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Shaw Announces Fourth Quarter and Full Year Financial and Operating Results and Preliminary Fiscal 2014 Guidance


Shaw Announces Fourth Quarter and Full Year Financial and Operating Results and Preliminary Fiscal 2014 Guidance

- Fourth quarter consolidated revenues improved 3% and operating income before amortization of $496 million was comparable to last year. On a full year basis revenues improved 3% to $5.14 billion and operating income before amortization was up over 4% to $2.22 billion.

- Net income was $117 million for the quarter or $0.24 per share. On an annual basis net income increased 3% over last year to $784 million, or $1.64 per share.

- 2014 preliminary financial guidance announced with consolidated free cash flow expected to range from $625 million to $650 million.

CALGARY, ALBERTA -- (Marketwired) -- 10/24/13 -- Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) announced consolidated financial and operating results for the fourth quarter and year ended August 31, 2013. Consolidated revenue for the current three and twelve month periods of $1.25 billion and $5.14 billion, respectively, were each up 3% over the comparable periods last year. Total operating income before amortization(1) for the quarter of $496 million was comparable to $501 million last year and the annual period improved 4% to $2.22 billion.

Free cash flow(1) for the three and twelve month periods of $61 million and $604 million, respectively, compared to $103 million and $482 million for the same periods last year. The current quarterly period had higher capital investment compared to the prior quarter, while the improvement in the current annual period was due to improved operating income before amortization and lower capital investment.

Chief Executive Officer Brad Shaw said, "Our fiscal 2013 results reflect healthy financial growth as we focus on sustainable subscriber acquisition, customer experience and operational execution. Our continued investments in technology, including expansion of Shaw Go WiFi - now with over 20,000 locations; additional apps supporting our TV everywhere service with the launch of Global Go; and, the Anik G1 satellite launch with the addition of over 140 new channels in Shaw Direct, continue to deliver innovation, choice and value to our customers."

Net income of $117 million or $0.24 per share for the quarter ended August 31, 2013 compared to $133 million or $0.28 per share for the same period last year. Net income for the annual period was $784 million or $1.64 per share compared to $761 million or $1.62 per share in the prior year. The annual net income improvement was primarily due to increased operating income and a gain on the sale of the Hamilton cable system partially offset by higher income taxes.

Revenue in the Cable division of $818 million and $3.27 billion for the current three and twelve month periods, respectively, each improved 2% over the comparable periods. Operating income before amortization for the quarter of $396 million was consistent with the same quarter last year and the twelve month period improved 5% to $1.58 billion.

Satellite revenue of $219 million and $860 million for the three and twelve month periods, respectively, compared to $213 million and $844 million in the same periods last year. Operating income before amortization for the current quarter was $66 million compared to $77 million last year and the twelve month amount of $285 million declined from $293 million in the prior year.

Revenue and operating income before amortization in the Media division for the quarter of $231 million and $34 million, respectively, increased 6% and 21% over the same period last year. On a full-year basis Media revenue and operating income before amortization of $1.11 billion and $353 million improved 5% and 6%, respectively.

Looking forward Mr. Shaw said, "We expect the environment to remain challenging over the coming year and with that backdrop we will continue to execute on our strategy that extends our leadership in core areas including internet, programming, and customer experience service delivery. On a preliminary basis, for fiscal 2014 we expect consolidated revenue and operating income before amortization growth, after adjusting for the net impact of fiscal 2013 acquisition and disposition activity, to range from 2% to 4%. We expect a marginal decline in capital investment, excluding capital investment funded through the accelerated capital fund, and an increase in cash taxes. Free cash flow is expected to range from $625 million to $650 million."

"We enter fiscal 2014 with a solid balance sheet and healthy liquidity position providing the financial flexibility to invest in our business and support the return of cash to shareholders. We see opportunities ahead as we continue to leverage our distribution and programming businesses driving innovation and operational efficiencies."

Shaw Communications Inc. is a diversified communications and media company, providing consumers with broadband cable television, High-Speed Internet, Home Phone, telecommunications services (through Shaw Business), satellite direct-to-home services (through Shaw Direct) and engaging programming content (through Shaw Media). Shaw serves 3.3 million customers, through a reliable and extensive fibre network. Shaw Media operates one of the largest conventional television networks in Canada, Global Television, and 19 specialty networks including HGTV Canada, Food Network Canada, HISTORY(R) and Showcase. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (TSX:SJR.B)(NYSE:SJR).

The accompanying Management's Discussion and Analysis forms part of this news release and the "Caution Concerning Forward Looking Statements" applies to all forward-looking statements made in this news release.


 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 

MANAGEMENT'S DISCUSSION AND ANALYSIS

AUGUST 31, 2013

October 24, 2013

Certain statements in this report may constitute forward-looking statements. Included herein is a "Caution Concerning Forward-Looking Statements" section which should be read in conjunction with this report.

The following Management's Discussion and Analysis ("MD&A") should also be read in conjunction with the unaudited interim Consolidated Financial Statements and Notes thereto of the current quarter and the 2012 Annual MD&A included in the Company's August 31, 2012 Annual Report including the Consolidated Financial Statements and the Notes thereto.

The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars.

CONSOLIDATED RESULTS OF OPERATIONS

FOURTH QUARTER ENDING AUGUST 31, 2013

Selected Financial Highlights


 
                              Three months ended                            
                                  August 31,          Year ended August 31, 
                           ------------------------ ------------------------
($ millions Cdn except per                                                  
 share amounts)              2013   2012  Change %    2013   2012   Change %
----------------------------------------------------------------------------
Operations:                                                                 
  Revenue                   1,246  1,210       3.0   5,142  4,998        2.9
  Operating income before                                                   
   amortization (1)           496    501      (1.0)  2,220  2,127        4.4
  Operating margin (1) (2)   39.8%  41.4%     (1.6)   43.2%  42.6%       0.6
  Funds flow from                                                           
   operations (3)             429    355      20.8   1,380  1,299        6.2
  Net income                  117    133     (12.0)    784    761        3.0
Per share data:                                                             
  Earnings per share                                                        
    Basic                    0.24   0.28              1.64   1.62           
    Diluted                  0.24   0.28              1.63   1.61           
  Weighted average                                                          
   participating shares                                                     
   outstanding during                                                       
   period (millions)          451    443               448    441           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 
2.  Operating margin for the twelve months ended August 31, 2013 includes
    the impact of an adjustment to align certain broadcast license fees with
    the CRTC billing period of approximately $14 million. Excluding the
    adjustment, operating margin would be 42.9%. 
3.  Funds flow from operations is before changes in non-cash working capital
    balances related to operations as presented in the unaudited interim
    Consolidated Statements of Cash Flows. 

Subscriber Highlights(1,) (2)


 
                                                     Growth                 
                                     ---------------------------------------
                                        Three months     Year ended August  
                           Total      ended August 31,          31,         
                      -------------- ------------------ --------------------
                          August 31,                                        
                                2013     2013     2012        2013     2012 
------------------------------------ ---------------------------------------
Subscriber statistics:                                                      
  Video customers          2,040,247  (29,522) (16,119)   (109,502) (69,938)
  Internet customers       1,890,506   10,564    6,458      28,031   38,248 
  Digital phone lines      1,359,960    4,722   28,570      52,416  134,781 
  DTH customers              903,565     (835)   1,155      (6,458)   1,140 
----------------------------------------------------------------------------

(1) Subscriber numbers for the comparative period have been restated to remove pending installs and have also been adjusted to reflect the results of a pre-migration subscriber audit recently undertaken prior to the planned migration of customers to Shaw's new billing system. The audit adjustments relate primarily to periods prior to 2009 and reflect a reduction of approximately 28,600 and 1,800 Video and Internet customers, respectively, and an increase of 900 Digital phone lines. Also, given the growth in Digital cable penetration, the Company has now combined the reporting of Basic cable and Digital cable as a Video customer.

(2) Subscriber numbers have been restated for comparative purposes to remove approximately 41,000 Video customers, 34,000 Internet customers and 38,000 Digital phone lines as a result of the sale of Mountain Cablevision Limited.

Consolidated Overview

Consolidated revenue of $1.25 billion and $5.14 billion for the three and twelve month periods, respectively, improved 3% and 2.9% over the comparable periods last year. Consolidated operating income before amortization for the three month period of $496 million was comparable to $501 million last year and on an annual basis operating income before amortization increased 4.4% to $2.22 billion. The revenue growth in the Cable division, primarily driven by rate increases and lower promotional activity, was partially reduced by various expense increases including employee related amounts and higher programming. Media was up due to improved advertising and subscriber revenues partially reduced by increased employee related amounts and higher programming costs. Revenue growth in the satellite division, primarily due to rate increases, was reduced by higher expenses including employee related, programming, operating costs related to the new Anik G1 satellite, and sales and marketing. Within all segments, the current annual period benefited from a one-time adjustment to align certain broadcast license fees with the CRTC billing period totaling approximately $14 million.

The Cable and Satellite divisions have approximately 6.2 million revenue generating units ("RGUs") - which represents the number of products sold to customers. The Company's strategy is to balance financial results with maintenance of overall RGUs. During the quarter, overall RGUs declined by 15,000 and for the year decreased 35,500, which was in line with targets set.

In late June severe floods impacted Shaw services in various locations across Southern Alberta. Technical, maintenance and customer care teams took immediate action to repair services for affected customers and proactive steps to maintain service and prevent any significant damage to Shaw infrastructure. The strength of the network redundancy and the tactical responsiveness ensured service interruptions were kept to a minimal period of time. Global News excelled in its extended special coverage of the crisis, establishing itself as the authority of information for the community. The current quarter operating income before amortization included approximately $3 million in one-time flood related costs.

Net income was $117 million and $784 million for the three and twelve months ended August 31, 2013, respectively, compared to $133 million and $761 million for the same periods last year. Non-operating items affected net income in both periods. Outlined on the following page are further details on these and other operating and non-operating components of net income for each period.


 
                    Year                           Year                     
($millions Cdn)    ended                          ended                     
               ----------                     ----------                    
                  August                Non-     August                Non- 
                31, 2013 Operating operating   31, 2012 Operating operating 
----------------------------------------------------------------------------
Operating                                                                   
 income            1,366     1,366         -      1,319     1,319         - 
 Amortization                                                               
  of financing                                                              
  costs - long-                                                             
  term debt           (4)       (4)        -         (5)       (5)        - 
 Interest                                                                   
  expense           (309)     (309)        -       (330)     (330)        - 
 Gain on sale                                                               
  of                                                                        
  cablesystem         50         -        50          -         -         - 
 Acquisition                                                                
  and                                                                       
  divestment                                                                
  costs               (8)        -        (8)         -         -         - 
 Gain on sale                                                               
  of associate         7         -         7          -         -         - 
 Gain on                                                                    
  remeasurement                                                             
  of interests                                                              
  in equity                                                                 
  investments          -         -         -          6         -         6 
 CRTC benefit                                                               
  obligation           -         -         -         (2)        -        (2)
 Gain on                                                                    
  derivative                                                                
  instruments          -         -         -          1         -         1 
 Accretion of                                                               
  long-term                                                                 
  liabilities                                                               
  and                                                                       
  provisions          (9)        -        (9)       (14)        -       (14)
 Other losses        (26)        -       (26)         -         -         - 
----------------------------------------------------------------------------
Income (loss)                                                               
 before income                                                              
 taxes             1,067     1,053        14        975       984        (9)
 Current income                                                             
  tax expense                                                               
  (recovery)         162       300      (138)       257       282       (25)
 Deferred                                                                   
  income tax                                                                
  expense                                                                   
  (recovery)         121       (25)      146        (43)      (58)       15 
----------------------------------------------------------------------------
Net income           784       778         6        761       760         1 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                   Three                          Three                     
($millions        months                         months                     
 Cdn)              ended                          ended                     
              -----------                     ----------                    
              August 31,                Non-     August                Non- 
                    2013 Operating operating   31, 2012 Operating operating 
----------------------------------------------------------------------------
Operating                                                                   
 income              273       273         -        292       292         - 
 Amortization                                                               
  of financing                                                              
  costs -                                                                   
  long-term                                                                 
  debt                (1)       (1)        -         (2)       (2)        - 
 Interest                                                                   
  expense            (75)      (75)        -        (83)      (83)        - 
 Gain on sale                                                               
  of associate        (2)        -        (2)         -         -         - 
 Accretion of                                                               
  long-term                                                                 
  liabilities                                                               
  and                                                                       
  provisions          (2)        -        (2)        (3)        -        (3)
 Equity loss                                                                
  from                                                                      
  associates           -         -         -         (1)        -        (1)
 Other gains                                                                
  (losses)           (17)        -       (17)         2         -         2 
----------------------------------------------------------------------------
Income before                                                               
 income taxes        176       197       (21)       205       207        (2)
 Current                                                                    
  income tax                                                                
  expense                                                                   
  (recovery)          15        60       (45)        60        64        (4)
 Deferred                                                                   
  income tax                                                                
  expense                                                                   
  (recovery)          44        (8)       52         12       (10)       22 
----------------------------------------------------------------------------
Net income           117       145       (28)       133       153       (20)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The changes in net income are outlined in the table below.


 
                                   August 31, 2013 net income compared to:  
                                 -------------------------------------------
                                          Three months ended     Year ended 
                                 ---------------------------- --------------
                                                  August 31,     August 31, 
($millions Cdn)                   May 31, 2013          2012           2012 
----------------------------------------------------------------------------
Increased (decreased) operating                                             
 income before amortization (1)            (89)           (5)            93 
Increased amortization                     (11)          (13)           (45)
Decreased interest expense                   -             8             21 
Change in net other costs and                                               
 revenue (2)                               (67)          (19)            23 
Decreased (increased) income                                                
 taxes                                      34            13            (69)
----------------------------------------------------------------------------
                                          (133)          (16)            23 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 
2.  Net other costs and revenue includes gain on sale of cablesystem,
    acquisition and divestment costs, gain on sale of associate, gain on
    remeasurement on interests in equity investments, CRTC benefit
    obligation, gain on derivative instruments, accretion of long-term
    liabilities and provisions, equity income from associates and other
    gains (losses) as detailed in the unaudited interim Consolidated
    Statements of Income. 

Basic earnings per share were $0.24 and $1.64 for the three and twelve months periods, respectively, compared to $0.28 and $1.62 in the same periods last year. In the current quarter, lower interest expense and income taxes of $8 million and $13 million, respectively, were more than offset by higher amortization of $13 million and net other costs and revenues of $19 million. The net other costs and revenue included a write-down of $14 million related to assets held for sale. The annual increase was primarily due to higher operating income before amortization of $93 million, improved net other costs and revenue of $23 million, and lower interest expense of $21 million, the total of which was partially reduced by increased amortization of $45 million and higher income taxes of $69 million. The improved net other costs and revenue included the gain on the sale of Mountain Cablevision Limited ("Mountain Cable"). The higher income taxes resulted as the comparable period benefited from a tax recovery related to the resolution of certain tax matters.

Net income in the current quarter declined $133 million compared to the third quarter of fiscal 2013 driven by lower operating income before amortization of $89 million, primarily due to seasonality in the Media business, along with reduced net other costs and revenue of $67 million, primarily due to the gain on the sale of Mountain Cable recorded in the third quarter. These declines were partially offset by lower income taxes of $34 million.

Free cash flow for the quarter and annual periods of $61 million and $604 million, respectively, compared to $103 million and $482 million in the same periods last year. The current quarter decline was primarily due to increased capital investment. The annual improvement was primarily due to higher operating income before amortization and lower capital investment and interest, partially reduced by increased cash taxes.

During the second quarter, the Company entered into agreements with Rogers Communications Inc. ("Rogers") to sell to Rogers its shares in Mountain Cable; and grant to Rogers an option to acquire its wireless spectrum licenses; and, to purchase from Rogers its 33.3% interest in TVtropolis General Partnership ("TVtropolis"). The sale of Mountain Cable closed at the end of April, and the purchase of TVtropolis transaction closed at the end of June, after the respective regulatory approvals were received. The potential option exercise for the sale of the wireless spectrum licenses, subject to Industry Canada approval, is expected to occur in fiscal 2015. Overall, Shaw expects to receive net proceeds of approximately $700 million from these transactions.

Shaw also announced it had entered into a number of transactions with Corus Entertainment Inc. ("Corus"), a related party subject to common voting control. In a series of agreements to optimize its portfolio of specialty channels, Shaw agreed to sell to Corus its 49% interest in ABC Spark and 50% interest in its two French-language channels, Historia and Series+. In addition, Corus agreed to sell to Shaw its 20% interest in Food Network Canada. Shaw expects to receive net proceeds of approximately $95 million from these transactions. The ABC Spark and Food Network Canada transactions closed at the end of April while Historia and Series+ are expected to close in the first half of fiscal 2014.

These transactions with Rogers and Corus are strategic in nature allowing the Company to use up to $500 million of the total expected net proceeds of approximately $800 million to accelerate certain capital investments to improve and strengthen its network advantage. Key investments include the completion of the Calgary data centre, further digitization of the network and additional bandwidth upgrades, development of IP delivery of video, expansion of the WiFi network, and additional innovative product offerings related to Shaw Go and other applications to provide an enhanced customer experience.

The Company established an accelerated capital fund of up to $500 million and is tracking the accelerated spending against this as the investments are made. Shaw plans to invest up to $500 million in fiscal 2013, 2014 and 2015 spending approximately $110 million, $250 million and $140 million in each of the respective years. After this period of accelerated spending the Company expects that the baseline capital intensity for the Cable business should decline.

On April 8, 2013 Shaw announced it had entered into a transaction to acquire ENMAX Envision Inc. ("Envision"), a company providing leading telecommunication services to Calgary and surrounding area business customers, for approximately $225 million. The acquisition closed at the end of April.

Shaw continues to make a positive contribution in the communities it operates. In late June, the Company responded to the southern Alberta floods with a $1 million donation to the Red Cross, and in August, Shaw supported a number of children's charities as title sponsor of the Shaw Charity Classic held in Calgary.

Key Performance Drivers

The Company's continuous disclosure documents may provide discussion and analysis of non-IFRS financial measures. These financial measures do not have standard definitions prescribed by IFRS and therefore may not be comparable to similar measures disclosed by other companies. The Company's continuous disclosure documents may also provide discussion and analysis of additional GAAP measures. Additional GAAP measures include line items, headings, and sub-totals included in the financial statements.

The Company utilizes these measures in making operating decisions and assessing its performance. Certain investors, analysts and others, utilize these measures in assessing the Company's operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. The non-IFRS financial measures and additional GAAP measures have not been presented as an alternative to net income or any other measure of performance required by IFRS.

The following contains a listing of non-IFRS financial measures and additional GAAP measures used by the Company and provides a reconciliation to the nearest IFRS measure or provides a reference to such reconciliation.

Operating income before amortization and operating margin

Operating income before amortization is calculated as revenue less operating, general and administrative expenses. It is intended to indicate the Company's ability to service and/or incur debt, and therefore it is calculated before amortization (a non-cash expense) and interest. Operating income before amortization is also one of the measures used by the investing community to value the business. Operating margin is calculated by dividing operating income before amortization by revenue.


 
                                  Three months ended                        
                                          August 31,  Year ended August 31, 
                               ---------------------- ----------------------
($ millions Cdn)                     2013       2012        2013       2012 
----------------------------------------------------------------------------
Operating income                      273        292       1,366      1,319 
Add back (deduct) amortization:                                             
  Deferred equipment revenue          (30)       (30)       (121)      (115)
  Deferred equipment costs             65         62         257        231 
  Property, plant and                                                       
   equipment, intangibles and                                               
   other                              188        177         718        692 
----------------------------------------------------------------------------
Operating income before                                                     
 amortization                         496        501       2,220      2,127 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Free cash flow

The Company utilizes this measure to assess the Company's ability to repay debt and return cash to shareholders.

Free cash flow is calculated as operating income before amortization, less interest, cash taxes paid or payable, capital expenditures (on an accrual basis and net of proceeds on capital dispositions and adjusted to exclude amounts funded through the accelerated capital fund) and equipment costs (net), adjusted to exclude share-based compensation expense, less cash amounts associated with funding the new and assumed CRTC benefit obligations related to the acquisition of Shaw Media as well as excluding non-controlling interest amounts that are consolidated in the operating income before amortization, capital expenditure and cash tax amounts. Free cash flow also includes changes in receivable related balances with respect to customer equipment financing transactions as a cash item, and is adjusted for recurring cash funding of pension amounts net of pension expense. Dividends paid on the Company's Cumulative Redeemable Rate Reset Preferred Shares are also deducted.

Free cash flow has not been reported on a segmented basis. Certain components of free cash flow including operating income before amortization, capital expenditures (on an accrual basis net of proceeds on capital dispositions) and equipment costs (net), CRTC benefit obligation funding, and non-controlling interest amounts continue to be reported on a segmented basis. Other items, including interest and cash taxes, are not generally directly attributable to a segment, and are reported on a consolidated basis.

For free cash flow purposes the Company considers the initial $300 million discretionary pension funding to be a financing transaction and has not included the amount funded or the related cash tax recovery in the free cash flow calculation.

Accelerated capital fund

The Company established a notional fund, the accelerated capital fund, of up to $500 million with proceeds received, and to be received, from several strategic transactions with each of Rogers and Corus. The accelerated capital initiatives will be funded through this fund and not cash generated from operations. Key investments include the completion of the Calgary data centre, further digitization of the network and additional bandwidth upgrades, development of IP delivery of video, expansion of the WiFi network, and additional innovative product offerings related to Shaw Go and other applications to provide an enhanced customer experience. It is expected up to $500 million will be used in fiscal 2013, 2014 and 2015 spending approximately $110 million, $250 million and $140 million in each of the respective years.

Free cash flow is calculated as follows:


 
                            Three months ended                              
                                August 31,           Year ended August 31,  
                         ------------------------- -------------------------
($millions Cdn)             2013    2012 Change %     2013    2012 Change % 
----------------------------------------------------------------------------
Revenue                                                                     
  Cable                      818     803      1.9    3,266   3,193      2.3 
  Satellite                  219     213      2.8      860     844      1.9 
  Media                      231     217      6.5    1,106   1,053      5.0 
----------------------------------------------------------------------------
                           1,268   1,233      2.8    5,232   5,090      2.8 
  Intersegment                                                              
   eliminations              (22)    (23)    (4.3)     (90)    (92)    (2.2)
----------------------------------------------------------------------------
                           1,246   1,210      3.0    5,142   4,998      2.9 
----------------------------------------------------------------------------
Operating income before                                                     
 amortization (1)                                                           
  Cable                      396     396        -    1,582   1,502      5.3 
  Satellite                   66      77    (14.3)     285     293     (2.7)
  Media                       34      28     21.4      353     332      6.3 
----------------------------------------------------------------------------
                             496     501     (1.0)   2,220   2,127      4.4 
----------------------------------------------------------------------------
                                                                            
Capital expenditures and                                                    
 equipment costs (net):                                                     
 (2)                                                                        
  Cable                      296     184     60.9      867     810      7.0 
  Accelerated capital                     greater                   greater 
   fund investment (1)                       than                      than 
                             (60)      -    100.0     (110)      -    100.0 
----------------------------------------------------------------------------
  Adjusted Cable             236     184     28.3      757     810     (6.5)
  Satellite                   31      27     14.8      123      94     30.9 
  Media                       15      13     15.4       31      31        - 
----------------------------------------------------------------------------
                             282     224     25.9      911     935     (2.6)
----------------------------------------------------------------------------
Free cash flow before the                                                   
 following                   214     277    (22.7)   1,309   1,192      9.8 
Less:                                                                       
  Interest                   (75)    (83)    (9.6)    (308)   (329)    (6.4)
  Cash taxes                 (60)    (64)    (6.2)    (300)   (282)     6.4 
Other adjustments:                                                          
  Non-cash share-based                                                      
   compensation                1       1        -        5       6    (16.7)
  CRTC benefit obligation                                                   
   funding                   (15)    (17)   (11.8)     (52)    (48)     8.3 
  Non-controlling                                                           
   interests                  (6)     (4)    50.0      (39)    (34)    14.7 
  Pension adjustment                      greater                           
                                             than                           
                               4       1    100.0       12      12        - 
  Customer equipment                      greater                           
   financing                                 than                           
                               1      (4)   100.0      (10)    (20)   (50.0)
  Preferred share                                                           
   dividends                  (3)     (4)   (25.0)     (13)    (15)   (13.3)
----------------------------------------------------------------------------
Free cash flow (1)            61     103    (40.8)     604     482     25.3 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating margin (1)                                                        
  Cable                     48.4%   49.3%    (0.9)    48.4%   47.0%     1.4 
  Satellite                 30.1%   36.2%    (6.1)    33.1%   34.7%    (1.6)
  Media                     14.7%   12.9%     1.8     31.9%   31.5%     0.4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 
2.  Per Note 3 to the unaudited interim Consolidated Financial Statements. 

Details on the accelerated capital fund and investment to date are as follows:


 
----------------------------------------------------------------------------
Estimated year of spend                      2013     2014     2015    Total
----------------------------------------------------------------------------
($millions Cdn)                                                             
----------------------------------------------------------------------------
Fund Opening Balance                          110      250      140      500
Accelerated capital investment                110        -        -      110
----------------------------------------------------------------------------
Fund Closing Balance, August 31, 2013           -      250      140      390
----------------------------------------------------------------------------

CABLE

Financial Highlights


 
                               Three months ended                           
                                       August 31,     Year ended August 31, 
                             --------------------- -------------------------
($millions Cdn)               2013  2012 Change %     2013    2012 Change % 
----------------------------------------------------------------------------
Revenue                        818   803      1.9    3,266   3,193      2.3 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before                                                     
 amortization (1)              396   396        -    1,582   1,502      5.3 
                                                                            
Capital expenditures and                                                    
 equipment costs (net):                                                     
  New housing development       23    25     (8.0)      94     100     (6.0)
  Success based                 64    42     52.4      203     250    (18.8)
  Upgrades and enhancement     133    79     68.4      380     322     18.0 
  Replacement                   13     9     44.4       46      41     12.2 
  Buildings and other                     greater                           
                                             than                           
                                63    29    100.0      144      97     48.5 
----------------------------------------------------------------------------
Total as per Note 3 to the                                                  
 unaudited interim                                                          
 Consolidated Financial                                                     
 Statements(2)                 296   184     60.9      867     810      7.0 
----------------------------------------------------------------------------
                                                                            
Operating margin (1)          48.4% 49.3%    (0.9)    48.4%   47.0%     1.4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 
2.  The three and twelve months ended August 31, 2013 include $60 million
    and $110 million respectively, related to certain capital investments
    that are being funded from the accelerated capital fund. 

Operating Highlights


 
--  The current quarter reflects a full quarter impact of the acquisition of
    Envision and disposition of Mountain Cable. 
--  Internet customers were up 10,564 during the quarter to 1,890,506 and
    Digital Phone lines increased 4,722 totaling 1,359,960 as at August 31,
    2013. During the quarter Video subscribers decreased 29,522. 

Cable revenue for the three and twelve month periods of $818 million and $3.27 billion improved 1.9% and 2.3%, respectively, over the comparable periods last year. Rate increases, lower promotional activity and customer growth in Internet and Digital Phone, were partially offset by lower Video subscribers, On Demand revenues and the divestiture of Mountain Cable. Also contributing to the improvement was growth in Business, including a full quarter inclusion of Envision. On Demand revenue was lower in both the current periods primarily due to lower buys, while the current annual period also reflected a shortened NHL hockey schedule.

Operating income before amortization of $396 million for the quarter was consistent with the same period last year. Revenue related improvements, reduced regulatory costs resulting from the CRTC mandated reduction in the Local Programming Improvement Fund ("LPIF") contribution from 1.5% to 1% and lower various other expenses were offset by higher employee related costs, increased marketing including the Shaw Charity Classic golf sponsorship, higher programming amounts related to new services and increased rates as contracts renewed, and the net impact of divestment and acquisition activity.

Operating income before amortization for the annual period improved 5.3% over the prior year to $1.58 billion. Revenue related growth, lower LPIF costs, the second quarter broadcast license fee adjustment of $7 million and lower various other expenses, were partially offset by higher employee related amounts due to employee growth and annual merit increases, and higher programming costs due to new services and rate increases.

Compared to the third quarter of fiscal 2013, revenue was marginally lower primarily due to the full quarter impact of the divestment of Mountain Cable partially offset by the acquisition of Envision. Operating income before amortization was comparable to the prior quarter. The revenue related declines, higher marketing, including costs related to the Shaw Charity Classic, and employee related amounts, were more than offset by lower various other expenses and higher margin contribution from Envision.

Total capital investment of $296 million and $867 million in the current three and twelve month periods increased $112 million and $57 million over the comparable periods last year. Capital investment in each period included $60 million and $110 million, respectively, funded through the accelerated capital fund established with net proceeds from the strategic transactions with each of Rogers and Corus. The accelerated capital fund initiatives included next generation video delivery systems, expediting WiFi infrastructure build, continued investment in the new data centre, and increasing network capacity.

Success-based capital was up $22 million over the comparable three month period due to higher rentals of Video equipment, particularly HD and HDPVR equipment. For the twelve month period Success-based spend was $47 million lower than the comparable period due to decreased Internet and Phone modem purchases and lower installation activity as well as a decline in subsidies from increased pricing for video equipment sales, partially offset by higher HD and HDPVR video equipment rentals.

Investment in Upgrades and enhancement and Replacement categories combined increased $58 million in the current quarter and $63 million on an annual basis compared to the same periods last year. The higher investment included fibre build, network and customer electronics in support of business growth, hub site and network electronics upgrades to improve internet capacity; and investment in the WiFi network and next generation video delivery systems, partially offset by prior year investment in the digital network upgrade project and residential and business telecom enhancements.

Investment in Buildings and other was up $34 million and $47 million, respectively, over the comparable three and twelve month periods last year. The increase was primarily due to spending on investment in the new data centre and Shaw Court, back office infrastructure replacement projects, and other corporate assets.

Spending in New housing development was comparable to the three and twelve month periods last year.

Late in the quarter the Company introduced video packages that include a complimentary HD box and launched service contracts that include an HDPVR or, for an additional fee, the equipment can be upgraded to a Gateway whole-home HDPVR solution. The contracts are for a 24 month term and provide for a bundled service of Video and Internet.

Subscriber Statistics


 
                                                  August 31, 2013           
                                       -------------------------------------
                                            Three months                    
                                                   ended         Year ended 
                                       ------------------ ------------------
                  August   August 31,                                       
                31, 2013 2012 (1) (2)    Growth Change %    Growth Change % 
----------------------------------------------------------------------------
VIDEO:                                                                      
Connected      2,040,247    2,149,749   (29,522)    (1.4) (109,502)    (5.1)
Penetration as                                                              
 % of homes                                                                 
 passed             50.9%        55.0%                                      
----------------------------------------------------------------------------
                                                                            
INTERNET:                                                                   
Connected and                                                               
 scheduled     1,890,506    1,862,473    10,564      0.6    28,033      1.5 
Penetration as                                                              
 % of basic         92.7%        86.6%                                      
Standalone                                                                  
 Internet not                                                               
 included in                                                                
 basic cable     320,724      252,437    20,752      6.9    68,287     27.1 
                                                                            
DIGITAL PHONE:                                                              
Number of lines                                                             
 (3)           1,359,960    1,307,544     4,722      0.3    52,416      4.0 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  Internet and Digital Phone subscriber statistics have been restated to
    exclude scheduled and pending installations at August 31, 2012 and all
    categories have been adjusted to reflect the results of a pre-migration
    subscriber audit undertaken prior to the migration of customers to
    Shaw's new billing system.  
2.  Subscriber numbers have been restated for comparative purposes to remove
    approximately 41,000 Video customers, 34,000 Internet customers and
    38,000 Digital phone lines as a result of the sale of Mountain Cable.  
3.  Represents primary and secondary lines on billing. 

SATELLITE

Financial Highlights(1)


 
                               Three months ended                           
                                       August 31,     Year ended August 31, 
                         ------------------------- -------------------------
($millions Cdn)             2013    2012 Change %     2013    2012 Change % 
----------------------------------------------------------------------------
Revenue                      219     213      2.8      860     844      1.9 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before                                                     
 amortization (2)             66      77    (14.3)     285     293     (2.7)
                                                                            
Capital expenditures and                                                    
 equipment costs (net):                                                     
  Success based (3)           27      20     35.0       88      81      8.6 
  Transponders                                                      greater 
                                                                       than 
                               -       2   (100.0)      23       2    100.0 
  Buildings and other          4       5    (20.0)      12      11      9.1 
----------------------------------------------------------------------------
Total as per Note 3 to                                                      
 the unaudited interim                                                      
 Consolidated Financial                                                     
 Statements                   31      27     14.8      123      94     30.9 
----------------------------------------------------------------------------
                                                                            
Operating margin(2)         30.1%   36.2%    (6.1)    33.1%   34.7%    (1.6)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  The Satellite segment was previously reported as DTH and Satellite
    Services. These segments have been combined into a single operating
    segment. 
2.  See definitions and discussion under Key Performance Drivers in MD&A. 
3.  Net of the profit on the sale of satellite equipment as it is viewed as
    a recovery of expenditures on customer premise equipment. 

Operating Highlights


 
--  During the quarter Shaw Direct subscribers decreased 835 and for the
    year declined 6,458. As at August 31, 2013 DTH customers totaled
    903,565. 

Revenue of $219 million and $860 million for the three and twelve month periods, respectively, was up 2.8% and 1.9% over the same periods last year primarily due to rate increases partially offset by increased promotional activity and lower subscribers.

Operating income before amortization of $66 million and $285 million for the three and twelve month periods, respectively, decreased 14.3% and 2.7% over the same periods last year. The revenue related growth was more than offset by higher employee related amounts, operating costs related to the new Anik G1 transponders, which approximate $2 million per month, as well as increased programming fees and marketing expenses. The current annual period benefitted from the second quarter broadcast license fee adjustment of $4 million.

Revenue was comparable to the third quarter as improved revenue from customer rate increases was reduced by lower On Demand and promotional activity. Operating income before amortization declined primarily due to higher operating costs related to the new transponders as well as increased marketing activity and customer support costs.

Total capital investment of $31 million and $123 million for the three and twelve month periods compared to $27 million and $94 million, respectively, in the same periods last year. The higher spend in the current annual period was mainly due to the final payment related to the Anik G1 transponders.

The Anik G1 satellite successfully launched in mid April and in May Shaw Direct took control of 16 transponders. On May 29 over 120 new channels were launched with Shaw Direct now offering over 650 channels of which more than 200 are HD. Currently over 70% of customers have equipment capable of accessing HD programming. Shaw Direct also offers streaming VOD to the satellite receiver with almost 10,000 available titles.

Subscriber Statistics


 
                                                  August 31, 2013           
                                       -------------------------------------
                                       Three months ended        Year ended 
                                       ------------------ ------------------
                       August   August                                      
                     31, 2013 31, 2012   Growth  Change %   Growth Change % 
----------------------------------------------------------------------------
                                                                            
DTH customers (1)     903,565  910,023     (835)        -   (6,458)    (0.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  Including seasonal customers who temporarily suspend their service. 

MEDIA

Financial Highlights


 
                               Three months ended                           
                                   August 31,         Year ended August 31, 
                             ----------------------- -----------------------
($millions Cdn)                2013   2012 Change %    2013   2012 Change % 
----------------------------------------------------------------------------
Revenue                         231    217      6.5   1,106  1,053      5.0 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before                                                     
 amortization (1)                34     28     21.4     353    332      6.3 
                                                                            
Capital expenditures:                                                       
  Broadcast and transmission      8      5     60.0      13     12      8.3 
  Buildings and other             7      8    (12.5)     18     19     (5.3)
----------------------------------------------------------------------------
Total as per Note 3 to the                                                  
 unaudited interim                                                          
 Consolidated Financial                                                     
 Statements                      15     13     15.4      31     31        - 
----------------------------------------------------------------------------
                                                                            
Other adjustments:                                                          
  CRTC benefit obligation                                                   
   funding                      (15)   (17)   (11.8)    (52)   (48)     8.3 
  Non-controlling interests      (6)    (4)    50.0     (39)   (34)    14.7 
                                                                            
Operating margin(1)            14.7%  12.9%     1.8    31.9%  31.5%     0.4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  See definitions and discussion under Key Performance Drivers in MD&A. 

Operating Highlights

Revenue and operating income before amortization for the quarter was $231 million and $34 million, respectively, compared to $217 million and $28 million last year. Revenue for the quarter was up 6.5% due to higher advertising and subscriber revenues. Operating income before amortization improved due to revenue growth partially reduced by higher operating expenses, including employee related and various other.

For the twelve months ending August 31, 2013 revenue of $1.11 billion and operating income before amortization of $353 million compared to $1.05 billion and $332 million, respectively, for the same period last year. Improved advertising and subscriber revenues were partially reduced by higher programming costs, and increased expenses including employee related amounts due to growth and merit increases, and various other. The current year also benefited from an expense adjustment of $3 million to align certain broadcast license fees with the CRTC billing period.

Compared to the third quarter of fiscal 2013, revenue and operating income before amortization decreased $76 million and $82 million, respectively. The declines were primarily due to the seasonality of the Media business.

Global continued to deliver solid programming results in the quarter, increasing the number of Top 20 positions nationally with key shows such as Under the Dome, Big Brother and Rookie Blue. These shows also delivered strong audiences on their season finales providing a solid lead-in to the fall programming line-up. The conventional fall programming premiered through the month of September and into early October, with a solid returning line-up combined with new drama programming that includes The Blacklist, Sleepy Hollow, Ironside and Dracula. Shaw Media also added several new comedies to the fall schedule including The Millers, Sean Saves the World, The Michael J Fox Show and Welcome to the Family.

In early September Global Go launched, providing 24/7 streaming of Global content plus full in-season stacking for key properties, making Shaw Media the first conventional broadcaster in Canada to offer in-season stacking.

Media's specialty portfolio continues to lead in the channel rankings in the Adult 25-54 category with 4 of the Top 10 analog channels, and 6 of the Top 10 digital channels. National Geographic, Action, Lifetime and MovieTime hold the top 4 digital positions. DTOUR, a new lifestyle channel, launched in late August adding to Shaw Media's portfolio of specialty channels.

Global News continues to maintain the number one position in the Vancouver, Calgary and Edmonton markets and was the go to source for coverage of the Southern Alberta floods that occurred in late June. Further, Global News was announced as the 2013 winner of the prestigious Edward R Murrow Award for overall News excellence in network television, the first Canadian network to earn that recognition in the award's 42 year history.

The Media business was recognized in the quarter by the Canadian Cable Systems Alliance as Broadcast Supplier of the Year for its ongoing partnership and support of the independent systems in Canada.

Capital investment continued on various projects in the quarter and included upgrading production equipment, infrastructure and facility investments.

OTHER INCOME AND EXPENSE ITEMS

Amortization


 
                                Three months ended                          
                                    August 31,        Year ended August 31, 
                             ----------------------- -----------------------
($millions Cdn)                2013   2012  Change %   2013   2012  Change %
----------------------------------------------------------------------------
Amortization revenue                                                        
 (expense) -                                                                
  Deferred equipment revenue     30     30         -    121    115       5.2
  Deferred equipment costs      (65)   (62)      4.8   (257)  (231)     11.3
  Property, plant and                                                       
   equipment, intangibles and                                               
   other                       (188)  (177)      6.2   (718)  (692)      3.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Amortization of deferred equipment revenue and deferred equipment costs increased over the comparable periods due to the sales mix of equipment, the timing and volume of sales as well as changes in customer pricing on certain equipment.

Amortization of property, plant and equipment, intangibles and other increased over the comparative periods as the amortization of new expenditures exceeded the impact of assets that became fully depreciated.

Amortization of financing costs and Interest expense


 
                              Three months ended                            
                                  August 31,         Year ended August 31,  
                           ------------------------ ------------------------
($millions Cdn)               2013   2012 Change %     2013   2012 Change % 
----------------------------------------------------------------------------
Amortization of financing                                                   
 costs - long-term debt          1      2    (50.0)       4      5    (20.0)
Interest expense                75     83     (9.6)     309    330     (6.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest expense decreased over the comparable periods due to lower average debt levels.

Gain on sale of cablesystem

During the current year, the Company closed the sale of Mountain Cable in Hamilton, Ontario to Rogers. The Company received proceeds, after working capital adjustments, of $398 million and recorded a gain of $50 million.

Acquisition and divestment costs

The Company incurred $8 million of costs in respect of the acquisition of Envision and the transactions with Rogers related to the sale of Mountain Cable, grant of an option to acquire the wireless spectrum licenses and purchase from Rogers of its interest in TVtropolis.

Gain on sale of associate

During the current year, the Company recorded a gain of $7 million on the sale of its interest in ABC Spark to Corus.

Gain on remeasurement of interests in equity investments and CRTC benefit obligation

During the comparative year, the company acquired the remaining interests in two specialty channels. In connection with the acquisition the Company recorded a gain of $6 million in respect of remeasurement to fair value of the Company's interests which were held prior to the acquisition. As part of the CRTC decision approving the acquisition, the Company is required to contribute approximately $2 million in new benefits to the Canadian broadcasting system over seven years.

Accretion of long-term liabilities and provisions

The Company records accretion expense in respect of the discounting of certain long-term liabilities and provisions which are accreted to their estimated value over their respective terms. The expense is primarily in respect of CRTC benefit obligations.

Other losses

This category generally includes realized and unrealized foreign exchange gains and losses on US dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and minor investments, and the Company's share of the operations of Burrard Landing Lot 2 Holdings Partnership. During the prior year, the category also included a pension curtailment gain and amounts in respect of the electrical fire and resulting water damage to Shaw Court that occurred during the fourth quarter. During the first quarter of the current year, the Company received insurance advances of $5 million related to its claim for costs that were incurred in the fourth quarter of fiscal 2012 and incurred additional costs of $13 million in respect of ongoing recovery activities. During the fourth quarter of the current year, the Company decided to discontinue further construction on a real estate project which resulted in a write-down of $14 million.

Income taxes

Income taxes were higher in the current year mainly due to a recovery in the prior year related to the resolution of certain tax matters.

RISKS AND UNCERTAINTIES

The significant risks and uncertainties affecting the Company and its business are discussed in the Company's August 31, 2012 Annual Report under the Introduction to the Business - Known Events, Trends, Risks and Uncertainties in Management's Discussion and Analysis. Developments of note since then are as follows:

AWS Spectrum Transfers

On June 28, 2013 the Minister of Industry announced a new framework for the review of spectrum license transfers, including prospective transfers that could arise from options and other agreements. A licensee is required to seek a review within 15 days of entering into any agreement that could lead to a prospective transfer. The 15 day timing provision within the framework does not apply to prior agreements. The spectrum option agreement with Rogers will not be subject to an immediate review, as it was entered into prior to the release of the new framework, but will be subject to review prior to any spectrum license transfer. Under the new framework, all spectrum transfer reviews will include consideration of a number of factors, including the overall distribution of license holdings in the licensed spectrum band and other commercial mobile spectrum bands in the licensed area, the relative utility and substitutability of the licensed spectrum and the change in spectrum concentration levels that would result from the transfer.

Consultation on Television

In the fall of calendar 2013, the Commission will initiate a "conversation with Canadians", which is expected to lead to a major review, in calendar 2014, of the regulatory and policy framework for television. While the scope, direction and possible outcomes of the hearing are uncertain, this review could lead to changes in the regulatory requirements applicable to television programming and broadcasting distribution undertakings.

Throne Speech

The Throne Speech delivered on October 16, 2013 included a statement indicating that the Government believes Canadians should have more ability to choose unbundled television channels, while protecting Canadian jobs. While no details have yet been provided on how this would be achieved, this could lead to changes in the regulatory requirements applicable to television programming and broadcasting distribution undertakings.

FINANCIAL POSITION

Total assets were $12.7 billion at August 31, 2013 and August 31, 2012. Following is a discussion of significant changes in the consolidated statement of financial position since August 31, 2012.

Current assets increased $144 million primarily due to the reclassification of assets held for sale of $116 million and increase in accounts receivable of $53 million partially offset by a decrease in other current assets of $17 million. Assets held for sale include the assets of Historia and Series+ totaling $105 million, the majority of which is comprised of intangibles and $11 million in respect of a property which will be sold. Accounts receivable increased due to the combination of rate increases, timing of collection of trade receivables, higher advertising revenue during the fourth quarter of the current year compared to the fourth quarter of the prior year and reclassification of advance bill payments to unearned revenue. Other current assets declined primarily due to a reduction in a tax indemnity upon resolution of the related income tax liabilities.

Property, plant and equipment increased $128 million primarily as a result of current year capital investment and the acquisition of Envision exceeding amortization and the impact of the sale of Mountain Cable.

Other long-term assets decreased $25 million primarily due to a decline in deferred equipment costs.

Intangibles decreased $202 million due to the sale of Mountain Cable of $245 million and reclassification of $92 million in respect of Historia and Series+ to assets held for sale partially offset by higher program rights and advances of $33 million, an increase in other intangibles of $19 million and the recognition of $87 million in customer relationships on the acquisition of Envision. Additional investment in software intangibles and acquired rights and advances exceeded the amortization for the current year.

Goodwill decreased $17 million primarily due to the sale of Mountain Cable of $81 million partially offset by $68 million on the acquisition of Envision.

Current liabilities increased $610 million due to increases in accounts payable and accruals of $48 million, current portion of long-term debt of $499 million, a promissory note of $48 million arising on the closing of the transactions with Corus, unearned revenue of $15 million and reclassification of $14 million in respect of liabilities associated with the Historia and Series+ assets held for sale, all of which were partially offset by a decrease in current income taxes payable of $20 million. Accounts payable and accruals increased due to higher trade and other payables primarily in respect of timing of capital expenditures and inventory. The current portion of long-term debt increased due to the reclassification of the 7.5% $350 million senior notes due in November 2013 and 6.5% $600 million senior notes due June 2014 partially offset by repayment of the 6.1% $450 million senior notes which were due in November 2012. Unearned revenue increased primarily due to reclassification of advance bill payments from accounts receivable. The liabilities associated with assets held for sale is primarily composed of deferred income taxes. Income taxes payable declined due to tax installment payments, the resolution of certain income tax liabilities and receipt of tax credits all of which were partially offset by the current period expense.

Long-term debt decreased $944 million due to the aforementioned reclassification of the 7.5% $350 million senior notes and 6.5% $600 million senior notes.

Other long-term liabilities decreased $330 million primarily due to the $300 million contribution to a retirement compensation arrangement trust ("the RCA") in order to partially fund its non-contributory defined benefit pension plan and a decrease in CRTC benefit obligations partially offset by current year pension expense.

Deferred credits increased $237 million primarily due to the $250 million received from Rogers in respect of the option to acquire the wireless spectrum licenses.

Deferred income tax liabilities, net of deferred income tax assets, increased $71 million primarily due to current year expense partially offset by the sale of Mountain Cable and the aforementioned reclassification of amounts in respect of Historia and Series+.

Shareholders' equity increased $379 million primarily due to increases in share capital of $205 million and retained earnings of $223 million partially offset by a decrease in non-controlling interests of $50 million. Share capital increased due to the issuance of 9,117,845 Class B Non-Voting Shares under the Company's option plan and Dividend Reinvestment Plan ("DRIP"). As of October 15, 2013, share capital is as reported at August 31, 2013 with the exception of the issuance of a total of 629,352 Class B Non-Voting Shares under the DRIP and upon exercise of options under the Company's option plan. Retained earnings increased due to current year earnings of $746 million partially offset by dividends of $467 million and a charge of $56 million representing the difference between the consideration and the carrying value of the additional interests acquired in Food Network Canada and TVtropolis. Non-controlling interests decreased as their share of earnings was exceeded by the distributions declared during the period and the impact of the aforementioned changes in ownership of Food Network Canada and TVtropolis.

LIQUIDITY AND CAPITAL RESOURCES

In the current year, the Company generated $604 million of free cash flow. Shaw used its free cash flow along with cash of $5 million, the net proceeds of $589 million from the transactions with Rogers, proceeds on issuance of Class B Non-Voting Shares of $69 million and other net items of $165 million (primarily in respect of a reduction in working capital including current taxes on non-operating items) to repay the 6.1% $450 million senior notes, fund $300 million in discretionary contributions to the RCA in respect of its non-contributory defined benefit pension plan, pay common share dividends of $319 million, purchase Envision for $222 million, invest an additional net $31 million in program rights and fund $110 million of accelerated capital spend. Due to timing, the net proceeds from the Rogers transactions have been temporarily used in ongoing operations to the extent the cash was not required to fund accelerated capital investments.

On December 5, 2012 Shaw received the approval of the TSX to renew its normal course issuer bid to purchase its Class B Non-Voting Shares for a further one year period. The Company is authorized to acquire up to 20,000,000 Class B Non-Voting Shares during the period December 7, 2012 to December 6, 2013. No shares have been repurchased during the current year.

To allow for timely access to capital markets, the Company filed a short form base shelf prospectus with securities regulators in Canada and the U.S. on May 13, 2013. The shelf prospectus allows for the issue up to an aggregate $4 billion of debt and equity securities over a 25 month period.

The Company issues Class B Non-Voting Shares from treasury under its DRIP which resulted in cash savings and incremental Class B Non-Voting Shares of $126 million during the twelve months ending August 31, 2013.

Based on available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations 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

Operating Activities


 
                             Three months ended                             
                                 August 31,          Year ended August 31,  
                          ------------------------ -------------------------
($millions Cdn)              2013   2012 Change %    2013    2012   Change %
----------------------------------------------------------------------------
Funds flow from operations    429    355     20.8   1,380   1,299        6.2
Net change in non-cash                                                      
 working capital balances                                            greater
 related to operations         66     99    (33.3)    (11)     18 than 100.0
----------------------------------------------------------------------------
                              495    454      9.0   1,369   1,317        3.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Funds flow from operations increased over the comparative three month period due to lower program rights purchases, interest expense and current income taxes in the current period. Funds flow from operations increased over the comparative year due to higher operating income before amortization adjusted for non-cash program rights expense, lower interest and current income tax expense and the settlement of the amended cross-currency interest agreements in the prior year, all of which were partially offset by the $300 million in discretionary contributions to the RCA. The net change in non-cash working capital balances related to operations fluctuated over the comparative periods due to the timing of payment of current income taxes payable and accounts payable and accrued liabilities as well as fluctuations in accounts receivable.

Investing Activities


 
                         Three months ended August                          
                                    31,              Year ended August 31,  
                         ------------------------- -------------------------
($millions Cdn)            2013   2012    Increase   2013   2012    Decrease
----------------------------------------------------------------------------
Cash flow used in                                                           
 investing activities      (295)  (191)        104   (642)  (983)        341
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The cash used in investing activities increased over the comparable quarter due to higher cash outlays for capital expenditures and equipment costs (net). The cash used in investing activities decreased over the comparable year due to the net receipt of $589 million in respect of the transactions with Rogers partially offset by the acquisition of Envision.

Financing Activities

The changes in financing activities during the comparative periods were as follows:


 
                                          Three months    Year ended August 
                                        ended August 31,         31,        
                                       ------------------ ------------------
($millions Cdn)                            2013     2012      2013     2012 
----------------------------------------------------------------------------
Bank credit facility arrangement costs        -        -         -       (4)
Repay 6.1% senior unsecured notes             -        -      (450)       - 
Dividends                                   (83)     (84)     (332)    (333)
Issuance of Class B Non-Voting Shares        21        3        69       17 
Distributions paid to non-controlling                                       
 interests                                   (7)      (7)      (19)     (26)
Contribution received from non-                                             
 controlling interest                         1        -         1        - 
Repayment of Partnership debt                 -        -        (1)      (1)
----------------------------------------------------------------------------
                                            (68)     (88)     (732)    (347)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION


 
                     Operating      Net income                              
                 income before attributable to               Basic   Diluted
                  amortization          equity       Net  earnings  earnings
Quarter Revenue            (1)    shareholders income(2) per share per share
----------------------------------------------------------------------------
($millions Cdn except per share amounts)                                    
                                                                            
2013                                                                        
Fourth    1,246            496             111       117      0.24      0.24
Third     1,326            585             239       250      0.52      0.52
Second    1,251            538             172       182      0.38      0.38
First     1,319            601             224       235      0.50      0.49
2012                                                                        
Fourth    1,210            501             129       133      0.28      0.28
Third     1,278            567             238       248      0.53      0.53
Second    1,231            493             169       178      0.38      0.38
First     1,279            566             192       202      0.43      0.43
----------------------------------------------------------------------------
 
1.  See definition and discussion under Key Performance Drivers in MD&A. 
2.  Net income attributable to both equity shareholders and non-controlling
    interests. 

Quarterly revenue and operating income before amortization are primarily impacted by the seasonality of the Media division and fluctuate throughout the year due to a number of factors including seasonal advertising and viewing patterns. Typically, the Media business has higher revenue in the first quarter driven by the fall launch of season premieres and high demand while the third quarter is impacted by season finales and mid season launches. Advertising revenue typically declines in the summer months of the fourth quarter when viewership is generally lower. Operating income before amortization in fiscal 2012 was also impacted by higher operating costs in the Cable division in the first and second quarters which included higher employee related costs, mainly related to bringing the new customer service centres on line, as well as higher marketing, sales and programming costs. The third and fourth quarters of 2012 benefited from improved operating income before amortization in the Cable business.

Net income has fluctuated quarter-over-quarter primarily as a result of the changes in operating income before amortization described above and the impact of the net change in non-operating items. In the fourth quarter of 2013, net income decreased by $133 million due to decreased operating income before amortization of $89 million and reduction in net other revenue items of $67 million partially offset by lower income taxes of $34 million. The reduction in net other revenue items was mainly due to the gain on sale of Mountain Cable of $50 million recorded in the third quarter and write-down of a real estate property of $14 million in the fourth quarter. In the third quarter of 2013, net income increased by $68 million due to increased operating income before amortization of $47 million, the aforementioned gain on sale of Mountain Cable and the gain on sale of the specialty channel ABC Spark partially offset by higher income taxes of $30 million and acquisition and divestment costs in respect of the transactions with Rogers and the acquisition of Envision. In the second quarter of 2013, net income decreased by $53 million primarily due to lower operating income before amortization of $63 million partially offset by lower income taxes of $5 million. In the first quarter of 2013, net income increased $102 million primarily due to higher operating income before amortization of $100 million. In the fourth quarter of 2012, net income decreased $115 million, primarily due to lower operating income before amortization of $66 million and increased income tax expense of $31 million. The fourth quarter also included a loss of $26 million in respect of the electrical fire at the Company's head office offset by a pension curtailment gain of $25 million. In the third quarter of 2012, net income increased $70 million mainly due to higher operating income before amortization of $74 million partially offset by increased income tax expense of $17 million. In the second quarter of 2012, net income decreased $24 million due to a decline in operating income before amortization of $73 million partially offset by lower income tax expense of $53 million. As a result of the aforementioned changes in net income, basic and diluted earnings per share have trended accordingly.

ACCOUNTING STANDARDS

Update to critical accounting policies and estimates

The MD&A included in the Company's August 31, 2012 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 other than as set out below.

Adoption of recent accounting pronouncements

The Company adopted the following standards and amendments effective September 1, 2012:

(i) Employee Benefits

IAS 19, Employee Benefits (amended 2011), eliminates the existing option to defer actuarial gains and losses and requires changes from the remeasurement of defined benefit plan assets and liabilities to be presented in the statement of other comprehensive income. The significant amendments to IAS 19 which impact the Company are as follows:


 
--  Expected return on plan assets is replaced with interest income and
    calculated based on the discount rate used to measure the pension
    obligation; the difference between interest income and actual return on
    plan assets is recognized in other comprehensive income 
--  Immediate recognition of past service costs when plan amendments occur
    regardless of whether or not they are vested 
--  Plan administration costs, other than costs associated with managing
    plan assets, are required to be expensed 
--  Expanded disclosures including plan characteristics and risks arising
    from defined benefit plans 

The Company early adopted the amended standard with retrospective restatement effective September 1, 2012 and the impact of adoption is outlined in Note 2 of the consolidated financial statements.

(ii) Presentation of Financial Statements

IAS 1, Presentation of Financial Statements, was amended to require presentation of items of other comprehensive income based on whether they may be reclassified to the statement of income and has been applied retrospectively.

(iii) Income Taxes

IAS 12, Income Taxes (amended 2011), introduces an exception to the general measurement requirements of IAS 12 in respect of investment properties measured at fair value. The amendment had no impact on the Company's consolidated financial statements.

2014 GUIDANCE

With respect to 2014 guidance, on a preliminary basis the Company expects consolidated revenue and operating income before amortization growth, after adjusting for the net impact of fiscal 2013 acquisition and disposition activity, to range from 2% to 4%. Shaw expects a marginal decline in capital investment, excluding capital investment funded through the accelerated capital fund, and an increase in cash taxes. Free cash flow is expected to range from $625 million to $650 million.

Certain important assumptions for 2014 guidance purposes include: stable customer base; stable pricing environment for Shaw's products relative to current rates; no significant market disruption or other significant changes in economic conditions, competition or regulation that would have a material impact; stable advertising demand and rates; and a stable regulatory environment.

See the following section entitled "Caution Concerning Forward-Looking Statements".

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Statements included in this MD&A that are not historic constitute "forward-looking statements" within the meaning of applicable securities laws. Such statements include, but are not limited to, statements about future capital expenditures, asset dispositions, financial guidance for future performance, business strategies and measures to implement strategies, competitive strengths, expansion and growth of Shaw's business and operations and other goals and plans. They can generally be identified by words such as "anticipate", "believe", "expect", "plan", "intend", "target", "goal" and similar expressions (although not all forward-looking statements contain such words). All of the forward-looking statements made in this report are qualified by these cautionary statements.

Forward-looking statements are based on 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 as of the current date. These assumptions include, but are not limited to, general economic conditions, interest and exchange rates, technology deployment, content and equipment costs, industry structure, conditions and stability, government regulation and the integration of recent acquisitions. Many of these assumptions are confidential.

You should not place undue reliance on any forward-looking statements. Many factors, including those not within Shaw's control, may cause Shaw's actual results to be materially different from the views expressed or implied by such forward-looking statements, including, but not limited to, general economic, market and business conditions; changes in the competitive environment in the markets in which Shaw operates and from the development of new markets for emerging technologies; industry trends and other changing conditions in the entertainment, information and communications industries; Shaw's ability to execute its strategic plans; opportunities that may be presented to and pursued by Shaw; changes in laws, regulations and decisions by regulators that affect Shaw or the markets in which it operates; Shaw's status as a holding company with separate operating subsidiaries; and other factors referenced in this report under the heading "Risks and uncertainties". The foregoing is not an exhaustive list of all possible factors. Should one or more of these risks materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein.

The Company provides certain financial guidance for future performance as the Company believes that certain investors, analysts and others utilize this and other forward-looking information in order to assess the Company's expected operational and financial performance and as an indicator of its ability to service debt and return cash to shareholders. The Company's financial guidance may not be appropriate for this or other purposes.

Any forward-looking statement speaks only as of the date on which it was originally made and, except as required by law, Shaw expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect any change in related assumptions, events, conditions or circumstances.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited)


 
(millions of Canadian dollars)               August 31, 2013 August 31, 2012
----------------------------------------------------------------------------
                                                                            
ASSETS                                                                      
Current                                                                     
  Cash                                                   422             427
  Accounts receivable                                    486             433
  Inventories                                             96             102
  Other current assets                                    72              89
  Derivative instruments                                   3               -
  Assets held for sale (notes 4 and 12)                  116               -
----------------------------------------------------------------------------
                                                       1,195           1,051
Investments and other assets                              10              13
Property, plant and equipment                          3,370           3,242
Other long-term assets                                   306             331
Assets held for sale                                       -               1
Deferred income tax assets                                 -              14
Intangibles                                            7,153           7,355
Goodwill                                                 698             715
----------------------------------------------------------------------------
                                                      12,732          12,722
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current                                                                     
  Accounts payable and accrued liabilities               859             811
  Provisions                                              26              19
  Income taxes payable                                   136             156
  Unearned revenue                                       172             157
  Promissory note (note 4)                                48               -
  Current portion of long-term debt (note 6)             950             451
  Derivative instruments                                   -               1
  Liabilities associated with assets held for                               
   sale (note 4)                                          14               -
----------------------------------------------------------------------------
                                                       2,205           1,595
Long-term debt (note 6)                                3,868           4,812
Other long-term liabilities (notes 2 and 11)             223             553
Provisions                                                 9               8
Deferred credits (note 4)                                872             635
Deferred income tax liabilities                        1,142           1,085
----------------------------------------------------------------------------
                                                       8,319           8,688
Shareholders' equity (notes 2, 7 and 9)                                     
Common and preferred shareholders                      4,182           3,753
Non-controlling interests in subsidiaries                231             281
----------------------------------------------------------------------------
                                                       4,413           4,034
----------------------------------------------------------------------------
                                                      12,732          12,722
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


 
                                            Three months  Year ended August 
                                        ended August 31,                31, 
                                       ------------------ ------------------
(millions of Canadian dollars except                                        
 per share amounts)                        2013     2012      2013     2012 
----------------------------------------------------------------------------
Revenue (note 3)                          1,246    1,210     5,142    4,998 
Operating, general and administrative                                       
 expenses (note 5)                         (750)    (709)   (2,922)  (2,871)
Amortization:                                                               
  Deferred equipment revenue                 30       30       121      115 
  Deferred equipment costs                  (65)     (62)     (257)    (231)
  Property, plant and equipment,                                            
   intangibles and other                   (188)    (177)     (718)    (692)
----------------------------------------------------------------------------
Operating income                            273      292     1,366    1,319 
  Amortization of financing costs -                                         
   long-term debt                            (1)      (2)       (4)      (5)
  Interest expense                          (75)     (83)     (309)    (330)
  Gain on sale of cablesystem (note 4)        -        -        50        - 
  Acquisition and divestment costs                                          
   (note 4)                                   -        -        (8)       - 
  Gain on sale of associate (note 4)         (2)       -         7        - 
  Gain on remeasurement of interests in                                     
   equity investments                         -        -         -        6 
  CRTC benefit obligation                     -        -         -       (2)
  Gain on derivative instruments              -        -         -        1 
  Accretion of long-term liabilities                                        
   and provisions                            (2)      (3)       (9)     (14)
  Equity income from associates               -       (1)        -        - 
  Other gains (losses) (note 12)            (17)       2       (26)       - 
----------------------------------------------------------------------------
Income before income taxes                  176      205     1,067      975 
  Current income tax expense (note 3)        15       60       162      257 
  Deferred income tax expense                                               
   (recovery)                                44       12       121      (43)
----------------------------------------------------------------------------
Net income                                  117      133       784      761 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income attributable to:                                                 
Equity shareholders                         111      129       746      728 
Non-controlling interests in                                                
 subsidiaries                                 6        4        38       33 
----------------------------------------------------------------------------
                                            117      133       784      761 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share (note 8)                                                 
Basic                                      0.24     0.28      1.64     1.62 
Diluted                                    0.24     0.28      1.63     1.61 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


 
                                          Three months    Year ended August 
                                        ended August 31,         31,        
                                       ------------------ ------------------
(millions of Canadian dollars)             2013     2012      2013     2012 
----------------------------------------------------------------------------
Net income                                  117      133       784      761 
                                                                            
Other comprehensive income (loss) (note                                     
 9)                                                                         
Items that may subsequently be                                              
 reclassified to income:                                                    
  Change in unrealized fair value of                                        
   derivatives designated as cash flow                                      
   hedges                                     1       (1)        4        - 
  Adjustment for hedged items                                               
   recognized in the period                  (1)      (1)       (1)      (2)
  Unrealized gain on available-for-sale                                     
   investment                                 -        -         -        3 
  Reclassification of realized gain on                                      
   available-for-sale investment              -        -         -       (3)
----------------------------------------------------------------------------
                                              -       (2)        3       (2)
----------------------------------------------------------------------------
Items that will not be subsequently                                         
 reclassified to income:                                                    
  Remeasurements on employee benefit                                        
   plans                                      3       (5)        3      (62)
----------------------------------------------------------------------------
                                              3       (7)        6      (64)
----------------------------------------------------------------------------
Comprehensive income                        120      126       790      697 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Comprehensive income attributable to:                                       
Equity shareholders                         114      122       752      664 
Non-controlling interests in                                                
 subsidiaries                                 6        4        38       33 
----------------------------------------------------------------------------
                                            120      126       790      697 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)


 
Year ended August 31, 2013                                                  
                                   Attributable to equity shareholders      
                             -----------------------------------------------
(millions of Canadian                              Contributed     Retained 
 dollars)                        Share capital         surplus     earnings 
----------------------------------------------------------------------------
Balance as at September 1,                                                  
 2012                                    2,750              77        1,019 
Net income                                   -               -          746 
Other comprehensive income                   -               -            - 
----------------------------------------------------------------------------
Comprehensive income                         -               -          746 
Dividends                                    -               -         (341)
Dividend reinvestment plan                 126               -         (126)
Shares issued under stock                                                   
 option plan                                79             (10)           - 
Share-based compensation                     -               5            - 
Distributions declared by                                                   
 subsidiaries to non-                                                       
 controlling interests                       -               -            - 
Contribution from non-                                                      
 controlling interest                        -               -            - 
Acquisition of non-                                                         
 controlling interests                       -               -          (56)
----------------------------------------------------------------------------
Balance as at August 31, 2013            2,955              72        1,242 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Year ended August 31, 2013                                                  
                             Attributable to equity                         
                                  shareholders                              
                             -----------------------                        
                                 Accumulated                  Equity        
                                      other          attributable to        
(millions of Canadian          comprehensive         non-controlling  Total 
 dollars)                               loss  Total        interests equity 
----------------------------------------------------------------------------
Balance as at September 1,                                                  
 2012                                    (93) 3,753              281  4,034 
Net income                                 -    746               38    784 
Other comprehensive income                 6      6                -      6 
----------------------------------------------------------------------------
Comprehensive income                       6    752               38    790 
Dividends                                  -   (341)               -   (341)
Dividend reinvestment plan                 -      -                -      - 
Shares issued under stock                                                   
 option plan                               -     69                -     69 
Share-based compensation                   -      5                -      5 
Distributions declared by                                                   
 subsidiaries to non-                                                       
 controlling interests                     -      -              (19)   (19)
Contribution from non-                                                      
 controlling interest                      -      -                1      1 
Acquisition of non-                                                         
 controlling interests                     -    (56)             (70)  (126)
----------------------------------------------------------------------------
Balance as at August 31, 2013            (87) 4,182              231  4,413 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
Year ended August 31, 2012                                                  
                                  Attributable to equity shareholders       
                          --------------------------------------------------
(millions of Canadian                           Contributed        Retained 
 dollars)                    Share capital          surplus        earnings 
----------------------------------------------------------------------------
Balance as at September 1,                                                  
 2011                                2,633               73             728 
Net income                               -                -             728 
Other comprehensive loss                 -                -               - 
----------------------------------------------------------------------------
Comprehensive income                                                        
 (loss)                                  -                -             728 
Dividends                                -                -            (339)
Dividend reinvestment plan              98                -             (98)
Shares issued under stock                                                   
 option plan                            19               (2)              - 
Share-based compensation                 -                6               - 
Distributions declared by                                                   
 subsidiaries to non-                                                       
 controlling interests                   -                -               - 
----------------------------------------------------------------------------
Balance as at August 31,                                                    
 2012                                2,750               77           1,019 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                                                            
                                                                            
Year ended August 31, 2012                                                  
                           Attributable to equity                           
                                shareholders                                
                          ------------------------                          
                             Accumulated                    Equity          
                                  other            attributable to          
(millions of Canadian      comprehensive           non-controlling    Total 
 dollars)                           loss    Total        interests   equity 
----------------------------------------------------------------------------
Balance as at September 1,                                                  
 2011                                (29)   3,405              272    3,677 
Net income                             -      728               33      761 
Other comprehensive loss             (64)     (64)               -      (64)
----------------------------------------------------------------------------
Comprehensive income                                                        
 (loss)                              (64)     664               33      697 
Dividends                              -     (339)               -     (339)
Dividend reinvestment plan             -        -                -        - 
Shares issued under stock                                                   
 option plan                           -       17                -       17 
Share-based compensation               -        6                -        6 
Distributions declared by                                                   
 subsidiaries to non-                                                       
 controlling interests                 -        -              (24)     (24)
----------------------------------------------------------------------------
Balance as at August 31,                                                    
 2012                                (93)   3,753              281    4,034 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


 
                                                Three months                
                                                ended August    Year ended  
                                                    31,         August 31,  
                                               -------------- --------------
(millions of Canadian dollars)                   2013   2012    2013   2012 
----------------------------------------------------------------------------
                                                                            
OPERATING ACTIVITIES                                                        
Funds flow from operations (note 10)              429    355   1,380  1,299 
 Net change in non-cash working capital                                     
 balances related to operations                    66     99     (11)    18 
----------------------------------------------------------------------------
                                                  495    454   1,369  1,317 
----------------------------------------------------------------------------
INVESTING ACTIVITIES                                                        
  Additions to property, plant and equipment                                
   (note 3)                                      (257)  (135)   (802)  (730)
  Additions to equipment costs (net) (note 3)     (30)   (41)   (132)  (178)
  Additions to other intangibles (note 3)         (22)   (15)    (69)   (65)
  Net reduction (addition) to inventories          14     19       6     (5)
  Proceeds on sale of cablesystem (note 4)          -      -     398      - 
  Divestment costs (note 4)                         -      -      (5)     - 
  Business acquisitions, net of cash acquired                               
   (note 4)                                         -    (21)   (222)   (18)
  Proceeds on wireless spectrum license option                              
   (note 4)                                         -      -      50      - 
  Refundable deposit on wireless spectrum                                   
   license (note 4)                                 -      -     200      - 
  Proceeds on disposal of property, plant and                               
   equipment (note 3)                               -      1       3      9 
  Proceeds from (additions to) investments and                              
   other assets                                     -      1     (69)     4 
----------------------------------------------------------------------------
                                                 (295)  (191)   (642)  (983)
----------------------------------------------------------------------------
FINANCING ACTIVITIES                                                        
  Increase in long-term debt                        -      -     590      - 
  Debt repayments                                   -      -  (1,041)    (1)
  Bank credit facility arrangement costs            -      -       -     (4)
  Issue of Class B Non-Voting Shares (note 7)      21      3      69     17 
  Dividends paid on Class A Shares and Class B                              
   Non-Voting Shares                              (80)   (80)   (319)  (318)
  Dividends paid on Preferred Shares               (3)    (4)    (13)   (15)
  Distributions paid to non-controlling                                     
   interests in subsidiaries                       (7)    (7)    (19)   (26)
  Contribution received from non-controlling                                
   interest                                         1      -       1      - 
----------------------------------------------------------------------------
                                                  (68)   (88)   (732)  (347)
----------------------------------------------------------------------------
Increase (decrease) in cash before discontinued                             
 operations                                       132    175      (5)   (13)
Decrease in cash from discontinued operations       -      -       -     (3)
----------------------------------------------------------------------------
Increase (decrease) in cash                       132    175      (5)   (16)
Cash, beginning of the period                     290    252     427    443 
----------------------------------------------------------------------------
Cash, end of the period                           422    427     422    427 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

August 31, 2013 and 2012

(all amounts in millions of Canadian dollars, except share and per share amounts)

1. CORPORATE INFORMATION

Shaw Communications Inc. (the "Company") is a diversified Canadian communications company whose core operating business is providing broadband cable television services, Internet, Digital Phone, and telecommunications services ("Cable"); Direct-to-home satellite services and satellite distribution services ("Satellite"); and programming content (through Shaw Media). The Company's shares are listed on the Toronto and New York Stock Exchanges.

2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Statement of compliance

These condensed interim consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") and in compliance with International Accounting Standard ("IAS") 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB").

The condensed interim consolidated financial statements of the Company for the three and twelve months ended August 31, 2013 were authorized for issue by the Board of Directors on October 24, 2013.

Basis of presentation

These condensed interim consolidated financial statements have been prepared primarily under the historical cost convention except as detailed in the significant accounting policies disclosed in the Company's consolidated financial statements for the year ended August 31, 2012 and are expressed in millions of Canadian dollars. The condensed interim consolidated statements of income are presented using the nature classification for expenses.

The notes presented in these condensed interim consolidated financial statements include only significant events and transactions occurring since the Company's last fiscal year end and are not fully inclusive of all matters required to be disclosed by IFRS in the Company's annual consolidated financial statements. As a result, these condensed interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended August 31, 2012.

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 noted below.

Adoption of recent accounting pronouncements

The Company adopted the following standards and amendments effective September 1, 2012.

(i) Employee Benefits

IAS 19, Employee Benefits (amended 2011), eliminates the existing option to defer actuarial gains and losses and requires changes from the remeasurement of defined benefit plan assets and liabilities to be presented in the statement of other comprehensive income. The significant amendments to IAS 19 which impact the Company are as follows:


 
--  Expected return on plan assets is replaced with interest income and
    calculated based on the discount rate used to measure the pension
    obligation; the difference between interest income and actual return on
    plan assets is recognized in other comprehensive income 
--  Immediate recognition of past service costs when plan amendments occur
    regardless of whether or not they are vested 
--  Plan administration costs, other than costs associated with managing
    plan assets, are required to be expensed 
--  Expanded disclosures including plan characteristics and risks arising
    from defined benefit plans 

The Company early adopted the amended standard with retrospective restatement which resulted in an increase in other long-term liabilities and decrease in retained earnings by $1 at August 31, 2012. There was no impact on the Company's consolidated statements of income, comprehensive income or cash flows for 2012.

(ii) Presentation of Financial Statements

IAS 1, Presentation of Financial Statements, was amended to require presentation of items of other comprehensive income based on whether they may be reclassified to the statement of income and has been applied retrospectively.

(iii) Income Taxes

IAS 12, Income Taxes (amended 2011), introduces an exception to the general measurement requirements of IAS 12 in respect of investment properties measured at fair value. The amendment had no impact on the Company's consolidated financial statements.

3. BUSINESS SEGMENT INFORMATION

The Company's chief operating decision makers are the CEO and CFO and they review the operating performance of the Company by segments which comprise Cable, Satellite and Media. The chief operating decision makers utilize operating income before amortization for each segment as a key measure in making operating decisions and assessing performance. Shaw Media's operating results are affected by seasonality and fluctuate throughout the year due to a number of factors including seasonal advertising and viewing patterns. As such, operating results for an interim period should not be considered indicative of full fiscal year performance. In general, advertising revenues are higher during the first quarter and lower during the fourth quarter and expenses are incurred more evenly throughout the year. All of the Company's reportable segments are substantially located in Canada. Information on operations by segment is as follows:

Operating information


 
                                          Three months    Year ended August 
                                        ended August 31,         31,        
                                       ------------------ ------------------
                                           2013     2012      2013     2012 
                                              $        $         $        $ 
----------------------------------------------------------------------------
Revenue                                                                     
  Cable                                     818      803     3,266    3,193 
  Satellite (1)                             219      213       860      844 
  Media                                     231      217     1,106    1,053 
----------------------------------------------------------------------------
                                          1,268    1,233     5,232    5,090 
Intersegment eliminations                   (22)     (23)      (90)     (92)
----------------------------------------------------------------------------
                                          1,246    1,210     5,142    4,998 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income before amortization                                        
 (2)                                                                        
  Cable                                     396      396     1,582    1,502 
  Satellite (1)                              66       77       285      293 
  Media                                      34       28       353      332 
----------------------------------------------------------------------------
                                            496      501     2,220    2,127 
Amortization                               (223)    (209)     (854)    (808)
----------------------------------------------------------------------------
Operating income                            273      292     1,366    1,319 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest                                                                    
  Operating                                  75       83       308      329 
  Burrard Landing Lot 2 Holdings                                            
   Partnership                                -        -         1        1 
----------------------------------------------------------------------------
                                             75       83       309      330 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current taxes                                                               
  Operating                                  60       64       300      282 
  Other/non-operating                       (45)      (4)     (138)     (25)
----------------------------------------------------------------------------
                                             15       60       162      257 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  The Satellite segment was previously reported as DTH and Satellite
    Services. These segments have been combined into a single operating
    segment for reporting purposes which is consistent with the operating
    segment reporting that is provided to the chief operating decision
    makers.  
2.  The current year includes the impact of an adjustment to align certain
    broadcast license fees with the CRTC billing period. The adjustment was
    recorded in the second quarter and amounted to $7, $4 and $3 for Cable,
    Satellite and Media, respectively. 

Capital expenditures


 
                                             Three months                   
                                             ended August      Year ended   
                                                 31,           August 31,   
                                           ---------------- ----------------
                                              2013    2012     2013    2012 
                                                 $       $        $       $ 
----------------------------------------------------------------------------
Capital expenditures accrual basis                                          
  Cable (including corporate) (1)              289     164      825     729 
  Satellite (net of equipment profit)            7       7       42      11 
  Media                                         15      13       31      31 
----------------------------------------------------------------------------
                                               311     184      898     771 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equipment costs (net of revenue)                                            
  Cable                                          7      20       42      81 
  Satellite                                     24      20       81      83 
----------------------------------------------------------------------------
                                                31      40      123     164 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures and equipment costs                                    
 (net)                                                                      
  Cable                                        296     184      867     810 
  Satellite                                     31      27      123      94 
  Media                                         15      13       31      31 
----------------------------------------------------------------------------
                                               342     224    1,021     935 
----------------------------------------------------------------------------
Reconciliation to Consolidated Statements                                   
 of Cash Flows                                                              
  Additions to property, plant and                                          
   equipment                                   257     135      802     730 
  Additions to equipment costs (net)            30      41      132     178 
  Additions to other intangibles                22      15       69      65 
----------------------------------------------------------------------------
  Total of capital expenditures and                                         
   equipment costs (net) per                                                
  Consolidated Statements of Cash Flows        309     191    1,003     973 
  Increase (decrease) in working capital                                    
   related to capital expenditures              33      37       33     (10)
  Increase in customer equipment financing                                  
   receivables                                   1      (2)      (9)    (16)
  Less: Proceeds on disposal of property,                                   
   plant and equipment                           -      (1)      (3)     (9)
  Less: Satellite equipment profit (2)          (1)     (1)      (3)     (3)
----------------------------------------------------------------------------
  Total capital expenditures and equipment                                  
   costs (net) reported by segments            342     224    1,021     935 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  The three and twelve months ended August 31, 2013 include $60 and $110,
    respectively, related to certain capital investments that are being
    funded from the accelerated capital fund. 
2.  The profit from the sale of satellite equipment is subtracted from the
    calculation of segmented capital expenditures and equipment costs (net)
    as the Company views the profit on sale as a recovery of expenditures on
    customer premise equipment. 

4. PURCHASE AND SALE OF ASSETS

Transactions with Rogers Communications Inc. ("Rogers")

During the second quarter, the Company entered into agreements with Rogers to sell to Rogers its shares in Mountain Cablevision Limited ("Mountain Cable") and grant to Rogers an option to acquire its wireless spectrum licenses as well as to purchase from Rogers its 33.3% interest in TVtropolis General Partnership ("TVtropolis"). The sale of Mountain Cable closed on April 30, 2013 and the acquisition of the additional interest in TVtropolis closed on June 30, 2013. The exercise of the option and the sale of the wireless spectrum licenses is still subject to regulatory approval and is expected to occur in fiscal 2015. The transactions are strategic in nature allowing the Company to use a portion of the net proceeds to accelerate various capital investments to improve and strengthen its network advantage.

The Company incurred costs of $5 in respect of the transactions with Rogers. These costs have been expensed and are included in acquisition and divestment costs in the statement of income.

Mountain Cable

Mountain Cable has approximately 40,000 video customers in its operations based in Hamilton, Ontario. It represented a disposal group within the cable operating segment and accordingly, is not presented as discontinued operations in the statement of income.

The Company received proceeds of $398 in cash on the sale of the Mountain Cable and recorded a gain of $50. The assets and liabilities disposed of were as follows:


 
                                                                           $
----------------------------------------------------------------------------
Accounts receivable                                                        2
Property, plant and equipment                                             65
Other long-term assets                                                     3
Intangibles                                                              245
Goodwill                                                                  81
----------------------------------------------------------------------------
                                                                         396
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Accounts payable and accrued liabilities                                   1
Income tax payable                                                         1
Unearned revenue                                                           2
Deferred credits                                                           2
Deferred income taxes                                                     42
----------------------------------------------------------------------------
                                                                          48
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Wireless spectrum licenses

The wireless spectrum licenses are not classified as assets held for sale due to regulatory restrictions preventing the exercise of the option and subsequent transfer of the licenses until fiscal 2015. During the second quarter, the Company received $50 in respect of the purchase price of the option to acquire the wireless spectrum licenses. The amount is recorded in deferred credits and will be included as part of the proceeds received on exercise of the option and sale of the wireless spectrum licenses, or alternatively as a gain if the option is not exercised and expires. In the third quarter, the Company received a $200 refundable deposit in respect of the option exercise price. The deposit has been recorded in deferred credits and will be included as part of the proceeds received on exercise of the option and sale of the wireless spectrum licenses or refunded to Rogers if the option is not exercised and expires.

TVtropolis

The acquisition of Rogers' 33.3% interest in TVtropolis increased the Company's ownership to 100%. The difference between the consideration of $59 and carrying value of the interest acquired of $23 has been charged to retained earnings.

ENMAX Envision Inc. ("Envision")

On April 30, 2013, the Company acquired Envision, a wholly-owned subsidiary of ENMAX Corporation, for $222 in cash. Envision provides telecommunication services to business customers in Calgary and the surrounding area. The purpose of the transaction is to expand on the Company's business initiatives and enhance the profile of its telecommunications services in the competitive Calgary business marketplace.

Envision has contributed approximately $12 of revenue and $1 of net income for the four month period. If the acquisition had occurred on September 1, 2012, revenue and net income would have been approximately $33 and $4, respectively. Acquisition related costs of $3 to effect the transaction have been incurred and are included in acquisition and divestment costs in the statement of income.

A summary of net assets and allocation of consideration is as follows:


 
                                                                           $
----------------------------------------------------------------------------
Accounts receivable                                                        3
Other current assets                                                       1
Property, plant and equipment                                             73
Intangibles (1)                                                           87
Goodwill (2)                                                              68
----------------------------------------------------------------------------
                                                                         232
Accounts payable and accrued liabilities                                   1
Unearned revenue                                                           2
Deferred credits                                                           5
Deferred income tax liability                                              2
----------------------------------------------------------------------------
                                                                         222
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  Intangibles is comprised of customer relationships and are being
    amortized over 15 years. 
2.  Goodwill represents the combined value of growth expectations, an
    assembled workforce and expected synergies and efficiencies from
    integrating the operations with the Company's existing business.
    Goodwill of $66 is deductible for income tax purposes. 

Transactions with Corus Entertainment Inc. ("Corus")

During the third quarter, the Company entered into a series of agreements with Corus, a related party subject to common voting control, to optimize its portfolio of specialty channels. Effective April 30, 2013, the Company sold to Corus its 49% interest in ABC Spark and acquired from Corus its 20% interest in Food Network Canada. In addition, the Company has agreed to sell to Corus its 50% interest in its two French-language channels, Historia and Series+. The sale of Historia and Series+ is expected to occur in fiscal 2014.

Food Network Canada and ABC Spark

The acquisition of an additional 20% interest in Food Network Canada increased the Company's ownership to 71%. The difference between the consideration of $67 and carrying value of the interest acquired of $47 has been charged to retained earnings.

The Company recorded proceeds, including working capital adjustments, of $19 and gain on sale of associate of $7 on the disposition of its 49% interest in ABC Spark.

The Company issued a non-interest bearing promissory note of $48 to satisfy the net consideration in respect of these transactions. The settlement of the promissory note, which came due on September 30, 2013, has been extended to the closing date of the Company's sale of Historia and Series+ to Corus.

Historia and Series+

The assets and liabilities associated with Historia and Series+ and classified as held for sale in the statement of financial position at August 31, 2013 are as follows:


 
                                                                           $
----------------------------------------------------------------------------
Accounts receivable                                                        4
Other current assets                                                       5
Intangibles                                                               92
Goodwill                                                                   4
----------------------------------------------------------------------------
                                                                         105
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Accounts payable and accrued liabilities                                   2
Deferred income tax liability                                             12
----------------------------------------------------------------------------
                                                                          14
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5. OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES


 
                                       Three months ended  Year ended August
                                           August 31,             31,       
                                       ------------------ ------------------
                                            2013     2012      2013     2012
                                               $        $         $        $
----------------------------------------------------------------------------
Employee salaries and benefits               235      205       900      835
Purchases of goods and services              515      504     2,022    2,036
----------------------------------------------------------------------------
                                             750      709     2,922    2,871
----------------------------------------------------------------------------
----------------------------------------------------------------------------

6. LONG-TERM DEBT


 
                                              August 31, 2013               
                              ----------------------------------------------
                               Long-term debt     Adjustment  Long-term debt
                                 at amortized    for finance    repayable at
                                         cost          costs        maturity
                                            $              $               $
----------------------------------------------------------------------------
Corporate                                                                   
Cdn Senior notes-                                                           
 6.10% due November 16, 2012                -              -               -
 7.50% due November 20, 2013              350              -             350
 6.50% due June 2, 2014                   599              1             600
 6.15% due May 9, 2016                    296              4             300
 5.70% due March 2, 2017                  398              2             400
 5.65% due October 1, 2019              1,243              7           1,250
 5.50% due December 7, 2020               496              4             500
 6.75% due November 9, 2039              1417             33           1,450
----------------------------------------------------------------------------
                                        4,799             51           4,850
----------------------------------------------------------------------------
Other                                                                       
Burrard Landing Lot 2 Holdings                                              
 Partnership                               19              -              19
----------------------------------------------------------------------------
Total consolidated debt                 4,818             51           4,869
Less current portion (1)                  950              1             951
----------------------------------------------------------------------------
                                        3,868             50           3,918
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                              August 31, 2012               
                               ---------------------------------------------
                                Long-term debt                Long-term debt
                                  at amortized Adjustment for   repayable at
                                          cost  finance costs       maturity
                                             $              $              $
----------------------------------------------------------------------------
Corporate                                                                   
Cdn Senior notes-                                                           
 6.10% due November 16, 2012               450              -            450
 7.50% due November 20, 2013               349              1            350
 6.50% due June 2, 2014                    598              2            600
 6.15% due May 9, 2016                     295              5            300
 5.70% due March 2, 2017                   397              3            400
 5.65% due October 1, 2019               1,242              8          1,250
 5.50% due December 7, 2020                496              4            500
 6.75% due November 9, 2039              1,416             34          1,450
----------------------------------------------------------------------------
                                         5,243             57          5,300
----------------------------------------------------------------------------
Other                                                                       
Burrard Landing Lot 2 Holdings                                              
 Partnership                                20              -             20
----------------------------------------------------------------------------
Total consolidated debt                  5,263             57          5,320
Less current portion (1)                   451              -            451
----------------------------------------------------------------------------
                                         4,812             57          4,869
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  Current portion of long-term debt at August 31, 2013 includes the 7.50%
    senior notes due November 20, 2013, the 6.50% senior notes due June 2,
    2014 and the amount due within one year on the Partnership's mortgage
    bonds. 

7. SHARE CAPITAL

Changes in share capital during the year ended August 31, 2013 are as follows:


 
                   Class A Shares Class B Non-Voting Shares Preferred Shares
                   -------------- ------------------------- ----------------
                       Number   $      Number             $     Number     $
----------------------------------------------------------------------------
August 31, 2012    22,520,064   2 421,188,697         2,455 12,000,000   293
Issued upon stock                                                           
 option plan                                                                
 exercises                  -   -   3,564,856            79          -     -
Issued pursuant to                                                          
 dividend                                                                   
 reinvestment plan          -   -   5,552,989           126          -     -
----------------------------------------------------------------------------
August 31, 2013    22,520,064   2 430,306,542         2,660 12,000,000   293
----------------------------------------------------------------------------
----------------------------------------------------------------------------

8. EARNINGS PER SHARE

Earnings per share calculations are as follows:


 
                                          Three months    Year ended August 
                                        ended August 31,         31,        
                                       ------------------ ------------------
                                           2013     2012      2013     2012 
----------------------------------------------------------------------------
Numerator for basic and diluted                                             
 earnings per share ($)                                                     
Net income                                  117      133       784      761 
Deduct: net income attributable to non-                                     
 controlling interests                       (6)      (4)      (38)     (33)
Deduct: dividends on Preferred Shares        (3)      (4)      (13)     (15)
----------------------------------------------------------------------------
Net income attributable to common                                           
 shareholders                               108      125       733      713 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Denominator (millions of shares)                                            
Weighted average number of Class A                                          
 Shares and Class B Non-Voting Shares                                       
 for basic earnings per share               451      443       448      441 
Effect of dilutive securities (1)             2        -         2        1 
----------------------------------------------------------------------------
Weighted average number of Class A                                          
 Shares and Class B Non-Voting Shares                                       
 for diluted earnings per share             453      443       450      442 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share ($)                                                      
Basic                                      0.24     0.28      1.64     1.62 
Diluted                                    0.24     0.28      1.63     1.61 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
1.  The earnings per share calculation does not take into consideration the
    potential dilutive effect of certain stock options since their impact is
    anti-dilutive. For the three and twelve months ended August 31, 2013,
    2,423,065 (2012 - 17,732,912) and 8,201,720 (2012 - 14,320,753) options
    were excluded from the diluted earnings per share calculation,
    respectively. 

9. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of other comprehensive income and the related income tax effects for the year ended August 31, 2013 are as follows:


 
                                                Amount  Income taxes    Net 
                                                     $             $      $ 
----------------------------------------------------------------------------
Items that may subsequently be reclassified to                              
 income                                                                     
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                      5            (1)     4 
Adjustment for hedged items recognized in the                               
 period                                             (1)            -     (1)
----------------------------------------------------------------------------
                                                     4            (1)     3 
Items that will not be subsequently                                         
 reclassified to income                                                     
Remeasurements on employee benefit plans             4            (1)     3 
----------------------------------------------------------------------------
                                                     8            (2)     6 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Components of other comprehensive income and the related income tax effects for the three months ended August 31, 2013 are as follows:


 
                                                  Amount  Income taxes  Net 
                                                       $             $    $ 
----------------------------------------------------------------------------
Items that may subsequently be reclassified to                              
 income                                                                     
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                        1             -    1 
Adjustment for hedged items recognized in the                               
 period                                               (1)            -   (1)
----------------------------------------------------------------------------
                                                       -             -    - 
Items that will not be subsequently reclassified                            
 to income                                                                  
Remeasurements on employee benefit plans               4            (1)   3 
----------------------------------------------------------------------------
                                                       4            (1)   3 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Components of other comprehensive loss and the related income tax effects for the year ended August 31, 2012 are as follows:


 
                                                   Amount  Income taxes Net 
                                                        $             $   $ 
----------------------------------------------------------------------------
Items that may subsequently be reclassified to                              
 income                                                                     
Adjustment for hedged items recognized in the                               
 period                                                (3)            1  (2)
Unrealized gain on available-for-sale investment        4            (1)  3 
Reclassification of realized gain on available-                             
 for-sale investment                                   (4)            1  (3)
----------------------------------------------------------------------------
                                                       (3)            1  (2)
Items that will not be subsequently reclassified                            
 to income                                                                  
Remeasurements on employee benefit plans              (83)           21 (62)
----------------------------------------------------------------------------
                                                      (86)           22 (64)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Components of other comprehensive loss and the related income tax effects for the three months ended August 31, 2012 are as follows:


 
                                                  Amount  Income taxes  Net 
                                                       $             $    $ 
----------------------------------------------------------------------------
Items that may subsequently be reclassified to                              
 income                                                                     
Change in unrealized fair value of derivatives                              
 designated as cash flow hedges                       (2)            1   (1)
Adjustment for hedged items recognized in the                               
 period                                               (1)            -   (1)
Unrealized gain on available-for-sale investment       1            (1)   - 
Reclassification of realized gain on available-                             
 for-sale investment                                  (1)            1    - 
----------------------------------------------------------------------------
                                                      (3)            1   (2)
Items that will not be subsequently reclassified                            
 to income                                                                  
Remeasurements on employee benefit plans              (7)            2   (5)
----------------------------------------------------------------------------
                                                     (10)            3   (7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive loss is comprised of the following:


 
                                                  August 31,     August 31, 
                                                        2013           2012 
                                                           $              $ 
----------------------------------------------------------------------------
Items that may subsequently be reclassified to                              
 income                                                                     
Fair value of derivatives                                  2             (1)
                                                                            
Items that will not be subsequently                                         
 reclassified to income                                                     
Remeasurements on employee benefit plans                 (89)           (92)
----------------------------------------------------------------------------
                                                         (87)           (93)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

10. STATEMENTS OF CASH FLOWS

Disclosures with respect to the Consolidated Statements of Cash Flows are as follows:

i. Funds flow from operations


 
                                                Three months                
                                                ended August    Year ended  
                                                     31,        August 31,  
                                               -------------- --------------
                                                  2013   2012    2013   2012
                                                     $      $       $      $
----------------------------------------------------------------------------
Net income                                         117    133     784    761
Adjustments to reconcile net income to funds                                
 flow from operations:                                                      
  Amortization                                     224    211     858    813
  Program rights                                    32     13    (31)   (42)
  Deferred income tax expense (recovery)            44     12     121   (43)
  Equity income from associates                      -      1       -      -
  CRTC benefit obligation                            -      -       -      2
  CRTC benefit obligation funding                 (15)   (17)    (52)   (48)
  Gain on sale of cablesystem (note 4)               -      -    (50)      -
  Divestment costs (note 4)                          -      -       5      -
  Gain on sale of associate (note 4)                 2      -     (7)      -
  Gain on remeasurement of interests in equity                              
   investments                                       -      -       -    (6)
  Share-based compensation                           1      1       4      5
  Defined benefit pension plans                      4   (24)   (288)   (13)
  Gain on derivative instruments                     -      -       -    (1)
  Realized loss on settlement of derivative                                 
   instruments                                       -      -       -    (7)
  Accretion of long-term liabilities and                                    
   provisions                                        2      3       9     14
  Settlement of amended cross-currency interest                             
   rate agreements                                   -      -       -  (162)
  Write-down of properties (note 12)                14     20      14     20
  Other                                              4      2      13      6
----------------------------------------------------------------------------
Funds flow from operations                         429    355   1,380  1,299
----------------------------------------------------------------------------
----------------------------------------------------------------------------

ii. Interest and income taxes paid and classified as operating activities are as follows:


 
                     Three months ended August                              
                                31,                 Year ended August 31,   
                   ---------------------------- ----------------------------
                             2013          2012           2013          2012
                                $             $              $             $
----------------------------------------------------------------------------
Interest                       32            33            315           328
  Income taxes                 19            49            154           218
----------------------------------------------------------------------------
----------------------------------------------------------------------------

iii. Non-cash transactions:

The Consolidated Statements of Cash Flows exclude the following non-cash transactions:


 
                                       Three months ended  Year ended August
                                           August 31,             31,       
                                       ------------------ ------------------
                                            2013     2012      2013     2012
                                               $        $         $        $
----------------------------------------------------------------------------
Issuance of Class B Non-Voting Shares:                                      
 Dividend reinvestment plan                   35       27       126       98
Issuance of promissory note:                                                
 Transactions with a related party                                          
 (note 4)                                      3        -        48        -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

11. OTHER LONG-TERM LIABILITIES

During the first quarter, the Company's non-contributory defined pension plan became partially funded as the Company made discretionary contributions of $300 to a Retirement Compensation Arrangement Trust.

12. OTHER GAINS (LOSSES)

Other gains (losses) generally includes realized and unrealized foreign exchange gains and losses on US dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and minor investments, and the Company's share of the operations of Burrard Landing Lot 2 Holdings Partnership. During the prior year, the category also included a pension curtailment gain of $25 and a loss of $26 in respect of the electrical fire and resulting water damage to Shaw Court that occurred during the fourth quarter, including a write-down of $20 related to the damages sustained to the building and its contents. During the current year, the Company received insurance advances of $5 related to its claim for costs that were incurred in the fourth quarter of fiscal 2012 and incurred additional costs of $13 in respect of ongoing recovery activities. During the fourth quarter of the current year, the Company decided to discontinue further construction on a real estate project which resulted in a write-down of $14 and classification of $11 as assets held for sale at August 31, 2013. Contacts: Shaw Communications Inc. Investor Relations investor.relations@sjrb.ca www.shaw.ca

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