PART 2 OF 2 Shaw Communications Fourth Quarter Results - Continued Growth in Revenue, Operating Income, Free Cash Flow and Customers.Part 2 CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--Oct. 22, 2003 Shaw Communications Shaw Communications Inc. (TSX: SJR.NV.B NYSE: SJR) is a Canadian telecomunications company headquartered in Calgary, Alberta. The company was founded by J.R. Shaw in 1966 as Capital Cable Television Co Ltd.. , Inc. (NYSE NYSE See: New York Stock Exchange :SJR SJR Senate Joint Resolution SJR Superjoint Ritual (band) SJR St John Rigby (Catholic Sixth Form College) SJR Signal-To-Jammer Ratio SJR Saint Joseph Regional High School (USA) )(TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :SJR.B): Part 2 of 2 RISKS AND UNCERTAINTIES There have been no material changes in any risks or uncertainties facing the Company since the year ended August 31, 2002. Further to our disclosure in our first quarter release dated January January: see month. 15, 2003 concerning the status of the Anik F1 satellite, Telesat has provided the following update in its press release of February February: see month. 4, 2003: "Telesat announced today that it has signed a contract with Astrium, Europe's largest space company, for a new satellite targeted for launch in 2005 to replace the Anik F1 satellite and ensure continuity of service for its customers. The new satellite, Anik F1R, will carry telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , broadcasting and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the services." Based on the foregoing, we do not anticipate any incremental cost Incremental Cost The encompassing change that a company experiences within its balance sheet due to one additional unit of production. Notes: Incremental cost is the overall change that a company experiences by producing one additional unit of good. to the Company or disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. to our DTH (Direct-To-Home) Typically refers to satellite TV broadcasting directly to a dish antenna on the roof of a house. See DBS. and satellite services customers. Further to our disclosure in our Fourth Quarter 2002 Release, dated October October: see month. 17, 2002, concerning the possible launch of a new Mexican New Mexico Abbr. NM or N.M. or N.Mex. A state of the southwest United States on the Mexican border. It was admitted as the 47th state in 1912. satellite (operated by Satmex), we have learned that the Governments of Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. intend to conclude a new Satellite Coordination coordination /co·or·di·na·tion/ (ko-or?di-na´shun) the harmonious functioning of interrelated organs and parts. co·or·di·na·tion n. 1. The harmonious adjustment or interaction of parts. Agreement to accommodate the operation of a new Mexican satellite network according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the terms and parameters included in the 2000 Coordination Agreement. This would ensure that the operation of a new Mexican satellite will not interfere with the Anik satellites used by Star Choice. As a result, Shaw no longer considers this issue as a significant potential risk to Star Choice's DTH operations. FINANCIAL POSITION Overview Total assets at August 31, 2003 were $7.6 billion compared to $8.5 billion at August 31, 2002. The following discussion describes the significant changes in the balance sheet since August 31, 2002. Current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. decreased by $87.0 million principally due to a $57.0 million reduction in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and $47.0 million decrease in inventories offset by increased cash of $20.8 million. The decrease in accounts receivables is primarily due to collection of miscellaneous receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , payment received on the Access Communications
Access Communications Co-operative Ltd. Inc. promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. and a decrease in subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. receivables as a result of the sale of the US cable systems. Inventories decreased as the result of improved management of supply and demand and lower levels of customer activations. Investments decreased by $84.2 million principally due to the third quarter write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of $15.0 million and due to the removal of $74.6 million of net book value on the sale of Cogeco Cogeco (TSX: CGO) is a Canadian media and communications company. The corporation first entered the television business in the mid-1950s with the launch of a Radio-Canada affiliate in Trois-Rivières, CKTM. shares and the surrender To give up, return, or yield. The word surrender presupposes the possession or ownership of the thing that is to be returned or given up. It indicates a transfer of title as well as possession, but it does not express or in any way suggest the transaction of a sale of the Liberate (Liberate Technologies, San Mateo, CA) A software company that specialized in the information appliance field. Formerly Network Computer, Inc. (NCI), a spin-off from Oracle in 1996, it changed its name in 1999. and Terayon Terayon Communication Systems, Inc. is a company that sells equipment to broadband service providers for delivering broadband voice, video and data services to residential and business subscribers. shares on the settlement of the SHELS SHELS Shuttle Hitchhiker Experiment Launch System SHELS Shuttle Hitchhiker Ejectable Launch System . Property, plant and equipment decreased by $362.0 million due mainly to the disposal of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $132 million of plant, property and equipment on the US cable systems dispositions and due to current year amortization being in excess of capital expenditures. Deferred charges decreased by $50.9 million due to a $43.3 million decrease in foreign exchange losses on the translation of hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. US dollar denominated debt as a result of the strengthening of the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents since August 31, 2002, amortization of financing and other costs of $21.2 million, a net increase in unamortized equipment subsidies of $8.6 million and an increase in other deferred charges of $5.1 million. Broadcast licenses decreased by $249.5 million primarily due to the removal of $253.2 million of net book value in respect of the US cable systems which were sold in 2003. Goodwill decreased by $66.9 million due to $16.9 million on the sale of Business Television and the $50.0 million write-down of goodwill during the third quarter. Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. (excluding current portion of long-term debt Current Portion Of Long-Term Debt A portion of the balance sheet that represents the total amount of long-term debt that must be paid within the next year. The balance sheet has a liability section, which is broken down into long-term and current debt. ) decreased by $89.8 million primarily due to a reduction in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. of $97.4 million resulting from the payment of August 2002 accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. capital expenditures, repayments under the Star Choice vendor financing Vendor Financing The lending of money by a company to one of its customers so that the customer can buy products from it. By doing this, the company increases its sales even though it is basically buying its own products. facility and lower interest accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. resulting from a decreased debt level. The increase in unearned revenue Unearned Revenue When an individual or company receives money for a service or product that has yet to be fulfilled. Notes: For example, prepayment on a lease contract - the revenue is a liability until it has been earned. See also: Earned Income, Passive Income is primarily due to an increase in prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. from retailers on DTH equipment. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. (including current portion) decreased by $552.6 million due to the net repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of the Company's debt of $352.9 million and a decrease of $199.7 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the translation of the US dollar denominated debt. Deferred credits increased by $102.1 million primarily due to a $123.8 million increase in foreign exchange gains on the translation of hedged US dollar denominated debt which was offset by $12.0 million in amortization of prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. IRU Iru (ī`r ), in the Bible, Caleb's eldest son. rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. revenue and a $6.5 million
mark-to-market Mark-to-marketAdjustment of the book value or collateral value of a security to reflect current market value. credit removed as part of the Star Choice US $150 million Senior secured note redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. . Future incomes taxes have decreased $76.3 million primarily due to the sale of the US cable systems. Share capital decreased by $183.5 million as a result of the settlement of the SHELS III, IV and V equity linked debentures by delivery of the underlying Liberate and Terayon shares. LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition continues to be a significant strength for Shaw. Our future liquidity depends on three factors: free cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , access to available credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities and sale of non-strategic assets. First, we grew free cash flow in the cable division from negative $349.4 million last year to positive $205.2 million this year. Further, the satellite division, including satellite services and DTH, reduced its cash requirements by $105.6 million over last year, and is making substantial progress towards becoming free cash flow positive. As we continue growing free cash flow, it will become an increasing source of liquidity. Second, Shaw has access to over $1 billion of available credit facilities from its existing bank syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism . These facilities are available to re-finance debt or to fund other corporate requirements or opportunities that may arise. And finally, with respect to the sale of non-strategic assets to increase liquidity, Shaw sold its US cable assets with approximately 75,000 subscribers for gross proceeds of Cdn. $260 million. In addition, a number of redundant Repetitive. See redundancy. properties and other non-strategic assets were sold, resulting in proceeds of approximately $22.5 million. A number of steps were taken during 2003 to improve the Company's existing debt structure which will result in lower interest costs in the future. During the second quarter, Cancom's credit facility was re-financed through a $350 million term loan obtained by Shaw from a new syndicate of banks, which includes a number of banks that are part of Shaw's main banking syndicate. The interest on this loan was fixed via hedges at rates which range from 4.9525% to 7.0775% depending on debt to cash flow ratios. At August 31, 2003 the rate was 5.9525%. In addition, Shaw repaid and cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. Cancom's $40 million subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. credit facility. These changes to Cancom's debt will, based on current rates, generate interest savings of approximately $7 million next year. Finally, utilizing a portion of the proceeds from the sale of the Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and and Texas cable systems, the Company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. the Star Choice US $150 million Senior secured notes in August 2003. These notes had an interest rate of 13% and were due December December: see month. 15, 2005. The early redemption entailed redemption premium redemption premium See call premium. and other costs amounting to $10.6 million; however, this will be more than offset by interest savings resulting from the redemption. With existing and anticipated strong growth in cash flow from operations and access to over $1 billion of available credit facilities, Shaw is in an excellent position to finance its growth and at the same time improve its debt to cash flow ratios.
CASH FLOW
Operating Activities
Three months ended Year ended
August 31, August 31,
2003 2002 % 2003 2002 %
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($000s Cdn)
Cash flow from
operations 156,140 107,258 45.6 534,766 332,109 61.0
Net change in
non-cash working
capital balances
related to
operations (5,354) 56,974 (109.4) 3,675 3,303 11.3
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150,786 164,232 (8.2) 538,441 335,412 60.5
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Cash flow from operations increased mainly as a result of the strong growth in profitability in the cable and Star Choice divisions and due to decreased interest expense of $5.2 million and $7.6 million over the comparative quarter and year respectively. Cash flow from working capital fluctuates primarily with the timing of accounts payable and accrued liabilities payments.
Investing Activities
Three months ended Year ended
August 31, August 31,
--------------------------------------------------------------------
2003 2002 Increase 2003 2002 Increase
--------------------------------------------------------------------
($000s Cdn)
Cash flow
provided by
(used in)
investing
activities 175,009 (124,086) 299,095 (95,037) (825,558) 730,521
--------------------------------------------------------------------
The cash from investing activities was $299.1 million higher than the August 2002 quarter primarily due to the proceeds of $257.4 million received on sale of the US cable systems. The cash outlay required for investing activities was $730.5 million lower than the year ended August 2002 due to a $485.9 million reduction in capital expenditures and the proceeds on the sale of the US cable systems. Financing Activities The changes in financing activities during the period were as follows:
Three months ended Year ended
August 31, August 31,
2003 2002 2003 2002
----------------------------- --------------------
(In millions Cdn)
Star Choice note
redemption, including
restructuring costs (228.2) - (228.2) -
Bank loans - net
repayments (79.8) (45.6) (141.8) (15.9)
Dividends (14.2) (13.4) (50.6) (53.2)
Other 0.3 2.3 (2.0) (8.1)
Issue of Shels V - - - 90.5
Issue of US $300 million
notes - - - 476.8
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Cash flow provided by
(used in) financing
activities 321.9 (56.7) (422.6) 490.1
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-------------------------------------------------------------------
CAUTION CONCERNING FORWARD LOOKING STATEMENTS Certain statements included and incorporated by reference herein constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . When used, the words "anticipate", "believe", "expect", "plan", intend", "target", "guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. ", "goal", and similar expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of Shaw's business and operations, plans and references to the future success of Shaw. These forward-looking statements are based on certain assumptions and analyses made by Shaw in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . However, whether actual results and developments will conform with the expectations and predictions of Shaw is subject to a number of risks and uncertainties, including, but not limited to, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by Shaw; increased competition in the markets in which Shaw operates and from the development of new markets for emerging technologies; changes in laws, regulations and decisions by regulators in Shaw's industries in both Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. ; Shaw's status as a holding company with separate operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. ; changing conditions in the entertainment, information and communications industries communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. ; risks associated with the economic, political and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. policies of local governments and laws and policies of Canada and the United States; and other factors, many of which are beyond the control of Shaw. Should one or more of these risks materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should assumptions underlying the forward-looking statements prove incorrect Incorrect means to not be correct and may also refer to:
You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement (and such risks, uncertainties and other factors) speak only as of the date on which it was originally made and we expressly disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any obligation or undertaking to disseminate dis·sem·i·nate v. dis·sem·i·nat·ed, dis·sem·i·nat·ing, dis·sem·i·nates v.tr. 1. To scatter widely, as in sowing seed. 2. any updates or revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to any forward-looking statement contained in this document to reflect any change in our expectations with regard to those statements or any other change in events, conditions or circumstances on which any such statement is based, except as required by law. New factors emerge from time to time, and it is not possible for us predict what factors will arise or when. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
CONSOLIDATED BALANCE SHEETS
August 31, August 31,
(thousands of Canadian dollars) 2003 2002
------------------------------------------------------------------
(Unaudited) (Audited)
ASSETS (Restated - note 1)
Current
Cash and term deposits 20,753 -
Accounts receivable 140,998 197,963
Inventories 81,787 128,811
Prepaids and other 16,783 20,588
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260,321 347,362
Investments and other
assets 49,415 133,602
Property, plant and
equipment 2,415,662 2,777,697
Deferred charges 169,045 219,916
Intangibles (note 3) -
Broadcast licenses 4,627,728 4,877,256
Goodwill 78,948 145,865
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7,601,119 8,501,698
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness - 2,303
Accounts payable and
accrued liabilities 413,712 511,106
Income taxes payable 15,725 10,631
Unearned revenue 95,918 91,095
Current portion of
long-term debt (note 4) 271,520 -
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796,875 615,135
Long-term debt (note 4) 2,645,548 3,469,637
Deferred credits 735,353 633,259
Future income taxes 928,277 1,004,559
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5,106,053 5,722,590
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Shareholders' equity
Share capital (note 5) 2,834,878 3,018,332
Deficit (340,294) (240,737)
Cumulative translation
adjustment 482 1,513
------------------------------------------------------------------
2,495,066 2,779,108
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7,601,119 8,501,698
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See accompanying notes
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
RETAINED EARNINGS (DEFICIT)
Three months ended Year ended
August 31, August 31,
-------------------- ------------------
(thousands of Canadian
dollars except per
share amounts) 2003 2002 2003 2002
---------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Audited)
(Restated - (Restated -
note 1) note 1)
Revenue (note 2) 520,319 498,351 2,076,740 1,914,284
Operating, general and
administrative expenses 295,468 313,136 1,256,140 1,281,611
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Operating income before
amortization (note 2) 224,851 185,215 820,600 632,673
Amortization of deferred
charges and property,
plant and equipment
(note 1) 146,205 144,971 598,189 585,331
Amortization of deferred
IRU revenue (3,126) (3,189) (11,984) (11,517)
---------------------------------------------------------------------
Operating income 81,772 43,433 234,395 58,859
Interest 62,943 68,110 259,702 267,323
---------------------------------------------------------------------
18,829 (24,677) (25,307) (208,464)
Gain (loss) on sale of
investments 729 (283) 1,957 2,321
Write-down of investments - (61,538) (15,000) (330,466)
Gain on redemption of SHELS
(note 5) - - 119,521 218,327
Dilution loss on issuance of
stock by equity investee - - - (571)
Loss on sale of satellite
assets (note 3) - - (3,800) (1,281)
Foreign exchange gain (loss)
on unhedged long-term debt (6,819) (6,383) 32,617 (1,658)
Provision for loss on sale
and write-down of assets
(note 3) 5,326 - (124,674) -
Debt restructuring costs (10,634) - (10,634) -
Other revenue (expense)
(note 8) 4,068 (686) 9,338 6,048
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Income (loss) before income
taxes 11,499 (93,567) (15,982) (315,744)
Income tax expense
(recovery) 7,375 (19,911) 29,925 (82,907)
---------------------------------------------------------------------
Income (loss) before the
following 4,124 (73,656) (45,907) (232,837)
Equity income (loss) on
investees 20 (697) (1,921) (53,487)
---------------------------------------------------------------------
Net income (loss) 4,144 (74,353) (47,828) (286,324)
Retained earnings (deficit)
beginning of period as
previously reported (328,535)(143,936) (230,327) 111,830
Adjustment for change in
accounting policy (note 1) - (6,704) (10,410) (12,378)
---------------------------------------------------------------------
Retained earnings (deficit),
beginning of period
restated (328,535)(150,640) (240,737) 99,452
Dividends -
Class A and Class B Non-Voting
Shares (5,768) (5,767) (11,536) (11,534)
Equity instruments (net of
income taxes) (10,135) (9,977) (40,193) (42,331)
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Deficit, end of period (340,294)(240,737) (340,294) (240,737)
---------------------------------------------------------------------
Loss per share (note 6)
Basic and diluted (0.03) (0.36) (0.38) (1.42)
---------------------------------------------------------------------
(thousands of shares)
Weighted average
participating shares
outstanding during
period 231,850 231,848 231,848 231,820
Participating shares
outstanding, end of period 231,857 231,848 231,857 231,848
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See accompanying notes
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Year ended
August 31, August 31,
-------------------- ---------------
(thousands of Canadian
dollars) 2003 2002 2003 2002
---------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Audited)
(Restated - (Restated -
note 1) note 1)
OPERATING ACTIVITIES (note 7)
Cash flow from operations 156,140 107,258 534,766 332,109
Net change in non-cash
working capital balances
related to operations (5,354) 56,974 3,675 3,303
--------------------------------------------------------------------
150,786 164,232 538,441 335,412
--------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property,
plant and equipment
(note 2) (54,302) (79,845) (257,683) (743,568)
Additions
to equipment
subsidies (note 2) (33,680) (22,655) (162,876) (121,654)
Net reduction to
inventories 15,125 14,289 59,708 15,397
Proceeds on sale
of US cable systems
(note 3) 257,435 - 257,435 -
Cable systems acquisitions
(note 3) (1,508) (34,606) (3,634) (40,454)
Proceeds (costs) on sale
of satellite assets - 245 6,461 (631)
Proceeds on sale
of investments
and other assets 2,368 5,836 22,469 18,489
Costs on redemption of
SHELS - - (2,113) (3,134)
Acquisition of investments (7,313) (6,845) (9,662) (28,158)
Proceeds received
on assets held for sale - - - 89,500
Additions
to deferred charges (3,116) (505) (5,142) (11,345)
--------------------------------------------------------------------
175,009 (124,086) (95,037) (825,558)
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FINANCING ACTIVITIES
Increase (decrease)
in bank indebtedness - 2,303 (2,303) 514
Proceeds on pre-payment
of IRU 235 - 235 -
Payment to terminate
interest rate swaps - - - (9,400)
Increase in long-term
debt 3,640 35,000 505,599 1,049,520
Long-term debt
repayments (294,510) (80,644) (858,510) (588,644)
Debt restructuring costs (17,134) - (17,134) -
Issue of equity instruments,
net of after-tax expenses - (2) - 90,481
Issue of Class B Non-Voting
Shares, net of after-tax
expenses 95 - 95 792
Dividends paid -
Class A and Class B
Non-Voting Shares (5,768) (5,767) (11,536) (11,534)
Equity instruments,
net of current taxes (8,475) (7,637) (39,084) (41,618)
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(321,917) (56,747) (422,638) 490,111
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Effect of currency
translation on cash
balances and cash flows 89 96 (13) 35
--------------------------------------------------------------------
Increase (decrease) in cash 3,967 (16,505) 20,753 -
Cash, beginning of the
period 16,786 16,505 - -
--------------------------------------------------------------------
--------------------------------------------------------------------
Cash, end of the period 20,753 - 20,753 -
--------------------------------------------------------------------
--------------------------------------------------------------------
Cash includes cash and term deposits
See accompanying notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge (unaudited) August 31, 2003 (all amounts in thousands of Canadian dollars, except per share amounts) 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES The interim consolidated financial statements include the accounts of Shaw Communications Inc. and its subsidiaries (collectively the "Company"). The notes presented in these interim consolidated financial statements include only significant events and transactions occurring since the Company's last fiscal year and are not fully inclusive of inclusive of prep. Taking into consideration or account; including. all matters normally disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the Company's annual audited consolidated financial statements. As a result, these interim consolidated financial statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Company's consolidated financial statements for the year ended August 31, 2002. The interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements except as noted in the following changes. Adoption of recent Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. accounting pronouncements (i) Foreign currency translation Commencing September September: see month. 1, 2002, the Company retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Canadian standard for foreign currency translation which is consistent with US standards and eliminates the deferral deferral - Waiting for quiet on the Ethernet. and amortization method of accounting for unrealized translation gains and losses on non-current monetary assets and liabilities Monetary assets and liabilities Assets and liabilities with contractual payoffs. that are not hedged and requires exchange gains and losses to be included in net income in the period they are incurred. Upon adoption of this amended standard September 1, 2002, deferred unamortized foreign exchange losses net of gains amounting to $12,378 (net of taxes) were eliminated and charged against the opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. as at September 1, 2001. As prior years were restated upon adoption, the Company's net loss increased by $3,706 ($0.01 per share) and decreased by $1,968 ($0.01 per share) for the prior year quarter and year to date respectively. (ii) Stock-based compensation and other stock-based payments Commencing September 1, 2002, the Company adopted the new Canadian New Canadian Noun Canad a recent immigrant to Canada standard for stock-based compensation and other stock-based payments which requires that all stock-based awards granted to non-employees be accounted for at fair value. With limited exceptions relating to direct awards of stock, awards required or expected to be settled in cash and stock appreciation rights, the new standard permits the Company to continue its current policy of not recording any compensation cost on the grant of stock options to employees. No restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior periods was required as a result of the adoption of the new standard. See note 5 for full disclosure as required by this standard. Reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. To be consistent with other practices throughout the Company, in fiscal 2003 the Company retroactively changed the presentation of equipment revenue and cost of sales in respect of sale of DCT (Discrete Cosine Transform) An algorithm that is widely used for data compression. Similar to Fast Fourier Transform, DCT converts data (pixels, waveforms, etc.) into sets of frequencies. The first frequencies in the set are the most meaningful; the latter, the least. and modem modem [modulator/demodulator], an external device or internal electronic circuitry used to transmit and receive digital data over a communications line normally used for analog signals. equipment at a subsidized sub·si·dize tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es 1. To assist or support with a subsidy. 2. To secure the assistance of by granting a subsidy. cost to cable and Internet subscribers. Prior to fiscal 2003, Shaw accounted for the price charged to the subscriber for a DCT or modem as a cost recovery on the equipment provided as part of the service connection process. The price charged to the subscriber for a DCT or modem is now recorded as equipment revenue offset by an equal cost of sale. As a result of the change in accounting presentation, cable revenue and expenses have increased by $5,877 (2002 - $3,741) and $26,489 (2002 - $25,724) respectively for the quarter and year ended August 2003. 2. BUSINESS SEGMENT INFORMATION The Company provides cable television services, high-speed Internet See broadband. access and Internet infrastructure services (Big Pipe) ("Cable"); DTH (Star Choice) satellite services; and, satellite distribution services. All of these operations are located in Canada except for two small cable television systems located in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. which were sold effective June June: see month. 30, 2003. Information on operations by segment is as follows: Operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. and income (loss) before amortization
Three months ended Year ended
August 31, August 31,
----------------- -------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Revenue
Cable 369,197 366,626 1,488,929 1,395,103
DTH 130,519 107,823 496,804 416,981
Satellite services 26,976 29,314 116,782 119,774
--------------------------------------------------------------------
526,692 503,763 2,102,515 1,931,858
Inter segment -
Cable (641) (579) (2,607) (1,816)
DTH (1,248) (1,430) (5,167) (1,430)
Satellite services (4,484) (3,403) (18,001) (14,328)
--------------------------------------------------------------------
520,319 498,351 2,076,740 1,914,284
--------------------------------------------------------------------
--------------------------------------------------------------------
Operating income (loss) before
amortization(1)
Cable 186,277 173,883 727,458 608,916
DTH 20,256 2,264 52,814 (14,103)
Satellite services 10,318 9,068 41,578 42,460
Satellite restructuring - - (4,850) -
DTH write-down of inventory - - (4,400) -
Corporate restructuring (4,000) - (4,000) (4,600)
Recovery of Cable litigation
accrual 12,000 - 12,000 -
--------------------------------------------------------------------
224,851 185,215 820,600 632,673
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (loss) before amortization is presented because it is a widely accepted financial indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of a company's ability to service and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. debt. Operating income (loss) before amortization is not a measurement in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian or US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and should not be considered as an alternative to net income or any other measure of performance required by Canadian or US GAAP.
Capital expenditures
Three months ended Year ended
August 31, August 31,
---------------------- ------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
--------------------------------------------------------------------
Capital expenditures
accrual basis
Cable 35,600 75,935 163,835 543,760
Corporate (1) 8,296 17,977 36,789 87,119
--------------------------------------------------------------------
Sub-total Cable
including corporate 43,896 93,912 200,624 630,879
--------------------------------------------------------------------
DTH 4,181 19,481 35,038 80,558
Satellite services 24 211 1,912 20,576
--------------------------------------------------------------------
Sub-total Satellite 4,205 19,692 36,950 101,134
--------------------------------------------------------------------
Total capital
expenditures accrual
basis 48,101 113,604 237,574 732,013
Change in working
capital related to
capital expenditures 6,201 (33,759) 20,109 11,555
--------------------------------------------------------------------
Capital expenditures
cash flow 54,302 79,845 257,683 743,568
--------------------------------------------------------------------
--------------------------------------------------------------------
Equipment subsidies
Cable 7,133 11,008 67,628 52,446
Satellite 26,547 11,647 95,248 69,208
--------------------------------------------------------------------
33,680 22,655 162,876 121,654
--------------------------------------------------------------------
--------------------------------------------------------------------
Total capital
expenditures on an
accrual basis
including equipment
subsidies
Cable 51,029 104,920 268,252 683,325
Satellite 30,752 31,339 132,198 170,342
--------------------------------------------------------------------
81,781 136,259 400,450 853,667
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Includes the Company's 38.3% proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share or $3,656 and $10,976 for the quarter and year ended respectively, of capital expenditures in respect of the Burrard Burrard can mean many things:
adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. (see Note 1 to the Company's 2002 Consolidated Financial Statements.) As the Partnership is financed by its own credit facility, this is a non-cash item for the Company.
Assets
August 31, 2003
----------------------------------------------------
Cable DTH Satellite services Total
$ $ $ $
--------------------------------------------------------------------
Segment assets 5,771,952 965,510 556,844 7,294,306
---------------------------------------------------------
---------------------------------------------------------
Corporate assets 306,813
----------
Total assets 7,601,119
----------
----------
August 31, 2002
----------------------------------------------------
Cable DTH Satellite services Total
$ $ $ $
--------------------------------------------------------------------
Segment assets 6,520,696 999,372 637,371 8,157,439
---------------------------------------------------------
---------------------------------------------------------
Corporate assets 344,259
----------
Total assets 8,501,698
----------
----------
3. INTANGIBLES
The changes in the carrying amount of intangibles for the year ended
August 31, 2003 are as follows:
Broadcast licenses Goodwill
$ $
--------------------------------------------------------------------
Balance as of September 1, 2002 4,877,256 145,865
Business acquisition 3,634 -
Business divestitures (173,162) (16,917)
Write-down (80,000) (50,000)
--------------------------------------------------------------------
Balance as of August 31, 2003 4,627,728 78,948
--------------------------------------------------------------------
--------------------------------------------------------------------
Divestitures Effective June 30, 2003 the Company sold its US cable systems comprised of approximately 75,000 basic cable subscribers and 13,000 Internet subscribers in Texas and Florida for $257.4 million. Prior to the sale, the Company wrote-down the value of its US cable systems by $80.0 million. A significant portion of the write-down was in respect of the strengthening Cdn $ impacting the translated net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). . Due to a slight recovery of the US$ in the fourth quarter, the actual loss was $74.7 million resulting in a $5.3 million gain on the sale this quarter.
4. LONG-TERM DEBT (1)
Effective August 31,
Interest rates ------------------------
2003 2002
% $ $
--------------------------------------------------------------------
Corporate
Fixed and
Bank loans variable 606,798 425,106
Senior notes -
Due April 11, 2005 7.05 275,000 275,000
Due October 17, 2007 7.40 300,000 300,000
US $440 million due April
11, 2010 7.88 609,708 685,872
US $225 million due April
6, 2011 7.68 311,783 350,729
US $300 million due
December 15, 2011 7.61 415,710 467,640
--------------------------------------------------------------------
2,518,999 2,504,347
--------------------------------------------------------------------
Cancom
Bank loans (2) Variable - 253,800
Subordinated credit
facility Variable - 40,000
Structured Note, due
December 15, 2003 7.00 250,000 250,000
--------------------------------------------------------------------
250,000 543,800
--------------------------------------------------------------------
Star Choice
US $150 million Senior
secured notes 13.00 - 233,820
--------------------------------------------------------------------
Other subsidiaries
Videon CableSystems Inc.
8.15% Senior Debentures
Series A due April 26, 2010 7.63 130,000 130,000
Big Pipe Ventures, L.P. Variable - 50,000
Burrard Landing Lot 2
Holdings Partnership Variable 18,069 7,670
--------------------------------------------------------------------
148,069 187,670
--------------------------------------------------------------------
Total consolidated debt 2,917,068 3,469,637
Less current portion (3) 271,520 -
--------------------------------------------------------------------
2,645,548 3,469,637
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Availabilities under banking facilities are as follows at
August 31, 2003:
Total Operating Revolving Term (a) Term (2)
$ $ $ $ $
--------------------------------------------------------------------
Total
facilities 1,775,198 60,000 1,150,000 215,198 350,000
Amount drawn
(excluding
letters of
credit) 606,798 - 41,600 215,198 350,000
--------------------------------------------------------------------
1,168,400 60,000 1,108,400 - -
--------------------------------------------------------------------
--------------------------------------------------------------------
The amount available under the revolving facility amortizes such
that the facility expires April 30, 2007 as follows:
Date Amount Available %
--------------------------------------------------------------------
August 31, 2003 $ 1,150,000 100
October 31, 2003 1,092,500 95
April 30, 2004 1,035,000 90
October 31, 2004 948,750 82.5
April 30, 2005 862,500 75
October 31, 2005 718,750 62.5
April 30, 2006 575,000 50
October 31, 2006 287,500 25
April 30, 2007 - 0
(a) Amortizes on the same basis as the revolving facility. (2) A syndicate of banks has provided the Company with an unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. term loan in the amount of $350,000 due February 10, 2006. The proceeds of the loan were invested in preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Cancom, which in turn used the proceeds to repay in full the amounts outstanding under its $350,000 senior credit facility. Cancom's credit facility was then cancelled. The loan is subject to essentially the same terms and conditions as the Company's existing unsecured credit facility. During the prior quarter, the Company entered into interest rate hedges to fix interest for the duration of the loan at a rate that ranges from 4.9525% to 7.0775% depending on debt to cash flow ratios. At August 31, 2003 the rate was 5.9525%. (3) Current portion of long-term debt includes the Cancom Structured Note and current portion of the term facilities.
5. SHARE CAPITAL
Issued and outstanding
Number of Securities
August 31, August 31,
--------------------------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------------------------
--------------------------------------------------------------------
$ $
11,360,432 11,373,972 Class A Shares 2,491 2,493
220,496,092 220,473,552 Class B Non-Voting
Shares 2,107,464 2,107,367
--------------------------------------------------------------------
231,856,524 231,847,524 2,109,955 2,109,860
--------------------------------------------------------------------
EQUITY INSTRUMENTS
COPrS -
5,700,000 5,700,000 8.45% Series A US
$142.5 million
due Sept. 30, 2046 192,871 192,871
100,000 100,000 8.54% Series B due
Sept. 30, 2027 98,467 98,467
6,900,000 6,900,000 8.50% Series US
$172.5 million due
Sept. 30, 2097 252,525 252,525
6,000,000 6,000,000 8.875% Series due
Sept. 28, 2049 147,202 147,202
--------------------------------------------------------------------
691,065 691,065
--------------------------------------------------------------------
SHELS -
- 33,923 Series III - US
$33.9 million - 50,342
- 28,853 Series IV - US
$28.9 million - 42,726
- 57,583 Series V - US
$57.6 million - 90,481
--------------------------------------------------------------------
- 183,549
--------------------------------------------------------------------
Zero Coupon Loan -
US $22.8 million 33,858 33,858
--------------------------------------------------------------------
2,834,878 3,018,332
--------------------------------------------------------------------
--------------------------------------------------------------------
The Series V SHELS were redeemed on February 28, 2003 by delivering the underlying security of 5,326,827 Terayon shares. The proceeds on the surrender of the Terayon shares were recorded using the SHELS historical cost which resulted in a gain of $44,179 on redemption of the SHELS. The Series III and IV SHELS were redeemed on May 31, 2003 by delivering the underlying security of 1,452,506 Liberate shares. The proceeds on the surrender of the Liberate shares were recorded using the SHELS historical cost which resulted in a gain of $44,561 and $30,781 on redemption of the SHELS III and IV, respectively. Stock option plan Under a stock option plan, directors, officers, employees and consultants of the Company are eligible to receive stock options to acquire Class B Non-Voting non-voting adj non-voting shares → azioni fpl senza diritto di voto Shares with terms not to exceed 10 years from the date of grant. Twenty-five percent of the options are exercisable on each of the first four anniversary dates from the date of the original grant. The options must be issued at not less than their fair market value of the Class B Non-Voting Shares at the date of grant. The maximum number of Class B Non-Voting Shares issuable under this plan and the warrant plan described below may not exceed 16,000,000. The changes in options for the year ended August 31, 2003 are as follows:
Weighted average
exercise price
Shares $
--------------------------------------------------------------------
Outstanding at August 31, 2002 8,303,000 32.58
Granted 1,093,250 32.62
Exercised - -
Forfeited (1,788,750) 32.64
--------------------------------------------------------------------
Outstanding at August 31, 2003 7,607,500 32.58
--------------------------------------------------------------------
--------------------------------------------------------------------
The following table summarizes information about the options
outstanding at August 31, 2003:
Range Number Weighted Weighted Number Weighted
of outstanding average average exercisable average
prices at August 31, remaining exercise at August 31, exercise
2003 contractual price 2003 price
life
---------------------------------------------------------------------
29.70 -
34.08 7,607,500 7.7 32.58 3,336,486 32.36
---------------------------------------------------------------------
---------------------------------------------------------------------
For common share options granted to employees, had the Company determined compensation costs based on the fair values at grant dates of the common share options consistent with the method prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). under CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) Handbook
This article is about reference works. For the subnotebook computer, see .
A financial projection based on assumptions. amounts indicated below:
August 31, 2003
--------------------------------
Three months ended Year ended
--------------------------------------------------------------------
Net income (loss) for the period 4,144 (47,828)
Proforma net loss for the period (990) (68,664)
Proforma loss per share (0.05) (0.47)
--------------------------------------------------------------------
--------------------------------------------------------------------
The weighted average estimated fair value at the date of the grant for common share options granted for the year ended August 31, 2003 was $1.23 per share. The fair value of each option granted was estimated on the date of the grant using the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on with the following assumptions:
August 31, 2003
---------------------------------
Three months ended Year ended
--------------------------------------------------------------------
Dividend yield 0.30% 0.33%
Risk-free interest rate 3.69% 3.19%
Expected life of options 4 years 4 years
Expected volatility factor of the
future expected market price of Class
B Non-Voting Shares 36.5% 40.4%
---------------------------------------------------------------------
---------------------------------------------------------------------
For the purposes of pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis. Other stock options In conjunction with the acquisition of Cancom, holders of Cancom options elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to receive 0.9 of a Shaw Class B Non-Voting Share in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. one Cancom share which would have been received upon the exercise of an option under the Cancom plan. At August 31, 2003, there were 78,002 Cancom options outstanding with exercise prices between $7.75 and $23.25 and a weighted average price of $12.89. The weighted average remaining contractual life of the Cancom options is 3.6 years. At August 31, 2003, 65,002 Cancom options were exercisable into 58,502 Class B Non-Voting Shares of the Company at a weighted average price of $14.13 per Class B Non-Voting Share. Warrants Prior to the Company's acquisition and consolidation of Cancom effective July July: see month. 1, 2000, Cancom and its subsidiary Star Choice had established a plan to grant warrants to acquire Cancom common shares at a price of $22.50 per share to distributors and dealers. The Company provided for this obligation (using $25 per equivalent Shaw Class B Non-Voting Share) in assigning as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. fair values to the assets and liabilities in the purchase equation on consolidation based on the market price of the Shaw Class B Non-Voting Shares at that time. Accordingly, the issue of the warrants under the plan had no impact on the earnings of the Company. A total of 262,807 warrants remain outstanding under the plan and vest evenly over a four year period. At August 31, 2003, 122,929 of these warrants had vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) . 6. LOSS PER SHARE
Loss per share calculations are as follows:
August 31,
--------------------------------------------------------------------
Three months ended Year ended
--------------------------------------------------------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Net income (loss) 4,144 (74,353) (47,828) (286,324)
Equity entitlements,
net of income tax (10,135) (9,977) (40,193) (42,331)
--------------------------------------------------------------------
(5,991) (84,330) (88,021) (328,655)
--------------------------------------------------------------------
--------------------------------------------------------------------
Loss per share
- basic and diluted (0.03) (0.36) (0.38) (1.42)
--------------------------------------------------------------------
--------------------------------------------------------------------
Weighted average number of
Class A and B Non-Voting
Shares used as denominator
in above calculations
(thousands of shares) 231,850 231,848 231,848 231,820
--------------------------------------------------------------------
--------------------------------------------------------------------
Class B Non-Voting Shares issuable under the terms of the Company's
stock option plans are anti-dilutive (decrease loss per share) and
are therefore not included in calculating diluted loss per share.
7. STATEMENTS OF CASH FLOWS
Additional disclosures with respect to the Consolidated Statements
of Cash Flows are as follows:
(i) Cash flow from operations
August 31,
----------------------------------------
Three months ended Year ended
------------------ ------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Net income (loss) 4,144 (74,353) (47,828) (286,324)
Non-cash items:
Amortization of deferred charges
and property, plant
and equipment 146,205 144,971 598,189 585,331
Amortization
of deferred IRU revenue (3,126) (3,189) (11,984) (11,517)
Future income tax recovery (1,793) (28,243) (5,781) (120,231)
Loss (gain) on sale
of investments (729) 283 (1,957) (2,321)
Write-down of investments - 61,538 15,000 330,466
Gain on redemption of SHELS - - (119,521) (218,327)
Dilution loss on issuance
of stock by equity investee - - - 571
Loss on sale of satellite assets - - 3,800 1,281
Foreign exchange loss (gain)
on unhedged long-term debt 6,819 6,383 (32,617) 1,658
Provision for loss on sale
and write-down of assets (5,326) - 124,674 -
Debt restructuring costs 10,634 - 10,634 -
Equity (income)
loss on investees (20) 697 1,921 53,487
Other (668) (829) 236 (1,965)
--------------------------------------------------------------------
Cash flow from operations 156,140 107,258 534,766 332,109
--------------------------------------------------------------------
--------------------------------------------------------------------
(ii) Changes in non-cash working capital balances related to
operations include the following:
August 31,
----------------------------------------
Three months ended Year ended
------------------ ------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Accounts receivable 19,676 (22,380) 49,864 6,082
Prepaids and other (3,087) 516 3,369 1,568
Accounts payable
and accrued liabilities (26,365) 63,263 (67,085) (38,682)
Income taxes payable 6,693 9,150 8,655 18,737
Unearned revenue (2,271) 6,425 8,872 15,598
--------------------------------------------------------------------
(5,354) 56,974 3,675 3,303
--------------------------------------------------------------------
--------------------------------------------------------------------
(iii) Interest and income taxes paid (recovered) and classified as
operating activities are as follows:
August 31,
----------------------------------------
Three months ended Year ended
------------------ ------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Interest 58,119 50,853 272,110 257,609
Income taxes (1,922) (5,526) 3,151 (10,443)
--------------------------------------------------------------------
--------------------------------------------------------------------
8. OTHER REVENUE (EXPENSE) Included in other revenue (expense) are foreign exchange gains (losses) on the translation of current assets and liabilities of $2,426 (2002 - ($753)) and $8,032 (2002 - $667) for the quarter and year respectively. 9. UNITED STATES ACCOUNTING PRINCIPLES The consolidated financial statements of the Company are prepared in Canadian dollars in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). The following adjustments and disclosures would be required in order to present these consolidated financial statements in accordance with accounting principles generally accepted in the United States ("US GAAP").
August 31,
---------------------------------------
Three months ended Year ended
------------------ ------------------
2003 2002 2003 2002
$ $ $ $
--------------------------------------------------------------------
Reported income (loss)
using Canadian GAAP 4,144 (74,353) (47,828) (286,324)
Add (deduct) adjustments for:
Deferred charges (2) 10,187 20,688 (9,849) 35,594
Foreign exchange gains
(losses) (3) (5,418) (39,423) 54,527 1,370
Equity in loss
of investees (4) - 113 2,001 (19,901)
Entitlement payments
on equity instruments (8) (15,552) (16,626) (64,827) (70,551)
Adjustment to write-down
of GT Group Telecom Inc. (11) - - - 28,374
Income tax effect
of adjustments 2,724 6,208 18,005 13,631
--------------------------------------------------------------------
Net loss using US GAAP (3,915) (103,393) (47,971) (297,807)
--------------------------------------------------------------------
Unrealized foreign exchange loss
on translation of self-sustaining
foreign operations 17,731 3,040 (1,031) 1,513
Unrealized gains
on available-for-sale securities,
net of tax (7)
Unrealized holding gains
arising during the period 1,316 24,200 1,361 59,406
Less: reclassification
adjustments for gains
included in net income - - (95,879) (180,425)
--------------------------------------------------------------------
19,047 27,240 (95,549) (119,506)
Adjustment to fair value
of derivatives (9) (43,619) 80,732 (224,341) 53,293
Foreign exchange gains (losses)
on hedged
long-term debt (10) (13,610) - 136,975 -
--------------------------------------------------------------------
(38,182) 107,972 (182,916) (66,213)
--------------------------------------------------------------------
Comprehensive income (loss)
using US GAAP (42,097) 4,579 (230,886) (364,020)
--------------------------------------------------------------------
--------------------------------------------------------------------
Net loss per share
using US GAAP (0.02) (0.45) (0.21) (1.28)
Comprehensive income (loss)
per share using US GAAP (0.18) 0.02 (1.00) (1.57)
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Balance sheet items using US GAAP
August 31, August 31,
2003 2002
------------------ -------------------
Canadian US Canadian US
GAAP GAAP GAAP GAAP
$ $ $ $
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Investments
and other assets (7) 49,415 74,758 133,602 280,231
Derivative instruments
asset (9) - - - 110,096
Deferred charges (2) (10) 169,045 42,068 219,916 59,532
Broadcast licenses
(1) (5) (6) 4,627,728 4,602,494 4,877,256 4,852,022
Deferred credits (3) (10) 735,353 597,246 633,259 618,941
Derivative instruments
liability (9) - 168,757 - -
Future income taxes 928,277 892,442 1,004,559 1,007,287
Long-term debt (8) 2,645,548 3,363,685 3,469,637 4,433,869
Shareholders' equity 2,495,066 1,655,246 2,779,108 1,897,573
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The cumulative effect of these adjustments on consolidated
shareholders' equity is as follows:
August 31, August 31,
2003 2002
$ $
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Shareholders' equity using Canadian GAAP 2,495,066 2,779,108
Amortization of intangible assets (1) (123,542) (123,542)
Deferred charges (2) (34,130) (29,579)
Equity in loss of investees (4) (36,202) (37,843)
Gain on sale of subsidiary (5) 13,822 13,822
Gain on sale of cable television systems (6) 47,501 47,501
Equity instruments (8) (709,540) (942,848)
Accumulated other comprehensive income 2,753 192,467
Cumulative translation adjustment (482) (1,513)
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Shareholders' equity using US GAAP 1,655,246 1,897,573
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August 31, August 31,
2003 2002
$ $
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Accumulated other comprehensive income
Unrealized foreign exchange gain
on translation of self-
sustaining foreign operations 482 1,513
Unrealized gains on investments (7) 20,721 122,038
Fair value of derivatives (9) (131,698) 92,643
Foreign exchange gains (losses)
on hedged long-term debt (10) 113,248 (23,727)
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2,753 192,467
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Areas of material difference between accounting principles generally accepted in Canada and the United States and their impact on the consolidated financial statements are as follows: (1) Amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. prior to September 1, 2001 is required on a straight-line basis for US GAAP purposes, instead of an increasing charge method. (2) US GAAP requires all costs associated with launch and start-up Start-up The earliest stage of a new business venture. activities and equipment subsidies to be expensed as incurred instead of being deferred and amortized. (3) US GAAP requires exchange gains (losses) on translation of equity instruments treated as debt as described in item 8 below, to be included in income or expense. (4) Equity in loss of investees has been adjusted to reflect US GAAP. (5) Gain on a sale of a subsidiary that was not permitted to be recognized under Canadian GAAP was required to be recognized under US GAAP. (6) Gain on an exchange of cable systems was required to be recorded under US GAAP but may not be recorded under Canadian GAAP. (7) US GAAP requires equity securities included in investments to be carried at fair value rather than cost as required by Canadian GAAP. (8) US GAAP treats equity instruments classified as equity under Canadian GAAP as debt and the related interest as an expense rather than a dividend. (9) Under US GAAP, all derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. are recognized in the balance sheet at fair value with gains and losses recorded in income or comprehensive income. Under Canadian GAAP, derivatives are not recognized in the balance sheet. (10) Foreign exchange gains (losses) on translation of hedged long-term debt are deferred under Canadian GAAP but included in comprehensive income (loss) for US GAAP. (11) Write-down of GT Group Telecom Inc. has been adjusted due to a lower investment carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. under US GAAP. 10. SUBSEQUENT EVENTS AND PENDING TRANSACTIONS The Company agreed to acquire certain cable systems of Monarch A data capture program from Datawatch Corporation, Chelmsford, MA, (www.datawatch.com), that is used to transfer data from mainframe and minicomputer reports to the PC. It uses report files that contain data ready to print. Cablesystems Ltd. ("Monarch") for $90 million including $25 million of either cash or assumption of debt and the balance through the issuance of Class B Non-Voting Shares of Shaw at $17.39 per share. The cable systems serve approximately 35,000 basic subscribers in the Medicine Hat (Medicine Hat, Taber Taber (tā`bər), town (1991 pop. 6,660), S Alta., Canada, NE of Lethbridge. The area is irrigated for crop and livestock raising. The town has a sugar beet refinery and a vegetable cannery. Coal, oil, and natural gas are found nearby. , Brooks Brooks , Gwendolyn Elizabeth 1917-2000. American poet known for her verse detailing the dreams and struggles of African Americans. An early volume of poems, Annie Allen (1949), was awarded a Pulitzer Prize. Noun 1. ), Canmore (Canmore, Banff Banff, former county, Scotland Banff, former county, Scotland: see Banffshire. Banff (bămf, bănf), town (1991 pop. 5,688), SW Alta., Canada, in the Rocky Mts., on the Bow River and the Trans-Canada Highway. , Lake Louise Lake Louise can mean: Canada
Kimberley, geographical area, c.139,000 sq mi (360,010 sq km), Western Australia, NW Australia. The Kimberley Goldfield was the site (1882) of the first major Western Australian gold strike. ) regions. The transaction is subject to approval by the CRTC CRTC Canadian Radio-Television & Telecommunications Commission CRTC Combat Readiness Training Center CRTC Cathode Ray Tube Controller CRTC China Railway Telecommunications Center CRTC Cold Region Test Center CRTC Continuously Regenerated Trap Column and the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. . Monarch is controlled by a Director of the Company. The transaction was reviewed and approved by an independent committee of the Board of Directors. |
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