Shaw 2011 Annual Report Download - page 53

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Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2011
Amortization of financing costs and Interest expense
Change
(In $000’s Cdn) 2011 2010 2009
2011
%
2010
%
Amortization of financing costs – long-term
debt 4,302 3,972 3,984 8.3 (0.3)
Interest 331,584 248,011 237,047 33.7 4.6
Interest expense increased in 2011 as a result of the broadcasting business acquisition.
Approximately $1 billion was required to complete the transaction including repayment of the
CW Media term loan and breakage of related currency swaps. In addition, US $338.3 million
13.5% senior unsecured notes were assumed as part of the acquisition. The Company
repurchased US $56 million of the senior unsecured notes in December 2010 and redeemed
the remaining outstanding amount on August 15, 2011. Interest expense increased in 2010 as
a result of higher average debt levels partially offset by a lower average cost of borrowing
resulting from changes in various components of long-term debt.
Other income and expenses
Increase (decrease) in
income
(In $000’s Cdn) 2011 2010 2009 2011 2010
Gain on redemption of debt 32,752 ––32,752 –
Debt retirement costs –(81,585) (8,255) 81,585 (73,330)
CRTC benefit obligation (139,098) ––(139,098) –
Business acquisition, integration and
restructuring costs (90,648) ––(90,648) –
Loss on derivative instruments (22,022) (45,164) – 23,142 (45,164)
Accretion of long-term liabilities (14,975) (2,142) – (12,833) (2,142)
Foreign exchange gain on unhedged
long-term debt 16,695 ––16,695 –
Other gains 11,022 5,513 19,644 5,509 (14,131)
The gain on redemption of debt is in respect of the Media 13.5% senior unsecured notes. As a
result of a change of control triggered on the acquisition of the Media business an offer to
purchase all of the US $338.3 million 13.5% senior unsecured notes at a cash price equal to
101% was required. An aggregate US $51.6 million face amount, having an aggregate accrued
value of US $56 million, was tendered under the offer and purchased by the Company for
cancellation. Also during 2011, the Company elected to redeem the remaining outstanding US
$260.4 million face amount, having an aggregate accrued valued of US $282.3 million, at
106.75% as set out under the terms of the indenture. As a result, the Company recorded a gain
of $32.8 million which resulted from recognizing the remaining unamortized acquisition date
fair value adjustment of $57.4 million partially offset by the 1% repurchase and 6.75%
redemption premiums totaling $19.5 million and $5.1 million in respect of the write-off of the
embedded derivative instrument associated with the early prepayment option.
49