Shaw 2014 Annual Report Download - page 41

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2014
exchange rates between the Canadian and US dollar. This risk is mitigated by the US
dollar denominated debt which is designated as a hedge of the net investment.
Upon completion of the ViaWest acquisition in September 2014, a portion of the
Company’s revenues and operating expenses are incurred in US dollars. In addition
certain of the Company’s capital expenditures are incurred in US dollars. Fluctuations
in the value of the Canadian dollar relative to the US dollar could have a material
effect on the Company’s business and operating results.
(c) Capital markets: The Company requires ongoing access to capital markets to support
its operations. Changes in capital market conditions, including significant changes in
market interest rates or lending practices, or changes in Shaw’s credit ratings, may
have a material adverse effect on the Company’s ability to raise or refinance short-term
or long-term debt, and thus on its financial position and ability to operate.
Shaw manages its exposure to floating interest rates through maintaining a balance of fixed and
floating rate debt. To mitigate some of the foreign exchange uncertainty with respect to capital
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,
Shaw assesses the creditworthiness of its swap counterparties. Further information concerning
the policy and use of derivative financial instruments is contained in Notes 2 and 28 to the
Consolidated Financial Statements.
iv) Litigation
The Company and its subsidiaries are involved in litigation matters arising in the ordinary
course and conduct of its business. Although management does not expect that the outcome of
these matters will have a material adverse effect on the Corporation, there can be no assurance
that these matters, or other matters that arise in the future, will not have an adverse effect on
the Corporation’s business and operating results.
v) Uninsured risks of loss
The Company relies on three satellites (Anik F2, Anik F1R and Anik G1) owned by Telesat
Canada (“Telesat”) to conduct its Satellite business. The Company owns certain transponders
on Anik F2 and has long-term capacity service agreements in place in respect of transponders
on Anik F1R, Anik F2 and Anik G1. The Company’s interests in these transponders are only
insurable indirectly through the satellite owner. In the case of transponders on Anik F1R and
Anik F2, the Company does not maintain any indirect insurance coverage as it believes the
costs are uneconomic relative to the benefit which could otherwise be derived through an
arrangement with Telesat. In the case of Anik G1, Telesat is committed to maintaining
insurance on the satellite for five years from its April 2013 launch. As collateral for the
transponder capacity pre-payments that were made by the Company to facilitate the
construction of the satellite, the Company maintains a security interest in the transponder
capacity and any related insurance proceeds that Telesat recovers in connection with an insured
loss event.
The Company does not maintain business interruption insurance covering damage or loss to one
or more of the satellites as it believes the premium costs are uneconomic relative to the risk of
satellite failure. Transponder capacity is available to the Company on an unprotected, non-
preemptible basis, in both the case of the Anik F2 transponders that are owned by Shaw and
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