Shaw 2010 Annual Report Download - page 114

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components of its US dollar denominated debt. The Company utilized cross-currency swaps, where
appropriate, to hedge its exposures on US dollar denominated debenture indebtedness. During the
year the Company redeemed all of its outstanding US dollar denominated debt.
In addition, some of the Company’s capital expenditures are incurred in US dollars, while its
revenue is primarily denominated in Canadian dollars. Decreases in the value of the Canadian dollar
relative to the US dollar could have an adverse effect on the Company’s cash flows. To mitigate some
of the uncertainty in respect to capital expenditures, the Company regularly enters into forward
contracts in respect of US dollar commitments. With respect to 2010, the Company entered into
forward contracts to purchase US $84,000 over a period of 12 months commencing in September
2009 at an average exchange rate of 1.1089 Cdn. In addition, the Company had in place long-term
forward contracts to purchase US $6,972 during 2010 at an average rate 1.4078. At August 31,
2010 the Company had forward contracts to purchase US $200,000 in October 2010 at an average
exchange rate of 1.0172 Cdn in respect of the closing of the Canwest acquisition.
Interest rate risk
Due to the capital-intensive nature of its operations, the Company utilizes long-term financing
extensively in its capital structure. The primary components of this structure are banking facilities
and various Canadian and US denominated senior notes and debentures with varying maturities
issued in the public markets as more fully described in note 9.
Interest on the Company’s banking facilities is based on floating rates, while the senior notes and
debentures are fixed-rate obligations. The Company utilizes its credit facility to finance day-to-day
operations and, depending on market conditions, periodically converts the bank loans to fixed-rate
instruments through public market debt issues. As at August 31, 2010, 100% of the Company’s
consolidated long-term debt was fixed with respect to interest rates.
Market risk
Net income and other comprehensive income for 2010 could have varied if the Canadian dollar to
US dollar foreign exchange rates or market interest rates varied by reasonably possible amounts.
The sensitivity to currency risk has been determined based on a hypothetical change in Canadian
dollar to US dollar foreign exchange rates of 10%. The financial instruments impacted by this
hypothetical change include foreign exchange forward contracts and cross-currency interest rate
exchange agreements and would have changed net income by $3,759 net of tax (2009 – $nil) and
other comprehensive income by $18,378 net of tax (2009 – $17,092). A portion of the Company’s
accounts receivables and accounts payable and accrued liabilities is denominated in US dollars;
however, due to their short-term nature, there is no significant market risk arising from fluctuations
in foreign exchange rates.
The sensitivity to interest rate risk has been determined based on a hypothetical change of one
percentage or 100 basis points. The financial instruments impacted by this hypothetical change
include foreign exchange forward contracts and cross-currency interest rate exchange agreements
and would have changed net income by $200 net of tax (2009 – $nil) and other comprehensive
income by $51 net of tax (2009 – $5,691). Interest on the Company’s banking facilities is based on
floating rates and there is no significant market risk arising from fluctuations in interest rates.
110
Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2010, 2009 and 2008
[all amounts in thousands of Canadian dollars except share and per share amounts]