efforts plan to raise C$50 million for its share of the Own The Podium program. On May 22, it confirmed to the federal government it will do its best to raise the remaining C$14 million. The federal government is contributing C$55 million, and the BC government has already contributed C$5 million to the C$110 million plan to put Canadian athletes on the medal podiums in 2010.
VENUE CONSTRUCTION
As of April 30, VANOC's construction account, which is kept separate from its operational accounts in part because the revenues for the account come from a C$580 million budget that's funded 50/50 by the BC and Canadian governments. It's all on track, financially and for scheduling, for the most part, and as far as spending is concerned, VANOC is now past the half-way mark in its program. VANOC spent C$63 million during the quarter on construction.
VANOC and the Canadian government are still haggling -- same as they did last year at this time --over a contribution agreement that sets how how and when federal Olympic funding is to arrive.
Last year, the delay was due to a new but hesitant government being asked to fund an increase in the budget that was long predicted, and so instead of getting out its chequebook, it launched a series of accounting reviews of VANOC's construction, some of which didn't finish until March 31. Last year, it didn't pay up until about six months into Ottawa's fiscal year, which starts April 1.
This time, the Canadian government's much more comfortable in its role, and has advanced C$5.8 million to cover some of VANOC's construction expenses during April without the funding agreement in place yet, but assuming that one will eventually be settled. That brought the VANOC quarterly income from Ottawa to C$22.8 million. During that same period, BC provided, as usual, more money; it's contribution totaled C$53.7 million during the quarter. So far, BC's provided a total of C$170.7 million of its C$290 million share since VANOC started up, while the Canadian government has paid only C$152.2 million of its share.
We'll wrap things up at this point, and send you a status report on VANOC's construction venues, and their spending, in a future report.
Originally published to Morgan:News:2010:Gold subscribers on June 28, 2007
VANOC THIRD-QUARTERLY FISCAL REPORT: CASH HEAVY, WITH SOME KEY BENCHMARKS ACHIEVED
The Vancouver Organizing Committee for the 2010 Olympic and Paralympic Games (VANOC) today released its third-fiscal quarter financial report, showing that it had quite a bit of cash in the bank as of April 30. The report also showed that it had passed the halfway mark in spending its venue construction budget and that it is tapping the contingency portion, but not in a significant way.
Here are the things we learned from the report and subsequent interviews with VANOC's senior executives:
OPERATIONAL REVENUES:
VANOC had a surplus of C$53.7 million on April 30, compared with C$6.8 million at the end of the previous quarter (because VANOC grows exponentially, it makes more sense to compare the current quarter with the previous one than the same period a year earlier). The large amount of cash is due to a C$64.8 million advance payment by the International Olympic Committee from the expected total broadcasting revenue, and the cash position is expected to be whittled down as expenses over the next few months eat into it, but flatten as operational revenues flow in.
Operational revenues net of the IOC payment were C$19.6 million, but C$12.2 million of that was eaten by marketing-rights royalties, mostly an C$11 million payment to the Canadian Olympic Committee. Just about all of VANOC's revenue streams have royalty payments associated with them. The COC payment for instance, is because it has a deal with the COC to pay it 16% royalty on sponsorship cash revenue, and 12% on value in kind revenue. The last-quarter's payment brings the total VANOC's paid to the COC to C$27 million. VANOC also pays the IOC 7.5% royalty on sponsorship cash revenues, and 5% on VIK, which is why it paid the IOC C$1.2 million during the quarter for those revenues.
International sponsorship income: Value-in-kind -- materials and services -- from international sponsors totaled C$2.2 million during the last quarter. That amount alone accounted for about half of such operational revenue recorded by VANOC since it began operations in 2003, and it reflects the quickening operational buildup of the organization. The international sponsors haven't yet started paying the cash component of their deals. That's to come later.
Domestic sponsors: They're already paying in cash and VIK for the Games. C$12.7 million arrived in cash from them during the third fiscal quarter, with another C$3.6 million in VIK.
Licensee revenues: This amount is holding steady for the moment at about C$600,000 per quarter, but that's expected to swell as more products licensed earlier this year get into the marketplace over the next few months.
OPERATIONAL EXPENSES:
VANOC spent C$31.1 million during the quarter (without including the big, but notional, ebbs and flows of fluctuations in its financial position from its foreign-exchange protection program). Most of the spending focused on C$8 million for technology, plus another C$9.9 million for the combined spending of staffing, sustainability programs being launched or monitored, and work done by its International Client Services, mostly around a visit last March by the IOC commission that oversees VANOC's franchise.
About C$5.5 million was spent on office and administration, but a goodly chunk of that was due to the fact that VANOC also did a lot of the fit-out of the second, two-storey building it's using as part of its headquarters in east Vancouver during the third fiscal quarter. That's where its technology control centre is located.
As for foreign exchange, it was up an unrealized C$11 million during the quarter, but that was still shy of the C$12 million it notionally lost the previous quarter. However it was actually out about C$1 million on some Euro contracts that settled on March 31. The hedging is aimed at protecting its substantial future revenue flows, which are paid in US dollars and Euros, from the vagaries of currency markets.
As of April 30, VANOC had 370 full-time equivalent employees, up 67 during the quarter, and it expects to have 550 by the end of this calendar year. Some of the expenses noted in the last-quarter report included some accrual accounting for VANOC's new C$44.6-million employee-retention program, which has now been approved by VANOC's board of directors.
Cobb says the amount has several components: part is a salary-increase provision for all VANOC staff that works out to about 3% per year. As VANOC will have about 1,400 staff by 2009, about of quarter of the budgeted amount, about C$11 million, accounts for that component, but, he adds, "the actual amounts we pay will depend on the market at the time, and the circumstances that any business would go through when determining their salary increases."
The second element of the program, which is also open to all VANOC employees, "is there to deal with a significant issue that every organizing committee has to deal with -- and any project has to deal with: people who join us know they are going to be out of work at the end of the Games. It's natural for people to worry about where they're going to get their next paycheque from. History shows that organizing committees lose a significant amount of people in the last year or two before the Games, because they start thinking about what they're going to do next. Over the last several Olympic Games, the average has been about eight people per month during their last year. The success of our Games is dependent to a large degree on our people, and we do have to keep them. This part of the plan is to pay our employees for a period of time after the Games end, so they can go out and look for work, and not go through financial hardship because of that." There are two caveats, according to Cobb. Staffers only get that extended pay if they stay with VANOC to the end of their role with the Games, and senior executives will see their portion of that compensation package reduced if they fail to make budget, a provision VANOC's board insisted be in place. "All recent Games have put these plans in place," says Cobb.
Three days ago, VANOC signed its venue-management agreement with Orca Bay Arena Limited Partnership, owner of VANOC's key hockey venue, General Motors Place arena, and immediately gave it a cheque for C$18.9 million, including C$300,000 worth of interest owed due to delays in coming to a conclusion on the deal. VANOC's new chief financial officer John McLaughlin, in the quarterly report, describes the payment as "a facility enhancement agreement." Dave Cobb, VANOC's executive vice-president of Revenue, Marketing and Communications, says the 2010 organization has a "general understanding" with Orca Bay that "the building will be maintained in a first-class state in 2010." Cobb says "the first area" where it committed to put the money to work, based on discussions a year ago, is "into their new scoreboard system, which was a significant investment. The other areas they'll be putting the money into will be things that we'll work with them as we go, between now and 2010, but there isn't a specific plan, at this point, about where each dollar will go." There aren't any further payments due before 2010 under the arrangement. There's currently a bitter civil court case over the ownership of Orca Bay; Cobb says VANOC is protected by the agreement so that its arrangements will be supported by the winner of the court case.
VANOC has so far reached commitments totalling C$34 million of its best-efforts plan to raise C$50 million for its share of the Own The Podium program. On May 22, it confirmed to the federal government it will do its best to raise the remaining C$14 million. The federal government is contributing C$55 million, and the BC government has already contributed C$5 million to the C$110 million plan to put Canadian athletes on the medal podiums in 2010.
VENUE CONSTRUCTION
As of April 30, VANOC's construction account, which is kept separate from its operational accounts in part because the revenues for the account come from a C$580 million budget that's funded 50/50 by the BC and Canadian governments. It's all on track, financially and for scheduling, for the most part, and as far as spending is concerned, VANOC is now past the half-way mark in its program. VANOC spent C$63 million during the quarter on construction.
VANOC and the Canadian government are still haggling -- same as they did last year at this time --over a contribution agreement that sets how how and when federal Olympic funding is to arrive.
Last year, the delay was due to a new but hesitant government being asked to fund an increase in the budget that was long predicted, and so instead of getting out its chequebook, it launched a series of accounting reviews of VANOC's construction, some of which didn't finish until March 31. Last year, it didn't pay up until about six months into Ottawa's fiscal year, which starts April 1.
This time, the Canadian government's much more comfortable in its role, and has advanced C$5.8 million to cover some of VANOC's construction expenses during April without the funding agreement in place yet, but assuming that one will eventually be settled. That brought the VANOC quarterly income from Ottawa to C$22.8 million. During that same period, BC provided, as usual, more money; it's contribution totaled C$53.7 million during the quarter. So far, BC's provided a total of C$170.7 million of its C$290 million share since VANOC started up, while the Canadian government has paid only C$152.2 million of its share.
We'll wrap things up at this point, and send you a status report on VANOC's construction venues, and their spending, in a future report.
Originally published to Morgan:News:2010:Gold subscribers on June 28, 2007
