Shaw 2014 Annual Report Download - page 28

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2014
Free cash flow is calculated as operating income before restructuring costs and amortization,
less interest, cash taxes paid or payable, capital expenditures (on an accrual basis and net of
proceeds on capital dispositions and adjusted to exclude amounts funded through the
accelerated capital fund) and equipment costs (net), adjusted to exclude share-based
compensation expense, less cash amounts associated with funding the new and assumed CRTC
benefit obligations related to the acquisition of Shaw Media as well as excluding non-controlling
interest amounts that are consolidated in the operating income before restructuring costs and
amortization, capital expenditure and cash tax amounts. Free cash flow also includes changes
in receivable related balances with respect to customer equipment financing transactions as a
cash item, and is adjusted for recurring cash funding of pension amounts net of pension
expense. Dividends paid on the Company’s Cumulative Redeemable Rate Reset Preferred
Shares are also deducted.
Free cash flow has not been reported on a segmented basis. Certain components of free cash
flow including operating income before restructuring costs and amortization, capital
expenditures (on an accrual basis net of proceeds on capital dispositions) and equipment costs
(net), CRTC benefit obligation funding, and non-controlling interest amounts continue to be
reported on a segmented basis. Other items, including interest and cash taxes, are not generally
directly attributable to a segment, and are reported on a consolidated basis.
For free cash flow purposes the Company considers the initial $300 million supplemental
executive retirement plan funding in the prior year to be a financing transaction and has not
included the amount funded or the related cash tax recovery in the free cash flow calculation.
v) Accelerated capital fund
During 2013, the Company established a notional fund, the accelerated capital fund, of up to
$500 million with proceeds received, and to be received, from several strategic transactions.
The accelerated capital initiatives are being funded through this fund and not cash generated
from operations. Key investments include the completion of the Calgary internal data centre,
further digitization of the network and additional bandwidth upgrades, development of IP
delivery of video, expansion of the WiFi network, and additional innovative product offerings
related to Shaw Go and other applications to provide an enhanced customer experience. Details
on the accelerated capital fund and investment are as follows:
Estimated year of spend 2013 2014 2015 Total
($millions Cdn)
Fund Opening Balance 110 240 150 500
Accelerated capital investment 110 240 – 350
Fund Closing Balance, August 31, 2014 – – 150 150
STATISTICAL MEASURES:
Subscriber counts (or Revenue Generating Units (“RGUs”)), including penetration and bundled
customers
The Company measures the count of its customers in Cable and DTH (Shaw Direct). Video cable
subscribers include residential customers, multiple dwelling units (“MDUs”) and commercial
customers. A residential subscriber who receives at a minimum, basic cable service, is counted
as one subscriber. In the case of MDUs, such as apartment buildings, each tenant with a
minimum of basic cable service is counted as one subscriber, regardless of whether invoiced
individually or having services included in his or her rent. Each building site of a commercial
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