Shaw Communications Inc.
Wireless
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Three months ended November 30,
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Change
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(millions of Canadian dollars)
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2017
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2016
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%
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Revenue
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175
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138
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26.8
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Operating income before restructuring costs and amortization
(1)
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35
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30
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16.7
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Operating margin
(1)
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20.0
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%
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21.7
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%
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(1.7pts
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(1)
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See definitions and discussion under
Non-IFRS
and additional GAAP measures.
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The Wireless division added 34,310 RGUs in the
first quarter
of fiscal 2018 as compared to 9,470 RGUs gained in the first quarter of fiscal 2017. An
expanded handset lineup, simplified packaging and pricing, including the introduction of the Big Gig plans, and continued investment in the new
LTE-Advanced
network helped drive continued strong subscriber
growth.
Revenue highlights include:
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Revenue of $175 million for the
first quarter
of fiscal 2018 was up $37 million or 26.8% over the first quarter of fiscal 2017. The increase in revenue was driven primarily by year-over-year growth in
both handset and service revenue. Service revenue grew as a result of increased postpaid and prepaid RGUs, and improved ARPU of $37.52 as compared to $36.79 in the first quarter of fiscal 2017.
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As
compared to the fourth quarter
of fiscal 2017, the current quarter revenue increased $3 million or 1.7%.
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Operating income before restructuring costs and amortization highlights include:
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Operating income before restructuring costs and amortization of $35 million for the
first quarter
of fiscal 2018 improved by $5 million or 16.7% over the first quarter of fiscal 2017. The improvements
were driven primarily by increased revenue offset partially by an increase in marketing, network, and other commercial costs associated with onboarding new subscribers and expanding the
LTE-Advanced
network.
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As
compared to the fourth quarter
of fiscal 2017, operating income before restructuring costs and amortization for the current quarter increased $2 million or 6.1%.
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Capital expenditures and equipment costs
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Three months ended November 30,
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Change
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(millions of Canadian dollars)
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2017
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2016
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%
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Wireline
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New housing development
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29
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22
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31.8
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Success based
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92
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81
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13.6
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Upgrades and enhancements
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93
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72
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29.2
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Replacement
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7
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6
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16.7
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Building and other
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15
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24
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(37.5
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Total as per Note 4 to the unaudited interim consolidated financial statements
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236
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205
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15.1
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Wireless
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Total as per Note 4 to the unaudited interim consolidated financial statements
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117
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64
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82.8
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Consolidated total as per Note 4 to the unaudited interim consolidated financial
statements
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353
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269
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31.2
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In the
first quarter
of fiscal 2018, capital investment from continuing operations was $353 million, a
$84 million or 31% increase over the comparable period in fiscal 2017, driven by added capital expenditures of $53 million in the Wireless division, $19 million in Wireline network infrastructure and broadband capacity expansion
expenditures, $11 million in success based customer equipment and $7 million in
17
Shaw Communications Inc.
growth and upgrade equipment related to residential and business customer acquisition. These increases were
partially offset by a lower investment in corporate facilities and other projects.
Wireline highlights include:
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Success based capital for the quarter of $92 million was $11 million higher than in the first quarter of fiscal 2017. The increase was primarily driven by purchases of advanced Internet
Wi-Fi
modems and video equipment costs related to BlueSky TV activations.
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For the quarter, investment in the combined upgrades and enhancement, and replacement categories was $100 million, a $22 million or 28% increase over the prior year driven by higher planned spend on network
upgrades in support of enhanced broadband capacity and DOCSIS 3.1 infrastructure.
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Buildings and other decreased $9 million over the comparable quarter mainly due to reduced spend on corporate facilities.
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Wireless highlights include:
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Capital investment of $117 million in the first quarter related primarily to investment for the continued improvement in network infrastructure, specifically the completion of the
LTE-Advanced
network rollout, spectrum refarming, and back office system upgrades.
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Discontinued
operations
Shaw Tracking
On May 31, 2017,
the Company entered an agreement to sell a group of assets comprising the operations of Shaw Tracking, a fleet tracking operation reported within the Companys Business Network Services segment. The Company determined that the assets and
liabilities of the Shaw Tracking business met the criteria to be classified as a disposal group held for sale. Accordingly, the assets and liabilities of the Shaw Tracking business are classified in the consolidated statement of financial position
at August 31, 2017 as current assets held for sale or current liabilities held for sale, respectively, as the sale of these assets and liabilities is expected to be completed within one year. In addition, the operating results and operating
cash flows of the business are presented as discontinued operations separate from the Companys continuing operations. The transaction closed on September 15, 2017.
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Three months ended November 30,
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(millions of Canadian dollars)
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2017
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2016
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Revenue
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1
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8
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Operating, general and administrative expenses
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Employee salaries and benefits
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2
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Purchases of goods and services
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1
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4
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6
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Restructuring
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Amortization
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(1
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Impairment of goodwill/disposal group
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Income from discontinued operations before tax and loss on divestiture
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3
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Income taxes
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1
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Income from discontinued operations, net of tax, before loss on divestiture
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2
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Loss on divestiture, net of tax
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(6
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Income (loss) from discontinued operations, net of tax
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(6
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2
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18
Shaw Communications Inc.
ViaWest, Inc.
In the fourth quarter of fiscal 2017, the Company entered into an agreement to sell 100% of its wholly owned subsidiary ViaWest, Inc. (ViaWest) for
proceeds of approximately USD $1.68 billion. Accordingly, the operating results and operating cash flows for the previously reported Business Infrastructure Services segment relating to ViaWest are presented as discontinued operations separate
from the Companys continuing operations. The remaining operations of the previously reported Business Infrastructure Services segment and their results are now included within the Wireline segment.
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Three months ended November 30,
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(millions of Canadian dollars)
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2017
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2016
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Revenue
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89
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Operating, general and administrative expenses
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Employee salaries and benefits
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21
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Purchases of goods and services
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35
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56
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33
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Amortization
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32
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Interest on long-term debt
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9
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Amortization of transaction costs
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1
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Loss from discontinued operations before tax and gain on divestiture
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(9
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Income taxes
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(3
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Loss from discontinued operations, net of tax, before gain on divestiture
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(6
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Loss from discontinued operations, net of tax
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(6
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19
Shaw Communications Inc.
Supplementary quarterly financial information
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Quarter
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Revenue
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Operating
income before
restructuring
costs and
amortization
(1)
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Net income from
continuing
operations
attributable to
equity shareholders
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Net income
attributable
to equity
shareholders
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Net income
(2)
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Basic and
Diluted earnings
per share from
continuing
operations
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Basic and
Diluted
earnings
per share
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(millions of Canadian dollars except per share amounts)
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2018
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First
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1,249
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481
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120
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114
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114
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0.23
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0.22
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2017
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Fourth
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1,244
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479
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149
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481
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481
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0.30
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0.97
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Third
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1,216
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511
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164
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133
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133
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0.33
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0.27
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Second
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1,206
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503
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150
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147
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147
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0.30
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0.30
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First
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1,216
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504
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93
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89
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89
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0.19
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0.18
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2016
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Fourth
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1,212
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514
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145
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154
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154
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0.29
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0.31
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Third
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1,189
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519
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78
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700
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704
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0.15
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1.45
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Second
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1,055
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466
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120
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156
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164
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0.24
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0.32
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(1)
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See definition and discussion under
Non-IFRS
and additional GAAP measures.
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(2)
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Net income attributable to both equity shareholders and
non-controlling
interests
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In the first quarter of fiscal 2018, net income decreased $367 million compared to the fourth quarter of fiscal 2017 mainly due to the $330 million
gain on divestiture, net of tax, of ViaWest, as well as a $11 million
non-operating
provision recovery in the prior quarter. See Other income and expense items for further details on
non-operating
items.
In the fourth quarter of fiscal 2017, net income increased $348 million compared to the third
quarter of fiscal 2017 mainly due to the gain on divestiture, net of tax, of ViaWest, and lower current quarter restructuring costs. The increase was partially offset by a decrease in operating income before restructuring costs and amortization,
higher amortization, lower equity income from our investment in Corus and higher income taxes. Net other costs and revenue changed primarily due to a $14 million decrease in income from an equity accounted associate and a $11 million
provision reversal related to the wind down of shomi in the quarter.
In the third quarter of fiscal 2017, net income decreased $14 million compared
to the second quarter of fiscal 2017 mainly due to current quarter restructuring costs and losses on discontinued operations, net of tax, as well as increased amortization. The decrease was partially offset by an increase in operating income before
restructuring costs and amortization and lower income taxes. Net other costs and revenue changed primarily due to a $16 million increase in income from an equity accounted associate and a $15 million provision reversal related to the wind
down of shomi in the quarter.
In the second quarter of fiscal 2017, net income increased $58 million compared to the first quarter of fiscal 2017
mainly due to a
non-recurring
provision related to the wind down of shomi operations recorded in the first quarter, partially offset by an increase in amortization and income taxes. Also contributing to the
increased net income were lower restructuring costs, partially offset by lower equity income from our investment in Corus. Net other costs and revenue changed primarily due to a provision of $107 million recorded in the prior quarter relating
to shomi operations partially offset by a $17 million decrease in income from an equity accounted associate in the quarter.
In the first quarter of
fiscal 2017, net income decreased $65 million compared to the fourth quarter of fiscal 2016 mainly due to a
non-recurring
provision related to the wind down of shomi operations included in net other costs
and revenue for the current quarter. Also contributing to the decreased net income was lower operating income before restructuring costs and amortization, higher restructuring charges and lower
20
Shaw Communications Inc.
income from discontinued operations, partially offset by lower income taxes. Net other costs and revenue
changed primarily due to a $107 million impairment of the Companys joint venture investment in shomi and a $27 million increase in income from an equity accounted associate in the quarter.
In the fourth quarter of fiscal 2016 net income decreased $550 million compared to the third quarter of fiscal 2016 mainly due to lower income from
discontinued operations, net of tax, relating primarily to the gain on the divestiture of the former Media division recorded in the third quarter, decreased operating income before restructuring costs and amortization, and higher income taxes.
Partly offsetting the decrease in net income were decreases in net other costs and revenue and restructuring costs. Net other costs and revenue changed primarily due to
non-recurring
charges recorded in the
third quarter, including a $54 million impairment of the Companys joint venture investment in shomi, a $20 million write-down of a private portfolio investment, $12 million acquisition related costs and a $10 million loss
from an equity accounted associate.
Net income for the third quarter of fiscal 2016 increased $540 million compared to the second quarter of fiscal
2016 mainly due to higher income from discontinued operations, net of tax, relating primarily to the gain on the divestiture of the former Media division, increased operating income before restructuring costs and amortization and lower income taxes.
Partly offsetting the net income improvement in the quarter were: i) decreased net other costs and revenue; ii) increased restructuring charges; and iii) increased amortization. Net other costs and revenue changed primarily due to a $54 million
impairment of the Companys shomi joint venture investment, a $20 million write-down of a private portfolio investment and a $10 million loss from an equity accounted associate.
In the second quarter of fiscal 2016, net income decreased $54 million compared to the first quarter of fiscal 2016 mainly due to decreased income from
discontinued operations, net of tax, of $30 million, primarily due to the seasonality of the Media business reflected in income from discontinued operations, net of tax, and net other costs and revenue of $13 million. Net other costs and
revenue changed primarily due to an additional $8 million of costs recorded in the quarter related to the acquisition of Freedom Mobile (formerly, WIND Mobile).
Other income and expense items
Amortization
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Three months ended November 30,
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Change
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(millions of Canadian dollars)
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2017
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2016
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%
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Amortization revenue (expense)
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Deferred equipment revenue
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9
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10
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(10.0
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)
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Deferred equipment costs
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(30
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)
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|
(31
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)
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(3.2
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)
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Property, plant and equipment, intangibles and other
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(235
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)
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(203
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)
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15.8
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Amortization of property, plant and equipment, intangibles and other increased 15.8% for the three months ended
November 30, 2017 over the comparable period due to amortization of new expenditures exceeding the amortization of assets that became fully amortized during the period.
21
Shaw Communications Inc.
Amortization of financing costs and Interest expense
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Three months ended November 30,
|
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Change
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(millions of Canadian dollars)
|
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2017
|
|
|
2016
|
|
|
%
|
|
Amortization of financing costs long-term debt
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|
|
1
|
|
|
|
1
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|
|
|
|
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Interest expense
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|
|
61
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|
|
|
66
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|
|
(7.6
|
)
|
Interest expense for the three-month period ended November 30, 2017 was lower than the comparable period due to lower
average outstanding debt balances in the current year. (See note 6 of the interim consolidated unaudited financial statements for further detail.)
Equity income (loss) of an associate or joint venture
For the three-month period ended November 30, 2017 the Company recorded equity income of $30 million, related to its interest in Corus, compared to
equity income of $27 million for the comparable period.
Other gains/losses
This category generally includes realized and unrealized foreign exchange gains and losses on U.S. dollar denominated current assets and liabilities, gains and
losses on disposal of property, plant and equipment and minor investments, and the Companys share of the operations of Burrard Landing Lot 2 Holdings Partnership. In the comparable quarter, the category included a $107 million provision
in respect of the Companys investment in shomi, which announced a wind down of operations in fiscal 2017.
Income taxes
Income taxes are higher in the current year mainly due to an increase in net income from continuing operations and the impact of revaluing the deferred income
tax assets and liabilities as a result of the increase in the B.C. provincial corporate income tax rate from 11% to 12% effective January 1, 2018.
Financial position
Total assets
were $14.3 billion at November 30, 2017. The following is a discussion of significant changes in the consolidated statement of financial position since August 31, 2017.
Current assets decreased $147 million due to decreases in cash of $62 million, accounts receivable of $50 million, assets held for sale of
$61 million, partially offset by increases in inventories of $15 million and other current assets of $11 million. Cash decreased as the funds provided by operations was exceeded by cash outlay for investing and financing activities.
Accounts receivable decreased primarily due to the receipt of a commodity tax refund relating to the purchase of spectrum licenses made by Freedom Mobile in fiscal 2017. Assets held for sale as at August 31, 2017 included the assets of the Shaw
Tracking business, which was completed on September 15, 2017.
Investments and other assets increased $7 million primarily due to equity income
and other comprehensive income of associates related to the Companys investment in Corus. Property, plant and equipment increased $96 million due to capital investments in excess of amortization.
Current liabilities decreased $116 million during the quarter due to decrease in accounts payable and accrued liabilities of $15 million, income
taxes payable of $69 million, and liabilities held for sale of $39 million, partially offset by increases in provisions of $7 million. Income taxes payable decreased due to
22
Shaw Communications Inc.
normal course tax installment payments, partially offset by the current period provision. Liabilities held
for sale as at August 31, 2017 included the liabilities of the Shaw Tracking business which was completed on September 15, 2017.
Shareholders equity increased $31 million due to an increase in share capital of $77 million, which was offset by a decrease in retained
earnings of $36 million, accumulated other comprehensive loss of $6 million and contributed surplus of $4 million. Share capital increased due to the issuance of 2,769,336 Class B
non-voting
participating shares (Class B
Non-Voting
Shares) under the Companys option plan and Dividend Reinvestment Plan (DRIP).
Retained earnings decreased due to dividends of $150 million, partially offset by current year earnings of $114 million. Accumulated other comprehensive loss increased due to the
re-measurement
recorded on employee benefit plans and the Companys share of other comprehensive income of associates, which was partially offset by a change in unrealized fair value of derivatives.
As at December 31, 2017, share capital is as reported at November 30, 2017 with the exception of the issuance of a total of 152,150 Class B
Non-Voting
Shares upon exercise of options under the Companys stock option plan and the issuance of a total of 625,972 Class B
Non-Voting
Shares under the
Companys dividend reinvestment plan.
Liquidity and capital resources
In the three-month period ended November 30, 2017, the Company generated $51 million of free cash flow. Shaw used its free cash flow along with
proceeds on issuance of Class B
Non-Voting
Shares of $21 million, proceeds from the sale of the Shaw Tracking business of $18 million, and cash on hand to fund the net working capital change of
$17 million, pay common share dividends of $96 million, and make $383 million in investments in long-term assets.
As at November 30,
2017, the Company had $445 million of cash on hand and its $1.5 billion fully undrawn bank credit facility. The facility is used for working capital and general corporate purposes.
As at November 30, 2017, the net debt leverage ratio for the Company is 1.9, which is consistent with August 31, 2017. Having regard to prevailing
competitive, operational and capital market conditions, the Board of Directors has determined that having this ratio in the range of 2.0 to 2.5x would be optimal leverage for the Company in the current environment. Should the ratio fall below this,
other than on a temporary basis, the Board may choose to recapitalize back into this optimal range. The Board may also determine to increase the Companys debt above these levels to finance specific strategic opportunities such as a significant
acquisition or repurchase of Class B
Non-Voting
Participating Shares in the event that pricing levels were to drop precipitously.
23
Shaw Communications Inc.
The Company calculates net debt leverage ratio as
follows
1
:
|
|
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
August 31,
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2017
|
|
Current portion of Long-Term Debt
|
|
|
1
|
|
|
|
2
|
|
Long-Term Debt
|
|
|
4,299
|
|
|
|
4,298
|
|
50% of Outstanding Preferred Shares
|
|
|
147
|
|
|
|
147
|
|
Cash
|
|
|
(445
|
)
|
|
|
(507
|
)
|
|
|
|
|
|
|
|
|
|
(A) Net Debt
2
|
|
|
4,002
|
|
|
|
3,940
|
|
|
|
|
|
|
|
|
|
|
Operating income before restructuring costs and amortization
|
|
|
1,974
|
|
|
|
1,997
|
|
Corus Dividends
|
|
|
90
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
(B) Adjusted operating income before restructuring costs and amortization
2
|
|
|
2,064
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
(A/B) Net debt leverage ratio
|
|
|
1.9
|
x
|
|
|
1.9
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The following contains a description of the Companys use of
non-IFRS
financial measures provides a reconciliation to the
nearest IFRS measure or provides a reference to such reconciliation.
|
(2)
|
These financial measures do not have standard definitions prescribed by IFRS and therefore may not be comparable to similar measures disclosed by other companies and
have not been presented as an alternative to liquidity prescribed by IFRS.
|
The Company issued Class B
Non-Voting
Shares from treasury under its DRIP which resulted in cash savings and incremental Class B
Non-Voting
Shares of $52 million during the three months
ending November 30, 2017.
Shaws credit facilities are subject to customary covenants which include maintaining minimum or maximum financial
ratios.
|
|
|
|
|
|
|
|
|
|
|
Covenant Limit
|
|
Shaw Credit Facilities
|
|
|
|
|
|
|
|
|
Total Debt to Operating Cash Flow
(1)
Ratio
|
|
|
<
|
|
|
|
5.00:1
|
|
Operating Cash Flow
(1)
to Fixed Charges
(2)
Ratio
|
|
|
>
|
|
|
|
2.00:1
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Operating Cash Flow, for the purposes of the covenants, is calculated as net earnings before interest expense, depreciation, amortization and current and deferred
income taxes, excluding profit or loss from investments accounted for on an equity basis, for the most recently completed fiscal quarter multiplied by four, plus cash dividends and other cash distributions received in the most recently completed
four fiscal quarters from investments accounted for on an equity basis.
|
(2)
|
Fixed Charges are defined as the aggregate interest expense for the most recently completed fiscal quarter multiplied by four.
|
As at November 30, 2017, Shaw is in compliance with these covenants and based on current business plans, the Company is not aware of any condition or
event that would give rise to
non-compliance
with the covenants over the life of the borrowings.
Based on the
aforementioned financing activities, available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations, including maturing debt, during the upcoming fiscal year. On a
longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and refinance maturing debt.
Cash Flow from Operations
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
|
|
|
|
|
|
|
|
Change
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
|
%
|
|
Funds flow from continuing operations
|
|
|
384
|
|
|
|
389
|
|
|
|
(1.3
|
)
|
Net change in
non-cash
balances related to
operations
|
|
|
(17
|
)
|
|
|
(137
|
)
|
|
|
(87.6
|
)
|
Operating activities of discontinued operations
|
|
|
(2
|
)
|
|
|
11
|
|
|
|
(>100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
365
|
|
|
|
263
|
|
|
|
38.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended November 30, 2017, funds flow from operating activities increased over the comparable period
in fiscal 2017 primarily due to a lower net change in
non-cash
balances related to operations and lower write-down of assets and investments partially offset by lower operating income
24
Shaw Communications Inc.
before restructuring costs and amortization. The net change in
non-cash
working capital balances related to operations fluctuated over the comparative period due to changes in accounts receivable and other current asset balances and the timing of payment of current income
taxes payable and accounts payable and accrued liabilities.
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
|
Increase
|
|
Cash flow used in investing activities
|
|
|
(350
|
)
|
|
|
(301
|
)
|
|
|
49
|
|
For the three months ended November 30, 2017, the cash used in investing activities increased over the comparable period
in fiscal 2017 due primarily to higher cash outlays for inventory, capital and intangible expenditures in the current year. This was partially offset by proceeds received from the sale of the Shaw Tracking business of $18 million in the current
fiscal year.
Financing Activities
The changes in
financing activities during the comparative periods were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
Bank loans net borrowings (repayments)
|
|
|
|
|
|
|
(1
|
)
|
Dividends
|
|
|
(98
|
)
|
|
|
(98
|
)
|
Issuance of Class B
Non-Voting
Shares
|
|
|
21
|
|
|
|
3
|
|
Financing activities of discontinued operations
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
Accounting standards
The MD&A included in the Companys August 31, 2017 Annual Report outlined critical accounting policies, including key estimates and assumptions
that management has made under these policies, and how they affect the amounts reported in the Consolidated Financial Statements. The MD&A also describes significant accounting policies where alternatives exist. The condensed interim
consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements except as described below.
Standards and amendments to standards issued but not yet effective
The Company has not yet adopted certain standards and amendments that have been issued but are not yet effective. The following pronouncements are being
assessed to determine their impact on the Companys results and financial position.
|
|
|
IFRS 15
Revenue from Contracts with Customers
, was issued in May 2014 and replaces IAS 11
Construction Contracts
, IAS 18
Revenue
, IFRIC 13
Customer Loyalty Programs
, IFRIC 15
Agreements
for the Construction of Real Estate
, IFRIC 18
Transfers of Assets from Customers
and
SIC-31
RevenueBarter Transactions Involving Advertising Services
. The new standard requires
revenue to be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. The principles are to be applied
in the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
|
25
Shaw Communications Inc.
The application of IFRS 15 will impact the Companys reported results, including the
classification and timing of revenue recognition and the treatment of costs incurred to obtain contracts with customers. IFRS 15 requires the estimation of total consideration to be received over the contract term at contract inception, and the
allocation of that consideration to performance obligations in the contract, typically based on the relative stand-alone selling price of each obligation. IFRS 15 also requires that incremental costs to obtain a contract with a customer (for
example, commissions) be capitalized and amortized into operating expenses over time. The Company currently expenses such costs as incurred.
The Companys financial position will also be impacted by the adoption of IFRS 15, with new contract asset and contract liability
categories recognized to reflect differences between the timing of revenue recognition and the actual billing of those goods and services to customers. While similar differences are recognized currently, IFRS 15 introduces additional requirements
and disclosures specific to contracts with customers.
Shaw continues to evaluate the impacts of IFRS 15 and preparations are underway for
the adoption of the new standard. Initial planning and scoping efforts were conducted during fiscal 2017, with ongoing development of the required accounting policies, significant judgments and estimates, processes, information systems and internal
controls expected to continue throughout the Companys 2018 fiscal year. In connection with these development efforts, the Company also expects a significant historical data gathering initiative will be required to identify and account for
multi-year contracts with customers at the date of adoption. At this stage in the Companys IFRS 15 implementation process, it is not possible to make reasonable quantitative estimates of the effects of the new standard.
The new standard is effective for annual periods beginning on or after January 1, 2018, which for the Company will be the annual period
commencing September 1, 2018, and must be applied either retrospectively or on a modified retrospective basis for all contracts that are not complete as at that date. The Company continues to evaluate the adoption approach in conjunction with
its assessment of the expected impacts of adoption.
|
|
|
IFRS 16 Leases requires entities to recognize lease assets and lease obligations on the balance sheet. For lessees, IFRS 16 removes the classification of leases as either operating leases or finance leases, effectively
treating all leases as finance leases. Certain short-term leases (less than 12 months) and leases of
low-value
are exempt from the requirements and may continue to be treated as operating leases. Lessors will
continue with a dual lease classification model. Classification will determine how and when a lessor will recognize lease revenue, and what assets would be recorded.
|
As the Company has significant contractual obligations currently being recognized as operating leases, we anticipate that the application of
IFRS 16 will result in a material increase to both assets and liabilities and material changes to the timing of the recognition of expenses associated with the lease arrangements although at this stage in the Companys IFRS 16 implementation
process, it is not possible to make reasonable quantitative estimates of the effects of the new standard.
The standard may be applied
retroactively or using a modified retrospective approach for annual periods commencing January 1, 2019, with early adoption permitted if IFRS 15 Revenue from Contracts with Customers has been adopted. The Company will evaluate the adoption
approach in conjunction with its assessment of the expected impacts of adoption.
Change in accounting policy
In September 2017, the IFRS Interpretations Committee (the Committee) published a summary of its agenda decision regarding accounting for interest
and penalties related to income taxes, which is not specifically addressed by IFRS Standards. Although the Committee decided not to add this issue to its
26
Shaw Communications Inc.
standard-setting agenda, the Committee noted if an entity considers a particular amount payable or receivable
for interest and penalties to be an income tax, then the entity applies IAS 12
Income Taxes
to that amount. If an entity does not apply IAS 12 to a particular amount payable or receivable for interest and penalties, it applies IAS 37
Provisions, Contingent Liabilities and Contingent Assets
. As such, the Company retrospectively changed its accounting policy for the accounting of interest and penalties related to income taxes to be in line with the Committee decision. The
change of accounting policy did not have a significant impact on the previously reported consolidated financial statements.
Related Party Transactions
The
Companys transactions with related parties are discussed in its Managements Discussion and Analysis for the year ended August 31, 2017 under Related Party Transactions and under Note 27 of the Consolidated Financial
Statements of the Company for the year ended August 31, 2017. There has been no material change in the Companys transactions with related parties between August 31, 2017 and November 30, 2017.
Financial Instruments
There
has been no material change in the Companys risk management practices with respect to financial instruments between August 31, 2017 and November 30, 2017. See Known Events, Trends, Risks and Uncertainties Interest Rates,
Foreign Exchange Rates and Capital Markets in the Companys Managements Discussion and Analysis for the year ended August 31, 2017 and the section entitled Risk Management under Note 28 of the Consolidated Financial
Statements of the Company for the year ended August 31, 2017.
Risks and Uncertainties
The significant risks and uncertainties affecting the Company and its business are discussed in the Companys August 31, 2017 Annual Report under
Known Events, Trends, Risks and Uncertainties in Managements Discussion and Analysis.
27
Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
|
|
|
|
|
|
|
|
|
(millions of Canadian dollars)
|
|
November 30, 2017
|
|
|
August 31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash
|
|
|
445
|
|
|
|
507
|
|
Accounts receivable
|
|
|
236
|
|
|
|
286
|
|
Inventories
|
|
|
124
|
|
|
|
109
|
|
Other current assets
|
|
|
166
|
|
|
|
155
|
|
Assets held for sale
[note 3]
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
971
|
|
|
|
1,118
|
|
Investments and other assets
[notes 11 and 12]
|
|
|
944
|
|
|
|
937
|
|
Property, plant and equipment
|
|
|
4,440
|
|
|
|
4,344
|
|
Other long-term assets
|
|
|
258
|
|
|
|
255
|
|
Deferred income tax assets
|
|
|
4
|
|
|
|
4
|
|
Intangibles
|
|
|
7,434
|
|
|
|
7,435
|
|
Goodwill
|
|
|
280
|
|
|
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,331
|
|
|
|
14,373
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
898
|
|
|
|
913
|
|
Provisions
|
|
|
83
|
|
|
|
76
|
|
Income taxes payable
|
|
|
82
|
|
|
|
151
|
|
Unearned revenue
|
|
|
212
|
|
|
|
211
|
|
Current portion of long-term debt
[notes 6 and 11]
|
|
|
1
|
|
|
|
2
|
|
Liabilities held for sale
[note 3]
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,276
|
|
|
|
1,392
|
|
Long-term debt
[notes 6 and 11]
|
|
|
4,299
|
|
|
|
4,298
|
|
Other long-term liabilities
|
|
|
127
|
|
|
|
114
|
|
Provisions
|
|
|
68
|
|
|
|
67
|
|
Deferred credits
|
|
|
479
|
|
|
|
490
|
|
Deferred income tax liabilities
|
|
|
1,897
|
|
|
|
1,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,146
|
|
|
|
8,219
|
|
Shareholders equity
[notes 7 and 9]
|
|
|
|
|
|
|
|
|
Common and preferred shareholders
|
|
|
6,184
|
|
|
|
6,153
|
|
Non-controlling
interests in subsidiaries
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,185
|
|
|
|
6,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,331
|
|
|
|
14,373
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
28
Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
Revenue
[note 4]
|
|
|
1,249
|
|
|
|
1,216
|
|
Operating, general and administrative expenses
[note 5]
|
|
|
(768
|
)
|
|
|
(712
|
)
|
Restructuring costs
[note 5]
|
|
|
|
|
|
|
(12
|
)
|
Amortization:
|
|
|
|
|
|
|
|
|
Deferred equipment revenue
|
|
|
9
|
|
|
|
10
|
|
Deferred equipment costs
|
|
|
(30
|
)
|
|
|
(31
|
)
|
Property, plant and equipment, intangibles and other
|
|
|
(235
|
)
|
|
|
(203
|
)
|
|
|
|
|
|
|
|
|
|
Operating income from continuing operations
|
|
|
225
|
|
|
|
268
|
|
Amortization of financing costs long-term debt
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Interest expense
|
|
|
(61
|
)
|
|
|
(66
|
)
|
Equity income of an associate or joint venture
|
|
|
30
|
|
|
|
27
|
|
Other gains (losses)
|
|
|
4
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
197
|
|
|
|
121
|
|
Current income tax expense
[note 4]
|
|
|
36
|
|
|
|
36
|
|
Deferred income tax expense (recovery)
|
|
|
41
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
120
|
|
|
|
93
|
|
Loss from discontinued operations, net of tax
[note 3]
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
114
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders
|
|
|
120
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
[note 8]
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
0.23
|
|
|
|
0.19
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
[note 8]
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
0.23
|
|
|
|
0.19
|
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
29
Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
(millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
Net income
|
|
|
114
|
|
|
|
89
|
|
Other comprehensive income (loss)
[note 9]
|
|
|
|
|
|
|
|
|
Items that may subsequently be reclassified to income:
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
Change in unrealized fair value of derivatives designated as cash flow hedges
|
|
|
5
|
|
|
|
2
|
|
Adjustment for hedged items recognized in the period
|
|
|
1
|
|
|
|
(1
|
)
|
Share of other comprehensive income (loss) of associates
|
|
|
(1
|
)
|
|
|
8
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Exchange differences on translation of a foreign operation
|
|
|
|
|
|
|
27
|
|
Exchange differences on translation of US denominated debt hedging a foreign operation
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
24
|
|
Items that will not subsequently be reclassified to income:
|
|
|
|
|
|
|
|
|
Remeasurements on employee benefit plans:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(11
|
)
|
|
|
17
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
108
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders
|
|
|
108
|
|
|
|
130
|
|
Non-controlling
interests in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
30
Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(unaudited)
Three months ended
November 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
[millions of Canadian dollars]
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Retained
earnings
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
Total
|
|
|
Equity
attributable to
non-controlling
interests
|
|
|
Total
equity
|
|
Balance as at September 1, 2017
|
|
|
4,090
|
|
|
|
30
|
|
|
|
2,164
|
|
|
|
(131
|
)
|
|
|
6,153
|
|
|
|
1
|
|
|
|
6,154
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
114
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
114
|
|
|
|
(6
|
)
|
|
|
108
|
|
|
|
|
|
|
|
108
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
Dividend reinvestment plan
|
|
|
52
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under stock option plan
|
|
|
25
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
20
|
|
Share-based compensation
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at November 30, 2017
|
|
|
4,167
|
|
|
|
26
|
|
|
|
2,128
|
|
|
|
(137
|
)
|
|
|
6,184
|
|
|
|
1
|
|
|
|
6,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity shareholders
|
|
|
|
|
|
|
|
[millions of Canadian dollars]
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Retained
earnings
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
Total
|
|
|
Equity
attributable to
non-controlling
interests
|
|
|
Total
equity
|
|
Balance as at September 1, 2016
|
|
|
3,799
|
|
|
|
42
|
|
|
|
1,908
|
|
|
|
(52
|
)
|
|
|
5,697
|
|
|
|
1
|
|
|
|
5,698
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
41
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
41
|
|
|
|
130
|
|
|
|
|
|
|
|
130
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
(99
|
)
|
Dividend reinvestment plan
|
|
|
49
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under stock option plan
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Share-based compensation
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at November 30, 2016
|
|
|
3,853
|
|
|
|
42
|
|
|
|
1,849
|
|
|
|
(11
|
)
|
|
|
5,733
|
|
|
|
1
|
|
|
|
5,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Shaw Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended November 30,
|
|
(
millions of Canadian dollars)
|
|
2017
|
|
|
2016
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Funds flow from continuing operations
[note 10]
|
|
|
384
|
|
|
|
389
|
|
Net change in
non-cash
balances related to continuing
operations
|
|
|
(17
|
)
|
|
|
(137
|
)
|
Operating activities of discontinued operations
|
|
|
(2
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
365
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
[note 4]
|
|
|
(332
|
)
|
|
|
(226
|
)
|
Additions to equipment costs (net)
[note 4]
|
|
|
(16
|
)
|
|
|
(23
|
)
|
Additions to other intangibles
[note 4]
|
|
|
(35
|
)
|
|
|
(26
|
)
|
Net (additions) reductions to inventories
|
|
|
(15
|
)
|
|
|
(2
|
)
|
Proceeds on sale of discontinued operations (note 3)
|
|
|
18
|
|
|
|
|
|
Net additions to investments and other assets
|
|
|
23
|
|
|
|
(9
|
)
|
Proceeds on disposal of property, plant and equipment
|
|
|
7
|
|
|
|
|
|
Investing activities of discontinued operations
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Debt repayments
[note 6]
|
|
|
|
|
|
|
(1
|
)
|
Issue of Class B
Non-Voting
Shares
[note
7]
|
|
|
21
|
|
|
|
3
|
|
Dividends paid on Class A Shares and Class B
Non-Voting
Shares
|
|
|
(96
|
)
|
|
|
(96
|
)
|
Dividends paid on Preferred Shares
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Financing activities of discontinued operations
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
Effect of currency translation on cash balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
(62
|
)
|
|
|
(116
|
)
|
Cash, beginning of the period
|
|
|
507
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
Cash of continuing operations, end of the period
|
|
|
445
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
32
Shaw Communications Inc.