Shaw 2010 Annual Report Download - page 45

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During October 2009 the Company issued $1.25 billion of senior notes at a rate of
5.65% due 2019. The net proceeds (after issuance at a discount of $4.0 million and
underwriting expenses) of approximately $1.24 billion were used to fund the early
redemption of the US senior notes detailed above. In conjunction with the redemption
of the US senior notes, the Company unwound and settled a portion of the principal
component of two of the associated cross-currency interest rate swaps. The Company
simultaneously entered into offsetting currency swap transactions for the outstanding
notional principal amounts under all the remaining cross-currency interest rate swap
agreements.
As previously highlighted, 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 a material
adverse effect on the Company’s cash flows. To mitigate some of the uncertainty with
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 $84.0 million 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
$7.0 million during 2010 at an average rate 1.4078. At August 31, 2010 the
Company had forward contracts to purchase US $200.0 million in October 2010
at an average exchange rate of 1.0172 Cdn in respect of the closing of the Canwest
acquisition.
Further information concerning the policy and use of derivative financial instruments
is contained in Note 1 to the Consolidated Financial Statements.
(c) Capital markets: The Company requires ongoing access to capital markets to support
its operations. Changes in capital market conditions, including significant changes in
market interest rates or lending practices, may have a material adverse effect on the
Company’s ability to raise or refinance short-term or long-term debt, and thus on its
financial position and ability to operate.
(d) Economic conditions: During 2009 and in early 2010 Canada’s economic growth
trended downward reflecting the uncertainty in global financial and equity markets
and the slowdown in global economic growth. While the Company believes the Western
Canadian market has started to recover, there can be no assurance that these events or
any future events caused by volatility in world financial and equity markets or a decline
in economic growth will not have an adverse effect on the Company’s business and
operating results.
Advertising is particularly impacted by prevailing economic conditions. Changes in
economic conditions can affect demand for advertising airtime as well as advertising
rates.
iii) Contingencies
The Company and its subsidiaries are involved in litigation matters arising in the ordinary course
and conduct of its business. Although such proceedings cannot be predicted with certainty,
management does not expect that the outcome of these matters will have a material adverse
effect on the corporation.
41
Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2010