CALGARY, ALBERTA--(Marketwired - April 12, 2013) - Shaw Communications Inc. (TSX:SJR.B) (NYSE:SJR) announced consolidated financial and operating results for the three and six months ended February 28, 2013 and February 29, 2012. Consolidated revenue for the three and six month periods of $1.25 billion and $2.57 billion, respectively, was up 2% over each of the comparable periods last year. Total operating income before amortization1of $538 million improved 9% over the comparable quarterly period and the year-to-date amount of $1.14 billion was up 8%.
Free cash flow1 for the three and six month periods was $161 million and $405 million, respectively, compared to $57 million and $176 million for the comparable periods last year. Increased operating income before amortization and lower capital investment during the first half of 2013 were the main drivers of the improvement.
Chief Executive Officer Brad Shaw said, "Our second quarter financial results were solid reflecting the underlying strength across our businesses as we focus on sustainable and profitable growth. We remain focused on providing an exceptional customer experience as we continue to leverage our leading network infrastructure and high quality content to enhance and expand innovative product offerings for our customers."
Mr. Shaw continued, "Over the past several months we announced several strategic transactions with each of Rogers and Corus that will provide estimated net proceeds to Shaw of approximately $800 million. We plan to invest up to $500 million of these net proceeds back into our core business over fiscal 2013, 2014 and 2015 accelerating our investment in certain strategic capital initiatives. Key investments to be accelerated include the completion of our Calgary data centre, further digitization of our network and additional bandwidth upgrades, development of IP delivery of video, expansion of our WiFi network, and additional innovative product offerings related to Shaw Go and other applications to provide an enhanced customer experience.
Most recently we announced entering 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. This acquisition demonstrates our commitment to investing in and growing our Business Services. We look forward to serving our new customers and adding the Envision employees and management to our team."
Net income of $182 million or $0.38 per share for the quarter ended February 28, 2013 compared to $178 million or $0.38 per share for the same period last year. Improved operating income was partially offset by higher income taxes in the current quarter. Net income for the first six months of the year was $417 million or $0.88 per share compared to $380 million or $0.81 per share. Increased operating income before amortization accounted for the improvement.
Revenue in the Cable division of $814 million and $1.62 billion for the current three and six month periods increased 1% and 2%, respectively, over the comparable periods. Operating income before amortization for the quarter of $393 million was up 12% compared to the same quarter last year and the year-to-date period improved 8% to $789 million.
Satellite revenue of $209 million and $423 million for the three and six month periods, respectively, compared to $211 million and $420 million in the same periods last year. Operating income before amortization for the current quarter was $73 million compared to $71 million last year and the year-to-date amount was up 5% to $147 million.
Revenue and operating income before amortization in the Media division for the quarter of $249 million and $72 million, respectively, each increased 3% over the same period last year. On a year-to-date basis Media revenue improved 5% and operating income before amortization was up 7%.
Brad Shaw continued, "We announced preliminary guidance in October 2012 and are today updating our free cash flow guidance. With the first half of the year behind us and modest positive variances across service operating income before amortization, capital investment and interest and cash taxes, we now expect free cash flow to approximate $550 million. We expect our capital spend to ramp up during the last half of the year with the annual spend still expected to decline marginally from 2012 levels." (The accelerated capital investment funded through the accelerated capital fund is not included in free cash flow. See further discussion in Management's Discussion and Analysis.)
In January the Board of Directors approved a 5% increase in the equivalent annual dividend rate to $1.02 on Shaw's Class B Non-Voting Participating shares and $1.0175 on Shaw's Class A Participating shares. This new rate was effective commencing with the monthly dividends paid on March 27, 2013.
Mr. Shaw concluded, "We are operating in a dynamic competitive environment where driving performance through continuous improvement and leveraging opportunities as they arise is necessary. Financial performance for the first half of the year and the various strategic transactions recently announced demonstrate the ability of our leadership team to create value and sustainable long-term growth for our shareholders."
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 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
FEBRUARY 28, 2013
April 11, 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, 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
SECOND QUARTER ENDING FEBRUARY 28, 2013
Selected Financial Highlights
| Three months ended | Six months ended | |||||||||||
| ($ millions Cdn except per share amounts) | February 28, 2013 | February 29, 2012 | Change % | February 28, 2013 | February 29, 2012 | Change % | ||||||
| Operations: | ||||||||||||
| Revenue | 1,251 | 1,231 | 1.6 | 2,570 | 2,510 | 2.4 | ||||||
| Operating income before amortization (1) | 538 | 493 | 9.1 | 1,139 | 1,059 | 7.6 | ||||||
| Operating margin (1) (2) | 43.0 | % | 40.0 | % | 3.0 | 44.3 | % | 42.2 | % | 2.1 | ||
| Funds flow from operations (3) | 386 | 164 | >100.0 | 513 | 520 | (1.3 | ) | |||||
| Net income | 182 | 178 | 2.2 | 417 | 380 | 9.7 | ||||||
| Per share data: | ||||||||||||
| Earnings per share | ||||||||||||
| Basic | 0.38 | 0.38 | 0.88 | 0.81 | ||||||||
| Diluted | 0.38 | 0.38 | 0.87 | 0.80 | ||||||||
| Weighted average participating shares outstanding during period (millions) | 446 | 440 | 445 | 439 | ||||||||
(1) See definitions and discussion under Key Performance Drivers in MD&A.
(2) Operating margin for the current year 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 41.9% and 43.8% for the three and six months ended February 28, 2013, respectively.
(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 Highlights1
| Growth | |||||||||
| Total | Three months ended | Six months ended | |||||||
| February 28, 2013 | February 28, 2013 | February 29, 2012 | February 28, 2013 | February 29, 2012 | |||||
| Subscriber statistics: | |||||||||
| Video customers | 2,136,707 | (29,829 | ) | (9,946 | ) | (53,741 | ) | (32,714 | ) |
| Internet customers | 1,910,185 | 7,800 | 21,328 | 13,756 | 30,371 | ||||
| Digital phone lines | 1,375,707 | 13,090 | 51,359 | 30,435 | 69,956 | ||||
| DTH customers | 907,330 | 1,328 | 1,274 | (2,693 | ) | 1,805 | |||
(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.
Consolidated Overview
Consolidated revenue of $1.25 billion and $2.57 billion for the three and six month periods, respectively, increased 1.6% and 2.4% over the same periods last year. Consolidated operating income before amortization for the three month period of $538 million was up 9.1% and on a year-to-date basis improved 7.6% to $1.14 billion. The revenue growth in the Cable and Satellite divisions, primarily driven by rate increases, 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 programming costs. Within all segments, the current quarter also benefited from a one-time adjustment to align certain broadcast license fees with the CRTC billing period totaling approximately $14 million.
The Company's strategy is to balance financial results with maintenance of overall revenue generating units ("RGUs"). The Cable and Satellite divisions have over 6.3 million RGUs - which represents the number of products sold to customers. During the quarter, overall RGUs declined by 7,611. Video RGUs declined more than expected as reduced promotions and tight discipline was maintained on customer equipment offers. Going forward, the Company intends to focus more on providing equipment to customers, while refraining from overly promotional pricing. As part of this focus, the Company plans to offer contracts, with equipment offers, as an alternative for customers. In this regard, it is expected that success-based spending will ramp up in the second half of the year.
Net income was $182 million and $417 million for the three and six months ended February 28, 2013, respectively, compared to $178 million and $380 million for the same periods last year. Non-operating items affected net income in both periods. Outlined on the following page are further details on these and other operating and non-operating components of net income for each period.
| ($millions Cdn) | Six months ended | Six months ended | |||||||||||||||||
| February 28, 2013 | Operating | Non-operating | February 29, 2012 | Operating | Non-operating | ||||||||||||||
| Operating income | 720 | 720 | - | 658 | 658 | - | |||||||||||||
| Amortization of financing costs - long-term debt | (2 | ) | (2 | ) | - | (2 | ) | (2 | ) | - | |||||||||
| Interest expense | (159 | ) | (159 | ) | - | (165 | ) | (165 | ) | - | |||||||||
| Gain on derivative instruments | - | - | - | 1 | - | 1 | |||||||||||||
| Accretion of long-term liabilities and provisions | (5 | ) | - | (5 | ) | (7 | ) | - | (7 | ) | |||||||||
| Equity income from associates | - | - | - | 1 | - | 1 | |||||||||||||
| Other losses | (6 | ) | - | (6 | ) | (5 | ) | - | (5 | ) | |||||||||
| Income (loss) before income taxes | 548 | 559 | (11 | ) | 481 | 491 | (10 | ) | |||||||||||
| Current income tax expense (recovery) | 85 | 155 | (70 | ) | 146 | 148 | (2 | ) | |||||||||||
| Deferred income tax expense (recovery) | 46 | (9 | ) | 55 | (45 | ) | (45 | ) | - | ||||||||||
| Net income (loss) | 417 | 413 | 4 | 380 | 388 | (8 | ) | ||||||||||||
| ($millions Cdn) | Three months ended | Three months ended | |||||||||||
| February 28, 2013 | Operating | Non-operating | February 29, 2012 | Operating | Non-operating | ||||||||
| Operating income | 327 | 327 | - | ||||||||||
