Shaw 2013 Annual Report Download - page 39

S
haw
C
ommunications Inc
.
MANA
G
EMENT’
S
DI
SCUSS
I
O
N AND ANALY
S
I
S
August
31
,
2013
ii)
Econom
i
c cond
i
t
i
on
s
Canada’s economy is affected by uncertainty in global financial and equity markets and
slowdowns in global economic growth. Advertising revenues are affected by prevailing economi
c
cond
i
t
i
ons.
C
han
g
es
i
n econom
i
c cond
i
t
i
ons ma
y
a
ff
ect d
i
scret
i
onar
y
consumer s
p
end
i
n
g,
resulting in increased or decreased demand for Shaw’s product offerings as well as advertising
airtime and rates. There can be no assurance that current or future events caused b
y
volatilit
y
i
n domest
i
cor
i
nternat
i
onal econom
i
c cond
i
t
i
ons or a decl
i
ne
i
n econom
i
c
g
rowth w
i
ll not hav
e
an adverse effect on the Company’s business and operating results.
iii)
Interest rates,
f
ore
ig
n exchan
g
e rates and ca
pi
tal market
s
As at August 31, 2013 Shaw has the following financial exposures at risk in its day-to-da
y
o
perations:
(a) Interest rates: Due to the capital-intensive nature of Shaw’s operations, the Company
u
t
i
l
i
zes lon
g
-term
fi
nanc
i
n
g
extens
i
vel
yi
n
i
ts ca
pi
tal structure. The
p
r
i
mar
y
c
omponents o
f
th
i
s structure are:
1
. Bank
i
ng
f
ac
i
l
i
t
i
es as more
f
ully descr
i
bed
i
n Note
13
to the
C
onsol
i
dated
Financial Statements.
2. Various Canadian denominated senior notes and debentures with varying
matur
i
t
i
es
i
ssued
i
n the
p
ubl
i
c markets as more
f
ull
y
descr
i
bed
i
n Note
13
to the
Co
n
so
l
idated
F
i
n
a
n
cia
l
State
m
e
n
ts
.
Interest on bank
i
ndebtedness
i
s based on
f
loat
i
ng rates wh
i
le the sen
i
or notes ar
e
fixed-rate obligations. If required, Shaw utilizes its credit facility to finance day-to-da
y
o
p
erat
i
ons and, de
p
end
i
n
g
on market cond
i
t
i
ons,
p
er
i
od
i
call
y
converts the bank loan
s
to
fi
xed-rate
i
nstruments through publ
i
c market debt
i
ssues. Increases
i
n
i
nterest rates
c
ould have a material adverse effect on the Company’s cash flows
.
A
s at August 31, 2013, 100% of Shaw’s consolidated long-term debt was fixed wit
h
r
es
p
ect to
i
nterest rates
.
(
b
)
Fore
ig
n exchan
g
e:
S
ome o
f
the
C
om
p
an
y
’s ca
pi
tal ex
p
end
i
tures are
i
ncurred
i
nU
S
do
ll
a
r
s
.D
ec
r
eases i
n
t
h
e
v
a
l
ue of t
h
eCa
n
adia
n
do
ll
a
rr
e
l
ati
v
etot
h
eUSdo
ll
a
r
cou
l
d
h
ave a material adverse effect on the Company’s cash flows
.
(c) Capital markets: The Company requires ongoing access to capital markets to suppor
t
i
ts o
p
erat
i
ons.
C
han
g
es
i
nca
pi
tal market cond
i
t
i
ons,
i
nclud
i
n
g
s
ig
n
ifi
cant chan
g
es
i
n
market interest rates or lending practices, or changes in Shaw’s credit ratings, ma
y
h
ave a material adverse effect on the Company’s ability to raise or refinance short-term
or lon
g
-term debt, and thus on
i
ts
fi
nanc
i
al
p
os
i
t
i
on and ab
i
l
i
t
y
to o
p
erate
.
Shaw manages its exposure to floating interest rates through maintaining a balance of fixed an
d
f
loat
i
n
g
rate debt. To m
i
t
ig
ate some o
f
the
f
ore
ig
n exchan
g
e uncerta
i
nt
y
w
i
th res
p
ect to ca
pi
ta
l
expenditures, the Company regularly enters into forward contracts in respect of US dollar
commitments. In order to minimize the risk of counterparty default under its swap agreements
,
S
haw assesses the cred
i
tworth
i
ness o
fi
ts swa
p
counter
p
art
i
es. Further
i
n
f
ormat
i
on concern
i
n
g
t
he policy and use of derivative financial instruments is contained in Notes 2 and 28 to the
Consolidated Financial Statements
.
35