Shaw 2012 Annual Report Download - page 121

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]
Currency risk
Certain of the Company’s capital expenditures and equipment costs 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 and equipment
costs, the Company regularly enters into forward contracts in respect of US dollar
commitments. With respect to 2012, the Company entered into forward contracts to purchase
US $83 over a period of 12 months commencing in September 2011 at an average exchange
rate of 0.9725 Cdn. At August 31, 2012 the Company had forward contracts to purchase US
$75 over a period of 12 months commencing in September 2012 at an average exchange rate
of 0.9998 Cdn in respect of capital expenditures and equipment costs.
As part of the broadcasting business acquisition in 2011, the Company assumed US dollar
denominated debt. To mitigate some of the foreign exchange risk with respect to interest
payments and amounts due on redemption of the senior unsecured notes, the Company entered
into forward contracts to purchase US $340 at an average exchange rate of 0.9931.
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 a banking
facility and various Canadian senior notes with varying maturities issued in the public markets
as more fully described in note 13.
Interest on the Company’s banking facility is based on floating rates, while the senior notes 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, 2012, 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 2012 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 $nil net of
tax (2011 – $1) and other comprehensive income by $5 net of tax (2011 – $4). 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 not have changed net income in 2012 or 2011. Interest on the
Company’s banking facility is based on floating rates and there is no significant market risk
arising from fluctuations in interest rates.
117