Shaw 2012 Annual Report Download - page 57

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012
To allow for timely access to capital markets, the Company filed a short form base shelf
prospectus with securities regulators in Canada and the U.S. on November 18, 2010. The shelf
prospectus allows for the issue of up to an aggregate $4 billion of debt and equity securities
over a 25 month period. Pursuant to this shelf prospectus, the Company issued $300 million of
Preferred Shares and completed three senior notes offerings totalling $1.3 billion in 2011.
During the current year, the Company entered into a five-year $1 billion bank credit facility
which includes a revolving term facility to a maximum of $50 million and matures in January
2017. The credit facility has a feature whereby the Company may request an additional $500
million of borrowing capacity so long as no event of default or pending event of default has
occurred and is continuing or would occur as a result of the increased borrowings. No lender
has any obligation to participate in the requested increase unless it agrees to do so at its sole
discretion. This facility replaced the prior credit and operating loan facilities which were
scheduled to mature in May 2012. The new facility will be used for general corporate purposes.
On November 16, 2012, the Company repaid the 6.1% $450 million senior unsecured notes.
The Company’s DRIP allows holders of Class A Shares and Class B Non-Voting Shares who are
residents of Canada to automatically reinvest monthly cash dividends to acquire additional
Class B Non-Voting Shares. Effective for the May 31, 2011 dividend payment, Class B
Non-Voting Shares distributed under the Company’s DRIP are new shares issued from treasury
at a 2% discount from the 5 day weighted average market price immediately preceding the
applicable dividend payment date. Previously, the Class B Non-Voting Shares were acquired on
the open market at prevailing market prices. The DRIP has resulted in cash savings and
incremental Class B Non-Voting Shares of $98 million in 2012.
On November 29, 2011 Shaw received the approval of the TSX to renew its normal course issuer
bid to purchase its Class B Non-Voting Shares for a further one year period. The Company is
authorized to acquire up to 20,000,000 Class B Non-Voting Shares during the period
December 1, 2011 to November 30, 2012. No shares were repurchased by the Company.
At August 31, 2012, the Company held $427 million in cash and had access to $1 billion
under its credit facility. Based on the available credit facility and forecasted free cash flow, the
Company expects to have sufficient liquidity to fund operations and obligations during the
upcoming fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have
borrowing capacity sufficient to finance foreseeable future business plans and refinance
maturing debt.
Debt structure and financial policy
Shaw structures its borrowings generally on a stand-alone basis. The borrowings of Shaw are
unsecured. While certain non-wholly owned subsidiaries are subject to contractual restrictions
which may prevent the transfer of funds to Shaw, there are no similar restrictions with respect
to wholly-owned subsidiaries of the Company.
Shaw’s borrowings are subject to covenants which include maintaining minimum or maximum
financial ratios. At August 31, 2012, Shaw is in compliance with these covenants and based on
current business plans, the Company is not aware of any condition or event that would give rise
to non-compliance with the covenants over the life of the borrowings. As at August 31, 2012,
the ratio of debt to operating income before amortization for the Corporation is 2.4 times.
Having regard to prevailing competitive, operational and capital market conditions, the Board of
Directors has determined that having this ratio in the range of 2.0 to 2.5 times would be
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