Shaw 2014 Annual Report Download - page 40

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2014
television programming rights for all platforms, including non-linear rights in addition to
traditional linear broadcast rights, and achieve high distribution levels. The Company expects
that competition will continue to increase and there can be no assurance that increased
competition will not have a material adverse effect on Shaw’s results of operations.
IMPACT OF REGULATION
As more fully discussed under Government regulations and regulatory developments, a majority
of the Corporation’s business activities are subject to regulations and policies administered by
Industry Canada and/or the CRTC. The Corporation’s operations and results are affected by
changes in regulations, policies and decisions, including changes in interpretation of existing
regulations by courts, the government or the regulators, in particular the CRTC, Industry
Canada, the Competition Bureau and the Copyright Board. This regulation relates to, and may
have an impact on, among other things, licensing, competition, programming carriage and
terms of carriage, strategic transactions and the potential for new or increased fees. Changes in
the regulatory regime may adversely affect the operations and performance of the Company.
ii) Economic conditions
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 economic
conditions. Changes in economic conditions may affect discretionary consumer spending,
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 by volatility
in domestic or international economic conditions or a decline in economic growth will not have
an adverse effect on the Company’s business and operating results.
iii) Interest rates, foreign exchange rates and capital markets
Shaw has the following financial risks in its day-to-day operations:
(a) Interest rates: Due to the capital-intensive nature of Shaw’s operations, the Company
utilizes long-term financing extensively in its capital structure. The primary
components of this structure include:
1. Banking facilities as more fully described in Note 13 to the Consolidated
Financial Statements.
2. Various Canadian denominated senior notes and debentures with varying
maturities issued in the public markets as more fully described in Note 13 to the
Consolidated Financial Statements.
Interest on bank indebtedness is based on floating rates while the senior notes are
primarily fixed-rate obligations. If required, Shaw 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. Increases in
interest rates could have a material adverse effect on the Company’s cash flows.
As at August 31, 2014, 94% of Shaw’s consolidated long-term debt was fixed with
respect to interest rates.
(b) Foreign exchange: In September 2014, the Company closed the acquisition of 100%
of the shares of US-based ViaWest for an enterprise value of US $1.2 billion which
was funded through a combination of cash on hand, assumption of ViaWest debt, and
a drawdown of US $330 million on the Company’s credit facility. Shaw’s net
investment in ViaWest is exposed to foreign exchange risk related to fluctuations in
36